Foreign direct investments (FDI) registered net inflows of US$242 million in May 2019, 85.1 percent lower than the US$1.6 billion net inflows posted in May 2018. This resulted mainly as net investments in debt instruments declined from US$1.3 billion in May 2018 to US$149 million during the month due mainly to higher prepayments and repayments of debt owed by resident enterprises to their foreign affiliates, coupled with the decline in their borrowings from their foreign affiliates. Moderate net inflows of equity capital amounting to US$1 million from US$241 million a year ago also contributed to the decline in FDI.1,2
Bulk of the equity capital placements during the month were sourced from the United States, Japan, Singapore, China, and Hong Kong. These capital infusions were invested largely in the 1) real estate, 2) manufacturing, 3) financial and insurance, 4) construction and 5) human health and social work industries. Meanwhile, reinvestment of earnings amounted to US$92 million, 15.9 percent higher than the US$80 million recorded in the same month last year.
As a result of these developments, FDI recorded US$3.1 billion net inflows in the first five months of 2019, albeit lower by 37.1 percent than the US$5 billion net inflows in the comparable period last year. This was due mainly to the drop in net equity capital investments as placements declined to US$787 million from US$1.5 billion, while withdrawals increased to US$451 million from US$139 million during the period. Net investments in debt instruments also decreased by 26 percent to US$2.4 billion from US$3.2 billion in January–May 2018.
For the period January–May 2019, equity capital placements originated from Japan, the United States, China, Singapore, and South Korea. These were channeled largely to 1) financial and insurance, 2) real estate, 3) manufacturing, 4) transportation and storage, and 5) administrative and support service industries. Reinvestment of earnings grew by 12.9 percent to US$418 million from US$371 million in the same 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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