Foreign direct investment (FDI) net inflows grew by 13.0 percent to US$1.0 billion in February 2023 from the US$926 million net inflows recorded in the same month last year (Figure 1).^1,2 The increase in FDI was due to higher non-residents’ net investments in debt instruments, notwithstanding lower net equity capital placements and reinvestment of earnings.³ 

During the reference month, the bulk of the equity capital placements emanated from Japan, the United States, and the Cayman Islands. The said investments were channeled mostly to the 1) manufacturing; 2) real estate; 3) electricity, gas steam and air conditioning supply; and 4) financial and insurance industries.

The year-to-date FDI net inflows amounted to US$1.5 billion, 14.6 percent lower than the US$1.8 billion net inflows posted in the first two months of 2022. All major FDI components yielded lower net inflows as foreign investors remained cautious amid persistent and broadening global inflation (Figure 2).

^1.The BSP statistics on FDI are compiled based on the Balance of Payments and International Investment Position Manual, 6th Edition (BPM6).  FDI includes (a) investment by a non-resident direct investor in a resident enterprise, whose equity capital in the latter is at least 10 percent, and (b) investment made by a non-resident subsidiary/associate in its resident direct investor.  FDI can be in the form of equity capital, reinvestment of earnings, and borrowings.

^2.The BSP FDI statistics are distinct from the investment data of other government sources. BSP FDI covers actual investment inflows. By contrast, the approved foreign investments data that are published by the Philippine Statistics Authority (PSA), which are sourced from Investment Promotion Agencies (IPAs), represent investment commitments, which may not necessarily be realized fully, in a given period. Further, the said PSA data are not based on the 10 percent ownership criterion under BPM6.  Moreover, the BSP’s FDI data are presented in net terms (i.e., equity capital placements less withdrawals), while the PSA’s foreign investment data do not account for equity withdrawals.

^3. Net investments in debt instruments consist mainly of intercompany borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the Philippines. The remaining portion of net investments in debt instruments are investments made by non-resident subsidiaries/associates in their resident direct investors, i.e., reverse investment.