FOR 6TH CONSECUTIVE MONTH, FDI DOWN

FOREIGN direct investments (FDI) into the Philippines continued to decline in August this year as global and local developments hamper investors’ long term sentiment about putting their capital into the local economy.

The Bangko Sentral ng Pilipinas (BSP) reported that the country received direct investments at a net inflow of $416 million, 45.1 percent lower than the investments made by foreign players in the same month last year.

FDI is the type of investment that is often more coveted, as it stays longer in the economy and creates job opportunities for locals. August is the sixth consecutive month that the Philippines saw a decline in its FDI.

UnionBank economist Ruben Carlo Asuncion traced the country’s inability to prop up its FDI numbers to investor concerns amid global and local developments.

“These consecutive declines are seen to be the impact of the weak external environment. Global trade has continued to reel from the protracted US-China trade war and has dampened investor sentiment, particularly that of emerging markets,” he said.

On a cumulative basis, the BSP said the January to August FDI hit $4.5 billion, 39.7 percent than the $7.5-billion net inflows registered last year.

In a statement on Monday, the BSP also acknowledged that international concerns are preventing FDI flows from growing in the country.

“The ongoing uncertainty in the global environment continued to dampen investor sentiment, which caused postponements in investment plans,” the BSP said in a statement.

Citira factor

HOwEVER, brewing local concerns also play a part in the decline of FDI in recent months.

According to Asuncion, the Corporate Income Tax and Incentives Rationalization Act (Citira) may also be dragging down these investments.

“Further hurting the general investment perception is the uncertainty brought by how certain fiscal reforms, such as the Citira bill, particularly the rationalization of the current fiscal incentives, and how it will come out in final form,” he added. “New investors and fresh investments are seen to be on hold waiting for the eventual outcome from discussions on the pending law.”

The decline in FDl resulted from the contraction in nonresidents’ net investments in debt instruments by 32.5 percent to $3.3 billion, from $4.9 billion last year, and equity capital by 73.4 percent to $536 million, from $2 billion in 2018.

Equity capital placements during the period were sourced largely from Japan, the US, Singapore, China, and South Korea. The industries that benefited from said capital infusions were financial and insurance, real estate, manufacturing, transportation and storage, and administrative and support service.

Meanwhile, reinvestment of earnings increased by 15.6 percent to $671 million, from $581 million in the comparable period in 2018.

Asuncion said there is still hope that FDI inflows to the country will snap their declining trend within the year.

“The October progress in the US-China trade tensions may provide a sliver of hope and a slight recovery of FDI inflows in the last months of 2019, and further clarity about the fiscal reform efforts may also add to the investment inflows rebound,” the economist said.