FDI inflows up 19% to $396 million in first quarter

MANILA, Philippines – Foreign direct investment (FDI) into the Philippines went up by 18.6 percent in the first quarter of the year after posting a strong inflow in March amid concerns about the debt crisis in Europe as well as the wait-and-see attitude adopted by investors in light of the May 10 elections.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that FDI inflows amounted to $396 million from January to March this year or $62 million higher than the $334 million inflows recorded in the same period last year.

Concerns about Europe’s debt crisis resulted in a 90-percent plunge in equity capital to $45 million in the first quarter of the year from $460 million in the same quarter last year. “This was, however, lower by 90 percent compared to the year-ago level, as investors remained risk averse on concerns about the sovereign debt problems in the Euro zone,” the central bank said in a statement.

Equity placed into the manufacturing, utilities, services, financial intermediation, and real estate sectors plummeted by 72.2 percent to $131 million from $471 million while withdrawals zoomed by 682 percent to $86 million from $11 million.

The BSP said investors came mainly from the US, Switzerland, Japan, The Netherlands, and Singapore.

Statistics showed that reinvested earnings amounted to $32 million in the first quarter of the year, a complete reversal of the net outflow of $78 million in the same period last year.

On the other hand, the central bank reported that other capital account consisting largely of inter-company borrowing or lending between foreign direct investors and their subsidiaries and affiliates in the Philippines zoomed by 764 percent to an inflow of $319 million in the first quarter of the year versus a net outflow of $48 million in the same period last year.

For the month of March alone, FDIs posted a net inflow of $14 million or a complete reversal of of the $258 million net outflow in the same month last year.

During the month, equity placements declined by 9.1 percent to $30 million from $33 million while withdrawals reached $34 million from only $1 million.

Reinvested earnings improved by 43.5 percent but was still a net outflow of $13 million from a net outflow of $23 million.

“This reflected the positive corporate earnings results during the first three months of 2010 that encouraged investors to retain earnings or profits in local enterprises,” the BSP said.

Other capital consisting largely of inter-company borrowing or lending between foreign direct investors and their subsidiaries and affiliates in the Philippines reached $31 million, a complete reversal of the $267 million outflow registered in the same month last year.

However, economists and analysts believe FDI inflows would further improve over the next few months after the success of the country’s first ever automated elections in which President-elect Benigno “Noynoy” Aquino III and Vice President-elect Jejomar Binay were proclaimed winners last Wednesday.

FDI inflows went up by 26.2 percent to $1.95 billion last year from $1.54 billion in 2008 on the back of strong equity inflows as investors continued to plow back earnings to the country in recognition of the resilient domestic economy. This after equity capital net inflows jumped 38.1 percent to $2.013 billion from $1.468 billion while withdrawals retreated by 7.2 percent to $207 million from $223 million.

The bulk of the investments went to manufacturing, real estate, construction, services, financial intermediation, mining, trade or commerce as well as transportation, storage, and communications sectors.

The BSP sees FDI inflows hitting $1.8 billion this year. This would result in higher gross international reserves (GIR) of about $48 billion to $49 billion this year from a record high of $44.24 billion last year. –Lawrence Agcaoili (The Philippine Star)