Up 123% year-on-year, on target for $6B in 2016
NET foreign direct investments (FDI) rose in January and more than doubled the level it posted a year ago as all components recorded increases during the month, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.
With this pace, economists are optimistic the country will see higher FDI this year, but noted that the Philippines would continue to be surpassed by neighboring countries when it comes to job-generating investments if necessary reforms were not implemented.
The central bank said FDI hit a net inflow of $587 million, 123 percent higher than the $263 million recorded in January 2015.
“This developed as all FDI components recorded increases, signaling investor optimism in the growth potential of various local industries, as well as confidence in the country’s sound macroeconomic fundamentals,” the BSP said in a statement.
Sharing the central bank’s view is University of Asia and the Pacific economist Dr. Victor Abola, who said that at its current pace, FDI could exceed $6 billion this year.
“However, the results of the election will likely dictate that pace and whether it will actually exceed that level, which for the Philippines is very good,” he told The Manila Times.
Compared to Vietnam and other Association of Southeast Asian Nations countries, however, even a further improvement this year would still keep Philippines at the bottom of FDI destinations in the region, he said.
Nicholas Antonio Mapa, associate economist at the Bank of the Philippines Islands, told the Times that the Philippines does have a rosy outlook when it comes to FDI given the robust consumption patterns and the demographic dividend.
Mapa pointed out, however: “Although it jumped, FDI still remains a weak point for the Philippines as we are unable to attract large ticket items because of the high cost of doing business in the Philippines.”
Amending restrictive constitutional provisions would help the FDI story in the Philippines, he suggested.
Recording the biggest gain in January were net equity capital investments, which expanded by 911 percent to $257 million from $25 million a year earlier. Equity capital placements of $260 million more than offset withdrawals of $3 million.
The bulk of equity capital investments came from the Hong Kong, the Bahamas, Taiwan, the United States and Singapore, and were channeled mainly to financial and insurance; real estate; electricity, gas, steam, and airconditioning supply; manufacturing; and information and communication activities.
Meanwhile, intercompany borrowings or nonresidents’ net placements in debt instruments issued by local affiliates swelled by 54.3 percent to $257 million from $167 million a year earlier.
Reinvestments of earnings, on the other hand, gained just 3.7 percent to $73 million from $71 million a year earlier.
The BSP has a $6.3-billion target for this year. Last year saw net FDI hitting $5.72 billion, falling short of the $6-billion forecast.