Foreign direct investments down 52% in January

MANILA, Philippines – Foreign direct investments continued to plummet, tumbling by 52 percent to only $13 million in January this year from $27 million in the same period last year and $184 million in January 2007.

The latest available data from the Bangko Sentral ng Pilipinas (BSP) confirmed fears that foreign direct investments would be hard hit by the ongoing global slowdown.

The BSP reported yesterday that equity capital investments fell by 34.1 percent to $54 million in January from $82 million in the same period last year but central bank officials are still optimistic that net inflows would continue despite the slowdown.

Central bank Governor Amando M. Tetangco Jr. said that despite the general gloom, the country is still attracting some foreign direct investments. Under the circumstances, he said inflows are still being lured by the country’s sound economic fundamentals.

Equity capital, according to Tetangco, went into real estate, financial intermediation and trade/commerce sectors. This marked investments in property development which remained buoyant despite the global pall.

Looking closer, however, January figures indicated that equity placements declined by 48.7 percent from $115 million last year to $59 million this year. But equity withdrawals also declined by 84.8 percent from $33 million to $5 million.

On the other hand, the BSP reported that reinvested earnings actually increased by 119 percent, indicating that foreign direct investors chose to keep their money in the country instead of pulling them out.

In January last year, investors actually pulled out $89 million but this year, reinvested earnings amounted to $17 million – a positive development although still small compared with $115 million that was reinvested in 2007.

Other capital, on the other hand, reversed to a net outflow of $58 million – a 270 percent decline compared with January 2008. This indicates that local companies paid a significant amount of debt they owed their foreign principals.

The BSP has been expecting FDIs to slow down dramatically this year because of lingering uncertainty over global prospects in the next two to three years.

“FDIs are expected to continue to come in although there could be a

slowdown, given the uncertainty in global growth prospects,” Tetangco said. Tetangco said risk aversion towards emerging economies, including the Phlippines, also continued to be a significant determinant of global funds movements.

“These are why the BSP endeavors to create a stable macroeconomic environment during these difficult times – to differentiate us and thus keep the confidence in our economy on solid footing,” Tetangco explained.

Foreign direct investments fell nearly 48 percent in 2008, just barely managing to sustain a net inflow of $1.52 billion compared with $2.916 billion at the end of 2007.

Official data from the BSP showed that there was a trickling of foreign direct investments amounting to $89 million in December 2008.

But inflows in December was 3.3 percent lower than the previous year and significantly lower than the $232-million inflows recorded in November 2007. The full-year data was exactly 47.9 percent lower than net foreign direct investment inflows recorded in 2007.

The BSP also reported that net equity capital flows amounted to $1.4 billion which was 30.7 percent lower than the $1.324-billion level recorded over the same period in 2007.

The BSP said the “other capital” account also recorded a net inflow of $261 million. This represented repayment by foreign affiliates abroad of trade credits from residents.

Reinvested earnings, on the other hand, reversed to a net outflow of $91 million because of losses realized by some foreign direct investment businesses in the country in 2008.

The BSP said the US, Japan, Singapore, South Korea, Germany, Malaysia, Taiwan, Hong Kong, United Kingdom, and the Netherlands were the major sources of equity capital flows. –Des Ferriols, Philippine Star