Foreign direct investments seen to drop this year

MANILA, Philippines – Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said foreign direct investments (FDIs) would slow down this year because of lingering uncertainty over global prospects in the next two to three years.

The Bangko Sentral ng Pilipinas (BSP) has been working on its foreign direct investments (FDI) projections this year but has been unable to pin down the level of expected inflows.

“FDIs are expected to continue to come in although there could be a slowdown, given the uncertainty in global growth prospects,” Tetangco said. Tetangco said risk aversion towards emerging economies, including the Phlippines, also continued to be a significant determinant of global funds movements.

“These are the reasons why the BSP endeavors to create a stable macroeconomic environment during these difficult times – to differentiate us and thus keep the confidence in our economy on solid footing,” Tetangco explained.

Foreign direct investments fell nearly 48 percent in 2008, just barely managing to sustain a net inflow of $1.52 billion compared with $2.916 billion at the end of 2007.

Official data from the BSP showed that there was a trickling of foreign direct investments amounting to $89 million in December 2008.

But inflows in December was 3.3 percent lower than the previous year and significantly lower than the $232-million inflows recorded in November 2007. The full-year data was exactly 47.9 percent lower than net foreign direct investment inflows recorded in 2007.

The BSP also reported that net equity capital flows amounted to $1.4 billion which was 30.7 percent lower than the $1.324-billion level recorded over the same period in 2007.

The BSP said the “other capital” account also recorded a net inflow of $261 million. This represents repayment by foreign affiliates abroad of trade credits from residents. 

Reinvested earnings, on the other hand, reversed to a net outflow of $91 million because of losses realized by some foreign direct investment businesses in the country in 2008.

The BSP said the US, Japan, Singapore, South Korea, Germany, Malaysia, Taiwan, Hong Kong, United Kingdom, and the Netherlands were the major sources of equity capital flows.

The bulk of the inflows, according to the BSP, were channeled to the manufacturing sector, mainly into shipbuilding and repair, auto electronics parts and components and the manufacture of paper, cigarette and other tobacco products.

The BSP said there were also inflows into services, particularly recreational and cultural businesses. Inflows also went into mining and construction projects such as hotel/resort/water spa development, power plant facility, global gateway and logistics hub.

Investments were also recorded going into utilities, real estate, trade and commerce, and financial institutions.

Foreign direct investments are expected to slow down dramatically this year but the BSP has not firmed up its projections, saying that it is still sorting through projects in the pipeline that could either be shelved or continued this year.

On the whole, however, the BSP expects the country’s foreign exchange reserve would reach at least $37.5 billion this year, down-scaling its earlier projected level of $39 billion as the growth in remittances grinds to a halt this year due to job losses abroad. –Des Ferriols, Philippine Star