Philippines (the): Investing in the Philippines
According to the UNCTAD's World Investment Report 2022, foreign direct investment inflows to the Philippines increased from USD 6.8 billion in 2020 to USD 10.5 billion in 2021, remaining above the full-year target of USD 8 billion set by the Central Bank of the Philippines. The stock of FDI also increased in 2021, reaching USD 113 billion. The United States, China, the United Kingdom, Singapore, and Japan are traditionally the main investors, while inflows are concentrated in the transportation and storage, electricity, real estate, manufacturing, and construction. Other sectors that attract the highest levels of investment are information and communication, and administrative and business support services activities. Moreover, the country relaxed the local employment requirement for workers of foreign investors.
Despite growing FDI inflow levels, the Philippines continue to lag behind regional peers, in part because the Filipino constitution limits foreign investment, and also due to the threat of terrorism in some parts of the country. This can be partially explained by the fact that the country is evolving into a service society with low capital strength, which means that it needs only minimal equipment. In addition, the government favours subcontracting agreements between foreign companies and local enterprises rather than FDI in the strict sense of the term. Lastly, factors such as corruption, instability, and inadequate infrastructure, high power costs, lack of juridical security, tax regulations and foreign ownership restrictions discourage investment. Nonetheless, the country offers many comparative advantages, including an English-speaking and well-skilled workforce, a strong cultural proximity to the U.S., exposure to an emerging market, and a geographical location in a dynamic region. Furthermore, the Philippines have been substantially improving its business climate in recent years: starting a business is now easier due to the abolishment of the minimum capital requirement for domestic companies; dealing with construction permits has been improved (improvement of coordination, standardisation of the process for obtaining an occupancy certificate); and minority investor protection has also been strengthened. According to the Economist Business Environment, the Philippines ranks 57 out of the 82 countries reviewed for their investment climate.
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 6,822 | 11,983 | 9,200 |
FDI Stock (million USD) | 103,394 | 111,526 | 112,965 |
Number of Greenfield Investments* | 50 | 66 | 134 |
Value of Greenfield Investments (million USD) | 1,454 | 1,375 | 3,508 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | Philippines (the) | East Asia & Pacific | United States | Germany |
Index of Transaction Transparency* | 9.0 | 5.9 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 4.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 7.0 | 6.7 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
The country's main strong points in terms of FDI attractiveness include:
The main weaknesses of the country include:
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Latest Update: November 2023