Foreign direct investments fall by 68%
By Doris Dumlao
Philippine Daily Inquirer
First Posted 11:38:00 08/12/2008
MANILA, Philippines -- The US-led global slowdown has scaled back the flow of net foreign direct investments (FDIs) to the Philippines by 68 percent in the first five months this year, the Bangko Sentral ng Pilipinas reported Tuesday.
The country captured $725 million in net FDIs from January to May this year, down from the net inflow of $2.3 billion posted a year ago.
"This developed as the investment environment turned more cautious due to concerns about global financial market fragilities and the downturn in many advanced economies including the US," the BSP said in the report.
Unlike portfolio investments which are more volatile, FDIs represent investments that are usually capital- and labor-intensive, such as factories, power plants, mining ventures, business process outsourcing (BPOs) and other enterprises. They are considered the least volatile form of financial flows.
FDIs can take the form of fresh equity capital, reinvested earnings or cash advances from principal investors abroad. These are reflected in the country's balance of payments with the rest of the world as part of the capital and financial account.
For May, the country posted $95 million in net FDI outflow for the first time in 11 months, mainly as inter-company loan repayments to offshore investors amounting to $152 million.
During the five-month period, net inflows of FDI came largely in the form of equity capital amounting to $322 million, while outflows in equity capital -- mainly as capital repatriated by non-resident investors from holding companies based in the Philippines -- reached $139 million.
Gross equity capital placements during the period reached $461 million and were channeled mainly to manufacturing, services, mining, construction real estate and financial institutions.
The manufacturing sub-sectors that benefited most during the five-month period were in shipbuilding and repair as well as those in the production of auto electronic parts and components.
Recreational and cultural services also attracted fresh FDIs while in construction, the top recipients were those in hotel and resort development and power plant construction.
The fresh FDIs mostly came from Japan, United States, Singapore, Germany, Malaysia and South Korea.
Reinvested earnings during the five-month period reached $161 million, lower by 4.7 percent from the previous same period as some local firms repatriated profits to their foreign investors.
Other capital, consisting mainly of inter-company borrowing and lending between FDI investors and their local subsidiaries or affiliates, recorded net inflows of $242 million. This was lower compared to the combined loan repayments and lower loan availments of local subsidiaries to and from their parent companies.
The BSP expects the country to attract $2.6 billion in net FDIs for the full year, slightly up from last year’s $2.7 billion, on sustained offshore investor interest in key sectors like mining, businesses process outsourcing, power and manufacturing.
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