FDI inflow breached record anew in September

AFP FILE PHOTO

MANILA, Philippines–Long-term bets by foreign firms in the country rose to a fresh record high in September as the Philippines, one of the fastest-growing economies in the region, remained attractive to investors.

Data released on Wednesday showed that foreign direct investments (FDIs) more than doubled in September.

FDIs come in the form of significant equity placements, advances by multinationals to local units, and foreign firms’ earnings reinvested in local operations.

The figure brought the total for the first three quarters of 2014 to a new record high, despite recent capacity constraints that threatened to choke capital formation onshore.

“The sustained increase in net inflows during the month reflects continued investor confidence in the country’s solid macroeconomic fundamentals,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.

Net inflow of FDIs rose by 116 percent in September to $680 million over the same month last year. For the nine months ending in September, FDI net inflows grew to $4.88 billion—higher than any full-year total on record.

Direct investments usually bankroll the construction of new facilities or the expansion of foreign firms’ new or existing operations in the country. These are considered a better measure of international investors’ confidence in the country because the placements tie them to the economy’s fortunes for the long term.

Because the investments fund business expansion, FDIs may also result in the creation of new jobs.

Data showed that the net inflow of equity capital increased significantly to $161 million from just $7 million last year.

This was due to the rise in equity capital placements by 252.4 percent to $178 million, coupled with the decline in equity capital withdrawals by 59.8 percent to $17 million.

The bulk of equity capital investments in September 2014—coming largely from the United States, Singapore, Taiwan, Japan and Germany—was channeled to the local manufacturing, real estate, wholesale and retail trade, financial and insurance, and transportation and storage sectors.

Also, intercompany loans from multinationals to their local units grew by 73.8 percent to $458 million, from the $263 million reported the previous year.

Reinvestment of earnings reached $61 million—41 percent higher than the $43 million recorded last year.