FDI inflows up 156% to $441 M in December

MANILA, Philippines –  Foreign direct investment (FDI) inflows surged by 156 percent in December last year as more and more investors find the Philippines attractive due to its solid macroeconomic fundamentals and brighter economic growth prospects, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data showed that FDIs in December posted a net inflow of $441 million, a notable 156 percent increase, or $269 million, from the $172 million net inflow booked in the same month in 2009.

The Philippines booked its strongest economic performance in 34 years after its   gross domestic product (GDP) posted a surprising growth of 7.3 percent last year. The country was on the verge of recession in 2009 after its GDP growth slackened to 1.1 percent from 3.8 percent in 2008 due to the full impact of the global financial crisis.

“The economy’s solid macroeconomic fundamentals and brighter growth potentials, together with the strengthening global economic recovery and improved risk appetite for emerging market assets, continued to drive investments into the country,” BSP officer-in-charge Juan de Zuniga Jr. said in a statement.

During the month, equity placements surged 2,606 percent to $406 million from $15 million in December in 2009 due primarily to the sizeable foreign investments in the hotel, entertainment, and transport service industries while equity withdrawals jumped 169 percent to $35 million from $13 million.

Reinvested earnings fell 50 percent to $12 million last December from $24 million in the same month in 2009 while other capital consisting largely of intercompany borrowings from foreign direct investors by subsidiaries and affiliates in the Philippines also plunged by 60.3 percent to $58 million from $146 million.

For 2010, de Zuniga reported that FDIs posted a net inflow of $1.71 billion, 12.7 percent lower than the $1.96 billion net inflow recorded in 2009 due to cautious investor sentiment. The actual inflow was lower than the target of $2 billion for last year.

He pointed out that equity placements dropped by 42.5 percent to $1.15 billion last year from $2 billion in 2009 while equity withdrawals went up by 10.8 percent to $307 million from $277 million.

“Equity capital investments in new and existing projects moderated during the year as investor sentiment was generally marked by cautiousness and uncertainties surrounding the sovereign debt crisis in some parts of Europe, geopolitical tensions in Korea, asset price bubble and overheating concerns in fast growing emerging markets,” de Zuniga explained.

He also added that large-scale investments arising from the privatization of a local power corporation and the acquisition of shares of a local beverage manufacturing firm were recorded in 2009.

These included 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.

Equity infusions last year coming from the US, Japan, Hong Kong, Macau, Singapore, Ireland, and Kuwait went to mining and quarrying, hotel services, real estate, transport and storage, banking, and the manufacturing sectors.

Reinvested earnings surged by 87.7 percent to $291 million last year from $155 million in 2009 as foreign investors in local firms retained a larger amount of profits given the favorable domestic economic prospects while other capital zoomed by 645.5 percent to $574 million from $77 million.

Monetary authorities were surprised with the strong capital inflows that continue to flood emerging market economies particularly the Philippines but is ready with its enhanced toolkit to prevent the build up of inflation pressures.

While FDI inflows continue to head south, the inflow of foreign portfolio investments or “hot money” hit a new record level of $4.61 billion last year or nearly 12 times the 2009 level of $388.02 million as funds continued to flood emerging markets including the Philippines. Inflows more than doubled to $12.997 billion last year from $6.335 billion in 2009 as investments shares listed at the Philippine Stock Exchange (PSE) surged by 75 percent to $8.5 billion from $4.8 billion. –Lawrence Agcaoili (The Philippine Star)