Philippines investment inflows surge but below Asian level

For the first eight months of this year ending August, the net inflows of foreign direct investment ( FDI) to the Philippines reached 4.3 billion U.S. dollars but the figure is still below compared to FDI inflows in other Asian economies.

For example, according to data from the Indonesia Investment Coordinating Board (BKPM), total FDI inflow in Indonesia for the second quarter of this year alone, or for three months, was recorded at 6.7 billion U.S. dollars.

Vietnam, which used to be the laggard in the region, registered an estimated 5.75 billion U.S. dollars in FDI for the first six months of 2014 whereas the Philippines has only 4.3 billion U.S. dollars for an eight-month period.

According to the Bangko Sentral ng Pilipinas (BSP), the country 's central bank, the FDI in August surged to more than double the 2013 level.

Net inflows of FDI rose to 299 million U.S. dollars in August, more than double the 141 million U.S. dollars recorded in the same month last year.

FDIs come in the form of significant buy-ins by foreign firms in local companies, and advances by multinationals to their local affiliates. Earnings of foreign firms operating in the Philippines that are kept in the country are also counted as FDIs.

By FDI component, net inflows of equity capital rose significantly (by 329.9 percent) to 180 million U.S. dollars in August from 42 million U.S. dollars in the same month last year.

The BSP said this was due to the rise in equity capital placements (107.6 percent), coupled with the decline in equity capital withdrawals (by 83.7 percent).

Equity capital investments in August, which came mostly from the United States, Thailand, the Netherlands, Sweden and Singapore, were channeled mainly to financial and insurance, manufacturing, transportation and storage, real estate, and administrative and support services sectors.

The BSP said the rise in the inflows FDI, which are more permanent compared to portfolio investments, is an indication of the confidence of foreign investors in the country's "sound macroeconomic prospects." The FDI is also the main source of jobs generation in the country.

According to the Manila-based Asian Development Bank (ADB) Philippine economy will continue its robust expansion through next year, but its growth outlook has been slightly lowered as reduced government spending, higher inflation, and monetary tightening dampen activity.

In a report released in September, the ADB said the Philippines ' gross domestic product (GDP) is now expected to grow by 6.2 percent in 2014, down from the forecast of 6.4 percent in April, and by 6.4 percent in 2015, compared with 6.7 percent in April.

Still, comparative statistics show that the Philippines still has the highest GDP growth forecast among the member countries of the Association of Southeast Asian Nations (ASEAN), the ADB said.

In the second quarter of the year, the Philippines and Malaysia were tied as Southeast Asia's fastest growing economies, both expanding by 6.4 percent.

The government remains confident of hitting its target of 6.5 to 7.5 percent GDP growth this year. Last year, the Philippine economy grew by 7.2 percent, the fastest in Southeast Asia.

Indonesia' growth has been reduced to 5.3 percent from 5.7 percent for 2014, and 5.8 percent from six percent for 2015, Singapore to 3.5 percent from 3.9 percent in 2014 and 3.9 percent from 4.1 percent in 2015, Thailand to 1.6 percent from 2.9 percent in 2014 and to stay steady at 4.5 percent next year, and Vietnam to 5.5 percent from 5.6 percent in 2014 and to 5.7 percent from 5. 8 percent in 2015.

Malaysia's GDP is seen to accelerate in 2014 to 5.7 percent from the April forecast of 5.1 percent and to 5.3 percent from 5 percent in 2015.

Meanwhile, a report released by the global professional service network PricewaterhouseCoopers (PwC) showed that two-thirds of existing companies in the 21 economies belonging to the Asia- Pacific Economic Cooperation (APEC) will expand their operations in the near term, with the Philippines seen as one of the top 10 countries to benefit from the expansion activities.

The report, which was issued during the recently-concluded APEC Summit in Beijing, showed that 72 percent of the business executives surveyed said that they would likely expand in China in the near term.

The other top expansion sites are the United States (61 percent of respondents), Indonesia (57 percent), Hong Kong (51 percent), Singapore (50 percent), the Philippines (47 percent), Vietnam (45 percent), and Japan, Malaysia and Thailand (43 percent each).