Foreign direct investments (FDI) registered US$569 million net inflows in September 2018, albeit lower than the US$807 million net inflows registered in the same month last year.1,2 This developed as equity capital withdrawals of US$187 million exceeded equity capital placements amounting to US$69 million. During the period, equity capital infusions originated largely from the United States, Japan, Macau, Hong Kong and China. Said investments were channeled mostly to 1) real estate, 2) manufacturing and 3) electricity, gas, steam and air-conditioning supply activities. Meanwhile, debt instruments (consisting mainly of intercompany borrowings/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines) expanded by 24.3 percent to US$609 million from US$490 million in the same month last year. Reinvestment of earnings amounted to US$78 million during the month.
For the first three quarters of the year, FDI net inflows grew by 24.2 percent to US$8 billion from US$6.5 billion last year on account of the increases registered in all FDI components. Investment inflows continued, buoyed by investor confidence in the Philippine economy on the back of strong macroeconomic fundamentals and high growth prospects. In particular, investments in debt instruments reached US$5.5 billion, an increase of 19.6 percent from the US$4.6 billion recorded in the comparable period in 2017.Net equity capital investments also rose by 52.1 percent to US$1.9 billion from US$1.2 billion a year ago. Bulk of the equity capital placements during the period emanated from Singapore, Hong Kong, the United States, Japan, and China. These investments were channeled largely to 1) manufacturing, 2) financial and insurance, 3) real estate, 4) arts, entertainment and recreation and 5) electricity, gas, steam and air-conditioning supply activities. Reinvestment of earnings amounted to US$614 million during the period.
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.
Source: Bangko Sentral NG Pilipinas (BSP)