The Philippines is expected to invest more on human capital and in developing science, technology, and innovation capabilities to ensure growth is sustainable post-pandemic and to be able to compete in attracting foreign direct investments (FDI) versus its Asian neighbors.
Standard Chartered Bank (Stanchart) in a report, “Winning in ASEAN” said the country “aims to expand economic opportunities across a broad range of sectors, such as agriculture, forestry, fisheries, manufacturing, and the digital economy.”
Stanchart added that technology and human capital will serve as key catalysts to drive the change, supported by foreign investment, particularly in sectors, such as manufacturing and information technology.
The ASEAN Sector Insights report, which stems from a survey of 480 C-suite and senior business leaders across four key sectors in the region, showed that 52 percent of business leaders have a positive outlook on the overall Philippine market.
About 31 percent of surveyed business leaders already have existing sales presence in the Philippines, while 21 percent are on the planning stage for the next three years.
Stanchart said the Philippines is “one of the strongest economies in Asia” due to a “young and dynamic English-speaking workforce.”
Thirty-two percent of the population are young adults or between 20 to 39 years old in 2021, and this is the highest percentage among the ASEAN-6.
“The government has sought to attract foreign investments to improve the economy by liberalising rules and regulations, such as simplifying business registration and providing tax holidays,” said Stanchart.
It cited the following as FDI-helpful factors: the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE Act) which allowed businesses to enjoy income tax holiday and special corporate income tax; the Special Economic Zones (SEZs) for foreign companies to come in with tax breaks and other incentives; the 2020 Investment Priority Plan (IPP); the amended Foreign Investment Act; and the revised Public Service Act.
The British bank’s local CEO, Lynette Ortiz, said in the report that the country’s GDP growth is backed by a strong consumer demand, which was supported by a “vibrant labour market, sound economic fundamentals and a globally competitive workforce.”
“The government’s commitment to further boost infrastructure spending and its focus on digitalization and sustainability are expected to drive the country’s economic rebound and growth momentum,” said Ortiz, adding that her bank is “well-positioned to help clients tap the growing business and investment opportunities in the country and contribute to its continuing progress.”
Overall in ASEAN, the Stanchart report said 93 percent of business leaders are confident about the regional growth prospects, while 81 percent think FDIs will increase in the trade bloc.
“The findings underscore the impetus for greater effective public-private partnership (PPP), to accelerate recovery and resilience in ASEAN and beyond,” said Stanchart in a separate statement.
Last year, the ASEAN group received the third highest FDIs in the world, at $174 billion. About 50 percent FDIs came from US, EU-27, and China. Intra-ASEAN FDI, meantime, contributed about 12 percent of the region’s FDI inflow in 2021, said the bank.
“Trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP), are expected to further accelerate growth. With RCEP in place, 81 per cent of business leaders surveyed plan to increase investments in ASEAN over the next three to five years. Overall, 93 per cent of them expect positive revenue growth from their ASEAN businesses,” added Stanchart.
The growing inter-connectivity in trade and capital flows in ASEAN, as well as digitalization and the green transition is expected to present more investment opportunities in the region, said Benjamin Hung, CEO of Asia Standard Chartered. “Corporates need to act decisively to capture what ASEAN has to offer today,” he added.
The report, meantime, emphasized that the top four growth sectors in the region are construction and infrastructure; consumer products; pharmaceutical and healthcare; and digital and eCommerce.
Stanchart said in the next two to three years, 65 percent of surveyed business leaders said they will strike new partnerships in ASEAN “to unlock the potential across the value chain” while 60 percent said “more can be done to upskill and nurture to future-proof the workforce.”
Another 55 percent said they “would like the PPP to look at developing infrastructure solutions more proactively to overcome systemic barriers.”
Stanchart noted that when looking for a banking partner, business leaders want their bank to have these: digitalized platforms for foreign exchange and other real-time access; multi-currency settlement services for their foreign exchange hedging; strong cash management capabilities; and widespread cross-border network.