Central Bank of Philippines : FDI Net Inflows Reach US$451 Million in October 2015; First Ten Months Level Almost Hit the US$5 Billion Mark

01.11.2016

Foreign direct investments (FDI) continued to post net inflows in October 2015 amounting to US$451 million, 1.4 percent higher than the US$445 million recorded in the same period last year. Favorable investor sentiment on the back of the country's strong macroeconomic fundamentals resulted in net inflows across all FDI components. In particular, net investments in debt instruments (or intercompany borrowings between foreign direct investors and their subsidiaries/affiliates in the Philippines) rose by 71.1 percent to US$287 million from US$168 million a year ago. Investments in equity capital also posted net inflows of US$101 million as equity capital placements of US$109 million outweighed equity capital withdrawals of US$8 million. These net inflows in equity capital, however, were lower by 52.5 percent than the US$213 million net inflows registered in the same period last year. The bulk of equity capital investments during the month-emanating largely from the Republic of Korea, Japan, the United States, Thailand and Taiwan-were channeled mainly to financial and insurance; real estate; manufacturing; administrative and support service; and electricity, gas, steam and airconditioning supply activities. Reinvestment of earnings reached US$62 million during the month.

On a cumulative basis, FDI registered net inflows of almost US$5 billion, albeit 4.9 percent lower than the US$5.2 billion net inflows recorded in the same period a year ago. This was mainly on account of the 11.6 percent decline in investments in debt instruments to US$2.8 billion from US$3.2 billion coupled with the 10.8 percent drop in reinvestment of earnings to US$637 million during the period. Meanwhile, net equity capital placements increased by 13.9 percent to US$1.5 billion from US$1.4 billion. The bulk of equity capital placements came from the United States, Japan, the United Kingdom, the Netherlands, and Singapore. By economic activity, equity capital investments were channeled mainly to manufacturing; financial and insurance; real estate; wholesale and retail trade; and construction activities.

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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).

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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