Nov. FDI net inflow down for 4th month

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By Melissa Luz T. Lopez
Senior Reporter

FOREIGN DIRECT INVESTMENT (FDI) net inflow into the country slid for the fourth straight month in November, the central bank reported on Monday, bringing 2018’s running tally lower than a year ago.

Appetite among foreign investors waned that month, sending net inflow down 45.9% to $531 million from the $982-million net investments received in November 2017. The latest figure improved from the $491 million net inflow tallied in October, according to latest data from the Bangko Sentral ng Pilipinas (BSP).

In a statement, the central bank attributed the lower FDI net inflow to lower placements in equity and debt instruments, which posted double-digit declines year-on-year.

Net equity investments slid 31.9% to $137 million from $202 million the previous year. November saw lower gross placements at $149 million which were partly offset by $11-million withdrawals. That compared to $228 million capital received in November 2017 against $26 million plucked out of the country.

Bulk of the equity placements went to financial and insurance; electricity, gas, steam and air-conditioning supply; manufacturing; and real estate.

Most of the capital came from investors in Taiwan, the United States, Thailand, Luxembourg and the Netherlands, the BSP said.

Investments in debt instruments, involving infusions by offshore parents in their Philippine subsidiaries, were halved to just $333 million from $724 million.

Only reinvested earnings grew — by nearly a tenth to $61 million from $56 million the prior year — but that was not enough to lift the month’s FDI tally.

FDIs are a source of capital for the Philippine economy, funding business expansion, generating jobs and, in turn, spurring domestic activity that fuels overall economic growth.

November’s inflows brought 11-month FDI net inflows to $9.061 billion, 3.2% lower than the $9.358 billion investments received during the comparable period in 2017. This casts doubt on the central bank’s expectation of a fresh FDI banner year with a projected $10.4 billion.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., attributed tempered foreign investment appetite to global jitters amid continuing Sino-US trade tensions.

“Overall, it may have been the lingering negative sentiment about the US-China trade issues,” Mr. Asuncion said when sought for comment.

“There has been a lot of uncertainty in the external environment that has dampened general investment appetite especially among emerging economies.”

Plans to revamp the fiscal incentives granted to companies investing in the Philippines may have also added to investor worries.

“Domestically, this decline, specifically, may have been brought by planned structural reforms such as the rationalization of investment incentives that current beneficiaries/firms view as a disincentive in general,” Mr. Asuncion said.

“Thus, future and potential investors are on wait-and-see mode before moving forward with their investment plans.”

He said 2018’s FDI net inflows were unlikely to top 2017’s $10.049 billion.

The BSP expects FDI net inflows to hit $10.2 billion this year, spurred by investor confidence on the back of easing inflation, as well as sustained state spending and domestic consumption.