‘Foreign banks to bring in FDI, support BOP’

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FOREIGN players are expected to play a crucial role in the Philippine banking industry’s ongoing liberalization, providing a much-needed boost to foreign direct investment (FDI) inflows to help maintain the country’s positive external position, the central bank said.

Data on the country’s official balance of payments (BOP) position for March is set to be released by the Bangko Sentral ng Pilipinas (BSP) today, Monday.

“We expect FDI to continue to improve as the presence of foreign banks will help facilitate the inflow of various investments from their home countries, including [that]in the manufacturing industry,” Diwa Guinigundo, deputy governor for the Monetary Stability Sector of the (BSP), said in an e-mail to reporters over the weekend.

The BSP has so far this year granted approval for three Asian banks to operate a branch in the country as part of opening up the industry, namely Sumitomo Mitsui Banking Corp. from Japan, Shinhan Bank from South Korea, and Cathay United Bank from Taiwan.


In January this year, FDI inflows reached $263 million, with the bulk coming from non-residents’ investment in debt instruments issued by local affiliates, amounting to $167 million.

Highlighting the role of foreign banks, Guinigundo pointed out they could help create financing opportunities to fund more productive activities in the local economy.

“These developments will support the financial account of the BOP,” he said.

Complementary to current account
The BSP official stressed that a healthy financial account will also complement surpluses in the current account, which could be affected by structural flows arising from overseas Filipino workers remittances, tourism receipts and business process outsourcing services.

“All of these point to a robust external position for the country over the medium term,” he said.

The central bank has forecast that the country will swing back to a payments surplus by end-2015 with $1 billion, from a deficit of $2.88 billion the year before.

The BOP in February this year showed a $985 million surplus, up by more than $800 million from the $136 million surplus in January. It was also significantly higher than the $345 million surplus seen in February 2014.

For the first two months of the year, the payments surplus hit $1.121 billion, surpassing the initial government target, as well as the comparative $1.084 billion surplus posted a year earlier.

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