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FDI Net Inflows Increase by 20.2 Percent in February 2019 & First Two Months Level Reaches US$1.4 Billion

05.10.2019

Foreign direct investments (FDI) net inflows rose by 20.2 percent to US$746 million in February 2019 from the US$621 million posted in the same period last year.1, 2 Investment inflows continued as investors remain confident in the Philippine economy on the back of strong economic growth prospects and sound macroeconomic fundamentals. Net equity capital investments contributed largely to the increase in FDI net inflows during the period, expanding by 141.7 percent to US$233 million from US$96 million in February 2018. This was due to the 126.3 percent increase in equity capital placements to US$258 million that were sourced mainly from Japan, China, the United States, Singapore, and Switzerland. Equity capital investments for the period were channeled primarily to 1) transportation and storage, 2) financial and insurance, 3) manufacturing, 4) real estate, and 5) professional, scientific
and technical industries. Likewise, reinvestment of earnings grew by 13.7 percent to US$79 million from US$69 million in the same month a year ago. Non-residents’ placements in debt instruments issued by local affiliates (intercompany borrowings) recorded lower net inflows of US$435 million from US$455 million in February 2018.

On a year-to-date basis, FDI net inflows amounted to US$1.4 billion. This level, however, was lower by 15.7 percent than the US$1.6 billion net inflows registered in the comparable period last year. The decrease in FDI net inflows during the period was due mainly to the 67.1 percent decline in non-residents’ net equity capital investments as placements decreased by 31.5 percent, while withdrawals grew by 236.5 percent. Equity capital placements during the period came mostly from Japan, China, South Korea, Mauritius, and the United States. By economic activity, equity capital infusions were mainly invested in 1) financial and insurance, 2) transportation and storage, 3) real estate, 4) administrative and support service and 5) manufacturing industries. Meanwhile, net placements in debt instruments increased by 12.9 percent to US$1 billion from US$896 million in the first two months of 2018. Reinvestment of earnings grew by 10.1 percent to US$155 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). 

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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