February net FDI inflow plunges nearly 60 pct


Posted at May 12 2014 03:44 PM | Updated as of May 12 2014 11:44 PM

MANILA, Philippines - Foreign direct investments plunged nearly 60 percent in Feburary as hot money continued to exit emerging markets, following the Fed's tapering of its economic stimulus program.

Net FDI inflows reached $350 million in February, 59 percent lower than the $854 million recorded during the same month in 2013. This is also 66 percent lower than the $1.027 billion recorded in January.

FDI pertains to money used to create new businesses or expand existing ones.

The BSP said the bulk of these equity capital investments were channeled mainly to financial and insurance activities, real estate, transportation and storage, manufacturing, as well as mining and quarrying activities.

"This resulted from sustained lending by parent companies abroad to their local subsidiaries/affiliates to support existing operations and to fund the expansion of their businesses in the country," the central banks aid.

For the first two months of the year, FDIs are down 24.7 percent to just $1.4 billion.

Despite robust economic growth that is among the fastest in Asia, the Philippines has only been able to attract paltry levels of FDI compared with its Southeast Asian peers due to poor infrastructure, high power costs and restrictions on foreign ownership in major industries and land acquisition by foreigners.

Placements by foreign investors in debt instruments issued by their Philippine affiliates fell 20 percent in February from a year earlier to $201 million.

Equity capital yielded a net inflow of $79 in February, down 85.4 percent from a year ago and coming mostly from the United States, Japan, Singapore, Germany and Hong Kong.

Equity capital inflows went into financial and insurance, real estate, transportation and storage, manufacturing, and mining and quarrying sectors.

The central bank expects net foreign direct investments of $2.6 billion this year. Net FDI last year totalled $3.9 billion, exceeding the central bank's forecast of $2.1 billion.

Net FDI, portfolio inflows, plus remittances from Filipinos working overseas help keep the country's balance of payments (BOP) in surplus. - With ANC and Reuters