Net FDI inflows slump to over 1-yr low in July

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Net foreign direct investments (FDI) slumped to their lowest level in over a year in July on the back of a steep drop in funds channeled into debt instruments, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.

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At $307 million, the net inflow for the month was 37.9 percent lower compared to July last year and was also the smallest since June 2016’s $238 million.

The Bangko Sentral said this was mainly on account of a 74.3-percent decline in investments in debt instruments, to $105 million from $407 million, which outweighed a more than five-fold increase in net equity capital.

Net equity capital, at $131 million in July, was 470 percent higher compared to the $23 million posted a year earlier. Equity capital placements totaled $170 million, outpacing the $39 million in withdrawals during the month.

The bulk of inflows came from Singapore, the United States, the Netherlands, Japan and Taiwan, the central bank said.

The funds were channeled primarily into manufacturing; real estate; wholesale and retail trade; finance and insurance; and electricity, gas, steam and air conditioning supply activities.

Reinvested earnings, meanwhile, grew by 11.5 percent to $71 million.

July’s slump weighed on net FDI flows for the first seven months of 2017, which fell by 16.5 percent year on year to $3.9 billion.

The Bangko Sentral said this was due to an 81.5-percent decline in net equity capital to $272 million.
Placements during the period came mostly from Singapore, the United States, Japan, Hong Kong and the Netherlands.

Net placements in debt instruments expanded by 13.9 percent to $3.14 billion from $2.76 billion.
Reinvested earnings reached $487 million, up 9.3 percent.

The Bangko Sentral raised its 2017 net FDI forecast to $8 billion in June, from $7 billion previously, citing improved domestic indicators and expected global uptick.

Concerns raised

Senator Franklin Drilon last week expressed concerns over “a significant deceleration in the influx of new investments” or equity placements during a hearing on the National Economic and Development Authority’s (NEDA) 2018 budget.

This prompted the NEDA to issue a statement on Tuesday claiming that foreign investors remained confident in doing business in the Philippines, a view also echoed by Presidential Adviser on Entrepreneurship Jose Ma. Concepion 3rd.

The NEDA, citing data released by the BSP last month, said net FDI totaled $3.6 billion in June, down 14 percent from a year earlier. This was due to a 90.3 percent drop in net equity capital to $141 million in the first half from $1.448 billion in the same period last year.

“While the data on equity placements serve as a gauge of new FDI entry and overall investor confidence, the figure is not complete. The figure does not show the total inward investments made by foreign investors in the country,” NEDA officer-in-charge Rolando G. Tungpalan said.

The decline in net equity capital was also attributed to a high base.

Tungpalan said the business outlook for the rest of the year was rosy based on the central bank’s latest Business Expectations Survey.

The NEDA said it was also exhausting all measures to further improve the business climate in the Philippines, particularly by easing foreign restrictions via revisions to the foreign investment negative list (FINL).
A draft FINL is now up for review and adoption by the NEDA Board.

Economic managers are also pushing for the approval of the Tax Reform for Acceleration and Inclusion (TRAIN) bill, which is a crucial component of the government’s massive infrastructure program, “Build Build Build.”

Cabinet officials have also been drumming up investor interest via briefings overseas, with the next leg to be held in New York with Socioeconomic Planning Secretary Ernesto M. Pernia, Budget Secretary Benjamin Diokno and Finance Secretary Carlos Dominguez III in attendance.

Confidence ‘pretty high’

Concepcion, meanwhile, claimed the plunge in net equity capital could be a “blip”.

“If it is constantly going down for the last two or three years, then maybe you have a problem. But if it was just a blip just like this year, I would not be concerned,” he said.

“Right now, the barometer of confidence to me in the business side is pretty high. And that can continue to be maintained if they see that the country is moving forward.”

Concepcion claimed that business confidence was manifested during a recent meeting between economic managers and private sector representatives for the “Build Build Build” program, with business leaders such as Ramon Ang of San Miguel, Lance Gokongwei of Cebu Pacific and Michael Tan of the Lucio Tan Group expressing their desire to participate in infrastructure projects.

“The business sector wants to be partners with them (the government) in their nationwide building program, and one of the areas that is of extreme interest is the airports in the Philippines. So if you’re saying that there is a weakness in confidence in the business community, [that’s] definitely not [the case],” he said

“From my perspective, everything is moving as fast as possible.”

Concepcion, however, conceded that the foreign funding for the Duterte administration’s infrastructure projects from Japan and China had yet to come in.

WITH LLANESCA T. PANTI

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