Philippines' FDI Net Inflows Surges to US$473M in May 2014

Foreign direct investments (FDI) in the Philippines posted net inflows amounting to US$473 million in May 2014, a turnaround from the US$62 million net outflows registered in the same period last year.

The improvement in FDI during the month was underpinned by the increases registered across major components, according to the Central Bank of the Philippines.

Investments of parent companies abroad in debt instruments issued by local affiliates (or intercompany borrowings) contributed in large part to the increase in FDI in May 2014 as these transactions reversed to net inflows of US$338 million from net outflows of US$12 million a year ago.

In addition, equity capital posted net inflows of US$73 million from net outflows of  US$117 million in the same period last year. This favorable development resulted from the combined effects of higher gross equity capital placements (to US$85 million from US$79 million) and lower gross equity capital withdrawals (to US$12 million from US$196 million). 

Equity capital investments—emanating mainly from the United States, Singapore, the United Kingdom, Japan, and Germany—were channeled largely to financial and insurance; real estate; manufacturing; wholesale and retail trade; and professional, scientific and technical activities.

Meanwhile, reinvestment of earnings totaled US$62 million in May 2014 from US$66 million in the same period last year.

On a cumulative basis, net inflows of foreign direct investments (FDI) rose to US$2.9 billion for the first five months of the year from US$2.2 billion in the previous year, reflecting investors’ confidence in the country’s sound macroeconomic fundamentals.

The 33.9 percent rise in FDI during the period was driven by the 75 percent increment in investment inflows in debt instruments to reach US$1.9 billion from US$1.1 billion a year ago.

This developed as a result of higher lending of parent companies abroad to their local affiliates to fund existing operations and business expansion plans in the country.

Equity capital also registered net inflows of US$708 million during the period, albeit lower than the year-ago level, as placements of US$1 billion more than compensated for the withdrawals of US$332 million.

The bulk of these equity capital investments—which emanated largely from the United States, Hong Kong, Japan, Singapore, and Taiwan—was channeled mainly to activities related to financial and insurance; real estate; manufacturing; wholesale and retail trade; and mining and quarrying activities. 

Reinvestment of earnings amounted to US$327 million during the period. 

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