Foreign money poured into so-called bricks-and-mortar ventures in the Philippines posted a year-on-year decline in the first two months to only $622 million, or almost half the amount the Bangko Sentral ng Pilipinas (BSP) reported last year, when this totaled $1.209 billion.

This, BSP Governor Amando M. Tetangco Jr. said, represented a decline of 48.6 percent and the result of the lower net inflows of all foreign direct investment (FDI) components for the period.

Because they remain invested in the Philippines for the long haul, the government would rather have FDI than the portfolio investment variety, also known as speculative investment or "hot" money, whose flighty nature makes it fly off the country at the merest hint of trouble or promise of greater rewards elsewhere.

Hot money typically gets invested in locally traded stocks and bonds that, apart from the fees exacted by the local debt and securities market participants, do not generate neither tax for the national coffers nor employment for the locals.

FDI in February alone proved 17.9 percent higher to $359 million, from year-ago FDI of only $305 million. These are inferior FDI numbers than that posted the previous January, when this aggregated $263 million, and the year-ago figure of $905 million. On year-on-year basis, FDI in January proved 71 percent weaker this year than in 2014, the BSP said.

According to the BSP, FDI in the first two months aggregated only $622 million, on account of so-called equity and investment fund shares, or simply equity investments, of $333 million, plus the net borrowings of the local subsidiaries from their overseas principals aggregating $289 million.

Reinvestment of earnings in the first two months this year totaled $128 million from year ago of $189 or lower by 32.1 percent.

Net equity capital also declined by 22.4 percent from $264 million to $205 million.

Equity capital investments during the period came mostly from the US, Spain, Singapore, Japan and Germany. These were mainly channeled to manufacturing, electricity, gas, steam and air conditioning supply; financial and insurance; real estate; and transportation and storage activities.

FDI the past four year average more or less $2.2 billion and by itself compare very poorly against FDI received by neighboring countries typically aggregating in the billions of dollars.

Thailand, for example, was a recipient of an estimated $13 billion worth of FDI in 2013, while Malaysia received a little bit lower than that the same year.

"I wouldn't look too much into the blip given that FDI data tends to be "chunky" or discrete. For example, February 2014 numbers may have seen an inflow from abroad to invest in a certain company and thus the same investment would not be implemented in February this year.

As such, we might need to look at FDI data possibly in between semesters. We could still hope for positive flows of FDI although I personally think it would be hard to top the 2014 performance," Nicholas Antonio Mapa, economist at the Bank of the Philippine Islands, said in reaction.

The Philippines was a recipient of FDI worth the equivalent of P95.19 billion in the last three months of 2014, sharply higher than FDI equal to only P18.31 billion a quarter earlier, based on data from the National Statistical Coordination Board.

By Bianca Cuaresma - businessmirror.com.ph

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