Foreign direct investments (FDI) posted net inflows of US$416 million in August 2019, albeit 45.1 percent lower than the US$758 million net inflows recorded in the same period last year.1,2 Bulk of the FDI net inflows for the month were in the form of investments in debt instruments (consisting mainly of intercompany borrowings/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines), which reached US$263 million (from US$534 million). Non-residents’ net equity capital investments dropped by 55.3 percent to US$77 million from US$172 million in the same month last year, as the decline in placements (from US$187 million to US$86 million) outweighed the decrease in withdrawals (from US$16 million to US$10 million). Equity capital placements during the period came mostly from Japan, the United States, Hong Kong, Cayman Islands, and Singapore. These investments were channeled mainly to 1) manufacturing, 2) real estate, 3) financial and insurance, 4) information and communication, and 5) wholesale and retail trade industries. Reinvestment of earnings expanded by 46 percent to US$77 million from US$53 million in the same month last year.
On a cumulative basis, FDI recorded net inflows of US$4.5 billion for the period January-August 2019, lower by 39.7 percent than the US$7.5 billion net inflows registered last year. The ongoing uncertainty in the global environment continued to dampen investor sentiment, which caused postponements in investment plans. The decline in FDI resulted from the contraction in non-residents’ net investments in debt instruments by 32.5 percent to US$3.3 billion (from US$4.9 billion) and equity capital by 73.4 percent to US$536 million (from US$2 billion). Net equity capital investments declined as placements dipped by 49.6 percent to US$1.1 billion (from US$2.2 billion), coupled with the 195.6 percent increase in withdrawals to US$578 million (from US$196 million). Equity capital placements during the period were sourced largely from Japan, the United States, Singapore, China, and South Korea. The industries that benefited from said capital infusions were 1) financial and insurance, 2) real estate, 3) manufacturing, 4) transportation and storage, and 5) administrative and support service. Meanwhile, reinvestment of earnings increased by 15.6 percent to US$671 million from US$581 million in the comparable period in 2018.
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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