‘Lackluster’ inflow seen in 2015 vs record 2014 – analyst
Foreign direct investment (FDI) in the Philippines fell 71 percent in January 2015 from a year earlier, indicating what an analyst expects to be “lackluster” inflows of such investment for the year compared with the record high reached in 2014.
Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed $263 million of FDI entered the Philippines in the first month of the year, down sharply from $905 million in the same month last year.
The BSP said the bulk of the $263 million that flowed in at the start of 2015 came partly from non-residents’ investment in debt instruments issued by local affiliates, which amounted to $167 million.
The January FDI level fell short of the investment amount recorded in December 2014, which stood at $557 million on an increase in net equity capital infusion.
Equity capital infusion
This year in January, however, equity capital net inflows dived to $25 million from $201 million in the comparative year-earlier period.
Equity capital placements declined, amounting to only $53 million, against $368 million in the comparative period, while withdrawals slumped to $27 million from $167 million the previous year.
The BSP said the bulk of the equity capital placement came from the United States, Germany, Singapore, the Netherlands and Japan.
The net inflow from placements was directed mostly to wholesale and retail trade, manufacturing, real estate, financial and insurance, as well as professional, scientific and technical activities.
Reinvestment of earnings stood at $70 million, much lower than the $120 million registered in January 2014.
Possible late-year surge
Explaining the slump, Nicholas Antonio T. Mapa, associate economist at the Bank of the Philippine Islands, said the FDI environment shows a volatile scenario given the big ticket projects in the country that are underway.
“I wouldn’t look too much into the data report as FDI tends to be quite volatile, given that total FDI is moved by large-scale projects as opposed to smaller inflows,” Mapa said in an interview via email on Friday.
“As such, a project can bring in as much as perhaps a billion US dollars in FDI to the country in any given month and, thus, we can expect some volatility from month to month,” he added.
The economist said FDI flows may still surge by year-end, but he urged caution given the uncertainty over the timing of the anticipated US Federal Reserve interest rate hike and its effects on financial flows and exchange rates in Southeast Asia.
“In general, FDI to the region and among regional players in [Southeast Asia] is [expected]to increase as investors seek higher yields and rapidly expanding markets, which most Southeast Asian Nations have pretty much down pat,” Mapa said.
The flow of such investment is seen benefiting the Philippines, but will be lackluster this year compared with the record high seen in 2014, he said.
Mapa pointed to factors such as the current poor state of infrastructure in the Philippines, as well as an “imminent” power crisis, which he said are poised to impede the investment flows into the country.
“We can help drive more FDI [into the country]by addressing these factors, as well as certain amendments to improve the economic investment prospects through ownership rights,” he added, referring to the foreign ownership limits in the country.
Such limits have often been mentioned as an impediment to more investment, but are now being addressed by the government in its current round of reforms.