FDI net inflows increase in October over global economic concerns

FOREIGN direct investments (FDIs) in the Philippines made a turnaround in October to net inflows, but was weaker during the first 10-month period as investment decisions were stalled by renewed concerns over uncertainties in the global economy.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday that FDIs recorded net inflows of $58 million in October, a reverse from the $32 million net outflows incurred in the same month in 2010.

Reinvested earnings and net equity capital amounted to $21 million and $20 million, respectively, higher by 75 percent and 11.1 percent against the levels posted during the comparable period in 2010.

Given the developments in October, cumulative net FDI inflows for the January to October period reached $729 million, which is lower by nearly 25 percent versus the $968 million net inflows registered during the same period in 2010.

“Investment decisions were stalled by renewed concerns over the prevailing uncertainties in the global economic environment and greater risk aversion following intensified financial strains in the Euro Zone and the continuing weal US economic performance,” BSP Governor Amando Tetangco Jr. said.

Despite the difficult external economic conditions, equity capital managed to post net inflows of $93 million as gross equity capital placements during the first 10 months last year improved to $498 million from $472 million during the same period in 2010. Investments largely came from the US, Japan, South Korea, Hong Kong, Singapore and The Netherlands.

These inflows were channeled to financial and insurance activities, real estate, manufacturing, mining and quarrying, among others.

The other capital account, which consists mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines, recorded $258 million net inflows in the January to October period. This was, however, 47 percent lower that the $490 million net inflows posted in the previous year.

Reinvested earnings account at end-October increased by 37.5 percent to $378 million versus the $237 million recorded during the comparable period from a year ago, as foreign direct investors opted to retain part of their earnings in domestic corporations. –KATRINA MENNEN A. VALDEZ REPORTER, Manila Times