FOREIGN direct investments (FDI) remained positive in August but were markedly lower compared to a year ago, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.
At $813 million, the net FDI inflow fell by 14.5 percent from the year-earlier $951 million.
"The decline in FDI net inflows during the month was due mainly to the 21.6-percent contraction in nonresidents' net investments in debt instruments to $529 million from $675 million," the BSP said in a statement.
Reinvestments of earnings also declined by 9.4 percent to $217 million, from $240 million, but investments in equity capital expanded by 83.6 percent to $66 million from $36 million.
The equity capital placements mostly came from Japan (72 percent) and the United States (17 percent) and were mostly channeled to the manufacturing (63 percent), real estate (20 percent), and electricity, gas, steam and air-conditioning supply sectors (9 percent).
Year to date, net FDI was 3.9 percent higher at $6.07 billion compared to the $5.84 billion seen in January-August 2023.
Equity capital placements ballooned to $1.34 billion in the eight-month period from just $840 million a year ago.
Reinvestments of earnings eased to $866 million from $910 million, while net investments in debt instruments fell to $3.86 billion from $4.09 billion.
Equity capital placements for January-August originated mostly from the United Kingdom (45 percent), Japan (36 percent) and the United States (8.0 percent).
The bulk, or 75 percent, went to the manufacturing sector, followed by real estate (11 percent) and wholesale and retail trade (4.0 percent).
Rizal Commercial Banking Corp. chief economist Michael Ricafort said that higher global interest rates may have partly weighed on FDI due to increased borrowing and financing costs.
Investments, however, are expected to increase "due to Create More and also due to the expected further rate cuts by the Fed (US Federal Reserve) that would increase demand for loans/credit, including those to finance FDIs into the country."
President Ferdinand Marcos Jr. on Monday signed Republic Act 12066, also known as the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act (Create More), which updates the original Create law (Republic Act 11534).
The new law aims to help businesses recover from the pandemic by reducing corporate income tax rates and making the country more attractive to investors via improved fiscal incentives.
It also simplifies the value-added tax (VAT) refund process by reducing required documents and addresses VAT concerns for export-oriented businesses.
Reforms to streamline and improve incentives-related processes were also introduced to create a more investor-friendly environment.
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