Opportunity dawns for foreign investors in the Philippines (2024)

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

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

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.

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.