The Philippines ranked second to the last among 11 countries covered by a regional corporate investor advisory firm’s Asia Manufacturing Index (AMI) 2026, slipping one notch from its ninth-place finish last year, amid persistent infrastructure and governance challenges.

The third annual AMI of Dezan Shira & Associates, a firm that assists foreign investors looking to pour money into Asia, showed that infrastructure constraints, limited supply chain depth, and governance challenges weighed on the country’s manufacturing competitiveness, placing the Philippines only ahead of cellar-dweller Bangladesh.

China ranked first overall, followed by Malaysia, Vietnam, Singapore, South Korea, India, Indonesia, Thailand, and Japan.

Across the eight pillars that determined the final ranking, the Philippines ranked highest—third—in the workforce pillar, followed by its sixth place in tax policy.

However, the country ranked ninth in the business environment, economy, infrastructure, and innovation pillars, while placing 10th in international trade and political risk.

“Infrastructure gaps remain a major impediment. Congestion in Metro Manila, uneven transport connectivity, limited deep-sea port capacity, and power supply challenges raise operating costs,” the report said.

The report also highlighted energy cost volatility and occasional supply interruptions that affect operational predictability for manufacturers. While big-ticket infrastructure projects under the Marcos Jr. administration’s Build Better More (BBM) program aim to improve connectivity, implementation timelines continue to weigh on near-term competitiveness.

Governance-related issues, including administrative complexity and inconsistent enforcement, were also cited as constraints. The report stressed that reforms to streamline procurement, taxation, and investment procedures are underway, but progress has been gradual.

It added that the Philippines’ trade policy was described as moderately protective, while integration into advanced supply chains remains limited due to logistical bottlenecks and a narrow local supplier base.

Despite these constraints, the report noted that the Philippines performed strongly in workforce-related indicators. In this year’s AMI, the country ranked third-best in the region in labor cost competitiveness and second-best in English-language availability. The workforce was noted to be particularly competitive in the electronics sector, although the report pointed to the need for stronger skills development in engineering and industrial technology.

“The country’s strength is labor availability. Its young, rapidly growing population provides a significant labor pool, and wage levels are competitively low relative to Association of Southeast Asian Nations (ASEAN) peers,” the report said.

The report noted that the Philippines has long-term growth potential and competitive advantages in electronics assembly, light manufacturing such as food processing, and industrial services—particularly those aligned with the country’s booming business process outsourcing (BPO) sector—provided infrastructure development and policy reforms continue.