Central Bank of Philippines : FDI Net Inflows Surge in October; First Ten Months Level Close to US$8 Billion

01.10.2018

Foreign direct investments (FDI) net inflows rose threefold in October 2017 to US$2 billion from US$670 million registered in the comparable period in 2016. The upswing in FDI reflects continued investor confidence in the country's strong macroeconomic fundamentals and growth prospects. More than three-fourths of FDI net inflows were in the form of equity capital, with gross placements rising markedly to US$1.6 billion from US$84 million a year ago. A significant portion of the equity capital placements were channeled to electricity, gas, steam and air-conditioning supply activities. The other sectors that received investment inflows were manufacturing; construction; real estate; and wholesale and retail trade. The top country sources were the Netherlands, Singapore, Kuwait, the United States, and Germany. Investments in debt instruments (or intercompany borrowings between foreign direct investors and their subsidiaries/affiliates in the Philippines) amounted to US$431 million, albeit lower by 22 percent than the previous year's level. Meanwhile, reinvestment of earnings reached US$57 million during the month.

On a cumulative basis, FDI net inflows for the first ten months of 2017 grew year-on-year by 20.5 percent to US$7.9 billion. In particular, net equity capital investments increased by 54.7 percent to US$2.6 billion as gross equity capital placements of US$3.1 billion more than offset withdrawals of US$465 million. Gross equity capital placements came mostly from the Netherlands, the United States, Singapore, Japan and Hong Kong. By economic activity, equity capital investments were channeled mainly to electricity, gas, steam and air-conditioning supply, manufacturing; real estate; construction; and wholesale and retail trade activities. Non-residents' net investments in debt instruments totaled US$4.6 billion during the period, 8.5 percent higher than the level recorded during the comparable period in 2016. Reinvestment of earnings amounted to US$662 million.

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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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