Long-horizon foreign direct investments (FDI) in August proved marginally lower this year at only USD789 million from year-ago level of USD792 million, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
According to the BSP, this resulted from lower inter-company borrowing activities of foreign-owned affiliates in the Philippines from their principal owners abroad that in August last year totaled USD 582 million but aggregated only USD537 million this year. Foreign-owned affiliate companies often borrow from their principals abroad to finance expanded business operations in the Philippines, which are then treated as additional investments by local authorities.
The 0.3 percent diminution of FDIs in August, however, was compensated for by reinvesting the earnings of foreign-owned affiliates back into the business instead of repatriating them to their foreign principals in August. The reinvested earnings in August totaled USD217 million or 21.4 percent more than last year’s USD179 million, the BSP said.
On top of reinvestments, the foreign principals added equity into existing affiliate operations 13.3 percent more in August this year to USD36 million from last year’s USD31 million.
But even then, FDIs in the first eight months this year, while continuing to grow, proved 13 percent lower to only USD5.46 billion from last year’s USD6.26 billion.
Reinvestment of earnings total only USD790 million for the period this year from year ago of USD838 million while equity other than reinvested earnings total only USD844 million versus last year’s USD971 million.
Foreign investor interest in the country’s debt notes similarly waned during the period to only USD3.82 billion from last year’s USD4.45 billion.
The investors who voted for the Philippines and its long-horizon prospects were fund managers from Japan, Singapore, the United States and Germany.
These investors poured their money in the manufacturing sector, wholesale and retail trade as well as in the information and communication industries, the BSP said.
Given the choice, the Philippines would rather welcome FDIs that generate employment for Filipinos and tax revenue for the nation’s coffers than the portfolio funds of global money managers and their “hot” money placements. Such funds exit the Philippines at the merest hint of domestic trouble or promise of better yield overseas.
