By Lee C. Chipongian
Before the virus outbreak resulted in lockdowns, the Philippines saw some $657 million in net foreign direct investment (FDI) inflows in January, up from same time in 2019 by 12.1 percent, as investors were optimistic about growth prospects, the central bank said.
The net FDI – composed of equity capital, reinvestment of earnings and borrowings — in January 2019 was at $586 million.
According to the Bangko Sentral ng Pilipinas (BSP), the positive development in net FDIs year-on-year — “which was before the imposition of the community quarantine in the country due to COVID-19, reflects continued investor confidence in the Philippine economy, despite global economic uncertainties.”
The BSP noted that it was the increase in equity capital of $352 million that contributed mostly to net FDI growth. The positive equity capital reversed the net withdrawal of $43 million in January last year.
“Equity capital placements more than doubled to $373 million (from $186 million), while withdrawals decreased by 90.7 percent to $21 million (from $229 million),” said BSP, adding that investors from the Netherlands and Singapore boosted equity capital placements in January which were invested mostly in the manufacturing and real estate industries.
The net investments in debt instruments issued by local affiliates – these are intercompany borrowings — dropped by 57.9 percent to $233 million in January from $553 million.
Reinvestment of earnings also declined by 5.1 percent to $72 million from $76 million same time in 2019.
In an online forum last week, BSP Governor Benjamin E. Diokno said despite the pandemic, the Philippines has enough resources and reserves to remain afloat.
“We have ample FX (foreign exchange) buffer, low public sector debt, manageable external payments position, and a solid credit profile. The country’s external debt metrics have steadily improved. The external debt-to-GDP ratio to only 23.3 percent as of end-2019 compared to about 60 percent in 2005,” said Diokno.
“When the coronavirus crisis arrived, the government had and continue to have adequate fiscal and monetary policy space which it immediately deployed to calm down the market and ease liquidity pressures. On its part, the BSP promptly implemented measures to ease liquidity, and sustain flow of credit that have calmed down market jitters,” said Diokno.
By BSP definition, FDIs are investments made by a non-resident direct investor in a resident enterprise with an equity capital of 10 percent minimum. FDIs are also investments made by a non-resident subsidiary/associate in its resident direct investor.
The BSP-monitored FDI “covers actual investment inflows (and) by contrast, the approved foreign investments data that are published by the Philippine Statistics Authority, which are sourced from Investment Promotion Agencies, represent investment commitments, which may not necessarily be realized fully, in a given period.”