FDI net inflows up 77 percent to $3.6 billion in January to June period

Foreign direct investments (FDI) representing capital infused in domestic business ventures that remain invested for the long haul flowed inward on net basis in June this year, totaling $588 million, the Bangko Sentral ng Pilipinas said on Wednesday.

The surge in FDI, favored more than its “hot” or speculative portfolio investments counterpart, represent a 77-percent increase from a year earlier.

FDI are favored over portfolio investments because these are the kind of foreign capital invested in so-called brick-and-mortar business ventures in the country that generate employment for Filipinos and taxes for the national coffers. Portfolio funds, on the other hand, benefit only the financial markets where they may be uprooted at the merest hint of trouble or promise of greater rewards elsewhere.

As a result, FDI in the first six months posted net inflows of $3.6 billion. This was higher than the $2- billion inflows in the same period last year. This also exceeded the government’s FDI inflow assumption of $1 billion for the whole year.

The central bank said the strong six-month cumulative FDI net inflows continue to “reflect strong investor confidence in the country’s solid macroeconomic fundamentals.”

In June alone, FDI posted net inflows amounting to $588 million, a turnaround from the $26-million net outflows registered in the same month last year.

“The increase in FDI during the period [first half of 2014] was brought about by the large increments in all FDI major components,” the central bank said.

In particular, investments of parent companies abroad in debt instruments issued by local affiliates, or the so-called intercompany borrowings, hit $2.4 billion in the first six months, double last year’s $1.2 billion. Reinvestment of earnings also nearly doubled in the first half this year, from $232 million in 2013 to $400 million in 2014.

Equity capital, meanwhile, rose by 30.7 percent in the January-to-June period this year, or a net inflow of $762 million from only $583 million seen last year.

The equity capital investments were channeled mostly to activities related to financial and insurance, real estate, manufacturing, wholesale and retail trade, as well as transportation and storage activities.

The equity placements from overseas investors were mostly from the United States, Hong Kong, Singapore, Japan and the United Kingdom. –Bianca Cuaresma, Businessmirror