FDI inflows drop 49% to $481 million in January-April

MANILA, Philippines - Foreign direct investment (FDI) that flowed into the Philippines was cut by almost half in the first four months of the year due to lower equity capital placements, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. announced yesterday.

Tetangco reported that FDI inflows plunged by 49.2 percent to $481 million from January to April this year compared with $947 million in the same period last year.

For the month of April alone, data showed that FDI inflows plummeted by 86 percent to $85 million from $613 million in the same month last year.

Tetangco attributed that the significant decline in FDI inflows for the month of April to a significant number of shares acquired by a foreign enterprise in a local beverage manufacturing firm in April last year.

However, the BSP chief pointed out that FDIs continued to flow into the Philippines despite the fragile global economic recovery.

“While FDI posted lower year-on-year net inflows owing to challenges posed by uneven pace of economic recovery across the globe, the country continued to be a recipient of foreign funds given its favorable macroeconomic fundamentals,” the BSP chief stressed.

Japanese brewer Kirin Holdings spent a total of P65.8 billion in February and April last year after it decided to acquire a stake in Manila-based San Miguel Brewery of diversified conglomerate San Miguel Corp.

Concerns about by the debt crisis in Europe as well as the wait-and-see attitude adopted by investors in light of the May 10 elections affected the inflow of FDIs in the first four months of the year.

“The net equity capital inflows from January to April 2010 of $102 million were nearly 11 times lower compared to the previous year as investors continued to be cautious partly to the uncertainties over the Eurozone debt crisis and as they awaited the outcome of the national elections in May 2010,” the BSP chief explained.

Data showed that equity capital fell by 90.6 percent to $102 million in the first four months of the year from $1.089 billion in the same period last year as equity placements retreated by 82.2 percent to $197 million from $1.105 billion while equity withdrawals zoomed by 494 percent to $95 million from $16 million.

The BSP reported that investors came largely from the US, Switzerland, Japan, Netherlands, Singapore, and Hong Kong while most equity placements poured into manufacturing, utilities, services, financial intermediation, real estate, and transport or storage sectors.

Statistics showed that reinvested earnings amounted to $42 million in the first four months of the year, a complete reversal of the net outflow of $49 million in the same period last year.

On the other hand, the central bank reported that other capital account consisting largely of inter-company borrowing or lending between foreign direct investors and their subsidiaries and affiliates in the Philippines zoomed by 464.5 percent to an inflow of $339 million in the first four months of the year versus a net outflow of $93 million in the same period last year.

Economists and analysts believe FDI inflows would improve over the next few months after the success of the country’s first ever automated elections.