Foreign direct investments down 60% in first quarter BSP

MANILA, Philippines – Foreign direct investments (FDIs) were badly hit by the general slowdown in major economies, dropping by 60 percent to $551 million in the first quarter of the year from $1.388 billion last year.

Bangko Sentral ng Pilipinas (BSP) data showed that FDIs rose last March, but were not nearly enough to cover the 83 percent drop in February.

Last March, the BSP reported a total of $208 million in FDIs or 94.4 percent increase from $107 million in March 2007.

Over the three-month period this year, however, investments went down by 60.3 percent, compared to the same period in 2007 when the BSP recorded $1.116 billion in February alone.

The BSP said the first quarter slowdown reflected the weakening of major economies of Japan, the United States, and Europe where FDIs originate.

FDIs also come from Malaysia and South Korea, it said.

From January to March, the BSP said the net FDIs resulted in equity placements amounting to $193 million.

The BSP said gross equity capital placements of $284 million were channeled mainly to manufacturing activities like ship-building and repair and auto electronics parts and components.

Part of the equity placements also went to recreational and cultural services, mining, construction projects in hotels and resort industries, and power plant development.

Over the three-month period, the BSP said the net reinvested earnings amounted to $100 million, 24.2 percent lower than the level recorded over the same period last year.

The BSP said banks repatriated profits to their foreign principals during the period, causing the slowdown in reinvested earnings.

It also reported a decline in the Other Capital account consisting mainly of borrowing and lending between foreign direct investors and their local subsidiaries.

The Other Capital account, the BSP said, showed a surplus of $258 million, but was lower than the $571-million posted in the same period last year.

The BSP said the slowdown reflected the repayment of loans by local companies to their foreign principals.

BSP governor Amando Tetangco said the first quarter data were consistent with the moderation of capital flows to emerging countries because of concerns over global economic slowdown as a result of the credit crisis in the US.

Tetangco also pointed out that the 2008 data so far were coming off a high base in 2007 when the BSP recorded a large-scale investment in a local firm.

The BSP is now reviewing its projections for 2008 but it initially estimates $4.2-billion worth of FDIs to come into the country, with about $1.4 billion to go the mining sector alone, dramatically higher than the $404 million that came in last year.

Based on data submitted by regulatory agencies, FDIs would remain strong this year, especially in mining where rising world prices have spurred a dramatic increase in investments worldwide.

The BSP said that of the $4.2 billion expected to flow into the country this year, the big-ticket investments would be in utilities, mainly the power sector, mining and manufacturing.