Foreign direct investments (FDI) posted net inflows in August 2016 amounting to US$711 million, an increase of 32 percent from the US$539 million recorded in the same period last year. 1, 2 This is on account of the 44.2 percent increase in investments in debt instruments (or intercompany borrowings) to US$636 million from US$441 million in August 2015. The increase in investments in debt instruments more than compensated for the decline in net equity capital investments to US$8 million from US$37 million last year. In gross terms, placements of equity capital slightly grew by 2 percent to US$49 million. The bulk of gross equity capital placements were sourced mainly from the United States, Singapore, the Netherlands, Japan, and Hong Kong. Equity capital placements were channeled mainly to real estate; manufacturing; wholesale and retail trade; electricity, gas, steam and air-conditioning supply; and arts, entertainment and recreation activities. Meanwhile, reinvestment of earnings grew by 9.9 percent to US$67 million during the month.
For the first eight months of 2016, net FDI inflows recorded a year-on-year increase of 71.1 percent to reach US$5.4 billion. The sustained FDI inflows were buoyed by investors’ confidence in the economy on the back of the country’s sound macroeconomic fundamentals. Investments in debt instruments amounted to US$3.4 billion, 94.4 percent higher than the US$1.8 billion registered in the comparable period last year. Net equity capital placements likewise rose by 68.3 percent to US$1.5 billion from US$877 million. This developed as equity capital placements increased by 53.4 percent while withdrawals dropped by 2.4 percent. Equity capital placements emanated largely from Japan, Singapore, Hong Kong, the United States, and Taiwan. These were invested mainly in financial and insurance; real estate; manufacturing; construction; and accommodation and food service activities. Reinvestment of earnings reached US$513 million during the period.
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.