Foreign direct investments (FDI) grew by 182.7 percent to US$674 million in June 2017 from US$238 million for the same month in 2016, reflecting investors’ continued bullish outlook on the Philippine economy. 1, 2 In part, the increase in FDI inflows during the month was due largely to the expansion in debt instruments (or intercompany borrowings from foreign direct investors by their subsidiaries/affiliates in the Philippines) to US$674 million. However, equity capital investments posted net withdrawals of US$72 million during the period as placements (US$113 million) were outpaced by withdrawals (US$185 million). Equity capital placements in June 2017 came mostly from the United States, Japan, Taiwan, Singapore, and India. These were channeled mainly to real estate; electricity, gas, steam and air conditioning supply; financial and insurance; manufacturing; and professional, scientific and technical activities. The net withdrawals in equity capital negated the reinvestment of earnings of US$72 million during the month.
On a cumulative basis, FDI registered net inflows of US$3.6 billion in the first half of 2017. This was 14 percent lower than the US$4.2 billion net inflows posted in the same period last year on account of the 90.3 percent decline in net equity capital to US$141 million from US$1.4 billion a year ago. Equity capital infusions during the first semester were sourced mainly from the United States, Japan, Singapore, Hong Kong, and Taiwan. These were invested mainly in real estate; financial and insurance; manufacturing; electricity, gas, steam and air conditioning supply; and wholesale and retail trade activities. Meanwhile, higher investments in debt instruments and reinvestment of earnings were registered in the first half of the year amounting to US$3 billion and US$416 million, respectively.
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.