Foreign investments down 55% in August

FOREIGN investments fell 55 percent in August as investors continued to shy away from the Philippines, where the planned infrastructure projects are still to take off more than a year into President Benigno Aquino III’s term.

The Bangko Sentral said the net inflows fell to $50 million from $111 million a year ago as a result of the debt crisis in Europe and the global economic uncertainty.

“Notwithstanding the Philippines’ solid macroeconomic fundamentals, the global economic setbacks—particularly the financial strains arising from the sovereign debt crisis in the euro area and the sluggish growth experienced in the US—have profoundly affected economic prospects, causing investor risk aversion to rise sharply,” the central bank said.

The sharp drop in the net inflows in August pulled down the eight-month total to P810 million from P1.002 billion.

Most of the net inflows were reinvested earnings and other capital, which offset the small placements that amounted to just $326 million in the eight months through August. That was 20.9 percent lower than $412 million in placements recorded a year earlier.

The new capital investments coming mostly from the United States, Japan, Hong Kong, Korea and Singapore were channeled to real estate, manufacturing, mining and quarrying, the utilities, and the wholesale and retail trade sectors.

Still, the capital withdrawals reached only $66 million in the first eight months compared with $205 million a year ago. That resulted in net equity capital inflows of $260 million compared $207 million a year ago.

The World Bank and the International Monetary Fund say the Philippine government must step up public spending in infrastructure projects to enhance the environment climate.

The gross domestic product grew by just 4.0 percent in the first half of 2011 amid the lackluster government spending that failed to support private investments.

The government has yet to start any of its much-trumpeted infrastructure projects under the so-called public-private sector partnership framework. –Roderick T. dela Cruz, Manila Standard Today