October 12, 2019
NET inflows of foreign direct investments (FDI) fell by double digits to $543 million in July from the amount posted a year ago, according to the Bangko Sentral ng Pilipinas (BSP).
Central bank data released on Thursday night showed that the latest figure was a 41.4-percent decrease from $926 million in the same month last year. The July amount dragged the year-to-date tally to $4.11 billion, down 39.1 percent from the figure posted in the first seven months of 2018.
Equity capital investments recorded the biggest drop, plunging by 62.2 percent to $99 million from $261 million.
In a statement, the BSP attributed this slide to the 39.6-percent decrease in equity capital placements to $168 million from $278 million and the 302.4-percent increase in equity capital withdrawals to $69 million from $17 million.
Placements in July mostly came from Japan, Germany, Singapore, the United States and South Korea. These were largely invested in financial and insurance, real estate, manufacturing, and human health and social work industries.
Net inflows in debt instruments — or lending by foreign companies abroad to their local affiliates to fund existing operations and expansion efforts — also fell by 39.5 percent to $357 million from $590 million a year ago.
Reinvested earnings were the only component that posted a positive growth, rising by 15.8 percent to P528 million in the month from the year-earlier amount.
Lower year-to-date net FDI inflows, the BSP said, stemmed from net equity capital investments declining by 75.1 percent to $459 million from $1.84 billion.
These capital investments in the first seven months came mainly from Japan, the United States, Singapore, China and South Korea. These were channeled into financial and insurance, real estate, manufacturing, transportation and storage, and administrative and support service industries.
Net investments in debt instruments also dropped by 30.3 percent to $3.06 billion from $4.39 billion.
The Bangko Sentral explained that the reduced net investments in the two components of FDI reflected “the impact of the weak pace of global economic activity that took [a] toll on investors’ business confidence and investment decisions globally.”
Meanwhile, reinvestment of earnings grew by 12.6 percent to $595 million from $528 million in the same period last year.
Global growth, Citira cited
In an interview on Friday, BSP Governor Benjamin Diokno said slower global growth and investor uncertainty over the fiscal incentives regime in the country might have affected the inflow of job-generating investments.
The International Monetary Fund recently revised downward its global economic growth forecast for this year and next to 3.2 percent and 3.5 percent from 3.3 percent an 3.6 percent, respectively.
The central bank chief also noted that “many investors have adopted [a] wait-and-see policy” because of the uncertainty over the second package of the Duterte administration’s Comprehensive Tax Reform Program.
Formally called House Bill 4157, or the “Corporate Income Tax and Incentive Rationalization Act” (Citira), the package aims to cut the corporate income tax rate from 30 percent to 20 percent. It also aims to modernize the country’s incentive system to make tax perks performance-based, time-bound, targeted and transparent.
“Investors want to know exactly what will be the final version of that bill. So the sooner we act on that, then the sooner the investors can make up their mind [on] whether to enter or exit,” Diokno said.
The House of Representatives approved Citira last month and is now being discussed at the committee level in the Senate.
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