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11 July 2009

Philippines’ FDI inflows lifted by Kirin-SMB deal

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The sale of a substantial stake in San Miguel Brewery Inc. (SMB) to a Japanese beer-maker propped up foreign direct investment (FDI) inflows to the Philippines in the first four months of this year, the Manila Times reported.

FDI is money used to put up new businesses or expand existing ones and so generate employment in the beneficiary country.

In a statement, the Bangko Sentral ng Pilipinas (BSP), the country’s central bank, said FDI inflows rose 29.1 percent to $648 million at end-April from $236 million in the same four-month period last year.

In April alone, inflows hit $601 million, nearly three times the $236 million posted a year ago.

Foreign equity capital placements reached $619 million in April, or about three-fourths of the total, stemming from the acquisition by Kirin Holdings Co., Ltd. of a 43.249-percent stake in SMB for 8.841 peso per share, or a total acquisition price of 58.9 billion peso.

“The rebound in FDI flows given the difficult global economic conditions reflected foreign investors’ confidence in the country’s macroeconomic fundamentals,” BSP Governor Amando Tetangco Jr. said.

He said the net inflows of equity capital and reinvested earnings offset the net outflows in the other capital account.

Net equity capital, which increased to $627 million in April this year from $283 million last year, was directed to the manufacturing, real estate, construction, financial intermediation, and trade/commerce sectors, with investors coming mainly from Japan and the US.

Reinvested earnings reached $67 million this year, an improvement from an outflow of $233 million last year, as the positive news on corporate earnings for the first quarter encouraged investors to retain profits in local banks and enterprises.

The other capital account, consisting largely of inter-company borrowing/lending between foreign direct investors and their subsidiaries/affiliates in the country, reverted to a net outflow of $46 million as a result of inter-company loan repayments and trade credits extended to affiliates abroad.

The BSP forecast FDI net inflows to reach $700 million this year, almost half of the $1.5 billion last year. The BSP is confident that FDI will turn positive this year, citing renewed investor confidence in the domestic economy.

The International Monetary Fund (IMF) and the World Bank earlier said the Philippines will contract this year after the country registered an anemic growth of 0.4 percent in the first quarter. The Development and Budget Coordinating Committee cut its target to between 0.8 percent and 1.8 percent, from an earlier goal of 3.1 percent to 4.1 percent.


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