(STAR) By Des Ferriols - Net foreign direct investment (FDI) into the country surged to $419 million in July, reversing last year’s $79-million outflow and nearly five times the previous month’s inflow, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The BSP said yesterday that July’s jump was largely due to intercompany loans. Capital investments from overseas also clocked up a net inflow of $80 million compared with a net outflow of $192 million a year earlier.

Net FDI inflows for the first seven months of the year reached $1.6 billion, nearly 70 percent higher than the same level a year ago.

Foreign companies, impressed by the Philippines’ improving economic growth and relative political calm, are investing more in the electronics sector, the clothing and food industries as well as information technology (IT), property and mining.

Major investors in the Philippines come from the United States, Japan, Singapore, South Korea and Hong Kong.

The BSP report said the substantial improvement in net FDI flows in July was due mainly to the fourfold increase in the net inflow in the other capital account which rose to $345 million against $89 million in 2006.

These transactions, according to the central bank, reflected inter-company lending between foreign direct investors and their subsidiaries and affiliates in the Philippines.

Net FDIs have been declining since April this year as investors kept to the sidelines until the smoke had cleared on the conduct and outcome of the May elections.

BSP Governor Amando M. Tetangco Jr. said local companies have also been taking advantage of the strength of the peso which had given them the flexibility to settle a significant portion of loans they owed their parent companies abroad.

As a result, the seven-month other capital account remained in deficit which amounted to $27 million compared to the $236-million surplus a year ago despite heavy inter-company investments in July.

The BSP reported that foreign equity capital investments also reversed to a net inflow of $80 million in July from a net outflow of $192 million a year ago.

Year-to-date, the BSP said the strong FDI performance was traced to the marked improvement in net foreign equity capital inflows which rose to $1.7 billion this year from only $589 million in 2006.

Specifically, the BSP reported that gross equity capital placements amounted to $1.8 billion. These investments went mostly to electronics, health and chemical products, garments, food, automotive sensors and decorative crafts industries in the manufacturing sector.

The BSP said it also recorded direct inflows into international courier, information technology development and multimedia service businesses in the services sector as well as construction, mining, real estate, financial intermediation, and agricultural industries.

The BSP said major investors came from the US, Japan, Singapore, South Korea and Hong Kong.

On the other hand, the BSP said there were also reinvested earnings which resulted to a surplus of $14 million over the seven-month period.

“It is expected that the continued solid performance of the economy and the improvement in underlying economic policies will encourage more foreign direct investments in the medium term,” the BSP said. — With Reuter

Chief News Editor: Sol Jose Vanzi

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