DESPITE double-digit declines in foreign direct investments (FDI) in the first seven months of the year, the Bangko Sentral ng Pilipinas (BSP) remains bullish that sustained net inflows could reach close to $8 billion in 2017.
This is similar to what was recorded last year, with prospective investments seen in the manufacturing sector, including electronics and motor parts.
In a statement released Thursday, BSP said its FDI prospects to the Philippines continue to be favorable, marked by a “subdued global economic growth, and sustained robust macroeconomic performance and investment grade status.”
Latest developments in the country’s FDIs have become a concern, particularly the decline observed in the first semester of 2017. As reported by the BSP, FDIs registered net inflows of $3.6 billion in January-June 2017, or 14 percent lower than the $4.2 billion net inflows recorded in the same period last year.
In addition, the recently released July 2017 FDI outturn brought the first seven months net FDI level to $3.9 billion, or 16.5 percent lower than previous year’s level. The net inflow for the month of July alone reached $307 million, said to be the lowest monthly level since it hit $238 million in FDIs in June 2016.
BSP attributed the lower net inflows in the first semester to the 90.3-percent decline in net equity capital, or new investments of foreign firms in the Philippines, to $141 million from $1.4 billion a year ago. In 2016, the central bank saw large investment flow coming from financial and the insurance industry.
“The decline in net equity capital was, however, offset in part by higher investments in debt instruments and reinvestment of earnings amounting to $3 billion and $416 million, respectively,” it added.
Amid the drop, the National Economic and Development Authority (Neda) assured that the foreign investors remain confident to do business in the Philippines. In a statement, it dismissed concerns raised by Senate minority leader Franklin Drilon on declining equity placements.
Equity placements dropped 61.4 percent to $641 million from January to July 2017 versus the $1.66 billion in the same period last year. On the other hand, equity withdrawals grew during the said period at $369 million from $189 million last year.
Neda, however, explained that the figure on foreign equity placements is not the entire figure.
“While the data on equity placements serve as a gauge of new FDI entry and overall investor confidence, the figure is not complete. The figure does not show the total inward investments made by foreign investors in the country,” Neda Officer-in-Charge, Undersecretary Rolando G. Tungpalan said.
To attract more FDIs, Neda said it exhausting all measures to improve the business climate, particularly easing foreign restrictions on several areas of business through the foreign investment negative list (see separate story).
BSP pointed out that reforms on foreign ownership, addressing infrastructure gaps, and reducing the cost of doing business to boost FDI in the country.