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FDI Net Inflows Increase by 70 Percent in August; Stood at US$5.1 Billion in the First Eight Months of 2017

11.10.2017

Foreign direct investments (FDI) net inflows increased by 70 percent to US$1.2 billion in August 2017 from US$708 million a year ago.1, 2 This reflected continued favorable investor sentiment on the Philippine economy on the back of the country’s strong macroeconomic fundamentals.   All FDI components posted net inflows during the period.  In particular, net equity capital investments surged to US$611 million from US$8 million a year ago.  The bulk of equity capital placements during the month originated from the United States (U.S.), Singapore, the Netherlands, Hong Kong and Japan.  These were channeled mainly to manufacturing; real estate; wholesale and retail trade; transportation and storage; and electricity, gas, steam and air conditioning supply activities.  Investments in debt instruments (or intercompany borrowings between foreign direct investors and their subsidiaries/affiliates in the Philippines) amounted to US$533 million, albeit lower by 15.7 percent than last year’s level.  Meanwhile, reinvestment of earnings was pegged at US$59 million during the month. 

On a cumulative basis from January to August 2017, FDI net inflows reached US$5.1 billion, lower by 5.2 percent than the US$5.4 billion recorded in the same period last year.  The main reason for the decline in FDI was the lower equity capital placements and higher withdrawals during the period, decreasing net equity capital investments by 40.3 percent to US$883 million from US$1.5 billion.  Equity capital infusions during the period came mostly from the U.S., Singapore, Japan, the Netherlands, and Hong Kong. These were invested mainly in manufacturing; real estate; wholesale and retail trade; financial and insurance; and electricity, gas, steam and air conditioning supply activities.  In contrast, investments in debt instruments amounted to US$3.7 billion, an expansion of 8.4 percent from US$3.4 billion
last year. In addition, reinvestment of earnings grew by 6.4 percent to US$546 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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