By Bianca Cuaresma, April 11 2019; Business Mirror

Image Credit to Business Mirror

LONG-TERM foreign investments in the Philippines shrank in January, as fewer businessmen placed their bets on the local wholesale and retail trade sector during the period, the latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

The BSP reported on Wednesday that foreign direct investments (FDI) fell by 38.2 percent to $609 million, from last year’s $986 million.

FDI is the type of investment that is often more coveted, as it stays longer in the economy and creates job opportunities for locals.

It is also not easily pulled out of the market unlike its shorter-term counterpart, the foreign portfolio investments.

The BSP attributed the decline in the country’s FDI net inflow to the drop in equity capital placements, which slid to $184 million from $531 million in January 2018.

Data indicated that the drop could be traced to the decline in investments in the wholesale and retail trade and repair of motor vehicles and motorcycles sector.

Larger equity withdrawals were also seen during the month, particularly from investors in Japan.

Overall, equity capital placements during the month came from Mauritius, South Korea, the United States, Singapore and the Netherlands.

These were channeled largely to the financial and insurance, administrative and support services, real estate, electricity, gas, steam and air-conditioning supply, and information and communication industries.

The decline could have been larger if not for the net investments in debt instruments, which increased by 31 percent to $577 million from the year-ago level of $441 million. This type of investment consists mainly of intercompany borrowings/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines.

Likewise, reinvestment of earnings rose to $76 million, from $71 million in the same month in 2018. Last year, the Philippines’s FDI print was $600 million short of the government’s FDI projection of $10.4 billion for 2018.

Country source data showed that FDI are increasingly becoming Asian in nature, as placements made by investors based in the US, Europe and Australia all posted declines last year.

In 2018, net equity placements made by investors in the US declined by 66.07 percent, while those from Europe were down by 80.76 percent. Investments made by those in Australia and New Zealand further plunged into the net outflow territory to hit a net outflow volume of $149.25 million, from the previous year’s $2.84 million.

These were partially offset by the growth in FDI from Asian countries—particularly from Southeast Asian countries, which posted a 36.42-percent growth in equity placements, as well as from South Korea, Hong Kong and Taiwan, which collectively grew their placements to the Philippines by 132.44 percent year-on-year.

The rest of Asia grew their FDI to the Philippines by 90.72 percent, with China registering a 590-percent jump in investments from 2017 to 2018.