Foreign direct investments up 72% in Q1

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The Philippines held the attention of foreign investors with inflows from abroad skyrocketing 72% in the first 3 months of the year

MANILA, Philippines – Foreign direct investments (FDI), a key measure of investor sentiment in a country,shot up 72.4% in the first 3 months of the year to to US$850 million from $493 million in the same period last year, according to the Bangko Sentral ng Pilipinas.

In a release on Monday, June 11, the BSP attributed “a large chunk of inflows for the the first 3 months” to a foreign-led acquisition of shares in a local beverage manufacturing company.

This masked the indicator’s dismal performance in the month of March when net FDI inflows plummeted by 91% to $14 million from $158 million in the same month last year. The gains in the first two months were enough to carry the quarter.

Nonetheless, the BSP touted the FDI level as a vote of confidence to the Philippines considering the fate of traditional investment destinations in the west.

In a statement, the BSP said the investment gains for the quarter were achieved “despite concerns over the deepening sovereign debt crisis in some parts of the euro zone area.” With traditional safe havens like Europe on shakey ground, developing markets like the Philippines no longer seem as risky by comparison. 

Despite the doom and gloom forcasts for other markets, investors have a “positive” outlook for the Philippines’ “favorable macroeconomic fundamentals” said the BSP.

The following sectors were the primary recipients of foreign investments:

  • Manufacturing (food, products, beverages, and electrical/electronic circuits)
  • Real estate
  • Wholesale
  • Retail trade
  • Financial and insurance services

BSP said “gross equity capital placements reached $1 billion, almost 6 times higher than the year-ago level of $176 million.”

Japan, the United States and the Netherlands – the country’s leading investors in 2011 – continued to send funds to the Philippines. The equity capital infusion in the first quarter came primarily from:

  • USA
  • Australia
  • Netherlands
  • Singapore 
  • Japan

Though reinvested earnings at $30 million only amounted to 1/3rd of the $91 million from last year.

Vote of confidence

Soaring FDIs and hot (or portfolio) money are often interpreted as a sign of confidence in the economy.

FDI, more than portfolio funds that are invested in the financial markets, have direct impact on job creation and feeding of the supply chains.

Inflows from abroad have soared under the Aquino administration, hitting a 15-year high for FDI in 2011.

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