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FDI Net Inflows Rise by 46.4 Percent in February 2018

05.10.2018

Foreign direct investments (FDI) posted US$573 million net inflows in February 2018, higher by 46.4 percent than the level recorded a year ago. 1, 2    This was due mainly to the 56.3 percent growth in investments in debt instruments (or intercompany borrowings between foreign direct investors and their subsidiaries/affiliates in the Philippines), amounting to US$412 million. Net equity capital likewise increased by 55.4 percent to US$96 million, as gross placements of US$114 million more than compensated for the withdrawals of US$18 million.   Equity capital placements came mostly from Hong Kong, the United States, China, the Netherlands, and Japan. The said placements were invested mainly in art, entertainment and recreation; real estate; manufacturing; construction; and electricity, gas, steam and air-conditioning supply activities. Meanwhile, reinvestment of earnings amounted to US$65 million during the period.

On a cumulative basis, FDI net inflows for the first two months of 2018 rose year-on-year by 52.6 percent to US$1.5 billion. The sustained investment inflows reflect investor confidence in the country’s sound macroeconomic fundamentals and growth prospects. In particular, net investments in debt instruments reached US$793 million, representing a 10 percent growth from the level recorded in the same period last year. Net equity capital increased by more than fourfold to US$569 million during the period. The bulk of the equity capital placements were sourced primarily from Singapore, China, Hong Kong, Taiwan, and Japan. These were channeled mainly to manufacturing; financial and insurance; real estate; art, entertainment and recreation; and electricity, gas, steam and air-conditioning supply activities. Reinvestment of earnings reached US$130 million.

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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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