FDIs are major sources of cash flows to boost the country’s gross international reserves. As of September dollar reserves have reached a record high of $18.6 billion.
Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said net FDI continued to grow in the first seven months of the year fueled by the inflow of investments into the manufacturing, real estate, financial and services – for example business product outsourcing — sectors.
The influx of investments came from Hong Kong and Japan, the country’s largest investors during the period.
Earlier Tetangco said the country’s FDI could hit $1.2 billion by the end of the year. FDI inflows are included in the country’s balance of payments, which summarizes the country’s economic transactions with the rest of the world.
Tetangco said last year’s conservative FDIs, which amounted only to $684 million, was because of the political uncertainties brought on by the May presidential elections and turnover in the government.
Based on the latest BSP data, as of July net equity capital inflows rose 30.3 percent to $594 million from $456 million last year underpinned by the combined effects of higher placements and lower withdrawals.
Meanwhile net inflows from reinvested earnings continued in the first seven months of the year although lower than last year, reflecting profitable FDI ventures in the country, which encouraged investors to extend their investment dealings in the country’s prime industries.
The BSP said the 2005 reinvested earnings data include those of local banks only, since data on enterprises are not yet available. "Recording of reinvested earnings or these companies will be made when their audited financial statements become available," the central bank said.
Tetangco said another factor that contributed to the strong performance of FDI flows was the 65.8 percent reduction in the net outflow of the other capital component to $101 million, due mainly to the decline in claims of resident firms on affiliated companies abroad.
Registered FDIs or those listed by the BSP only represent foreign equity investments or paid up capital.
On the other hand, the BoP FDIs cover cash and non-cash transactions on FDI flows that are coursed through the banking system. Machinery, equipment and reinvested earnings, which are not cash transactions are included if data are available.
