Foreign direct investments (FDI) registered net inflows of US$311 million in April 2020, a decline of 67.9 percent from the US$971 million net inflows posted in the same month last year.1,2 The slowdown in FDI inflows reflected the continued weak global and domestic demand prospects prompting many investors to put on hold investment plans amid the unresolved COVID-19 pandemic.
The drop in FDI net inflows in April 2020 resulted from lower net investments in debt instruments, which declined by 73.2 percent to US$223 million, and in equity capital, which decreased by 82.6 percent to US$7 million.3 In particular, equity capital placements declined by 68.3 percent to US$47 million from US$147 million. The bulk of the equity capital placements were sourced from Japan, the United States, Singapore, and Germany. These investments were channeled mostly to the 1) manufacturing, 2) wholesale and retail trade, and 3) real estate industries. Likewise, reinvestment of earnings decreased by 15.8 percent to US$81 million from US$96 million in the same period last year.
As a result of these developments, FDI net inflows during the first 4 months of the year reached US$2 billion, lower by 32.1 percent than the US$2.9 billion net inflows recorded in the comparable period last year. This was due largely to the 53 percent decline in net investments in debt instruments to US$1.1 billion from US$2.2 billion.3 In addition, reinvestment of earnings contracted by 21.7 percent to US$269 million during the review period from US$343 million a year ago.
The reduction in FDI for the period January to April 2020 was tempered by the 95.2 percent increase in net investments in equity capital to US$661 million from US$338 million. Equity capital placements emanated largely from the Netherlands, Japan, and Singapore during the period. These were invested mainly to the 1) manufacturing, 2) real estate, and 3) administrative and support service industries.
1 The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6). FDI includes (a) investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident subsidiary/associate in its resident direct investor. FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.
2 The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority (PSA), which are sourced from Investment Promotion Agencies (IPAs), represent investment commitments, which may not necessarily be realized fully, in a given period. Further, the said PSA data are not based on the 10 percent ownership criterion under BPM6. Moreover, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the PSA’s foreign investment data do not account for equity withdrawals.
3 Net investments in debt instruments consist mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines. The remaining small portion of net investments in debt instruments are investments made by non-resident subsidiaries/associates in their resident direct investors.
Source: Bangko Sentral ng Pilipinas (BSP)