Foreign direct investments (FDI) rose significantly in July 2018 to US$914 million from the US$344 million posted in July 2017.1,2 This reflected the continued positive investor sentiment on the Philippine economy on the back of strong macroeconomic fundamentals and growth prospects. More than sixty percent of FDI net inflows during the month were in the form of non-residents’ investments in debt instruments issued by local affiliates (intercompany borrowings), which expanded to US$584 million from US$136 million in the same period last year. Net equity capital investments grew by 90.2 percent to reach US$261 million from US$137 million in 2017. This was on account of the 60.6 percent increase in equity capital placements to US$278 million coupled with the decline in withdrawals by 52.3 percent to US$17 million. Equity capital placements were sourced primarily from Singapore, Taiwan, the United States, Korea and Japan. Investments were channeled largely to manufacturing; financial and insurance; real estate; wholesale and retail trade; and administrative and support service activities. Reinvestment of earnings amounted to US$69 million during the month.
For the first seven months of 2018, FDI net inflows increased by 52.1 percent to US$6.7 billion from US$4.4 billion last year. This was mainly on account of the expansion in net equity capital investments by more than five times to US$1.8 billion from US$338 million last year. Gross equity capital placements grew by almost thrice to US$2 billion, while withdrawals declined to US$180 million. Equity capital placements during the period came mainly from Singapore, Hong Kong, Japan, the United States and China. Investments were infused mostly in manufacturing; financial and insurance; real estate; arts, entertainment and recreation; and electricity, gas, steam and air-conditioning supply activities. Investment in debt instruments expanded by 21.8 percent to US$4.3 billion from US$3.6 billion last year. Meanwhile, reinvestment of earnings slightly rose to US$489 million during the period.
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.