MANILA, Philippines - Foreign direct investment (FDI) climbed 72.4 percent in the first quarter of the year on the back of the country’s sound macroeconomic fundamentals despite concerns over the deepening sovereign debt crisis in Europe, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.
BSP Governor Amando Tetangco Jr. said that FDI inflows reached $850 million from January to March or $357 million higher compared to the $493 million recorded in the same period last year as investor sentiment continued to improve.
“The appreciable growth of FDI reflected positive investor sentiment owing to the country’s favorable macroeconomic fundamentals despite concerns over the deepening sovereign debt crisis in some parts of the euro zone area,” Tetangco said.
Data showed that equity placements surged 477.8 percent to $1.02 billion in the first quarter from $176 million in the same quarter last year while withdrawals surged 244 percent to $86 million from $25 million.
“In particular, gross equity capital placements reached $1 billion, almost six times higher than the year-ago level of $176 million. A large chunk of the inflows for the first three months of 2012 was accounted for by the acquisition of shares by a foreign firm in a local beverage manufacturing company,” Tetangco said.
Kirin Holdings of Japan bought a 43- percent stake in diversified conglomerate San Miguel Corp. (SMC) in 2009 for $1.06 billion and spent another $300 million also in 2010 to acquire an interest in San Miguel Brewing International Ltd.
The BSP chief pointed out that equity capital infusion came mainly from the US, Australia, Netherlands, Singapore, and Japan and were primarily infused to manufacturing of food products, beverages, and electrical or electronic circuits as well as real estate, wholesale and retail trade, and financial and insurance services.
The BSP reported that other capital account consisting largely of intercompany borrowing between foreign direct investors and their subsidiaries or affiliates in the Philippines fell 144.2 percent to a net outflow of $111 million in January to March from a net inflow of $51 million in the same period last year due to higher trade credits extended to affiliates abroad.
Likewise, reinvested earnings retreated by 67 percent to $30 million from $91 million as foreign direct investors opted to cash in on the earnings of their local enterprises.
For March alone, FDI inflows plunged by 91.1 percent to $14 million from $158 million in the same month last year as other capital posted a net outflow of $80 million from a net inflow of $8 million.
Equity investments in March declined by 16.8 percent to $94 million from $113 million while withdrawals surged 125 percent to $9 million from $4 million. Reinvested earnings, likewise, fell 78 percent to $9 million from $41 million.
International credit rating agencies took note of the country’s strong external payments position. New York-based Standard and Poor’s (S&P) and Moody’s Investors Service recently raised the credit rating outlook to positive from stable paving the way for a possible upgrade of the rating that its currently two notches below investment grade.
On the other hand, London-based Fitch Ratings rates the country’s sovereign credit at one notch below investment grade while Moody’s as well as S&P rate the country’s sovereign credit at two notches below investment grade. - By Lawrence Agcaoili