Foreign direct investments (FDI) posted US$586 million net inflows in March 2019, which is lower by 13.9 percent than the US$681 million net inflows registered in the comparable period last year.1,2 This developed on account of the decline in net equity capital investments, as placements dropped to US$126 million from US$351 million in March 2018.
Equity capital placements during the month came mostly from Japan, the United States, Singapore, and the Netherlands. These placements were largely invested in the 1) manufacturing, 2) real estate, 3) accommodation and food service, 4) wholesale and retail trade and 5) arts, entertainments and recreation industries. Meanwhile, non-residents’ investments in debt instruments (consisting mainly of loans extended by parent companies abroad to their local affiliates) recorded an increase of 35.8 percent to US$399 million from US$294 million last year. Reinvestment of earnings increased by 14.4 percent to US$80 million during the period from US$70 million a year ago.
On a cumulative basis, net inflows of FDI reached US$1.9 billion in the first quarter of 2019, a decline of 15.1 percent from the US$2.3 billion net inflows in the same period in 2018. This resulted from the lower net inflows of net equity capital, which amounted to US$295 million from US$887 million last year. In particular, equity capital placements declined to US$568 million from US$996 million, while withdrawals increased to US$273 million from US$109 million.
Equity capital infusions during the period emanated mainly from Japan, China, the United States, Singapore, and South Korea. These were channeled largely to the 1) financial and insurance, 2) real estate, 3) transportation and storage, 4) manufacturing, and 5) administrative and support service industries. On the other hand, net investments in debt instruments increased by 18.6 percent to US$1.4 billion from US$1.2 billion in the same quarter in 2018. Reinvestment of earnings increased by 11.3 percent to US$234 million during the quarter from US$211 million in the comparable period last year.
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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