March FDI surges, boosted by US, Japan equity capital

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Foreign direct investment (FDI) in the Philippines surged 78.5 percent in March from a year earlier, with strong inflows of equity capital recorded from the United States, Japan, Singapore, Hong Kong and Taiwan.

However, the cumulative level of FDIs for the first three months of the year reflected an 11.6 percent year-on-year fall. FDIs are the type of capital investment that generates jobs, in contrast to hot money.

Data from the Bangko Sentral ng Pilipinas (BSP) on Tuesday showed net FDI surged 78.5 percent to $476 million in March from $266 million a year earlier.

In the three months to March, net FDI slid to a cumulative $1.852 billion from $2.096 billion in same period last year.


Equity capital inflow
The BSP said in a statement there was a net inflow of $278 million in equity capital investment in March, out of gross equity capital placements of $405 million. Withdrawals amounted to $126 million during the month.

A comparative year-earlier figure stood at $111 million worth of equity capital investments, indicating growth of 264.8 percent over the period to March this year.

The central bank said the bulk of the equity capital investment originated mainly from the United States, Japan, Singapore, Hong Kong and Taiwan, and were channeled mainly to financial and insurance activities; manufacturing; real estate; mining and quarrying; and wholesale and retail trade.

Intercompany borrowings, or non-residents’ net placements in debt instruments issued by local affiliates, declined by 18.7 percent to $143 million in March from $176 million in the same period last year.

“This was due to the continued lending of parent companies abroad to their local affiliates to fund existing operations and the expansion of their businesses in the country, an indication of sustained confidence in the country’s strong macroeconomic fundamentals,” the BSP said.

Improvement was also noted in reinvested earnings, which rose 3.5 percent year-on-year to $54 million in March. The BSP said this was because foreign investors opted to retain their earnings in local corporations amid favorable prospects for the Philippine economy.

On a cumulative basis, the net inflow of equity capital investments in the first three months reached $636 million as gross equity capital placements of $876 million more than compensated for withdrawals of $241 million.

Reinvestment of earnings and investment in debt instruments also registered net inflows amounting to $185 million and $1 billion, respectively, during the January to March period, the BSP said.

Big-ticket items sluggard
In terms of big-ticket direct investment, however, the Philippines trailed behind other countries in the Association of Southeast Asian Nations despite the higher FDI inflows in March, said Nicholas Antonio Mapa, Bank of the Philippine Islands associate economist.

“The first quarter of 2014 total was actually lower by 11.6 percent compared with the first three months for 2013,” Mapa said.

The economist added that the Philippines appears to have a long way to go to attract stable FDI flows, a necessary factor in reducing unemployment in the country.

In its explanatory note, the BSP said the figures of FDI cover actual investment inflows that could be in the form of equity capital, reinvestment of earnings, and borrowings between affiliates.

In contrast to investment statistics from other government sources, the BSP said its FDI data includes investments where ownership by a foreign enterprise is at least 10 percent.

This year, the central bank expects net FDIs to reach $2.6 billion, much lower than the $3.9 billion recorded for full-year 2013.

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