Foreign direct investment (FDI) net inflows in May 2021 was at US$429 million, a decline of 25.4 percent from US$575 million net inflows in May 2020 (Table 1).1, 2
Despite this, the cumulative FDI level remained higher by 37.8 percent at US$3.5 billion net inflows in January–May 2021 from US$2.5 billion net inflows in the same period last year.
Non-residents’ net investments in debt instruments rose by 76.2 percent to US$2.2 billion from US$1.2 billion.
Further, reinvestment of earnings grew by 3.0 percent to reach US$407 million from US$395 million in the same period last year. Meanwhile, net investments in equity capital remained broadly stable at US$1.3 billion.
The FDI decline in May 2021 reflected renewed investor concerns on the rising cases of the new variants of COVID-19 globally. By component of FDI, non-residents’ net investments in debt instruments during the month contracted by 23.4 percent to US$269 million from US$351 million in May 2020.3
Likewise, non-residents’ net investments in equity capital declined by 53.4 percent to US$60 million in May 2021 from US$130 million in the comparable month last year. This was on account of the increase in equity capital withdrawals (by 70.2 percent to US$21 million from US$13 million) coupled with the decrease in equity capital placements (by 42.6 percent to US$82 million from US$142 million).
Bulk of the equity capital placements during the month came from Japan, the United States, and Malaysia. These were channeled mostly to the 1) manufacturing; 2) real estate; and 3) financial and insurance industries.
Meanwhile, reinvestment of earnings rose by 6.0 percent to US$99 million from US$94 million in May 2020.
On a year-to-date basis, equity capital placements declined by 5.4 percent to US$1.0 billion (from US$1.1 billion). Equity capital placements were sourced mainly from Singapore, Japan, and the United States. These were infused largely to the 1) financial and insurance; 2) electricity, gas, steam, and air-conditioning; 3) manufacturing; and 4) real estate industries. Equity capital withdrawals also decreased by 26.7 percent to US$139 million (from US$190 million).
The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6). FDI includes (a) investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident subsidiary/associate in its resident direct investor. FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.
The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority (PSA), which are sourced from Investment Promotion Agencies (IPAs), represent investment commitments, which may not necessarily be realized fully, in a given period. Further, the said PSA data are not based on the 10 percent ownership criterion under BPM6. Moreover, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the PSA’s foreign investment data do not account for equity withdrawals.
Net investments in debt instruments consist mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines. The remaining portion of net investments in debt instruments are investments made by non-resident subsidiaries/associates in their resident direct investors, i.e., reverse investment.