Foreign investments are critical in shaping the economic trajectory of a country. For one, they bring in new capital to fund projects such as infrastructure, which are needed for long-term economic growth and development.
These investments also play a crucial role in creating jobs and employment opportunities, facilitating technology transfer, and enabling a country to have greater access to global markets, thereby integrating it further into the global economy.
In the 2023 World Competitiveness Ranking by the International Institute for Management Development (IMD), international business executives identified several factors that contribute to the attractiveness of competitive economies. The Philippines was recognized for its skilled workforce, characterized by open and positive attitudes, as well as the dynamism of its economy, all of which boost its appeal to foreign investors.
Indeed, the Philippines has many inherent strengths that can be leveraged to attract more foreign investments.
First is its strategic location, which influences its access to regional markets, trade routes, and global supply chains. The Philippines' position at the crossroads of Southeast Asia establishes it as a vital gateway to the broader Asia-Pacific region, making it an appealing hub for trade, logistics and regional operations.
Interestingly, its proximity to major global shipping routes and key markets like Japan and ASEAN countries, combined with its accessibility, further strengthens its attractiveness to multinational companies. Moreover, its distance from mainland Asia offers a degree of protection from challenges within the mainland.
Second, the Philippines has a young and skilled workforce. According to the Philippine Statistics Authority (PSA), the median age of the population is approximately 25 years, giving the country a favorable demographic profile.
This is especially advantageous as other Asian nations experience rapid aging of their populations. With a young median age, the country features a dynamic, adaptable, and eager-to-learn working generation.
Moreover, English being one of the official languages of the Philippines offers a significant advantage in forging connections with sources of capital and technology and accessing global markets. English is widely used in business, education, legal matters and daily communication.
It serves as the language of instruction in schools and is prevalent in employment contracts, legal documents and the judicial system. This proficiency in English enhances the attractiveness of the Filipino workforce to foreign investors looking to establish operations in the region, as it removes the language barrier problems that complicate work and business processes.
The cultural adaptability of the Filipino labor force is another major reason for its attractiveness. Having been under Western rule for centuries, the Filipino workforce shares common cultural affinities with both Western and Eastern markets, enabling it to bridge differences and foster better collaboration across regions.
Lastly, a large population of over 110 million – primarily young – also represents a significant consumer market. Coupled with increasing urbanization, strong remittance inflows and a youthful demographic, these factors present vast potential for growth. With a young median age, the country boasts a substantial segment of tech-savvy consumers who easily adapt to new trends and technologies, thereby influencing and driving market demand.
An expanding middle class, along with the nation's young population, is expected to sustain this consumer advantage for decades, enhancing household spending and driving demand for goods and services. Notably, data from the PSA indicates that household consumption typically accounts for approximately 70% of the country’s gross domestic product, underscoring the crucial role of consumer spending in driving economic activity in the Philippines.
Geopolitical shifts that impact global markets, trade flows and economic stability can present the Philippines with an opportunity to strengthen its position in the global economy and supply chain by leveraging its inherent strengths.
Fortunately, policy frameworks designed to attract further investment are already in place, including the creation of green lanes as well as the amendments to the Public Service Act, the Foreign Investments Act and the Retail Trade Liberalization Act. These policies are crucial in establishing a favorable environment for strategic investments.
But while the Philippines has made significant progress in enhancing its policy environment to attract investments, there is a need to continually and proactively update and adapt these measures to keep pace with the rapidly evolving global market.
Incentives must be ensured to be competitive and designed to attract high-value investments in emerging sectors. Amid challenges, such as issues related to corruption perception, government inefficiency and inconsistent policy implementation, the fact remains that the road ahead is still promising.
The government needs to employ a focused approach towards improving its internal strengths in trade and investment while forging stronger ties with like-minded foreign partners that value transparency and stable global supply chains. There is no better option if we desire to move forward with greater certainty with the rest of the world.
Venice Isabelle Rañosa is the research director of the Stratbase Group.