NET INFLOWS of foreign direct investments (FDI) grew more than three-fourths annually to their biggest amount in eight months in August, the central bank reported yesterday, further paring down these flows’ year-to-date fall since the beginning of 2015.

FDIs — a key source of jobs and credit for the economy — amounted to a net inflow of $526 million in August, 76.3% more than the $299 million recorded in 2014’s comparable month, fueled particularly by a surge in foreign firms’ loans to Philippine-based units and affiliates that month, the central bank said in a statement.

Such intercompany borrowings surged more than sevenfold to $431 million in August from $59 million a year ago and “more than compensated for the decline in net equity capital investments,” the central bank noted.

The same comparable months saw net equity capital investments dropping 81.2% to $34 million from $180 million, as gross placements fell 75.9% to $45 million from $188 million and withdrawals grew 43.1% to $11 million from $8 million.

“The bulk of equity capital investments during the month emanated largely from the United States, Japan, Singapore, Taiwan and Ireland,” the statement read, adding that such funds “were channeled mainly to manufacturing; real estate; professional, scientific and technical; wholesale and retail trade; and information and communication activities.

Reinvested earnings helped buoy the net amount, growing 2.8% to $61 million from $59 million.

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Year-to-date, net FDI inflows amounted to $3.004 billion, 27.1% less than the $4.122 billion recorded in 2014’s comparable eight months “as all FDI components recorded lower net inflows during the period,” the central bank noted.

The latest year-to-date performance, however, was still better then previous tallies: such net flows were halved or nearly so up to the four months to April. Year-to-date drops — of as much as 50.4% in the first quarter — have constantly been on the decline.

The comparative eight-month periods saw intercompany borrowings dropping 35.8% to $1.640 billion from $2.554 billion, net equity placements falling by 13% to $1.364 billion from $1.568 billion, and reinvested earnings declining by 11.2% to $525 billion from $591 billion.

Noting that FDI flows to the Philippines have continued to lag behind those of its Southeast Asian peers, John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, said via text: “I don’t expect the country to catch up unless there is an increased rate of reform” in terms of infrastructure, labor policy, customs modernization, “respect for contracts, foreign investment liberalization” and establishing “economic zones in the poorest provinces”.

The central bank expects net FDI inflows — which surged 65.9% annually to a record $6.2 billion in 2014 — to reach $6 billion this year. — M. L. T. Lopez

Source: http://www.bworldonline.com