Foreign direct investment (FDI) net inflows reached US$819 million in January 2022, albeit lower by 16.0 percent than the US$975 million net inflows posted in January 2021 (Table 1).1,2
The decline in FDI net inflows reflected the 68.2 percent contraction in equity capital placements to US$118 million from US$370 million in the same month last year.
This may be due largely to investor concerns following the resurgence of cases of the highly transmissible Omicron COVID-19 variant in the country and the re-imposition of stricter quarantine measures in early January 2022.
Equity capital placements originated mostly from Japan, the United States, the Netherlands, and Malaysia. Capital infusions were channeled mainly to the 1) manufacturing; 2) financial and insurance; and 3) real estate industries.
Reinvestment of earnings was little changed at US$78 million from US$79 million a year ago.
Meanwhile, non-residents’ net investments in debt instruments increased by 18.3 percent to US$634 million from US$536 million in January 2021 as inflows were infused to local affiliates to finance their operational requirements.3
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.