Foreign direct investments (FDI) recorded net inflows of US$566 million in September 2019, 2.9 percent lower than the US$582 million net inflows posted in the same period last year.1,2 This was mainly due to the decline in non-residents' net investments in debt instruments. However, the reversal of net equity capital investments from net outflows to net inflows mitigated the decrease in net investments in debt instruments. Net investments in debt instruments (consisting mainly of intercompany borrowings/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines) decreased by 36 percent to US$395 million (from US$618 million). Meanwhile, non-residents' net equity capital investments posted a 182 percent growth to US$96 million (from net equity capital withdrawals of US$117 million) as placements increased by 79.5 percent (from US$69 million to US$125 million), while withdrawals declined by 84.8 percent (from US$187 million to US$28 million). Equity capital placements during the period were sourced largely from Japan, Taiwan, the United States, Hong Kong, and Netherlands. These investments were channeled mainly to 1) financial and insurance, 2) manufacturing, and 3) real estate industries. Reinvestment of earnings declined by 9.4 percent to US$74 million from US$82 million in the same month last year.
On a cumulative basis, FDI for the first three quarters of 2019 recorded net inflows of US$5.1 billion, 36.9 percent lower than the US$8.1 billion net inflows registered last year. The slowdown in inflows reflected the adverse effects of the prolonged trade disputes, which continued to affect global growth negatively and prompted foreign investors to hold off their investment plans in emerging markets including the Philippines, until global growth outlook improves. Consequently, non-residents' net investments in debt instruments declined by 32.6 percent to US$3.7billion (from US$5.5 billion) and equity capital by 66.7 percent to US$632 million (from US$1.9 billion). Net equity capital investments decreased as placements dipped by 45.7 percent to US$1.2 billion (from US$2.3 billion), while withdrawals increased by 58.7 percent to US$607 million (from US$382 million). The bulk of equity capital placements during the period emanated from Japan, the United States, Singapore, China, and South Korea. The industries that benefited from said capital infusions were 1) financial and insurance, 2) real estate, and 3) manufacturing. Meanwhile, reinvestment of earnings amounted to US$746 million during the period from US$663 million a year ago.
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)