FDI breaches $2-B mark in 2012

MANILA, Philippines – Foreign direct investments (FDI) breached the $2-billion mark last year, the first time it did so in the past five years, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

FDI registered a net inflow of $2.033 billion last year, up by almost 10 percent from $1.852 billion the previous year. A net inflow indicates more investments entered the country than left.

It was the highest record since the $2.916 billion posted in 2007. The tally also surpassed the central bank’s revised $1.5-billion forecast. A $2.2-billion outlook has been set this year although that figure is up for review by April.

“The country continued to benefit from strong foreign investors’ confidence in the resilience of the domestic economy, given strong economic growth amid low and stable inflation as well as strong external payments dynamics,” the BSP said in a statement.

The economy grew 6.6 percent last year, beating official targets, against a backdrop of low inflation of 3.2 percent.

Broken down, FDI came mostly in the form equity placements or foreign companies’ infusions to their local offices. Data showed equity inflows more than doubled to $1.345 billion.
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These infusions, the central bank said, were sourced mainly from the US, Australia, the Netherlands, Japan and the British Virgin Islands. Top sectors that benefitted were manufacturing, real estate, wholesale and retail trade and financial and insurance.

Inflows were backed up by the retention of already existing foreign investments, BSP said. Reinvested earnings hit $1.061 billion, up 7.9 percent year-on-year.

“Foreign investors opted to retain a portion of their corporate earnings with their local enterprises,” the central bank said.

Weighing down the FDI were other capital accounts, which primarily cover borrowings among foreign companies and their affiliates and subsidiaries here.

Figures showed this segment reversed to a net outflow of $373 million last year from a net inflow of $311 million. BSP cited continued loan repayments of local firms to their mother companies abroad as well as trade credit grants to firms overseas.

In a research note last week, investment bank Nomura Singapore Ltd. said it sees further FDI inflows this year as the country inches in to an investment-grade rating. The Philippines, which targets that status this year, is currently graded one notch below that level.

The Aquino administration targets reaching investment grade this year in a bid to lower debt interest payments and attract more foreign investors to the country.

FDI forms part of the country’s balance of payments, which gauges the country’s ability to meet external trade obligations and settle debts. –Prinz P. Magtulis (The Philippine Star)