We use cookies to personalise the website and offer you the greatest added value. They are, among other purposes, used to analyse visitor usage in order to improve the website for you. By using this website, you agree to their use. Further information can be found in our data privacy statement.



Successfully investing in the Philippines

PrintMailRate-it

last updated on 19 May 2021 | reading time approx. 5 minutes

 

​​​​

 

 

 

How do you assess the current economic situation in the Philippines?

Through a long and chal­len­ging year, the Cov­id-19 out­break rep­res­ents a large ex­tern­al shock and sig­ni­fic­antly af­fected the Phil­ip­pines eco­nomy. In the light of re­cent data the eco­nomy con­trac­ted by 9.5 per cent in 2020, one of the most severe re­ces­sions amongst ASEAN coun­tries. By con­trast, be­fore the pan­dem­ic, eco­nom­ic growth was fore­cast at ap­prox­im­ately 6 to 7 per cent, one of the highest amongst ASEAN coun­tries, fol­low­ing a dec­ade of ro­bust growth. The num­ber of con­firmed cases surged in April 2021 to a total amount of 884,000. Thus, al­most ex­actly a year after the first “lock­down” a second En­hanced Com­munity Quar­ant­ine was im­ple­men­ted for the na­tion­al cap­it­al re­gion (NCR+). Giv­en the im­posed re­strict­ive meas­ures un­til the end of April 2021 and po­ten­tially bey­ond, a sus­tained re­cov­ery re­mains highly un­cer­tain. For the time be­ing in­ter­na­tion­al bor­ders re­main closed to for­eign cit­izen and in ad­di­tion, in­bound travel is lim­ited to 1,500 per day for those al­lowed to enter the coun­try. Re­open­ing is gradu­al and closely mon­itored.

Wide­spread fur­ther Cov­id ef­fects are an­ti­cip­ated, such as a de­press­ing private con­sump­tion, in­dus­tri­al activ­ity and net ex­ports. The me­di­um- to long-term im­pact of the pan­dem­ic on private con­sump­tion and oth­er eco­nom­ic in­dic­at­ors may be drawn from the ana­lys­is and ex­per­i­ence of past nat­ur­al dis­asters and exot­ic crisis. In the af­ter­math of such events the Phil­ip­pines were al­ways able to re­l­at­ively quickly bounce back to pre-crisis levels.

In Novem­ber 2020, the Phil­ip­pines in­tro­duced a roadmap for the Cov­id-19 vac­cine rol­lout pri­or­it­ise groups at highest risk, such as front­line health care work­ers and vul­ner­able groups de­term­ined by age and health. In Q1 of 2021 the gov­ern­ment of the Phil­ip­pines launched na­tion­wide vac­cin­a­tion pro­grams.

 

How would you describe the investment climate in the Philippines? Which sectors offer the largest potential?

Pre-pan­dem­ic the Phil­ip­pines was­able to con­tinu­ously in­crease its for­eign dir­ect in­vest­ment, linked not only to a large (con­sumer) mar­ket but also due to con­tinu­ous lib­er­al­isa­tion and im­prove­ment of “do­ing busi­ness” mar­ket con­di­tions. In 2021 the Phil­ip­pines passed its largest tax re­form in his­tory, re­du­cing the cor­por­ate in­come tax from one of the highest in ASEAN to 25 per cent (20 per cent for small en­tit­ies) and in­tro­du­cing a new com­pet­it­ive in­vest­ment in­cent­ives scheme. The tax re­form serves as one ele­ment of the Phil­ip­pines eco­nom­ic re­cov­ery pack­age. While it may take still some time for the Phil­ip­pines to re­cov­er from the pan­dem­ic, the coun­try may be one of the be­ne­fi­ciar­ies of the “New Nor­mal” where cer­tain tasks may not ne­ces­sar­ily re­quire work from a spe­cif­ic loc­a­tion. The Phil­ip­pines were already pre-pan­dem­ic one of the lead­ing coun­tries in the world with re­gards to Busi­ness Pro­cess Out­sourcing and Know­ledge Pro­cess Out­sourcing – sec­tors that are still go­ing strong dur­ing the pan­dem­ic and also formed part of new in­vest­ments dur­ing this time. Oth­er sec­tors that re­main strong will be the con­struc­tion and in­fra­struc­ture in­to which the gov­ern­ment in­ves­ted sig­ni­fic­antly again as part of the Cov­id-19 re­cov­ery pack­age. Oth­er pri­or­ity sec­tors are med­ic­al products and sup­plies of phar­ma­ceut­ic­als and ex­port ori­ented man­u­fac­tur­ing.

 

The Philippines is intended to become the fifth largest business location in Asia in the next few decades. How realistic is the forecast?

This forecast seems entirely justified, as the Philippines is already an important business location in Asia, which in our opinion continues to be largely underestimated. By 2050, the population is expected to grow from 108 to about 150 million inhabitants. The Philippines would thus further expand its position as the second largest domestic market in ASEAN, second to Indonesia. In addition to one of the youngest and fastest-growing populations in the world, the Philippines' strengths include widespread English language skills and relatively high levels of education.


This population growth, coupled with steadily increasing investment in infrastructure over the past decade, creates the best possible conditions. The country is rich in a wide variety of raw materials, many of which have not yet or not sufficiently been developed.


Human capital and Business Process Outsourcing (BPO) are one of the country's strengths, and the Philippines is one of the world's leaders in this area. The Philippines is a leader in call center and business support services. More and more highly skilled jobs are also being outsourced to the Philippines. These include engineering, financial and IT programming services. The trend towards home office solutions brought about by the corona virus will certainly further catalyze the tendency towards outsourcing certain non-local business processes.
 

In your opinion, how will the Philippines develop?

Look­ing ahead, the “Cor­por­ate Re­cov­ery and Tax In­cent­ives for En­ter­prises” (CRE­ATE) Act and the “Re­gion­al Com­pre­hens­ive Eco­nom­ic Part­ner­ship” (RCEP) are an­ti­cip­ated to con­trib­ute sub­stan­tially to the de­vel­op­ment and sup­port of the pan­dem­ic re­cov­ery.

The newly signed CRE­ATE Act start­ing 1 Ju­ly 2021 re­duces Cor­por­ate In­come Tax by 25 or 20 per cent and aims to ra­tion­al­ise fisc­al in­cent­ives in a bid to help busi­nesses re­cov­er from the ef­fects of the pan­dem­ic.

ASEAN mem­ber states, to­geth­er with Aus­tralia, China, Ja­pan, Korea and New Zea­l­and, signed RECP in Novem­ber 2020. The Phil­ip­pines are ex­pec­ted to drive be­ne­fits from the RECP trade agree­ment over the next ten years.

In the fo­cus on the di­git­al eco­nomy and new growth sec­tors, as well as gains from the RECP and CRE­ATE agree­ment, are an­ti­cip­ated to sus­tain Phil­ip­pines’s eco­nomy over the me­di­um term. The agree­ment po­ten­tially sup­ports an in­clus­ive and sus­tain­able post-Cov­id-19 eco­nom­ic re­cov­ery, job cre­ation and strength­en­ing of re­gion­al sup­ply chain

Contact

Contact Person Picture

Dr. Marian Norbert Majer

Senior Associate

+ 63 2 8 4791 785
+ 63 2 8 4791 555

Send inquiry

 Article series

Deutschland Weltweit Search Menu