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Foreign Direct Investments Post Strong Growth in January 2018

04.10.2018

Foreign direct investments (FDI) yielded net inflows of US$919 million in January 2018, an increase of 56.7 percent from the level recorded in the same month last year. 1, 2   Investor outlook on the country’s economic performance remained positive on the back of strong macroeconomic fundamentals. 

Net equity capital inflows, which accounted for the bulk of FDI during the period, rose more than eight times to US$473 million from US$58 million in the previous year. This was driven by the sevenfold increase in equity capital placements to US$531 million, while withdrawals amounted to only US$58 million during the month.  Equity capital placements were sourced largely from Singapore, China, Taiwan, Japan, and the United States. These capital infusions were invested mainly in manufacturing; financial and insurance; real estate; electricity, gas, steam and air-conditioning supply; and wholesale and retail trade activities. Meanwhile, net investments in debt instruments issued by local affiliates, consisting of intercompany loans, declined by 16.7 percent to US$381 million.  Reinvestment of earnings also decreased moderately by 8.4 percent to US$65 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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