• $1-B FDIs highlight need for infrastructure spending

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    Net foreign direct investments (FDI) in the Philippines rose 5.3-percent year-on-year to $1 billion in January, highlighting the urgency of the need for the government to implement more job-generating infrastructure projects.

    The Bangko Sentral ng Pilipinas (BSP) said in a statement on Thursday the FDI inflows in the month have reversed the 7.9 percent decline in investment recorded a year earlier.

    “This developed as investments in debt instruments and equity capital registered higher net inflows during the month despite the observed reversal in foreign portfolio investments,” the statement said.

    Non-residents’ net placements in debt instruments issued by local affiliates increased 7.3 percent to $687 million, accounting for about 67 percent of the FDI in the month, it said.

    This may be attributed to continued lending by the parent companies abroad to their local affiliates to fund existing operations and the expansion of their businesses in the country where macroeconomic fundamentals remained sound, the central bank said.

    Net equity capital inflows rose 10.5 percent to $278 million in January from $252 million posted during the same period last year.

    “In particular, gross placements of equity capital of $361 million more than offset withdrawals of $83 million recorded during the month,” it said.

    The bulk of gross equity capital placements originated mainly from Hong Kong, the United States, Japan, Singapore and the United Kingdom, and were channeled mainly to financial and insurance; wholesale and retail trade; real estate; manufacturing and information and communication activities.

    Welcome change
    Nicholas Antonio Mapa, Bank of the Philippine Islands associate economist, said the increase in FDI is a welcome change from the country’s chronic inability in the past to compete with its Association of Southeast Asian Nations (Asean) neighbors in attracting foreign investment.

    A World Bank report earlier noted that compared with other major Asean economies, the Philippines attracted relatively little FDI, receiving only 3 percent of total FDI to the region.

    “It is becoming more obvious that the glaring lack of infrastructure is the major impediment in the country’s quest to bring in foreign capital into the country. A lack of reliable and cost-effective power options also hinders our ability to attract manufacturing firms to the Philippines that could help alleviate the unemployment problem,” Mapa said.

    Earnings reinvestment
    Reinvestment of earnings reached $62 million in January.

    According to the BSP, figures on FDI cover 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 includes investments where ownership by the foreign enterprise is at least 10 percent.

    This year, the central bank expects $2.6 billion in net FDI, compared with $3.9 billion recorded as investments in full year 2013.

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