THE Philippines’ net foreign direct investment (FDI) posted a slight drop of 0.3 percent to $5.724 billion in 2015 from $5.74 year-on-year, due to lower inflows in inter-company borrowings and reinvented earnings, the central bank said Friday.
Last year’s net FDI also fell short of the $6-billion forecast by the Bangko Sentral ng Pilipinas (BSP) according to preliminary data released by the BSP.
Intercompany borrowings eased 3.9 percent to $3.137 billion from $3.263 billion in 2014, while reinvestment of earnings declined by 14.8 percent to $747 million from $877 million a year earlier.
Partially compensating for the declines registered in the other FDI components, net equity capital infusion during the year rose by 15.1 percent to $1.841 billion from $1.599 million in 2014.
Equity capital placements of $2.668 billion more than offset $827 million withdrawals, the BSP data showed.
Equity capital investments came mostly from the United States, the Netherlands, Japan, the United Kingdom, and Singapore, and were channeled mainly to manufacturing; financial and insurance; real estate; wholesale and retail trade; and construction activities.
ING Bank senior economist Joey Cuyegkeng said the softer intercompany borrowings and reinvested earnings may have something to do with company restructuring or challenges in their home economies.
“The leadership uncertainty in the Philippines due to the coming presidential elections may have [also]been a factor,” he added.
Nevertheless, Cuyegkeng stressed that the impact of uncertainty could be a minor one, noting that the major economic policies of the current administration including the focus on infrastructure expansion, improving delivery of social services, public-private partnership projects and institutionalized reforms through the passage of laws provide important reasons to keep operations in a growing economy.
Going forward, he said the economy’s fundamentals and prospects remain attractive.
“Liberalizing further certain sectors of the economy and improvement of the absorptive capacity of the economy could usher renewed and strong interest,” he recommended.
Dec FDI down
In December 2015 alone, net FDI retracted by 51.3 percent as inflows in equity capital and reinvested earnings posted declines from a year ago.
BSP data showed FDI net inflows for the month amounted to $273 million, lower from $561 million recorded in December 2014.
The central bank said net equity capital infusion incurred the biggest decline among FDI components, easing 84.1 percent to $77 million from $482 million for the same period in 2014.
“Net equity capital infusion reached $77 million as equity capital placements of $97 million more than offset the $20 million withdrawals,” the central bank explained.
The bulk of equity capital investments in December 2015—coming largely from the Singapore, the United States, Japan, South Korea, and the Netherlands—were channeled to financial and insurance; manufacturing; real estate; electricity, gas, steam and air conditioning supply; and administrative and support services activities.
Reinvested earnings in December decreased by 6.5 percent to $56 million from $60 million a year earlier.
Finally, the BSP said the increase in investments in debt instruments to $140 million from $20 million a year ago partially tempered the decline in FDI in December.