News Update Foreign direct investments drop 25% in Jan.-Oct., says BSP

Foreign direct investments (FDI) declined by 25 percent in the first 10 months of 2011, weighed down by concerns about the US economy and the unresolved euro debt crisis, the Bangko Sentral ng Pilipinas said Tuesday. "Investment decisions were stalled by renewed concerns over the prevailing uncertainties in the global economic environment and greater risk aversion following intensified financial strains in the euro zone and the continuing weak US economic performance," BSP Gov. Amando Tetangco Jr. noted. In a statement citing Tetangco, the Bangko Sentral said foreign direct investments totaled $729 million in January to October, down $239 million from $968 million a year earlier. Despite a 5.5 percent rise in equity placements to $498 million from $472 million, equities were also withdrawn at a much faster rate of 50.6 percent equivalent to $405 million from $269 million year-on-year. The result was a drop in net equity placements to $93 million from $203 million. "Notwithstanding these difficult external economic conditions, equity capital managed to post net inflows of $93 million," Tetangco said. Bulk of the investments were placed in the manufacturing sector, real estate, mining and quarrying, electricity, gas steam and air-conditioning supply, wholesale and retail trade, as well as financial and insurance activities. The sources of funds were the US, Japan, Korea, Hong Kong, Singapore, and the Netherlands. Inter-company borrowings — between foreign direct investors and subsidiaries or affiliates in the Philippines — declined by 47.3 percent to $258 million from $490 million, the central bank reported. Still, reinvested earnings went up 37.5 percent to $378 million from $275 million as investors decided to keep portions of their earnings in local enterprises. In October alone, the central bank said foreign direct investments totaled $58 million — a turn around from the $32 million net outflow a year earlier. "Positive balances were recorded across all the major FDI categories during the month in review," Tetangco said. It reflected investor sentiment regarding strong macroeconomic fundamentals, Tetangco added. Equity placements were steady at $22 million in October from $21 million year-on-year, while withdrawals dropped by 96.7 percent to $2 million from $61 million. Reinvested earnings grew by 75 percent to $21 million from $12 million while other capital placements posted a net inflow of $17 million from a net outflow of $62 million. — VS,