Foreign direct investments in May down 68%–BSP

MANILA, Philippines – The country registered a net outflow of foreign direct investments in May as the elections pushed investors to the sidelines while waiting for the political situation to stabilize.

According to the Bangko Sentral ng Pilipinas, net outflow of FDIs reached $35 million in May. This was a swing from the net inflow of $446 million in the same month in 2009.

The bleak investment picture in May dragged the FDIs for the first five months of the year. FDI in January to May stood at a net inflow of $446 million, down 68 percent from $1.39 billion in the same period a year ago.

Central bank officials said the outflow of investments in May and the decline in the net inflow in the first five months were due to uncertainties both in the domestic and international fronts.

Locally, they said, the elections prompted foreign investors to wait until the new administration stepped in and to look for signs the turnover of governance would be smooth. Offshore, the debt crisis in the Eurozone dampened risk appetite of investors.

Analysts said the crisis in the West somehow cast doubts on the sustainability of the recovery of the global economy from the 2009 recession. Asian developing countries, like the Philippines, are partly dependent on the global economic recovery, which would spell rebound of their export sectors, to boost their own growth rates.

“Investors stayed on the sidelines as they remained wary of potential spillovers of the Eurozone’s sovereign credit problems, notwithstanding the relatively peaceful conduct of the May 2010 local and national elections,” BSP Governor Amando Tetangco Jr. said in a statement.

Data from the central bank showed $630 million worth of gross inflows of FDIs in January to May, while gross outflows amounted to $184 million.

The BSP said bulk of the gross inflows of FDIs in the first five months came from the United States, Switzerland, Japan, Netherands, Singapore, and Hong Kong.

Investments from corporate entities from these countries benefited mostly the manufacturing, real estate, financial intermediation, utilities, mining, and transportation sectors.

The BSP expects the net outflow of investments in May to be reversed in the succeeding months given fresh optimism of the business sector, which private-sector analysts said became evident since Benigno Aquino III took over as the country’s new chief executive.

The government’s new economic team has vowed to improve the country’s business climate, particularly by trimming procedures in setting up a business and curbing corruption in line agencies.

The team is also promoting partnerships between the government and the private sector wherein the private sector will invest in public infrastructure projects.

Finance Secretary Cesar Purisima, who heads the economic team, said the government would put up an infrastructure fund, which would become a pool of investments from the private sector in priority infrastructure projects. –Michelle Remo, Philippine Daily Inquirer