Higher foreign investments to support long-term growth

The Department of Finance said over the weekend the year-on-year recovery of foreign direct investments suggests positive long-term prospects for the country.

“The considerable year-on-year increase in net debt instruments has contributed significantly to the growth in FDI in recent months. The proposed Capital Markets Developments Act [House Bill 9343] will increase demand for financial securities and support the continued growth of FDI,” the DOF said in a statement.

It said other reforms still in the legislature, such as amendments to the Foreign Investment Act, the Commonwealth-era Public Service Act and the Retail Trade Liberalization Act would also be instrumental in mobilizing more investment, in the form of both debt and equity and introduce more dynamism in the economy. 

Latest data from the Bangko Sentral ng Pilipinas showed that net inflows of foreign direct investments jumped 52 percent to $1.3 billion in July from the $831 million net inflows a year ago, as the country remained attractive to investors despite the global health crisis.

This brought the cumulative FDI net inflows in the first seven months to $5.6 billion, or 43.1 percent higher than the $3.9 billion net inflows in the first seven months of 2020. This was mainly on account of the 78.7-percent expansion in non-residents’ net investments in debt instruments to $3.9 billion from $2.2 billion.

Reinvestment of earnings reached $677 million, up by 19.3 percent from $567 million recorded a year ago. However, non-residents’ net investments in equity capital (other than reinvestment of earnings) declined by 12.4 percent to $1 billion from $1.1 billion in the comparable period last year.

Meanwhile, non-residents’ net investments in equity capital contracted by 58.3 percent to $34 million in July ]from $81 million in the comparable month in 2020. This developed as the increase in equity capital withdrawals by 634.7 percent to $57 million from $8 million more than offset the increase in equity capital placements by 2.6 percent to $91 million from $89 million. 

Data showed that in the first seven months, net investments in equity capital decreased by 12.4 percent due to the downturn in placements by 9.5 percent to $1.2 billion from $1.4 billion and the increase in withdrawals by 6.0 percent to $223 million from $210 million. 

Equity capital placements came largely from Singapore, Japan and the United States. These were infused mostly in manufacturing; financial and insurance; and electricity, gas, steam and air-conditioning industries.

Net FDIs hit $6.6 billion last year. This year, the BSP expects net FDIs to improve to $7 billion, taking into account the gradual reopening of major economies that could boost global trade.

Topics: Department of Finance , DOF , foreign direct investments
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