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FDI Registers US$531 Million Net Inflows in November 2018 & US$9.1 Billion in January-November 2018

02.11.2019

Foreign direct investments (FDI) recorded net inflows of US$531 million in November 2018, albeit 45.9 percent lower than the US$982 million net inflows posted in November 2017.1,2 The decline was due largely to the drop in net investments in debt instruments (consisting mainly of intercompany borrowings/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines), which amounted to US$333 million from US$724 million in the same month in 2017. Net investments of equity capital registered US$137 million, which was 31.9 percent lower than the US$202 million net equity capital inflows in November 2017. Equity capital placements during the month were sourced largely from Taiwan, the United States, Thailand, Luxembourg, and the Netherlands. These investments were channeled mostly to 1) financial and insurance, 2) electricity, gas, steam and air-conditioning supply, 3) manufacturing, and 4) real estate activities. Reinvestment of earnings rose by 9.5 percent to US$61 million in November 2018.

As a result of these developments, FDI registered US$9.1 billion net inflows in January–November 2018, 3.2 percent lower than the US$9.4 billion recorded in the same period in 2017. The lower net inflows was attributed mainly to the 28.3 percent decline in net investments of equity capital, which reached US$2.1 billion in the first eleven months of 2018. Equity capital placements during the period – mostly from Singapore, Hong Kong, the United States, Japan, and China – were invested mainly in 1) manufacturing,2) financial and insurance, 3) real estate, 4) arts, entertainment and recreation, and 5) electricity, gas, steam and air-conditioning supply activities. Meanwhile, net investments in debt instruments grew by 9.3 percent to reach US$6.2 billion from US$5.7 billion in the same period last year. Reinvestment of earnings also increased by 2.8 percent to US$738 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 fo equity withdrawals.

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