Foreign direct investments up 64% to $742 million in May —BSP

Foreign direct investments (FDI) into the country yielded net inflows and grew by double digit in May, data released by the Bangko Sentral ng Pilipinas (BSP) on Wednesday showed.

FDI net inflows stood at $742 million in May, up 64.1% from $452 million posted in the same month last year.

FDI is a cross-border investment of an overseas resident having control or a significant degree of influence on the management of an enterprise that resides in the Philippines.

FDI includes investment by a foreign direct investor in a resident enterprise, whose equity capital in the latter is at least 10%, and investment made by a foreign subsidiary or associate in its local direct investor or enterprise. 

FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.

The central bank said FDI grew following net inflows from foreigners’ net investments in debt instruments and equity capital of their local affiliates.

Equity capital placements came largely from Japan, the United States, Singapore and the Netherlands, according to the BSP.

These were invested mostly in the manufacturing, real estate, information and communication, and transportation and storage industries, it said.

For January to May, FDI net inflows grew by 18.8% to $4.2 billion from the $3.5 billion net inflows posted in the same period in 2021.

The year-to-date growth was mainly on account of the increase in foreigners’ net investments in debt instruments, which muted the decline in net equity capital placements, according to the BSP.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that “the passage of reform measures in recent months, especially the CREATE Law that reduces the corporate income tax by at least 5 percentage points (from 30%) retroactive July 2020 and providing greater certainty on investments would also continue to help attract more FDIs to be more decisive and locate in the country."

Ricafort said other reform measures to ease foreign ownership limits which are now laws such as the amendments to the Public Services Act, Foreign Investments Act and Retail Trade Liberalization Act would further encourage and attract more FDIs into the country.

This is seen to "align the country's rules with other countries in ASEAN/Asia and could help the country's total FDIs to increase further and catch with other neighboring countries in ASEAN/Asia,” Ricafort said.—LDF, GMA News