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FDI posts net inflow in November


Borrowings by Philippine-based companies in the manufacturing, outsourcing and financial sectors from their parents abroad led to $82 million worth of net foreign direct investment (FDI) inflows last November. This brought the 11-month FDI level to $1.4 billion, 5.5 percent higher than the year-ago level, the central bank said on Wednesday. Foreign direct investments are thought to be more useful to a country than investments in the equity of its companies since stock investments are potentially "hot money" that can leave at the first sign of trouble. In contrast, FDIs are generally useful whether things go well or badly since these are placed in so-called brick and mortar enterprises that generate jobs for thousands of Filipinos. "Net inflows in the other capital account reached $66 million due mainly to higher intercompany loan availments by subsidiaries from their parent companies abroad," central bank Officer-in-Charge Nestor A. Espenilla, Jr. said on Wednesday. Manufacturing, business process outsourcing, and financial intermediation industries were the major beneficiaries of these loans, he pointed out. Meanwhile, equity capital yielded a measly $8 million in net inflows, as investors remained cautious due to the slow pace of global economic recovery, even if the country’s fundamentals remained sound, Espenilla said. Reinvested earnings stood at $8 million in November. For January to November last year, net equity capital inflows were up by 12.8 percent to $1.4 billion from $1.2 billion in the same period in 2008, the central bank said. Gross equity capital placements during the period reached $1.5 billion, with the bulk of investments coming from the US, Japan, Hong Kong and the Netherlands. Recipient industries included manufacturing, real estate, construction, services, financial intermediation, mining, trade and commerce, as well as transportation, storage and communications. The BSP said reinvested earnings reversed to a net inflow of $133 million during the 11-month period from a net outflow of $126 million a year earlier, following stronger corporate earnings results in the three quarters of last year. Meanwhile, the other capital account — consisting mainly of intercompany borrowing and lending between foreign direct investors and their units here — posted a net outflow of $91 million compared to the US$249 million net inflow from a year earlier. The BSP traced the net outflow to higher trade credits extended by local units to their parent companies abroad. — Norman P. Aquino, GMANews.TV