Based on preliminary data, net inflows of foreign direct investment (FDI) in February 2020 reached US$505 million, 31.5 percent lower than the US$737 million net inflows recorded in the same month last year.1,2 FDI declined as uncertainties on the impact of the COVID-19 outbreak dampened investor sentiment. In particular, net investments in debt instruments decreased by 26.4 percent to US$317 million from US$431 million. Likewise, net placements of equity capital declined by 43 percent to US$129 million from US$227 million in the same month last year.3
Bulk of the equity capital placements during the period were sourced from Singapore, Japan, and the United States. These investments were channeled mainly to 1) manufacturing, 2) real estate, and 3) wholesale and retail trade industries. Reinvestment of earnings declined to US$59 million in February 2020 from US$80 million in the same month a year ago.
On a cumulative basis, FDI net inflows in the first two months of 2020 reached US$1.2 billion, a 12.2 percent decrease from the US$1.3 billion net inflows recorded in the same period in 2019. This was due largely to the 44.1 percent drop in net investments in debt instruments3 to US$550 million from US$984 million. Similarly, reinvestment of earnings declined by 16 percent to US$131 million from US$156 million.
Meanwhile, the decline in FDI was tempered by the 162 percent increase in net equity capital placements to US$481 million from US$184 million. Equity capital placements during the period emanated mostly from the Netherlands, Singapore, Japan, and the United States. These were infused largely in the 1) manufacturing, 2) real estate, and 3) wholesale and retail trade industries.
1 The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6). FDI includes (a) investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident subsidiary/associate in its resident direct investor. FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.
2 The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority (PSA), which are sourced from Investment Promotion Agencies (IPAs), represent investment commitments, which may not necessarily be realized fully, in a given period. Further, the said PSA data are not based on the 10 percent ownership criterion under BPM6. Moreover, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the PSA’s foreign investment data do not account for equity withdrawals.
3 Net investments in debt instruments consist mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines. The remaining small portion of net investments in debt instruments are investment made by a non-resident subsidiary/associate in its resident direct investor.
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