MANILA, January 12, 2006
 (STAR) By Des Ferriols - Net foreign direct investments surged by almost 65 percent during the first 10 months of 2005, reaching $863 million due to higher equity placements and lower withdrawals in October, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

In October alone, net foreign direct investment (FDI) flows into the country expanded by 100 percent to $102 million compared to the October 2004 level.

According to the BSP, this reversed the $87-million net outflow in September and ended the month with a net inflow of $73 million in the "other capital" component of FDI. This component is comprised of inter-company accounts between local companies and their foreign direct investors.

This favorable development brought the total net FDI flows from January to October 2005 to $863 million, up by 64.4 percent from the year-ago level of $525 million.

The BSP reported that higher net FDI inflows were in the form of equity capital which rose by 40.2 percent to reach $959 million due to the twin effect of higher equity placements and lower withdrawals.

BSP Governor Amando M. Tetangco Jr. said placements of fresh equity capital aggregated to $1.1 billion, with the manufacturing sector accounting for $503 million of total.

Real estate investments, on the other hand, amounted to $100 million during the 10-month period and foreign direct investments in the services sector amounted to $16 million.

According to Tetangco, the investments came mainly from the US and Hong Kong.

Tetangco noted that the positive performance of FDI during the 10-month period also resulted from the decline in the total net outflow in the "other capital" component of FDI to $102 million from the year-ago level of $291 million.

Tetangco said the net FDI inflow for 2005 is expected to reach $971 million with the expected equity capital placements in local enterprises amounting to $1.4 billion.

The BSP earlier pegged a slightly lower foreign direct investments of $1.2 billion in 2005. This year, higher FDI inflow is expected once mining investments start pouring in.

According to Tetangco, the 2005 FDI performance improved faster than expected because of the continued strength in business process outsourcing as well as manufacturing.

"The estimates we have for this year were based on approvals last year and the proceeds for the projects are expected to come in this year," Tetangco said.

According to Tetangco, the 2005 estimates indicate that the 2006 foreign direct investments could be even better once big-ticket mining projects start to come in.

The estimated 2005 foreign direct investments was more than double the $506 million investments recorded in 2004, Tetangco said. "This year’s inflows include only small amounts for mining which is the main growth area we are looking at in the coming years," he said.

Tetangco said this year’s foreign direct investments also included projects in the power and manufacturing sector.

"Business processing outsourcing is also particularly strong," he said.

Exporters have estimated that in 2004, the growth in BPOs was largely underestimated. Official record placed total revenues at $400 million worth of exported services but industry estimates that the actual number was closer to $1.7 billion.

According to Tetangco, BPO and mining would be the driving factors for FDI growth this year as well as the next, provided the investment climate continues to improve.

Chief News Editor: Sol Jose Vanzi

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