RP firms invested $1.8B abroad Doris Dumlao Inquirer
September 21, 2007
MANILA, Philippines - More Filipino firms have been investing their excess money abroad, making the most of the Bangko Sentral ng Pilipinas' initiative to liberalize the foreign exchange system.
From January to June this year, capital outflow from local enterprises amounted to about $1.8 billion--a complete turnaround from the $1 billion in net direct investment inflows recorded in the same semester last year, according to the BSP (the Philippine central bank).
The figure appeared in the country's balance of payments as direct investments abroad.
For the second quarter alone, direct investment outflows amounted to $2.46 billion, a turnaround from the $594-million inflow posted in the same quarter last year.
BSP officials did not take this development to mean that there was capital flight. They said that the outward investment flows merely indicated increased flexibility and improved health of local firms.
"It speaks of the financial strength and sophistication of our companies, consistent with globalization of Filipino firms, and that is something that can be very positive," BSP managing director Cyd Tuano-Amador said.
Earlier, the BSP doubled the maximum amount local companies can source from the banking system for offshore investments to $12 million from $6 million a year.
In undertaking these investments, the local firms need not seek the approval of the BSP's policy-making Monetary Board.
Enterprises that do not need to get dollars from banks are not covered by the BSP restriction.
"There was an increase in non-resident investments in the Philippines, but then there's a corresponding increase in the investment of residents abroad, resulting in a deficit in direct investment," BSP director Iluminada Sicat said.
Because of the forex liberalization and continued improvement in the financial position of corporations, the local enterprises were encouraged to invest abroad, she explained.
Net foreign direct investments during the first semester were estimated at $1 billion, due to fresh capital plowed into manufacturing, services, construction, mining, real estate, financial intermediation and agricultural industries. For the full year, net FDIs were projected by the BSP to reach $1.7 billion.
The BSP last April eased restrictions on capital outflows to temper the peso's sharp appreciation since the start of the year.
BSP Deputy Governor Diwa Guinigundo stressed that the outflows of capital shouldn't be viewed negatively because the domestic economy would also reap benefits from these offshore ventures.
The increase in the settlement of intercompany loans by local subsidiaries of foreign companies was likewise cited as a signal of an improved business environment.
So was the prepayment of foreign debts by both the private and public sectors, Guinigundo added.
