ANN/INQUIRER – Foreign direct investments (FDI) in the Philippines reached their highest level in eight months in October, fuelled by a significant increase in intercompany borrowings between multinational firms and their local affiliates, surpassing the inflows of new capital.
Job-generating FDIs registered a net inflow of USD1 billion in October, 50.2 per cent larger compared with a year ago, the Bangko Sentral ng Pilipinas (BSP) reported.
Unlike the so-called “hot money” that leaves markets at the first sign of trouble, FDIs are firmer capital inflows that create jobs for people. That said, the government wants existing FDIs to stay, while attracting new ones.
A net inflow means more of this foreign capital entered the country against those that left during a period. Data showed the October haul was the biggest since February 2024, when net inflows had amounted to USD1.4 billion.
This brought the 10-month FDI net inflow to USD7.7 billion, up by 8.2 per cent and approaching the USD9-billion forecast of the BSP for the entire 2024.
Dissecting the BSP’s report, debt instruments jumped by 60.7 per cent to USD839 million, cornering the bulk of FDIs in October.
That exceeded equity capital placements, a measure of new FDIs. Figures showed the inflow of fresh FDIs amounted to USD122 million, up at an annualised rate of 20.7 per cent.
But FDIs worth USD23 million left the country in October, albeit 16.2 per cent lower than a year ago.
This, in turn, yielded a net equity capital placement of USD100 million during the month, higher by 34.1 per cent. Most of the new FDIs in October came from Japan with a 63-per-cent share, followed by the United States (14 per cent) and Singapore (five per cent).
These investments were placed in key industries like manufacturing – which cornered 59 per cent of the total – as well as real estate (15 per cent) and construction (six per cent).
Meanwhile, reinvestment of earnings declined by 0.9 per cent to USD83 million.
Senior research fellow at the Philippine Institute for Development Studies (PIDS) John Paolo Rivera said that while the surge in inter-company borrowings suggested confidence among multinational firms, it would be better for the country to attract more fresh FDIs instead.
“The reliance on inter-company borrowings rather than fresh equity placements suggests that while foreign companies are reinvesting in their operations, new investments are not flowing in as strongly,” Rivera said.
