Net FDI inflows down in 2011

The net inflow of foreign direct investments into the country fell slightly in 2011 due to global economic challenges—led by the prolonged debt crisis in the eurozone and the weak recovery of the United States economy—which dampened the sentiment of investors.

The government claimed that the Philippines enjoyed favorable macroeconomic indicators last year, but unfavorable developments in the external environment dampened investor appetite even in emerging markets like the Philippines.

BSP data showed that the net inflow of FDIs reached $1.26 billion last year, down by 2.8 percent from the $1.298 billion registered in the previous year.

The net amount of FDIs came about as gross inflows reached $1.73 billion, while outflows amounted to $463 million.

The gross inflows marked a 41-percent drop from the $2.9 billion in the previous year, as many foreign businesses opted to stay in the sidelines and delay offshore investment plans in the wake of the uncertainties in the global economy, BSP officials said.

FDI outflows also declined by 72 percent from $1.63 billion a year before, as many of those invested in the country decided against moving their funds overseas, the BSP said.

Industries that benefited most from the FDI inflows last year included information and communication, real estate, manufacturing, mining and quarrying, and wholesale and retail trade.

BSP Governor Amando Tetangco Jr. earlier said there was a chance the Philippines could corner more FDIs this year given efforts to boost infrastructure spending and with a modest improvement in the US economy.

He said the Philippine banking sector had sufficient liquidity to support the financing needs of companies that intend to invest in the country.

While officials blamed external factors for the decline in the FDIs last year, economists pointed to other factors as reasons for the reluctance of foreign investors to do business in the country. They cited inferior infrastructure and tedious processes in setting up businesses as among these factors.

While it is true that global economic problems dampened investor appetite, some neighboring countries still enjoyed significant FDI inflows, they said.