Category : Press Release
Date : January 08, 2021
Agency : Bangko Sentral ng Pilipinas
Title : FDI Records US$423 Million Net Inflows in October 2020; Reaches US$5.3 Billion for the First Ten Months of 2020
Article : Foreign direct investments (FDI) continued to register net inflows, amounting to US$423 million in October 2020, albeit 24.5 percent lower than the US$561 million net inflows recorded in October 2019.(1,2) This resulted as all FDI major components posted lower net inflows during the month. In particular, non-residents’ net investments in debt instruments dipped by 16.8 percent to US$358 million from US$430 million in the same month in 2019.3 Likewise, reinvestment of earnings declined by 20.6 percent to US$65 million from US$82 million in the comparable period in 2019. The slowdown in FDI during the month may be attributed in part to concerns over the resurgence of COVID-19 cases in the US, Japan and some European countries.

Similarly, non-residents’ net investments in equity capital decreased by 98.2 percent to US$1 million in October 2020 from US$49 million in October 2019. The resulting modest inflows was on account of the steeper increase in equity capital withdrawals (by 165.2 percent to US$85 million) compared to that of placements (by 5.2 percent to US$86 million). Bulk of the equity capital placements originated from Japan, the Cayman Islands, and the United States. These were invested mainly in the 1) manufacturing, 2) real estate, and 3) information and communication industries.

On a cumulative basis, FDI recorded US$5.3 billion net inflows for the first ten months of 2020, 10.2 percent lower than the US$5.9 billion net inflows posted in the same period in 2019. The decline in FDI net inflows reflected the adverse impact on investor sentiment amid the uncertainties surrounding the effect of a prolonged pandemic on the global economy. By component, non-residents’ net investments in debt instruments fell by 21.4 percent to US$3.4 billion from US$4.3 billion. Reinvestment of earnings dropped by 20.5 percent to US$704 million from US$886 million. Meanwhile, non-residents’ net investments in equity capital grew by 72.1 percent to US$1.2 billion (from US$696 million), which partly mitigated the decline in the cumulative FDI net inflows. Equity capital placements increased by 6.4 percent to US$1.4 billion (from US$1.3 billion), while withdrawals decreased by 63.9 percent to US$235 million (from US$652 million). Equity capital infusions were sourced mainly from Japan, the Netherlands, the United States, and Singapore. These were channeled largely to 1) manufacturing, 2) real estate, and 3) financial and insurance industries.

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1 The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6). FDI includes (a) investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident subsidiary/associate in its resident direct investor. FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.

2 The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority (PSA), which are sourced from Investment Promotion Agencies (IPAs), represent investment commitments, which may not necessarily be realized fully, in a given period. Further, the said PSA data are not based on the 10 percent ownership criterion under BPM6. Moreover, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the PSA’s foreign investment data do not account for equity withdrawals.

3 Net investments in debt instruments consist mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines. The remaining small portion of net investments in debt instruments are investments made by non-resident subsidiaries/associates in their resident direct investors, i.e., reverse investment.
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?View Table 2?- https://www.bsp.gov.ph/Media_And_Research/Media%20Releases/2021_01/news-01082021a2.aspx
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