Foreign direct investments in PH drop to one-year low in July

MANILA, Philippines (UPDATED) – The amount of foreign direct investments (FDIs) coming into the Philippines plunged to its lowest since President Rodrigo Duterte assumed office in July 2016, underscoring challenges to economic growth.

In July 2017, the net inflow of FDIs into the country reached $307 million, latest data from the Bangko Sentral ng Pilipinas (BSP) showed. This is the country’s lowest monthly level since it hit $238 million in FDIs in June 2016.

This announcement comes amid an assurance from the National Economic and Development Authority (NEDA) that foreign investors remain confident to do business in the Philippines. (READ: Business confidence in PH plunges to 3-year low)

“This was mainly on account of the decline in investments in debt instruments to $105 million, from $407 million,” the country’s central bank announced on Tuesday, October 10. 

 

The BSP said the sharp decline in foreign investments in debt instruments outweighed the more than fivefold increase in net equity capital, also known as new investments in foreign firms in the Philippines.

The latest BSP data showed equity placements surged 271.9% to $170 million in July this year, from $46 million in July last year.

Equity placements came mainly from Singapore, the United States, the Netherlands, Japan, and Taiwan. These were channeled to manufacturing; real estate; wholesale and retail trade; financial and insurance; as well as electricity, gas, steam, and air conditioning supply.

But potential new investments that were withdrawn also surged by 70.7% to $39 million in July, from $23 million in the same month a year ago.

Meanwhile, reinvestment of earnings increased 11.5% to $71 million in July this year, from $63 million in the same month last year. (READ: Consumer confidence declines in PH during Q3 2017)

Drop in new investments a concern

During an interpellation on NEDA’s proposed budget last week, Senate Minority Leader Franklin Drilon pointed out the declining equity placements.

From January to July this year, equity placements dropped 61.4% to $641 million, from $1.66 billion in the same period last year.

Equity withdrawals, meanwhile, almost doubled to $369 million in the first 7 months of 2017, from $189 million last year.

Drilon had asked NEDA to explain the reason for the drop in equity placements, which is a portion of FDI net inflows.

NEDA then explained the huge decline in the net equity capital is attributed to a high base year.

“The BSP data in the 1st half of 2016 showed that the net equity capital grew by 121.5% on account of the combined effects of higher gross equity capital placements and lower gross equity capital withdrawals,” NEDA Officer-in-Charge Rolando Tungpalan said in a statement.

NEDA then said the figure on foreign equity placements is not the entire FDI.

“While the data on equity placements serve as a gauge of new FDI entry and overall investor confidence, the figure is not complete,” Tungpalan added.

The BSP said the Philippines’ FDI inflows declined to 16.5% to $3.9 billion during the 1st 7 months of 2017, from $4.68 billion in the same period last year.

The country saw a high of $2.24 billion in net FDI inflows in April last year, after the Bank of Tokyo-Mitsubishi UFJ Limited infused P37 billion in fresh equity in exchange for a 20% stake in listed Security Bank Corporation.

Meanwhile, NEDA is exhausting measures to further improve the business climate in the Philippines, particularly easing foreign restrictions in several areas of business through the foreign investment negative list (FINL). (READ: PH to add more sectors allowing 100% foreign ownership)

A draft FINL is now up for review and adoption by the NEDA Board, headed by Duterte. – Rappler.com