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Foreign Direct Investments Post Net Inflows of US$503 Million in July 2016; January - July 2016 Level Reaches US$4.7 Billion

10.10.2016

Foreign direct investments (FDI) recorded net inflows of US$503 million in July 2016, higher by 7.0 percent than the year-ago level of US$470 million. 1,2  Investments in debt instruments grew by 79.4 percent to US$417 million from US$232 million in the comparable period last year.  Equity capital registered net inflows of US$23 million during the month, albeit lower by 85.5 percent compared to the same period last year. Gross equity capital placements were sourced mainly from Germany, the United States, Singapore, Japan, and Korea.  These were invested largely in real estate; wholesale and retail trade; manufacturing; financial and insurance; and construction activities. Reinvestment of earnings declined by 19.5 percent to US$63 million during the month.

On a cumulative basis, FDI recorded net inflows of US$4.7 billion for the first seven months of 2016, registering a year-on-year growth of 79.1 percent. The increase in FDI inflows was driven by investors’ positive outlook on the Philippine economy, reinforced by strong macroeconomic fundamentals. The bulk of the net inflows were in the form of debt instruments (or intercompany borrowings) which amounted to US$2.8 billion, more than twice the US$1.3 billion recorded in the same period last year. Equity capital posted net inflows of US$1.5 billion, 74.7 percent higher than the US$841 million recorded last year, as placements of US$1.7 billion more than offset withdrawals of US$189 million. Equity capital placements came primarily from Japan, Singapore, Hong Kong, the United States, and Taiwan. These were channeled to financial and insurance; real estate; manufacturing; construction; and accommodation and food service activities. Meanwhile, reinvestment of earnings amounted to US$446 million during the period. 

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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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