Foreign investments up; BSP cites confidence

FOREIGN DIRECT investments (FDI) were up a tenth in the first semester given continued confidence in the country, the Bangko Sentral ng Pilipinas (BSP) yesterday reported.

June FDI alone rose by 16% to a net inflow of $73 million from a year earlier, bringing the first half tally to a net $917 million, up 10.6% from $829 million in the same period a year ago.

Investors, the BSP claimed, were confident about the country’s “subdued inflation environment, strong fiscal performance and favorable external payments position.”

During the first semester, equity capital or investments by foreign firms in local units surged by 311.5% to a net inflow $1.070 billion from $260 million.

Net reinvested earnings were also positive at a net inflow of $74 billion, albeit 57% lower than a year earlier.

But “other capital,” which consists of intercompany borrowing or lending between foreign firms and their subsidiaries or affiliates in the Philippines, swung to a net outflow of $227 million from a net inflow of $397 million last year.

“The turnaround in the other capital account was due to the settlement of trade credits extended to local companies by their foreign affiliates and the availment of trade credits by foreign companies from their local affiliates,” the BSP explained.

For June alone, equity capital surged by 290% to a net inflow of $78 million as a large infusion was made by a foreign firm to its domestic holding company in order to purchase more shares of a local manufacturer, the BSP said without naming the firms involved.

“The bulk of investments coming from the Netherlands, the United States, Japan, Germany and Singapore were channeled mainly to manufacturing, real estate, mining and quarrying sectors; wholesale and retail trade; and accommodation and food service activities,” it noted.

Reinvested earnings slipped by 4% but stayed positive at a net inflow of $23 million in June, while other capital reversed to a net outflow of $28 million.

In 2011, net FDI amounted to $1.262 billion, slightly below the previous year’s $1.298 billion. The BSP expects a further drop this year to a net $1.2 billion.

Asked if this year’s outlook may be revised given the latest data, central bank Deputy Governor Diwa C. Guinigundo reiterated that a scheduled review would push through next month.

“Forecasts for all BoP (balance of payments) accounts will be reviewed,” he said in a text message.

The BSP reassesses its forecasts every April and October. –KATHLEEN A. MARTIN, Reporter, Businessworld