Published June 10, 2016
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Foreign direct investments (FDI) rose by 59.1 percent to post US$364 million net inflows in March 2016 from US$229 million in the comparable period in the previous year.1, 2 The country’s sustained favorable economic performance as evidenced by 69 consecutive quarters of positive growth, and growth prospects for the year ahead, helped drive inflows in all FDI components during the period. Non-residents’ investments in debt instruments (consisting mainly of loans extended by parent companies abroad to their local affiliates) accounted largely for the increase in net FDI in March. In particular, net investments in debt instruments more than doubled to US$262 million from US$122 million last year. Likewise, net equity capital placements grew by 6.9 percent to US$53 million from US$50 million. This resulted as gross equity capital placements went up to US$135 million, more than offsetting withdrawals of US$82 million. Equity capital placements during the month came mostly from Singapore, the United States, Hong Kong, Japan, and Taiwan. These placements were channeled to accommodation and food service; real estate; manufacturing; financial and insurance; and wholesale and retail trade activities. Meanwhile, reinvestment of earnings declined by 14.3 percent to US$49 million during the period.
On a cumulative basis, FDI yielded US$1.3 billion net inflows in the first quarter of 2016, increasing by 52.1 percent from US$850 million in same period last year. This was on account of higher gross equity capital placements at US$599 million during the period from the previous year’s level of US$330 million. Equity capital infusions during the period emanated largely from Hong Kong, Singapore, Spain, the Bahamas, and Taiwan. By economic activity, equity capital were mainly channeled to financial and insurance; construction; accommodation and food service; real estate; and manufacturing activities. Net investments in debt instruments increased by 50.1 percent to US$617 million from US$411 million in the same quarter in 2015. Meanwhile, reinvestment of earnings contracted moderately by 2.1 percent to US$181 million.
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.
Re-disseminated by The Asian Banker