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FDI Net Inflows Increase by 94.9 Percent for the First Semester of 2016

09.13.2016

Foreign direct investment (FDI) posted net inflows of US$4.2 billion for the first semester of 2016, 94.9 percent higher than the US$2.2 billion recorded for the same period a year ago.1, 2  This reflected investors’ confidence in the Philippine economy on the back of sound macroeconomic fundamentals and robust growth.  In particular, investments of parent companies abroad in debt instruments issued by local affiliates (or intercompany borrowings) contributed a large part to the increase in FDI as these transactions more than doubled to US$2.4 billion from U$1.1 billion.  Similarly, net equity capital grew by 112 percent on account of the combined effects of higher gross equity capital placements (US$1.6 billion from US$884 million) and lower gross equity capital withdrawals (US$166 million from US$203 million).  Equity capital placements came mainly from Japan, Singapore, Hong Kong, the United States, and Taiwan.  These were infused largely in financial and insurance; real estate; manufacturing; construction; and accommodation and food service activities.  Meanwhile, reinvestment of earnings declined by 0.7 percent. 

For the month of June, FDI recorded net inflows of US$238 million, lower by 40.9 percent than the US$404 million posted a year ago.  Equity capital placements of US$36 million was lower than the equity capital withdrawals of US$41 million which resulted in net outflows of US$5 million from net inflows of US$215 million for the same month last year.  Equity capital investments originated largely from Japan, the United States, Singapore, Hong Kong, and China.  These infusions were channeled mainly to real estate; electricity, gas, steam and airconditioning supply; information and communication; wholesale and retail trade; and manufacturing activities. Investments in debt instruments rose by 49.4 percent to US$182 million from US$122 million in the previous year.  Reinvestment of earnings decreased by 7.8 percent to US$62 million during the month.

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1 Based on the Balance of Payments and International Investment Position Manual, 6th edition (BPM6) which uses the asset and liability principle in the compilation of FDI statistics.  Under the asset and liability principle, claims of non-resident direct investment enterprises from resident direct investors are presented as reverse investment under net incurrence of liabilities/non-residents’ investments in the Philippines (previously presented in the Balance of Payments Manual, 5th edition (BPM5) as negative entry under assets/residents’ investments abroad).  Conversely, claims of resident direct investment enterprises from foreign direct investors are presented as reverse investment under net acquisition of financial assets/residents’ investments abroad (previously presented as negative entry under liabilities/non-residents’ investments in the Philippines). 

2 BSP statistics on FDI covers actual investment inflows, which could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates.  In contrast to investment data from other government sources, the BSP’s FDI data include investments where ownership by the foreign enterprise is at least 10 percent. Meanwhile, FDI data of Investment Promotion Agencies (IPAs) do not make use of the 10 percent threshold and include borrowings from foreign sources that are non-affiliates of the domestic company. Furthermore, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the IPAs’ FDI do not account for equity withdrawals.

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