Slow start despite positive PH prospects
Even as the domestic economy outperforms in the region, job-generating foreign investments slowed in January as economic conditions globally continued to slump.
Documents from the Bangko Sentral ng Pilipinas (BSP) showed that foreign direct investments (FDI) at the start of the year stayed positive, but was lower by more than two-thirds over the same month in 2014.
The decline was noted across the board, with all forms of FDI, namely significant equity investments in local firms, earnings reinvested by multinationals and cash advances to big companies’ local subsidiaries, falling for the month.
Net inflows of FDIs reached $263 million in January, lower by 71 percent year-on-year, the BSP said in a statement.
Direct investments usually bankroll the construction of new facilities or the expansion of foreign firms’ new or existing operations in the country. These are considered a better barometer for the confidence of international investors in the country because these placements tie them to the economy’s fortunes for the long term.
Last year, FDIs to the Philippines reached a record $6.2 billion, rising by more than two-thirds year-on-year. Total investments for last year were higher than the average $2.2 billion in the four preceding years from 2010 to 2013.
The dip in January comes amid dim economic prospects for advanced markets that are the biggest sources of FDIs for the Philippines. The International Monetary Fund (IMF) projects that emerging markets will grow by 1.6 percent this year. While faster than the previous six-year average of 1.3 percent, growth is still below the pre-2008 crisis level of 2.25 percent.
In January, loans extended by multinationals to their local subsidiaries registered a net inflow of $167 million, which accounted for the bulk of FDIs during the period.
Equity capital registered net inflows of $25 million as equity capital placements amounting to $53 million more than offset withdrawals of $27 million.
Main sources of these equity investments came mainly from the United States, Germany, Singapore, Netherlands and Japan.
These were channeled largely to wholesale and retail trade, manufacturing, real estate, financial and insurance, and professional, scientific and technical (mainly landscape/architectural services) activities.
Meanwhile, net inflows of earnings reinvested by multinationals operating in the Philippines stood at $70 million.
Source: http://business.inquirer.net/190014/foreign-direct-investments-weaken#ixzz3X9kGVbhd
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