FDIs down 45% to $1.387B in first 9 months

Foreign direct investments (FDIs) tumbled by 45 percent to $1.387 billion during the first nine months of this year from $2.54 billion a year ago as foreign investors held back plans to expand their Philippine operations.

Clouded by fears of a deep recession in the world’s biggest markets, net inflows of foreign direct investments weakened further, marking a 55.7-percent decline in net equity investments to $823 million this year from $1.850 billion a year ago.

Data from the Bangko Sentral ng Pilipinas (BSP) revealed that equity capital placements alone fell 50.6 percent over the three-quarter period from $2.018 billion to $997 million.

Equity withdrawals, on the other hand, went up nine percent to $174 million during the nine month period from $159 million  a year ago. 

However, BSP Governor Amando M. Tetangco Jr. said the BSP recorded some encouraging signs in September when net inflows of FDIs   rose to $311 million compared with only $32 million in September last year.

According to Tetangco, the September improvement came from robust inflows in other capital and reinvested earnings.

In September, Tetangco said the FDI account known as other capital reversed to a net inflow of $230 million from a net outflow of $63 million in September last year.

Tetangco said the reversal was due to higher trade credits extended to affiliates abroad amounting to $187 million. The reinvested earnings account also rose to $18 million, from $14 million in the same month last year.

Also for the month of September, equity capital investments continued to post a net inflow of $63 million, although at lower level compared to $81 million last year.   

The September showing, however, was not enough to carry the three-quarter level closer to the 2007 level. Tetangco said this was caused by lingering global financial uncertainties that he said led foreign investors to stay on the sidelines and wait for more stable financial market conditions.

The equity capital that did come into the country, on the other hand, was infused by investors coming from the US, Japan, Singapore, South Korea, Germany, Malaysia, Taiwan, Hong Kong, and the Netherlands.

According to Tetangco, these equity capital investments went mainly to manufacturing activities such as shipbuilding and repair, auto electronics parts and components, paper and tobacco products.

Tetangco said there were also investments in services such as recreational and cultural businesses; as well as mining. He said investments were also seen in construction, mainly for hotel/resort/water spa development, power plant facility, global gateway and logistics hub.

BSP data also showed that for the nine-month period, reinvested earnings also grew $360 million, higher by more than 50 percent relative to the same period in 2007.

BSP data showed that for the nine-month period, reinvested earnings also grew $360 million, higher by more than 50 percent relative to the same period in 2007.

The other capital account, consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/ affiliates in the Philippines, recorded lower net inflows amounting to $204 million because of intercompany loan repayments. 

The drastic slowdown in net FDI was not unexpected, however and the BSP has already projected that total inflow this year would drop from $4.2 billion in 2007 to $2.6 billion and possibly even less.–Des Ferriols, Philippine Star