FDI inflows plunge 37% in 9 months

by Lawrence Agcaoili (The Philippine Star) – 11 Dec 2019

MANILA, Philippines — Net inflows of foreign direct investments (FDI) declined for the seventh straight month in September as investors continued to hold off their investment plans in emerging markets, including the Philippines, until global growth outlook improves, according to the Bangko Sentral ng Pilipinas (BSP).

Latest data released by the BSP showed net FDI inflows reached $566 million in September, 2.9 percent lower than the $582 million recorded in the same month last year.

This brings the net FDI inflows for the nine-month period to only $5.12 billion down by nearly 37 percent compared to the $8.11 billion recorded in the same period last year.

The month-on-month net FDI inflow has been declining since March this year.

According to the BSP, the net FDI inflow was still down despite the 79.5 percent jump in equity placements to $125 million in September from $69 million in the same month last year, while withdrawals fell by 84.8 percent to $28 million from $187 million.

Reinvestment of earnings decreased by 9.4 percent to $74 million during the month from $82 million a year ago, while non-residents’ investments in debt instruments consisting mainly of loans extended by parent companies abroad to their local affiliates plunged by 36 percent to $395 million from $618 million.

“The slowdown in inflows reflected the adverse effects of the prolonged trade disputes, which continued to affect global growth negatively and prompted foreign investors to hold off their investment plans in emerging markets including the Philippines, until global growth outlook improves,” the central bank said in a statement.

Equity placements fell by 45.7 percent to $1.24 billion from January to September compared to last year’s $2.28 billion, while withdrawals jumped 58.7 percent to $607 million from $382 million.

The central bank said the bulk of the capital infusion came from Japan, the US, Singapore, China and South Korea and flowed into financial and insurance, real estate as well as manufacturing.

Reinvestments of earnings increased by 12.5 percent to $746 million from $663 million, while net debt instruments plummeted by 32.6 percent to $3.74 billion from $5.55 billion.

BSP Governor Benjamin Diokno earlier said foreign investors continued to adopt a wait-and-see attitude pending the passage of the second package of the comprehensive tax reform program (CTRP).

Diokno is confident the proposed Comprehensive Income Tax and Incentive Rationalization Act (CITIRA) would be passed by Congress either before the end of this year or early next year after the Philippine Economic Zone Authority (PEZA) finally supported the tax package that would rationalize tax incentives.

“Investors want to know exactly what will be the final version of that bill. So the sooner we act on that, then the sooner the investors can make up their mind whether to enter or exit,” Diokno said.