Foreign direct investments (FDI) recorded net inflows of US$572 million in May 2017, higher by 57 percent than the US$364 million registered in the comparable period last year. 1,2 This was driven by continued positive outlook on the Philippine economy buoyed by strong macroeconomic fundamentals. All FDI components yielded net inflows during the period.
In particular, debt instruments (or lending by parent companies abroad to their local affiliates to fund existing operations and business expansion) posted net inflows of US$459 million, an increase of 108.3 percent from the US$220 million recorded in May 2016. Equity capital investments likewise registered net inflows of US$43 million as equity capital placements of US$83 million more than offset withdrawals of US$40 million. Equity capital placements during the month were sourced mainly from Hong Kong, the United States, Japan, Singapore, and Malaysia. These capital infusions were invested largely in real estate; financial and insurance; manufacturing; electricity, gas, steam and air conditioning supply; and wholesale and retail trade activities. Reinvestment of earnings amounted to US$71 million, 7.8 percent higher than the US$65 million recorded in May 2016.
As a result of these developments, FDI net inflows for the first five months of the year reached US$3 billion, albeit lower by 23.8 percent than the US$3.9 billion posted for the same period last year. Net inflows in equity capital investments declined by 85.4 percent to US$213 million during the period. Equity capital placements aggregating US$358 million came mostly from Japan, the United States, Hong Kong, Singapore, and Germany. These were channeled mainly to real estate; financial and insurance; manufacturing; wholesale and retail trade; and electricity, gas, steam and air conditioning supply activities. Net investments in debt instruments increased by 12.8 percent, amounting to US$2.4 billion from the US$2.2 billion registered in the same period last year. Meanwhile, reinvestment of earnings grew by 7.5 percent to US$345 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.