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FDI Posts US$623 Million Net Inflows in November 2019; January-November Level Reach US$6.4 Billion

02.10.2020

Foreign direct investments (FDI) posted US$623 million net inflows in November 2019, representing a 14.6 percent increase from the US$543 million net inflows in the comparable period in 2018.1,2 This was due mainly to the increases posted in all FDI components. In particular, net investments in debt instruments (consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines) recorded net inflows of US$380 million from US$341 million in November 2018. Similarly, net investments in equity capital grew by 12.9 percent as equity capital placements (US$174 million) more than offset equity capital withdrawals (US$19 million).  Reinvestment of earnings also increased by 35.1 percent to US$88 million during the period.

The bulk of equity capital placements were sourced mainly from the United States, Thailand, Japan, and South Korea. These investments were channeled mostly to the financial and insurance, and real estate industries.

From January–November 2019, FDI net inflows amounted to US$6.4 billion,a decline of 29.9 percent from the US$9.2 billion recorded in the comparable period in 2018. Concerns over the global economic outlook continued to curb FDI as investor confidence remained muted. Non-residents’ net investments in debt instruments declined by 25.2 percent to US$4.7 billion. Likewise, net equity capital investments contracted by 60.4 percent to US$845 million. Equity capital placements during the 11–month period emanated largely from Japan, the United States, Singapore, China, and South Korea. These capital infusions were invested primarily in the 1) financial and insurance, 2) real estate, and 3) manufacturing industries. Meanwhile, reinvestment of earnings reached US$913 million, up by 14.4 percent from the US$798 million registered in the first eleven months of 2018.


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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 for equity withdrawals.

 

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