The official working visit of President Ferdinand R. Marcos, Jr. to Japan has just been completed. From the reports, it seems to have been a successful and productive visit.
Japan has been among the more consistent sources of foreign direct investments (FDI) for the Philippines. This has not been limited to private investments only but also to Official Development Assistance (ODA) and government-to-government economic and social funding programs. Our partnership has stood the test of time.
As the Philippines emerges from the ravages of COVID, therefore, it is only natural that our ties with Japan are renewed and strengthened. Our country, after all, is geographically closer to Japan than any of our ASEAN neighbors. We are a populous nation of over 110 million and a young one at that. With a median age of 26 years old, there is much that can be expected in terms of a demographic bonus. Millions are just entering – and yet to enter – the labor force. This augurs well for a sustained rise in consumer spending through the 2040’s.
As it stands, our economic growth is already driven primarily – around 70% – by domestic consumption. In his first state-of-the-nation address, President Marcos, Jr. announced that the country will become an upper middle income economy by 2024. Secretary Arsenio Balisacan of the National Economic and Development Authority (NEDA) last December adjusted that target to 2025 due to setbacks from COVID and the depreciation of the Philippine Peso last year. No matter, this is welcome news for the country. Indeed, from a demand standpoint, Filipinos offer investors a strong business case.
From a supply standpoint, there are many pluses for investors to set up business in the Philippines, too. One, of course, is our young labor force that is easy to work with and train due to our English proficiency. Labor wages are still reasonably competitive. The Filipino is hard-working and eager to learn new skills in order to improve his or her life and that of their family. We are a highly literate society as well.
Of course, there are barriers, too, to investing in the Philippines. The cost of business can be excessive – electricity, for example. Local and national taxes can add layers to costs. Ease of doing business is, well, not easy. Sorting out all the necessary business permits can be complex for the uninitiated. Connectivity is fair, at best. And, downtime from traffic poses an added burden. But these are things that the current administration seems deadly intent on addressing in order to unlock more foreign investments. So, there is hope.
Out of the nine trips of President Marcos, Jr., the Japan visit reportedly had the most number of business delegates in attendance. One report has it that there were up to 150 members who joined this visit. This is testament to the breadth of economic ties between the Philippines and Japan. It also reflects the strength of these ties. Most importantly, it signifies the keen interest of the business sector of both countries to expand those ties even further.
To be sure, there are any number of opportunities for Japanese companies to invest in the Philippines. The pandemic revealed the essential sectors where the Philippines lacks security in and which could be ripe for Japanese investments. Agriculture and food production are low hanging fruits. Renewable energy is another. Medical equipment and supplies could also be another opportunity (remember, we even had to import masks and syringes to administer vaccines during the height of the pandemic!).
COVID exposed the soft-underbelly of supply chains for many sectors, too. The automobile industry is a case in point. In order to disperse auto component manufacturing – away from traditional production bases in mainland China, Taiwan, Malaysia and Vietnam – the Philippines can be a suitable alternative especially for microchips and semiconductors that are in such high demand. Even more basic parts like seatbelts could be produced in the country.
There could be some real hot spots for intending investors as well. Hospitality – for which the Japanese and Filipinos are renowned worldwide! – should be an obvious area of interest. Software development, cloud storage and IT services are right up the alley of Filipinos. In all my business travels around the world, IT talents from the Philippines are everywhere to be found.
What I really look forward to are investments that will create high value and sustainable jobs for Filipinos. Hopefully, FDI’s will find their way to the production and manufacturing sectors in order to more significantly increase the value-add to our economy.
With President Marcos, Jr. pulling out all the stops to promote the Philippines as an investment destination and making the country truly business-friendly, I am highly hopeful that we can establish that strong second leg for economic development: investment-led growth.
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