Opportunity dawns for foreign investors in the Philippines (2024)

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The Philippines is the fastest growing among the Association of Southeast Asian Nations’ five biggest economies, with GDP rising 5.6% in 2023 and forecast to expand another 5.8% in 2024.1 This, along with the country’s young and growing population and increasingly prosperous consumer base, is attracting keen interest from global investors and international businesses.

The Philippines has much to offer them. The main engine of its economy is its people: labour force participation is high, English is widely spoken, and its population of 118 million2 has a median age of just 25 years. The quality of employment opportunities is improving, which should sustain growth in private consumption.3 According to the World Economic Forum, recent reforms to court foreign investment, upgrade infrastructure and improve the skills of the country’s workforce have put the Philippines on track for transformational growth and development in the coming decade.4

Like the rest of ASEAN, the Philippines also benefits from increasing urbanisation and widespread adoption of digital technologies. The country’s digital economy is one of the region’s fastest growing, reaching an estimated USD24 billion in 2023 and poised to expand to USD35 billion by 2025, according to the latest annual e-Conomy Southeast Asia report from Google, Temasek and Bain & Company.5

The power of connections

Connectivity is key to unlocking both digital and physical opportunities in the Philippines, a nation of more than 7,000 islands. The government is in the process of bolstering nation-wide connections with plans to invest about USD162 billion6 on 185 flagship infrastructure projects covering strategically important sectors such as sustainable development, physical and digital connectivity, agriculture, energy, health, and climate-resilient infrastructure.

The Philippines’ connections with markets in Southeast Asia and beyond are another important driver of economic growth. Close integration with the rest of ASEAN – one of the world’s fastest growing and most dynamic regions – extends the reach of businesses based in the country to the 10-member trading bloc’s combined population of around 672 million7 and GDP on track to surpass USD4 trillion by 2025.8

Businesses in the Philippines are very confident about growing their intra-regional trade flows, with 85% expecting their trade with other ASEAN countries will increase this year, according to a HSBC survey of financial decision-makers in the region’s six biggest economies. Nearly four in ten expect growth of more than 30%.

ASEAN is experiencing strong and sustained growth not only in intra-regional trade, but also in its trade with China and other major Asia-Pacific economies on the back of several free trade agreements.9 ASEAN is also set to benefit significantly from the ongoing process of supply chain diversification.

In view of the region’s bright prospects, it is unsurprising that the survey also revealed that the top strategic priority for businesses in the Philippines is expansion into new ASEAN markets. More than two thirds plan to invest more inside ASEAN this year, as the region becomes increasingly interconnected.

HSBC has been helping to shore up these connections with its more than 135-year presence across ASEAN’s six biggest economies, and in the Philippines since 1875. In the early days, the bank supported the country’s sugar trade and helped finance the construction of the first railway line, from Manila to Dagupan. Today, HSBC is helping businesses in the Philippines capture new opportunities in global supply chains and expand their international footprint.

HSBC is also helping businesses in the Philippines improve their connectivity with customers in an increasingly digital landscape. HSBC Philippines recently began offering local firms its Omni Collect solution, which supports multiple online and offline payment options, as well as enabling monitoring and analysis of transaction data.10

Policy support

The government has rolled out a string of policy measures to open new sectors to foreign investment, streamline procedures and improve transparency. These have led to a considerable improvement in the business environment.

Several sectors previously defined as public utilities have been opened to full foreign ownership.11 These include railways, airports, expressways and telecommunications.12 Access to the local retail and renewable energy sectors has also been eased, and the minimum capital requirement for foreign-owned start-ups has been halved to USD100,000.13

Meanwhile, taxes faced by foreign corporations have been cut,14 while the scope for tax incentives – particularly for export-focused businesses15 – has been increased substantially.

Bridging opportunities

With its deep understanding of the local market and unmatched network across Asia and beyond, HSBC is ideally positioned to support businesses eyeing the opportunities from the new era for investment into the Philippines promises.

Over the years, HSBC has demonstrated its commitment to supporting the growth and development of the Philippines and providing a full range of international banking services in the country. The bank has financed international trade in goods and services, supported key infrastructure projects and helped businesses harness new opportunities in the booming digital economy with its innovative digital banking solutions.

HSBC continues to serve as a vital bridge for local businesses that are looking to expand into the rest of ASEAN and beyond, and for international businesses interested in accessing the country.

  1. https://www.pna.gov.ph/articles/1217969
  2. https://opinion.inquirer.net/167008/finally-the-demographic-tipping-point
  3. https://www.dof.gov.ph/phs-full-year-2023-gdp-growth-strongest-among-major-asian-economies/
  4. https://www.dof.gov.ph/recto-optimistic-on-wefs-bullishness-on-ph-following-the-successful-country-roundtable-in-manila/#:~:text=%E2%80%9CI%20think%20that%20this%20can,shown%20how%20resilient%20it%20is
  5. https://business.inquirer.net/435004/ph-digital-economy-on-track-to-hit-24b-in-2023
  6. https://neda.gov.ph/neda-board-approves-updated-ifp-list-other-projects-to-support-infra-devt/
  7. https://research.hktdc.com/en/article/Mzk5MzcxNjEz
  8. https://jakartaglobe.id/business/asean6s-nominal-gdp-to-top-4-trillion-by-2025-study
  9. https://asean.org/free-trade-agreements-with-dialogue-partners/
  10. https://www.bworldonline.com/banking-finance/2024/03/05/579373/hsbc-rolls-out-payment-solution-in-philippines/
  11. https://www.alliottglobal.com/insights/recent-revisions-in-foreign-investment-laws-in-the-philippines/
  12. https://www.business.hsbc.com/en-gb/insights/growing-my-business/philippines-a-growing-opportunity-for-foreign-investment
  13. https://www.lexology.com/library/detail.aspx?g=369d9c89-de3a-4646-abe8-d90b8b03b2f4
  14. https://taxnews.ey.com/news/2021-0679-philippines-enacts-law-reducing-corporate-income-tax-rates-and-rationalizing-fiscal-incentives
  15. https://www.sgv.ph/c-suite/Whats-new-with-Philippine-investment-incentives
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Opportunity dawns for foreign investors in the Philippines (2024)

FAQs

What are the advantages of foreign direct investment in the Philippines? ›

Policies Towards Foreign Direct Investment

They provide incentives and special investment packages to investors. Noteworthy advantages of the Philippine investment landscape include free trade zones, including PEZAs, and a large, educated, English-speaking, relatively low-cost Filipino workforce.

What is the status of foreign investment in the Philippines? ›

Foreign Direct Investment in Philippines increased by 1364 USD Million in February of 2024. Foreign Direct Investment in Philippines averaged 472.58 USD Million from 2005 until 2024, reaching an all time high of 2662.00 USD Million in December of 2021 and a record low of -396.00 USD Million in June of 2007.

Why do foreign investors pull out of the Philippines? ›

Restrictions on foreign ownership in some sectors, inadequate public investment in infrastructure, and lack of transparency in procurement tenders hinder foreign investment. The Philippines' regulatory regime remains ambiguous in many sectors of the economy, and corruption is a significant problem.

How do the Philippines attract foreign investors? ›

Noteworthy advantages of the Philippine investment landscape include free trade zones, including special economic zones, and a large, educated, English-speaking, and relatively low-cost workforce.

What are the advantages of foreign business in the Philippines? ›

Outsourcing to the Philippines allows businesses to operate 24/7, taking advantage of the time difference. With a workforce that is proficient in English and highly skilled, businesses can assign tasks to their offshore team in the Philippines during their own working hours and receive completed work the following day.

What are the threats of foreign direct investment in the Philippines? ›

Lastly, factors such as corruption, instability, inadequate infrastructure, high power costs, lack of juridical security, tax regulations and foreign ownership restrictions discourage investment.

Can a foreigner own 100% of a business in the Philippines? ›

Foreign investments in the Philippines

Anyone, regardless of nationality, can invest in the Philippines with up to 100% equity. A business with 60% Filipino equity is considered a Philippine company, while one with more than 40% foreign equity is considered a foreign-owned domestic company.

Is foreign investment good for the Philippine economy? ›

The government recognizes the pivotal role of private sector investments and, thereby, commits to continuously enhance the business climate. Foreign investments are encouraged to fill in capital gaps, help provide employment, increase production, and provide a base for the overall development of the economy.

Is the Philippines a good country to invest in? ›

Competitive investment costs

The Philippines has some of the lowest costs in the world, especially in outsourcing, making it a worthy foreign investment. Its low cost of living affects the workers' salaries in the country, which can start at around $500 per month or lower for rank-and-file employees.

Who is the largest foreign investor in the Philippines? ›

Germany emerged as the leading foreign investor in the Philippines, with total investments amounting to approximately 394 billion Philippine pesos. The Netherlands came next with about 350 billion Philippine pesos in investments.

Can a foreigner own a business in the Philippines Why or why not? ›

Anyone, regardless of their nationality, is welcome to do business and invest in the country, in almost areas of economic activities.

Why do people invest in the Philippines? ›

Bountiful Resources. As the second-largest archipelago in the world, the Philippines offers such natural bounty from land to marine to mineral resources. It is the biggest copper producer in Southeast Asia and among the top ten producers of gold in the world.

What is the trend in foreign direct investment in the Philippines? ›

Data are in current U.S. dollars. Philippines foreign direct investment for 2022 was $9.37B, a 21.84% decline from 2021. Philippines foreign direct investment for 2021 was $11.98B, a 75.65% increase from 2020. Philippines foreign direct investment for 2020 was $6.82B, a 21.33% decline from 2019.

What is an example of foreign direct investment in the Philippines? ›

According to UNCTAD's World Investment Report 2023, foreign direct investment inflows to the Philippines decreased from USD 11.9 billion in 2021 to USD 9.2 billion in 2022 (-23.2%) owing to acquisitions by local investors of foreign affiliates; for example, Union Bank of the Philippines acquired the Philippine consumer ...

What are the advantages of foreign direct investment? ›

FDI catalyzes economic growth, technological advancement, and job creation. The numerous advantages of FDI, including enhanced economic growth, technology transfer, employment generation, and infrastructure development, make it a sought-after strategy for nations aiming to boost their economies.

What is an advantage of foreign direct investment? ›

FDI can foster and maintain economic growth, in both the recipient country and the country making the investment. On one hand, developing countries have encouraged FDI as a means of financing the construction of new infrastructure and the creation of jobs for their local workers.

What are the three advantages of foreign direct investment? ›

Benefits of Foreign Direct Investment

Below are some of the benefits for businesses: Market diversification. Tax incentives. Lower labor costs.

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