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Buhay Pinay




Philippine News

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Foreign investments down

13 October 2017

The Philippine economy is beginning to suffer the adverse effects of the Duterte administration’s policies.

During a Senate hearing last week on the 2018 proposed budget of the National Economic and Development Authority (Neda), Senator Franklin Drilon expressed concerns over “a significant deceleration in the influx of new investments” or equity placements.

This prompted the Neda to issue a statement on October 10, claiming that foreign investors remained confident in doing business in the Philippines, a view echoed by Presidential Adviser on Entrepreneurship Jose Ma. Concepcion 3rd.

But on the same day, the Bangko Sentral ng Pilipinas (BSP) reported that net foreign direct investments (FDI) slumped to their lowest level in over a year in July on the back of a steep drop in funds channeled into debt instruments.

At $307 million, the net inflow for the month was 37.9 percent lower compared to July last year and was also the smallest since June 2016’s $238 million.

The Bangko Sentral said this was mainly on account of a 74.3-percent decline in investments in debt instruments, to $105 million from $407 million, which outweighed a more than five-fold increase in net equity capital.

Net equity capital, at $131 million in July, was 470 percent higher compared to the $23 million posted a year earlier. Equity capital placements totaled $170 million, outpacing the $39 million in withdrawals during the month.

The bulk of inflows came from Singapore, the United States, the Netherlands, Japan and Taiwan, the central bank said.

The funds were channeled primarily into manufacturing; real estate; wholesale and retail trade; finance and insurance; and electricity, gas, steam and air conditioning supply activities.

Reinvested earnings, meanwhile, grew by 11.5 percent to $71 million.

July’s slump weighed on net FDI flows for the first seven months of 2017, which fell by 16.5 percent year on year to $3.9 billion. The Bangko Sentral said this was due to an 81.5-percent decline in net equity capital to $272 million.

Placements during the period came mostly from Singapore, the United States, Japan, Hong Kong and the Netherlands.

Net placements in debt instruments expanded by 13.9 percent to $3.14 billion from $2.76 billion.

Reinvested earnings reached $487 million, up 9.3 percent.

The Bangko Sentral raised its 2017 net FDI forecast to $8 billion in June, from $7 billion previously, citing improved domestic indicators and expected global uptick.

Duterte’s economic managers are pushing for the approval of the Tax Reform for Acceleration and Inclusion (TRAIN) bill as a crucial component of the government’s massive infrastructure program, “Build Build Build.”

Cabinet officials have also been drumming up investor interest via briefings overseas, with the next leg to be held in New York with Socioeconomic Planning Secretary Ernesto M. Pernia, Budget Secretary Benjamin Diokno and Finance Secretary Carlos Dominguez III in attendance.

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