Foreign direct investment surge in November-BSP

THE Bangko Sentral ng Pilipinas reported that foreign direct investment (FDI) net inflows in November 2010 amounted to US$304 million, more than three times the US$92 million net inflows posted in the same month a year ago.

BSP Governor Amando M. Tetangco, Jr. noted that investors’ continued risk appetite for emerging Asia’s assets along with the brighter outlook on the Philippine economy helped boost the flow of capital into the country.

The robust growth of FDI during the month was driven by the rebound in equity capital net inflows to US$274 million (from only US$8 million in 2009), due largely to the sizeable investment by two Japanese firms in a local mining corporation.

This compensated for the lower net inflows from reinvested earnings and other capital which settled at US$4 million and US$26 million, respectively, or a decline of 77.8 percent and 60.6 percent from their year-ago levels.

FDI net inflows in November pushed the eleven-month cumulative FDI level to US$1.4 billion.  This level was lower, however, by 22.7 percent than the US$1.8 billion recorded a year ago.

This can be attributed to investor concerns over the sovereign debt crisis in some parts of Europe, rising inflation in China, tensions in Korea, and the subdued economic prospects in the US.

In particular, net inflows of equity capital amounting to US$477 million were markedly lower than the US$1.8 billion posted last year, a notable portion of which was due to large investments arising from the privatization of a local power corporation and the acquisition of a number of shares of a local beverage manufacturing firm.

Equity capital for the first eleven months of the year was infused by investors coming from the U.S., Japan, Singapore, Hong Kong, Ireland, and the Netherlands.  These investments went mainly to the following sectors: mining and quarrying, real estate, banking, manufacturing (pharmaceuticals, semiconductors, health products, and air conditioners/refrigerators/parts), finance and insurance, power generation, and electricity gas steam and air conditioning supply.

Meanwhile, the other capital account, consisting mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines, recovered in January-November 2010.

Net inflows of US$634 million were realized, a turnaround from the net outflows of US$88 million last year, driven by intercompany loan availments and trade credits extended by affiliates abroad.

Reinvested earnings also rose during the eleven-month period to US$263 million, more than four times the level in the same period in 2009.  Encouraged by the improvements seen in the domestic economic and corporate fundamentals, foreign investors opted to reinvest their accumulated earnings in local enterprises.


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