FOREIGN DIRECT INVESTMENT  FLOWS UP DESPITE NEWS REPORT - BSP

MANILA, August 21, 2005
 (STAR) The central bank of the Philippines clarified Friday that actual inflows of foreign direct investment (FDI) into the Philippines remain on an upward trend as of end-May 2005, contrary to news accounts of a 50 percent slump in FDI during the period.

According to the Bangko Sentral ng Pilipinas (BSP), what the news accounts cited earlier were indeed data from the central bank but these were data on foreign direct investments which registered with the BSP.

The BSP added registration records do not represent real flows for a number of reasons, noting that registration with the BSP is not mandatory.

It added that firms register their investments to secure authority to source foreign exchange from the local banking system to service capital repatriation and cash dividends/profits and other earnings accruing to BSP-registered investments.

Likewise, it said that companies that earn foreign exchange (e.g., exporters) may therefore opt not to register their investments with the BSP if they are able to source their foreign exchange requirements from their own operations.

Hence, it noted, investments of these companies are not captured by BSP-registered investments data.

Second, the country's monetary authority said there is currently no mandatory period within which to register foreign investments with the BSP, and as such, there could be a considerable time lag between the inflow of the investment funds and the registration with the BSP.

Instead, it declared, the true measure of FDI flows should be taken from the BSP’s balance of payments (BOP) statistics, which measures actual flows that transpire during the reference period, and whose measurement is based on internationally-accepted concepts and procedures.

Preliminary estimates show that BOP-FDI flows into the country for January to May 2005 increased by 172.5 percent to US$417 million.

All components of FDI, i.e., net equity capital, reinvested earnings and other capital such as inter-company loans posted gains.

New foreign investments into the country during the period consisted mainly of hefty investments in the manufacturing sector from Hong Kong and Japan.

Peso breaches 56:$1 anew By Donnabelle L. Gatdula The Philippine Star 08/20/2005

The peso breached the 56-to-the-dollar level anew in yesterday’s trades, closing at a two-week low of 56.04, in line with the weakening of major currencies against the US dollar.

Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the peso’s retreat could be traced to the impact of the other currencies losing ground against the dollar, coupled with anticipated demand as the week comes to an end.

"A stronger dollar, particularly versus the yen and euro, plus demand ahead of the weekend, weakened the peso," he said.

Closing last Thursday at 55.93, the local currency opened at 55.97 yesterday, edging slightly to 55.96 during the day, before settling at 56.04. It hit an intraday low of 56.05.

Volume turnover remained high, increasing to $355.5 million as against Thursday’s $275.5 million.

Tetangco assured that the monetary authority has not intervened in the foreign exchange market to soften the drop of the local currency.

"We have no intention to intervene in the market. We were not in the market," the central bank head stressed.

Forex dealers said since late June, the P56- per-dollar level has acted as chart support for the local currency.

"There was a lot of buying at the 56 to 56.04 level from commercial accounts," a Manila-based trader said. "When investors sensed there was no more demand for dollars, they went the other way to see how far they could push dollar/peso."

Dealers said optimism that the Supreme Court would lift the suspension on the expanded value-added tax (EVAT), perhaps as soon as next week, prevented a bigger peso selloff this week. The EVAT is the centerpiece of the government’s economic reforms aimed at plugging huge revenue leaks and budget deficits.

Asian currencies have taken a knock this week from concerns that high oil prices will crimp economic growth and from losses in regional stock markets.

But the peso has outperformed most of its Asian counterparts.

It has shed about 0.7 percent against the dollar this week, while the Indonesian rupiah has weakened almost two percent and the Singapore, South Korean and Taiwan currencies have eased about 0.9 percent each.


Reported by: Sol Jose Vanzi

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