FOREIGN direct investments (FDI) in the Philippines rose in May from a year earlier, underpinned by the increases registered across major components.
Cumulative levels of FDI for the first five months of the year showed a 34 percent year-on-year increase. FDIs are direct capital investments, in contrast to hot money, which is invested through the local financial markets.
Data from the Bangko Sentral ng Pilipinas (BSP) on Monday showed net FDI rose to $473 million in May, a turnaround from the $62 million net outflows a year earlier.
In the five months ending May, net FDI jumped to a cumulative $2.9 billion from $2.2 billion in same period last year, “reflecting investors’ confidence in the country’s sound macroeconomic fundamentals.”
In its explanatory note, the BSP said the FDI figures cover actual investment inflows that could be in the form of borrowings between affiliates, equity capital, and reinvestment of earnings.
The BSP said in a statement that a large part of the increase in FDI in May was due to the reversal to net inflows of intercompany borrowings, or non-residents’ net placements in debt instruments issued by local affiliates.
Intercompany borrowings during the month reversed to net inflows of $338 million in May from $12 million net outflows in the same period last year.
Similarly, intercompany borrowings for the first five months of the year posted a 75 percent increment to reach $1.9 billion from $1.1 billion a year earlier.
“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,” the BSP explained.
Equity capital inflows
On the other hand, the central bank said that equity capital placements posted net inflows of $73 million in May from net outflows of $117 million a year ago.
The central bank said this favorable development resulted from the combined effects of higher gross equity capital placements (to $85 million from $79 million) and lower gross equity capital withdrawals (to $12 million from $196 million).
For the first five months of the year, these placements also registered net inflows of $708 million during the period, albeit lower than the year-ago level, as placements of $1 billion offset the withdrawals of $332 million.
The central bank said the bulk of the equity capital investment originated mainly from the United States, Hong Kong, Japan, Singapore, and Taiwan, and were channeled to activities related to finance and insurance; real estate; manufacturing; wholesale and retail trade; and mining and quarrying activities.
Reinvested earnings totaled $62 million in May 2014 from $66 million in the same period last year. On a cumulative basis, reinvestment of earnings amounted to $327 million during the period.
In July, the central bank said net FDI inflows are projected reach $1 billion this year, lower that the $3.9 billion recorded for full-year 2013.