RP posts lower net FDI inflow in 7 months

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the net inflow of foreign direct investments (FDIs) plunged 42 percent in the first seven months of the year due to a lack of major capital inflows and higher equity withdrawals.

BSP officer-in-charge Nestor Espenilla Jr. said that the Philippines posted a net FDI inflow of $954 million from January to July this year or $693 million lower than the net inflow of $1.647 billion registered in the same period last year.

Espenilla said equity capital plummeted by 92.1 percent to $141 million in the first seven months of the year from $1.779 billion in the same period last year as placements plunged by 81.3 percent while withdrawals surged by 229 percent.

“This was 92.1 percent lower than the level posted in the comparable period in 2009 when direct investment inflows surged due to the acquisition of a significant number of shares in a local beverage manufacturing firm and the privatization of a local power corporation,” he explained.

The large inflow booked in 2009 include the investment made by China’s largest electricity provider State Grid Corp. and Monte Oro Grid Resources Corp. in state-owned National Transmission Corp. (TransCo) that bagged a $3.95-billion concession contract as well as the decision of Japanese brewer Kirin Holdings to acquire a stake in Manila-based San Miguel Brewery of diversified conglomerate San Miguel Corp. worth P65.8 billion.

Data showed that equity placements from January to July reached $345 million or $1.496 billion lower than the $1.841- billion placements made in the same period last year. Major sources of equity capital flows include the US, Ireland, Netherlands, Switzerland, Japan, and Singapore.

The BSP said the inflows were channeled to banking; manufacturing such as pharmaceutical products, semiconductors, health care products, and air conditioners or refrigerators; real estate; transport or storage; power generation; mining; and services.

On the other hand, equity withdrawals amounted to $204 million in the first seven months of the year or $142 million higher than the equity withdrawal of $62 million in the same period last year.

Espenilla explained that other capital consisting largely of intercompany borrowings from foreign direct investors by subsidiaries and affiliates in the Philippines surged 501 percent to $590 million from a net outflow of $147 million and was the biggest contributor to the net inflows.

“This development was due mainly to higher intercompany loan availments by Philippine subsidiaries from their parent companies abroad, particularly in the manufacturing, services, financial intermediation, and electricity/gas/water supply sectors,” he said.

Reinvested earnings zoomed by 1,386 percent to $223 million from $15 million.

For the month of July alone, the Philippines posted a net FDI inflow of $222 million as investors pumped in more funds into the Philippines on the back of its strong macroeconomic fundamentals and fresh hopes brought by the new administration under President Aquino after the success of the country’s first ever automated elections last May.

“FDI in July 2010 yielded net inflows of $222 million, reflecting positive investor sentiment on the back of the country’s stronger growth momentum, expectations of manageable inflation for the rest of the year, and healthy external payments dynamics,” the BSP deputy governor said. –Lawrence Agcaoili (The Philippine Star)