Foreign investments rebound 25% in August

Eight-month tally still down

MANILA, Philippines — Foreign direct investment (FDI) net inflows into the Philippines rebounded by nearly 25 percent in August as foreign investors put more equity into local businesses and reinvested a larger share of their earnings, although cumulative inflows remained below last year’s level. Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed net FDI inflows jumped by 24.9 percent to $690 million in August from $552 million in the same month last year. The amount was virtually unchanged from the $689 million recorded in July.

FDI refers to actual investments by foreign investors that establish a lasting interest in Philippine companies. This generally involves ownership of at least 10 percent of the voting power in a local enterprise.

The August improvement was driven by stronger equity capital investments and reinvestment of earnings, which more than offset weaker intercompany borrowings.

Net equity capital investments excluding reinvested earnings climbed by 29.5 percent to $189 million from $146 million a year earlier.

Gross equity placements, or fresh capital put into Philippine companies, jumped to $254 million from $158 million. Withdrawals, however, also increased to $65 million from $13 million.

Reinvestment of earnings surged by 50.2 percent to $365 million from $243 million. This represents profits that foreign investors keep in their Philippine operations rather than take out of the country.

Meanwhile, net investments in debt instruments fell by 16.7 percent to $136 million from $164 million.

Ser Percival Peña-Reyes, director of the Ateneo Center for Economic Research and Development, said the rebound reflected stronger equity capital investments and reinvested earnings.

“This suggests continued interest among foreign investors in Philippine business opportunities,” Peña-Reyes said.

“However, the broader picture remains challenging as weaker intercompany borrowings and cautious investment decisions amid global uncertainties continue to weigh on cumulative inflows,” he added.

Despite the August increase, FDI net inflows from January to August fell by 19.2 percent to $4.77 billion from $5.9 billion in the same period last year.

The decline was driven mainly by net investments in debt instruments, which dropped by 30 percent to $2.57 billion from $3.66 billion.

The BSP said this reflected lower net intercompany borrowings from foreign direct investors during the period.

Net equity capital investments excluding reinvested earnings, meanwhile, were virtually unchanged at $870 million compared to $871 million a year ago.

Gross equity placements declined to $1.19 billion from $1.37 billion, but withdrawals also fell to $314 million from $494 million.

The BSP said equity capital placements during the eight-month period came mainly from Japan, the United States and Singapore. These were directed largely toward manufacturing, financial and insurance activities and real estate.

Peña-Reyes said FDI flows are likely to remain uneven in the near term, with the August improvement offering some encouragement but not yet pointing to a sustained recovery.

“Much will depend on global economic conditions, investor confidence and our ability to address structural constraints such as high energy costs, infrastructure gaps and regulatory bottlenecks,” he said.