May FDI inflows slowed to a trickle; US, euro woes blamed

August 15, 2012 at 13:21

The net inflow of foreign direct investments to the Philippines dropped in May with monetary officials blaming it on global risk aversion arising from the extended crisis in Europe.

The Bangko Sentral ng Pilipinas on Friday reported that net FDI inflow amounted to only $7 million in May, falling by 96 percent from $195 million in the same month last year.

Gross FDI inflow for the month reached $13 million, while outflows hit $6 million.

“Investor sentiment remained subdued on the back of continued concerns over the development in some advanced economies, particularly the interlocking sovereign debt and banking crisis in the euro area,” the BSP said in a statement.

For the first five months of the year, nonetheless, net inflow of FDIs managed to keep a growing trend. It amounted to $844 million, up by about 10 percent from $766 million in the same period last year.

Gross outflows for the five-month period amounted to $949 million, while outflows stood at $105 million.

The biggest sources of FDIs in the first five months were the United States, Australia, Netherlands, Japan and the United Kingdom, the central bank said.

Investments were mostly in the sectors of manufacturing, real estate, wholesale and retail trade, and financial and insurance, it added.

The decline in net FDI inflow in May was despite the Philippines’ better-than-expected growth rate in the first quarter of 6.4 percent, which was the second-fastest in Asia, following China’s 8.1 percent.

Although investor sentiment was relatively weak, affecting FDIs inflows to emerging markets in general, the Philippines remained a laggard as far as attracting foreign direct investors is concerned.

While gross FDIs to the Philippines so far this year has yet to reach the billion-dollar mark, those to Indonesia already reached over $5 billion in the first quarter alone.

Economists said that besides uncontrollable, external factors that weigh down on the ability of the Philippines to attract foreign investments, domestic problems are likewise to blame. They said it takes more than a robust economic growth rate to attract foreign direct investors.

They said the Philippines has to develop its infrastructure, reduce cost of power, and to resolve the tedious process of setting up a business in the country to corner more foreign investments.

Government officials have claimed, however, that problems cited as affecting the country’s business climate are already being addressed. They said public infrastructure is a key priority under the Aquino administration.


Source: Michelle V. Remo, Philippine Daily Inquirer. (10 August 2012)

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