Foreign investments surged 20% in 2013

Long-term foreign investments in the Philippines surged last year amid the confidence toward the booming domestic economy, allowing the country to gain some  ground from its richer neighbors.

Central bank officials attributed the 20-percent increase in foreign direct investments (FDIs) to $3.86 billion by the end of the year to confidence in the country’s booming economy, which grew faster than any other Southeast Asian market in 2013.

“The increase in FDIs during the year was buoyed by investors’ confidence in the country’s sound macroeconomic fundamentals,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.

Bulk of the foreign investments came in the form of lending of multinationals to their subsidiaries in the Philippines. This component rose six-fold to $2.5 billion in 2013, the BSP said.

“This developed as parent companies abroad continued to lend to their local affiliates to fund existing operations and expansion of their businesses in the country,” the BSP said.

Net inflow of equity capital reached $664 million, while multinationals’ reinvested earnings totaled $701 million, the BSP said.

The main sources of investments were Mexico, Japan, United States, British Virgin Islands and Singapore.

The increase in FDIs was accompanied by the growth in foreign portfolio investments or “hot money” to a record $4.2 billion in the same period.

Foreign portfolio investments, or “hot money,” are placements in securities such as stocks, bonds and government IOUs. These are indicative of the world’s confidence in the prospects of the domestic economy, but FDIs are seen as more long-term bets on the country’s growth.

Despite the increase, FDIs received by the Philippines was still much less than what other major Southeast Asian markets get. Last year, Malaysia reported a record net inflow of about $11.8 billion in FDIs. Foreign direct investments to Indonesia, Southeast Asia’s largest economy, reached $22 billion.

Still, the country’s FDIs in 2013 were still nearly twice the annual average the country has seen in the past 10 years.