As if the warning of foreign trade groups about the vacillating policies of government turning away investors, foreign direct investments (FDI) recorded a net outflow of $78 million in March which means that more foreign capital were withdrawn from rather than infused into the country, Bangko Sentral ng Pilipinas (BSP) figures released yesterday showed.

The BSP said FDI net outflow in March was a reversal of the $179 million net inflow recorded a year ago. 

It attributed the dismal FDI figure in March to poor equity capital investments which posted a net outflow of $17 million due to the combined effects of lower equity capital placements and higher withdrawals during the month. 

Investments in debt ins-truments also registered a net outflow of $112 million largely as a result of remittance of profits by local branches of foreign banks to their head offices abroad. 

The BSP said the two indicators showing net outflows more than offset the net inflow in the reinvestment of earnings account amounting to $51 million for March. 

European Chamber of Commerce in the Philippines (ECCP) executive vice president Henry Schumacher had said while the government had addressed several economic issues such as the amendments to the sin tax law, revamping the law on foreign airlines payment of the common carrier tax, and exerting efforts in leveling the playing field through change in economic provisions, ever-changing policies, particularly on the tax system and the lack of value given to government contracts make investors think twice when considering the country as an investments destination.

He said that instead of creating a more pleasant environment for investors, the administration of President Aquino was also too pre-occupied with getting an investments grade from rating agencies.

“There is too much emphasis on investments grade, which has side effects that are not good for country,” Schumacher said adding that achieving an investments grade have the deleterious effect of boosting the peso’s strength.

A strong peso reduces the value of remittances and affects business process outsourcing (BPO) businesses through higher overhead costs in the country, he said.

The recent experiences of foreign companies which were provided fiscal incentives in setting up a local business such as tax-free importation of capital equipment and income tax breaks and are now having a hard time collecting the perks given them previously was also cited as a major reason for the anemic flow of investments into the country.

BSP data showed, nonetheless, that FDI continued to register net inflows amounting to $1.3 billion in the first three months, which was lower by 8.5 percent than the $1.4 billion net FDI inflow a year ago. 

“The decline in cumulative FDI was due mainly to lower net equity capital investments in the first quarter of the year,” the BSP said. 

By FDI component, gross equity capital placements totaled $1.5 billion, higher by 49.4 percent from $1 billion a year ago.

“The bulk of these equity capital investments, which emanated largely from Mexico, Japan, Malaysia and the U.S., were channeled to manufacturing; water supply, sewerage, waste management and remediation activities; financial and insurance activities; arts, entertainment and recreation; and real estate. These placements were partially offset by withdrawals of $799 million, resulting in US$729 million net infusion of equity capital during the first quarter of the year,” the BSP said. 

BSP data also showed reinvestment of earnings reached $196 million in the first quarter.

The BSP said this was the result of foreign investors opting to hold their earnings in local corporations due to favorable domestic economic prospects. 

The BSP, nevertheless, said this was lower by 26.3 percent compared to the $266 million reinvestements made last year. 

Non-residents’ net placements in debt instruments issued by local affiliates (or intercompany borrowings between foreign direct investors and their subsidiaries or affiliates in the Philippines in the form of loans and debt securities) totaled $378 million in the first quarter, the BSP figures showed. 

The figure was higher by 71 percent than the $221 million in intercompany borrowings posted during the same period last year. 

Parent companies abroad continued to lend funds to their local subsidiaries and affiliates to sustain existing operations or expand their businesses in the country, according to BSP.

The 2012 foreign investments data in the region showed that even with the 15 percent growth in foreign investments in the country last year, it is dead last in the preference of businesses locating in the region.

Official FDI data in the Asian community showed the Philippines’ $1.5 billion in foreign capital it attracted last year paled in comparison to even its least developed neighbors.

FDI figures last year showed Cambodia lured $1.8 billion; Myanmar, $1.9 billion; Vietnam, $8.4 billion; Singapore, $54.4 billion; Malaysia, $10 billion; Indonesia, $19.2 billion and Thailand $8.1 billion.