Net FDI inflow resurges in March

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THE Philippines recorded a net inflow of $509 million in foreign direct investment (FDI) in March, resurging from the level in February when the net inflow hit an eight-month low, central bank data showed on Tuesday.

The net inflow in March rose by 39 percent from $366 million in February and by 30.6 percent from $390 million a year earlier.

The Bangko Sentral ng Pilipinas (BSP) said the year-on-year increase was driven by inflows in intercompany borrowings. It did not provide an explanation for the rebound from the eight-month low in February.

Investments in debt instruments, or lending by parent companies abroad to their local affiliates to fund existing operations and business expansion, contributed largely to the FDI net inflows during the month, registering an increase of 75.1 percent to $445 million from $254 million a year ago.


Meanwhile, reinvestment of earnings grew 16.1 percent year-on-year to $56 million in March.

Partially offsetting these net inflows is the 91.5 percent drop in net equity capital infusion, which stood at $7
million in March, significantly lower than the $87 million recorded a year earlier, the BSP data showed.

In gross terms, equity capital placements of $49 million more than offset the $42 million withdrawals.

The bulk was sourced to the United States, Japan, Singapore, Hong Kong, and the Netherlands, the BSP said.
Placements were channeled primarily into real estate; manufacturing; financial and insurance; wholesale and retail trade; and professional, scientific, and technical activities.

Cumulative growth of 16.6%

For the January-March 2017 period, net cumulative FDI inflows registered a 16.6 percent year-on-year increase to $1.56 billion.

“The sustained FDI inflows reflect investors’ confidence in the country’s economy on account of continued growth prospects and strong macroeconomic fundamentals,” the BSP said in the statement that came with the data.

Net placements in debt instruments expanded by 108.8 percent to $1.26 billion from $606 million in the comparable period last year.

Equity capital investments recorded net inflows of $101 million, as equity capital placements reached $191 million while withdrawals amounted to only $91 million.

Placements during the period came mostly from Japan, the United States, Singapore, Hong Kong and Germany. These were largely invested in real estate; wholesale and retail trade; manufacturing; financial and insurance; and information and communication activities.

Reinvestment of earnings for the first three months of 2017 reached $193 million, up by 6.7 percent from the year-earlier level.

Calls for further reform

Analysts said the March FDI net inflows, as supported by large intercompany borrowings, reflected upbeat business activity in the country. However, they urged for more government reforms to improve the Philippine investment environment further.

Land Bank of the Philippines market economist Guian Angelo Dumalagan said rising FDI indicates foreign investors’ continued confidence in the Philippine economy.

“The increase in intercompany borrowings is an indication of upbeat business activity, which is fueling corporate expansions.

Higher borrowings might be attributed to the country’s low interest rate environment,” he explained.

Meanwhile, IHS Markit Asia Pacific chief economist Rajiv Biswas said despite improving FDI inflows into the Philippines, the total level of FDI inflows remains relatively moderate compared with other member economies of the Association of Southeast Asian Nations (Asean) such as Vietnam.

According to the World Investment Report of the United Nations Conference on Trade and Development, the Philippines recorded a total $7.91 billion FDI inflows in 2016, lagging Vietnam’s $12.60 billion.

“This highlights the need for further government reforms to accelerate FDI inflows into key sectors of the economy, such as manufacturing and infrastructure,” Biswas said.

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