FDI Records Higher Net Inflows in October 2019; First Ten Months Level at US$5.8 Billion

Foreign direct investments (FDI) net inflows grew by 33.7 percent to US$672 million in October 2019 from the US$502 million recorded during the same period in 2018.1,2. This was mainly on account of the expansion in non-residents' net investments in debt instruments issued by local affiliates (intercompany borrowings) by 60 percent to US$534 million (from US$334 million in 2018).

Meanwhile, net inflows of equity capital slowed down to US$58 million (from US$98 million in October 2018), following the decline in equity capital placements (to US$80 million from US$112 million) coupled with the increase in withdrawals (to US$22 million from US$14 million). Equity capital infusions during the month came mostly from the United States, South Korea, and Japan. Placements during the period were invested largely in 1) real estate, 2) financial and insurance, and 3) manufacturing industries. Reinvestment of earnings amounted to US$79 million, 12.7 percent higher than the US$71 million recorded in October 2018.

For the period January-October 2019, FDI net inflows reached US$5.8 billion. This, however, was lower by 32.8 percent from the US$8.6 billion posted in the same period in 2018. The lower FDI net inflows reflect subdued investor sentiment due to the continued sluggish global economic activity. Net investments in debt instruments decreased by 27.3 percent to US$4.3 billion from the US$5.9 billion during the same period in 2018. Likewise, net equity capital investments dropped by 65.4 percent as placements fell by 44.9 percent to US$1.3 billion and withdrawals rose by 58.8 percent to US$629 million.

The top country sources of equity capital placements during the period were Japan, the United States, Singapore, China, and South Korea. These were channeled mainly to 1) financial and insurance, 2) real estate, and 3) manufacturing industries. Reinvestment of earnings rose by 12.5 percent to US$825 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)