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By Melissa Luz T. Lopez
Senior Reporter

January bares good start for FDIs

Posted on April 11, 2017

FOREIGN direct investments (FDI) to the Philippines grew more than a tenth annually in January, the central bank reported yesterday, noting that lending by firms abroad to support operations and expansion of their local units had more than doubled.

The country got $685 million in net fresh foreign capital as the year opened, edging up from December’s $669 million and rising 13.2% from $605 million in January 2016, the Bangko Sentral ng Pilipinas (BSP) said in a statement.

The tally is also the highest since a $744-million net inflow posted in November last year.

FDIs are a key source of capital for the local economy, which open up more job opportunities for Filipinos as it fuels business expansion.

“This developed as investors remain optimistic on the growth potential of the economy backed by strong macroeconomic fundamentals,” the central bank said.

The Philippine economy expanded by an upwardly adjusted 6.9% in 2016, just below the top end of the government’s 6-7% growth goal and cementing the country’s place among the fastest growing of Asia’s major markets last year.

Economists and debt watchers have repeatedly cited the country’s rosy growth story as a credit strength, coupled with hefty foreign currency reserves and a sound banking system.

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FDIs’ January surge was fueled by funds foreign companies lent to their subsidiaries or affiliates in the country for “existing operations and business expansion.” Placements in such debt instruments soared by 122.6% to $566 million from $254 million a year ago.

This surge offset declines in net equity placements and reinvested earnings, BSP data showed.

Equity placements yielded a $48-million net inflow, barely a fifth of the year-ago $277 million as total placements plummeted 77.6% to $63 million from $281 million and withdrawals grew fivefold to $15 million from $3 million.

Firms also reduced amounts which they chose to keep in the country, slipping 3.1% to $71 million from $73 million.

For the month, the biggest sources of investments were firms based in Germany, Singapore, Hong Kong, the United States, and Japan, the central bank said.

Among the biggest FDI recipients were the sectors of electricity, gas, steam and airconditioning supply; construction; wholesale and retail trade; administrative and support service; as well as financial and insurance activities.

Sought for comment, a bank economist said the country’s strong economic performance likely fueled positive investor sentiment.

“Despite of the global uncertainties due to (US President Donald J.) Trump’s expected policies and the growing local political noise, FDI net inflows still manage to outdo the previous year’s numbers at 13.2% higher. I see no other more solid explanation rather than the evaluation that the Philippines macroeconomy is strong and investors can always profit from this particular solid fact,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said via e-mail.

The central bank expects FDIs to hit $7 billion this year, although officials have said that they will formally revise the forecast in their upcoming review this month since it had already been surpassed in 2016.

Total FDI inflows reached an all-time-high $7.933 billion last year, 40.7% more than 2015’s tally and breaching the BSP’s $6.7-billion target.

UnionBank’s Mr. Asuncion said an $8-billion FDI haul may be doable this year, even as he flagged possible policy shifts in the United States and at home that could weigh on investment decisions and “undermine the Philippine economic growth story.”

Since he bagged the US presidency on Nov. 8 last year, Mr. Trump has spoken of protectionist policies that would entail shunning immigrants and discouraging outsourcing to keep jobs at home, in turn affecting deployment of overseas Filipino workers and business process outsourcing (BPO) firms operating in the Philippines.

Remittances and BPO receipts have been cited as key pillars of the local economy, as they bring in dollars that boost the country’s buffers against external financial shocks.

Observers have said Mr. Trump’s words have so far not translated to concrete policy, outside the current crackdown on illegal immigrants and select asylum seekers. -- Melissa Luz T. Lopez