Foreign Investments in Philippines Shrink

Foreign direct investments (FDI) in Philippines in August yielded net inflows of US$13 million, significantly lower than the US$76 million net inflows registered in the same month in 2011, reflecting investors’ relatively cautious stance due to weak global economic prospects and financial strains in advanced economies.


According to the Central Bank of the Philippines, net inflows for the month consisted mainly of equity capital, which reached US$42 million, up by 35.5 percent from the level posted in August 2011.  Gross placements of equity capital came largely from the U.S., Macau and Japan and were channeled to real estate, transportation and storage and manufacturing sectors.


Reinvested earnings likewise registered net inflows of  US$16 million.  However, these inflows were offset by higher net outflows in the other capital account amounting to US$45 million as local branches of foreign banks remitted profits to their head offices abroad.


Meanwhile, FDI for January - August 2012 rose by 61.2 percent  to reach US$1 billion from US$644 million registered in the comparable period in 2011.


The surge in FDI emanated largely from net infusion of equity capital amounting to US$1.1 billion. In particular, gross equity capital placements during the eight-month period totaled US$1.3 billion, significantly higher than the year-ago level of US$400 million. 


Inflows were channeled mainly to the manufacturing, real estate, wholesale and retail, financial and insurance, and mining and quarrying sectors.  The bulk of these investments originated mostly from the U.S., Australia, the Netherlands, United Kingdom, Japan and Bermuda.


Moreover, reinvested earnings also recorded a cumulative net inflow of US$101 million. Nevertheless, this was markedly lower (by 52.4 percent) than the level posted in the same period last year.


Meanwhile, the other capital account—consisting largely of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines—posted net outflows of US$206 million, a reversal of the US$403 million net inflows recorded last year.  This was largely on account of lower intercompany loan availments and settlement of trade credits extended to local companies by their foreign affiliates.