Foreign direct investment (FDI) net inflows reached US$543 million in July 2019, bringing the year-to-date FDI to US$4.1 billion. 1,2 Non-residents’ net investments in debt instruments (composed mainly of intercompany borrowings between affiliates) posted US$357 million while non-residents’ net investments in equity capital amounted to US$99 million during the period. On the latter, the level was lower compared to that posted a year ago due to the decrease in equity capital placements by 39.6 percent, to US$168 million (from US$278 million) and expansion of equity capital withdrawals by 302.4 percent, to US$69 million (from US$17 million). Equity capital infusions during the month came mostly from Japan, Germany, Singapore, the United States, and South Korea. These placements were directed largely to 1) financial and insurance, 2) real estate, 3) manufacturing, and 4) human health and social work industries. Reinvestment of earnings increased by 15.8 percent to US$87 million during the month from US$75 million a year ago.
For the first seven months of 2019, FDI net inflows aggregated US$4.1 billion, 39.1 percent lower than the US$6.8 billion posted a year ago. This stemmed from the decline in non-residents’ net investments in equity capital by 75.1 percent to US$459 million (from US$1.8 billion) and in debt instruments by 30.3 percent to US$3.1 billion (from US$4.4 billion), reflecting the impact of the weak pace of global economic activity that took toll on investors’ business confidence and investment decisions globally. Placements of equity capital contracted by 49.2 percent to US$1 billion (from US$2 billion), and equity capital withdrawals increased by 215.8 percent to US$569 million (from US$180 million). Equity capital placements during the period emanated largely from Japan, the United States, Singapore, China, and South Korea. These were channeled mainly to 1) financial and insurance, 2) real estate, 3) manufacturing, 4) transportation and storage, and 5) administrative and support service industries. Meanwhile, reinvestment of earnings expanded by 12.6 percent to US$595 million from US$528 million in the same period last year.
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)