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THE country’s foreign direct investments (FDI) nearly doubled in January 2024, according to the latest data released by the Bangko Sentral ng Pilipinas (BSP).
Data showed FDI net inflows surged 89.9 percent to $907 million in January 2024 from the $478-million net inflows posted in January 2023. However, this was mainly driven by debt instruments which more than doubled during the period.
Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort told BusinessMirror that overall, this was still good news for the Philippines, indicating that businesses have higher confidence in the economy enough to secure debts for expansion and similar activities.
“On the whole, FDIs are among prepandemic highs on a monthly basis, even if mostly financed by borrowings lately,” Ricafort told this newspaper. “[This means] foreign investors are even more confident to borrow to finance more FDIs for the Philippines.”
Data showed nonresidents’ net investments in debt instruments soared 173.2 percent to $820 million in January 2024 from $300 million in January 2023.
BSP explained that 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 nonresident subsidiaries/associates in their resident direct investors, i.e., reverse investment.
“Foreign investors borrow to finance their investment in the country. This is usual practice, especially for large amounts of FDIs financed by loans/debt/credit,” Ricafort said.
“Even local investors take out loans/debts/credit from banks and also from the capital markets to finance new investments and expansion projects, both capex [Capital Expenditure] and opex [Operation Expenditure],” he added.
Meanwhile, BSP data showed the reinvestment of earnings likewise increased by 16.4 percent to $99 million in January 2024 from $85 million in January 2023.
Data showed nonresidents’ net investments in equity capital—other than reinvestment of earnings—posted net outflows of $11 million in January 2024 from the $93 million net inflows in January 2023.
“Equity capital placements during the period emanated largely from Japan and the United States. Said investments were channeled mostly to the manufacturing, real estate, construction, and wholesale and retail trade industries,” BSP said. FDI includes investment by a nonresident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and investment made by a nonresident subsidiary/associate in its resident direct investor.
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.
DTI hails FDI trend
THE Department of Trade and Industry (DTI) hailed the positive trend in FDI for January 2024.
“The surge in FDIs reflects the unwavering confidence and steadfast trust the global business community places in the Philippines’ economic potential,” said DTI Secretary Fred Pascual.
“This only strengthens our commitment to further improve the country’s business environment to attract even more foreign investments, which in turn will create more jobs and sustain our economic growth. In particular, we are leveraging our strengths across key sectors such as manufacturing, real estate, construction, and wholesale and retail trade,” he added.
The notable rise in FDI marks the third consecutive month of expansion, following growth of 28 percent in November and 30 percent in December, in a month-to-month comparison with the previous year, the DTI noted.
The DTI said it remains focused on further attracting significant investments in these essential sectors and other high-growth industries. By bolstering these foundational industries, the Philippines can create a more robust and resilient economy.
The announcement comes ahead of the Trilateral Economic Ministers Meeting, scheduled for April 11, 2024, in Washington, D.C. This significant event will bring together US Commerce Secretary Gina Raimondo, Japan’s METI Minister Ken Saito, and DTI Secretary Pascual. The meeting aims to explore new trade and investment avenues that promise to generate business, create jobs, and foster sustainability.
Past engagements, including Secretary Raimondo’s successful trade and investment mission to the Philippines and discussions during the Asean-Japan Economic Co-Creation Forum, have set the stage for future collaborations. These efforts underscore the robust economic ties between the Philippines, the United States, and Japan.
With a report by Andrea E. San Juan
Image credits: Michael Edwards | Dreamstime.com
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