FDI target exceeded

FOREIGN DIRECT investments (FDI) surprised on the upside in 2012, breaching the full-year forecast, as strong economic growth and low inflation attracted capital to the Philippines.

FDI registered a net inflow of $20 million in December, the Bangko Sentral ng Pilipinas (BSP) yesterday said in a statement, taking the 2012 tally to a net $2.033 billion.

The result — a five-year high — was up a tenth from 2011’s $1.852 billion and surpassed the BSP’s forecast of $1.5 billion.

Monthly results were also revised significantly by the central bank, buoying the full-year investment total.

“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.

The economy grew by 6.6% in 2012, outpacing most of Asia and beating the government’s 5-6% target. Inflation, meanwhile, was a benign 3.2%, well within the central bank’s 3-5% goal.

FDI was mainly driven by equity capital. Foreign investors put in a total of $1.635 billion while $290 million was withdrawn, for a net inflow of $1.345 billion. In comparison, foreign investors placed $1.021 billion and withdrew $463 million in 2011, for a net inflow of $558 million.

The bulk of last year’s equity capital came from the United States, Australia, the Netherlands, Japan and the British Virgin Islands. The funds were infused mostly in the manufacturing, real estate, wholesale and retail trade, and finance and insurance sectors.

Reinvested earnings, meanwhile, added a net inflow of $1.061 billion, while other capital accounts — inter-company borrowing and lending between foreign investors and their subsidiaries and affiliates in the Philippines — posted a net outflow of $373 million.

In December alone, equity placements registered a net inflow of $93 million, with $105 million in placements and $12 million in withdrawals. Reinvested earnings contributed a net inflow of $85 million, but other capital accounts took a net outflow of $158 million.

The importance of luring FDI as a means of promoting growth has long been stressed. While the country has progressed in leaps and bounds, it attracted mostly foreign portfolio investments — placements in stocks and bonds — which tend to be short-term and volatile. FDI, in contrast, goes into firms, tend to be long-term and yield improvements in infrastructure, employment and know-how.

The Philippines attracts the least FDI in the region. According to International Monetary Fund data, the country lured a total of $25.59 billion from 2000 to 2011, well below Malaysia’s $114.555 billion, Thailand’s $146.12 billion, Indonesia’s $185.804 billion and Singapore’s $617.922 billion. –Diane Claire J. Jiao, Senior Reporter, Businessworld
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