Foreign direct investment posts US$7.3B net inflows in first three quarters

Foreign direct investment (FDI) net inflows continued its growth momentum in September 2021, recording a 30.4 percent expansion year-on-year to reach US$660 million from the US$506 million net inflows in September 2020 (Table 1).^1,2

This brought the cumulative FDI net inflows for the first three quarters of 2021 to US$7.3 billion, higher by 43.8 percent than the US$5.1 billion net inflows in the same period in 2020. This was mainly on account of the 78.6 percent increase in non-residents’ net investments in debt instruments to US$5.3 billion from US$3 billion last year.³

Further, reinvestment of earnings reached US$865 million, up by 12.3 percent from the US$770 million a year ago. Meanwhile, non-residents’ net investments in equity capital (other than reinvestment of earnings) dropped by 15.7 percent to US$1.1 billion from US$1.3 billion in January-September 2020.

Net investments in equity capital declined as placements contracted by 8.1 percent to US$1.5 billion (from US$1.6 billion) and withdrawals rose by 30.7 percent to US$337 million (from US$258 million).

Bulk of the equity capital placements originated from Singapore, Japan, the United States, and the Netherlands. 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 September 2021 rose on the back of the 60.2 percent increase in non-residents’ net investments in debt instruments to US$538 million from US$336 million in the same month last year. Likewise, reinvestment of earnings grew by 25.2 percent to US$89 million from US$71 million.

However, non-residents’ net investments in equity capital (other than reinvestment of earnings) declined by 67.4 percent to US$32 million from US$99 million in September 2020. This was due to the decrease in equity capital placements (by 22.3 percent to US$88 million from US$114 million), coupled with the expansion in equity capital withdrawals (by 269.8 percent to US$56 million from US$15 million).

Equity capital placements during the month came largely from Japan, the United States, Hong Kong, Indonesia, and Singapore. These were channeled mainly to the 1) manufacturing; 2) real estate; 3) professional, scientific and technical; and 4) construction industries.

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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.