FDI rises by 98.9 pct in October 2021 to US$855M

Foreign direct investment (FDI) net inflows sustained its uptrend for the fifth consecutive month in October 2021, registering a 98.9 percent growth year-on-year to US$855 million from the US$430 million net inflows in the same month in 2020 (Table 1).1,2

Said development brought the FDI net inflows for the first ten months of 2021 to US$8.1 billion, higher by 48.1 percent than the US$5.5 billion net inflows in January-October 2020.

Cumulative FDI net inflows rose on the back of the 78.6 percent increase in non-residents’ net investments in debt instruments to US$5.9 billion from US$3.3 billion in the same period in 2020.[3]

Similarly, reinvestment of earnings reached US$942 million, an 11.9 percent increase from the US$842 million posted in January-October 2020.

Meanwhile, non-residents’ net investments in equity capital (other than reinvestment of earnings) remained broadly stable at US$1.3 billion.

Cumulative equity capital placements dipped slightly by 3.6 percent to US$1.6 billion (from US$1.7 billion), while withdrawals grew by 2.3 percent to US$351 million (from US$343 million).

Equity capital placements during the period came mostly from Singapore, Japan, the United States, and the Netherlands.

These were channeled primarily to the 1) manufacturing; 2) electricity, gas, steam, and air-conditioning; 3) financial and insurance; and 4) real estate industries.

The recorded increase in FDI net inflows in  October 2021 was mainly on account of the 78.5 percent growth in non-residents’ net investments in debt instruments to US$637 million from US$357 million in October 2020.

Non-residents’ net investments in equity capital (other than reinvestment of earnings) likewise increased to reach US$141 million from US$1 million in the comparable month in 2020.

The notable expansion was due to the improvement in equity capital placements (by 80.0 percent to US$154 million from
US$86 million) and the decline in equity capital withdrawals (by 84.1 percent to US$13 million from US$85 million).

Equity capital placements were sourced mainly from Japan, Singapore, and the United States.

These were channeled mainly to the 1) manufacturing; 2) electricity, gas, steam, and air-conditioning; and 3) real estate industries. Reinvestment of earnings for the month amounted to US$77 million, up by 7.1 percent from US$72 million.

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.