In his recent State of the Nation Address, Aquino bragged: “Just look: back in 2010, net foreign direct investment in our country was at $1.07 billion. In 2014, net foreign direct investments reached $6.2 billion. This is the highest ever recorded in our entire history. “

What a liar.

To start off, let’s have business consultant Peter Wallace — who has been supportive of Aquino in his Philippine Daily Inquirer column (and recently made Filipino by an act of Congress)—blow a big hole on that claim:

“A huge chunk—54 percent, or $3.35 billion, was made up of intercompany loans or borrowings of local subsidiaries from their parent firms.” Wallace wrote in his recent column. “Nice, but it’s just the confidence of the guys that are already here. Another 13 percent comprised reinvested earnings—again the guys that are already here. Only 33 percent was made up of new equity investment.”

Aquino is right that the $6.2 billion “is the highest ever recorded in our entire history” only because that figure for the first time in history includes not just foreign equity but even foreign debts, the amounts of which are  even suspect.

The Bangko Sentral ng Pilipinas — which used to be the country’s island of excellence and professionalism until it leaked confidential dollar accounts in the Corona impeachment case and now in Vice President Jejomar Binay’s character assassination program—has been recruited into Aquino’s propaganda machine. Another institution is made to bite the dust by the Yellow Lord.

Starting in 2013, the BSP revised its statistics to include even private foreign loans and other forms of debt instruments to companies here as part of its data on “foreign direct investments”. This obviously bloated the amount of foreign capital coming into the country under Aquino’s administration.

Investment or equity is your money, your cash that you put into a company. The loans you take out to finance your company are your company’s indebtedness. The BSP instead has revised the English language to create a rosy picture of Aquino’s administration, so that foreign direct investments include debts.

If one sticks the standard definition of investment, net foreign capital that flowed into the country in the last four and a half years of former President Gloria Macapagal-Arroyo totaled $6.1 billion. This is $1 billion bigger than during Aquino’s regime until 2014 (for which year whole-year figures are available) which amounted to only $5.0 billion.
The figures during Arroyo’s administration are impressive since there was even significant capital inflow in 2008 and 2009, or during the Global Financial Crisis, considered the worst since the 1930s depression. At that time, foreign capital flows to our neighbors in Southeast Asia even reversed and became huge net outflows.

According to World Bank figures, Vietnam, Thailand and Indonesia together had $17 billion and $9 billion in foreign capital fleeing their countries in 2008 and 2009, respectively. In contrast, the Philippines still managed to post $1.2 billion and $1.7 billion in net foreign direct investments for 2008 and 2009, respectively.

The main reason for this continued optimism of foreign capital at that time was the so-called Economic Resiliency Plan swiftly undertaken by President Arroyo. Totaling P330 billion, the plan injected much-needed funds in the system to counter-act the dampening of economic activity resulting from the Global Financial Crisis.

In fact, it was the Philippines’ success in weathering that severe worldwide economic crisis that convinced the world business community that the country’s fundamentals had become solid — better even than Thailand, Indonesia and Vietnam. Foreign investors subsequently rushed to the country after the global crisis, with Aquino and his Finance Secretary Cesar Purisima foolishly and falsely claiming that this was because of their wacko Daang Matuwid vision.

Because of those sold economic fundamentals that Arroyo built which the global crisis tested, Aquino could have spent the past five years mostly playing his X-Box, and foreign capital seeking profits would still have flowed into the country, and together with OFW remittances enlivened the economy for an average 6.2 percent GDP growth. (If you don’t believe that, think: What economic reforms has Aquino done?)

Worse, I suspect that BSP tampered with its figures because of the following reasons.

First, while it posts in its website a very detailed breakdown of where foreign equity came from ($2 billion from Hong Kong for instance from 2005-2014), the BSP does not give a country breakdown for “debt instruments.” Why, if they can get these from the companies where they got the figures on equity investments?

Second, the level of “debt instruments” the BSP reported inexplicably increased seven times from just $391 million in 2012 to $2.7 billion in 2013 and then nine times to $3.3 billion in 2014. There just hadn’t been any major change in the world or domestic financial system that created such a deluge of “debt instruments” to the country.

Third, the entry of “debt instruments” suspiciously came in surges: $525 million and $471 million on January and July 2013, respectively; $583 million, $424 million, and $457 million in January, June, and September of 2014, respectively

Such surges just do not happen in a financial system undetected by the market, as these weren’t.

Fourth, a more telling indication that the BSP may be tampering with data is that the amounts of debt instruments that came in in 2013 ($2.7 billion) and in 2014 ($3.3 billion) are inexplicably so huge that it would be impossible that these didn’t strengthen the peso’s value.

On the contrary, despite these purported huge inflows, the exchange rate was unchanged at P42 to the dollar in 2013, and even depreciated to P44 in 2014 – when there was supposed to be a flood of dollars from the purported $3.3 billion foreign “debt instruments”. The exchange rates were even unchanged in the months when there were huge inflows of such “debt instruments.” The only explanation is that this reported inflow of debt-instruments, didn’t really exist, except in the mind of some Aquino operative in the BSP  tampering with the data.

Fifth, the BSP doesn’t have the system to quickly count “debt instruments” in the past years, especially during Arroyo’s administration. I suspect they couldn’t or deliberately didn’t find the records on “debt instruments” for the past years so Aquino can brag that the $6 billion in “foreign investments” is the highest in history.

And sixth, the BSP’s own data contradict themselves. The data on “Debt Instruments” in its report on foreign investments turn up as “Direct Investment: Intercompany lending” in its report on “External Debt.”

However, this external-debt report, reported a surge of intercompany lending in 2013, but amounting to only $1,683 — nearly a billion dollars less than the debt-instruments totaling $2,654 in its foreign investment report. It’s worse for 2014, when the amount of intercompany lending totaled only $195 million, a trickle compared to the $3,346 million the BSP reported as “debt instruments” in its foreign-investment report.

The BSP’s attempts to please Aquino have created a distorted picture of our economy, and it is a dangerous one.

In its new definition of foreign investments, more than half of this is in the form of debt, and only a third in real equity. By the BSP’s system, we may be building up our foreign debts toward a debt crisis, while its reports paint a rosy picture of massive foreign capital surging into the economy.

Only for Aquino to boast in his SONA about something that wasn’t true.

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