FDI sustains growth in November 2021; January-November level rises to US$9.2B

Foreign direct investment (FDI) net inflows continued its growth trajectory in November 2021, posting a 96.0 percent increase year-on-year to reach US$1.1 billion from the US$559 million net inflows in November 2020 (Table 1).^1, 2

This brought the cumulative FDI net inflows in January-November 2021 to US$9.2 billion, a 52.5 percent growth from the US$6.1 billion net inflows in the same period in 2020.

Behind this development was the 82.1 percent growth in non-residents’ net investments in debt instruments which climbed to US$6.8 billion from US$3.8 billion in the comparable period in 2020. ³

Likewise, reinvestment of earnings rose by 12.8 percent to US$1 billion from the US$907 million recorded in the first eleven months of 2020.

Meanwhile, the growth in FDI inflows was moderated by the marginal contraction in non-residents’ net investments in equity capital (other than reinvestment of earnings) by 1.2 percent to US$1.4 billion.

Nonetheless, it was noted that the two consecutive monthly growth in net equity capital investments in October and November helped narrow the cumulative contraction of this account for the first 11 months of 2021 to a single digit from the double-digit declines posted during the period July-September 2021.

Bulk of the equity capital placements during the period were sourced from Singapore, Japan, and the United States. These were invested mostly in the 1) manufacturing; 2) financial and insurance; 3) electricity, gas, steam, and air-conditioning; and 4) real estate industries.

FDI net inflows in November 2021 rose on the back of the 109.3 percent upturn in non-residents’ net investments in debt instruments to US$896 million from US$428 million in the comparable month in 2020.

Non-residents’ net investments in equity capital (other than reinvestment of earnings) likewise rose by 78.8 percent to US$118 million from US$66 million in November 2020.

This improvement was on account of the increase in equity capital placements (by 37.9 percent to US$132 million from US$96 million) coupled with the decrease in equity capital withdrawals (by 52.8 percent to US$14 million from US$30 million).

Equity capital placements during the month emanated largely from the United States and Japan. Investments were channeled primarily to the 1) manufacturing; 2) financial and insurance; and 3) real estate industries. Likewise, reinvestment of earnings grew by 25.2 percent to US$81 million from US$64 million.

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¹ The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6).  FDI includes (a) investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident subsidiary/associate in its resident direct investor.  FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.

² The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority (PSA), which are sourced from Investment Promotion Agencies (IPAs), represent investment commitments, which may not necessarily be realized fully, in a given period. Further, the said PSA data are not based on the 10 percent ownership criterion under BPM6.  Moreover, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the PSA’s foreign investment data do not account for equity withdrawals.

³ Net investments in debt instruments consist mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines. The remaining portion of net investments in debt instruments are investments made by non-resident subsidiaries/associates in their resident direct investors, i.e., reverse investment.