Swedish companies are poised to increase their investments in the Philippines within the next 12 months, even as negative perceptions related to the country’s level of corruption remain elevated.

According to this year’s Business Climate Survey (BCS) among Swedish firms operating in the country, around 63 percent plan to increase their investments “slightly” or “significantly” over the coming year.

This is an improvement of eight percentage points (ppt) from the first edition of the BCS released last year, when 55 percent of the surveyed companies said they planned to increase their investments.

Companies that are well-positioned to ramp up their investments include those in the professional services sector, particularly as they integrate artificial intelligence (AI) into their operations.

Globally, this places the Philippines as the second most attractive market for investments among Swedish companies, trailing only South Africa, whose survey showed that 66 percent are open to increasing their investments.

The BCS showed that the willingness to pour more investments into the country followed strong profitability last year, with around 66 percent of firms reporting profits compared to 55 percent in the previous survey.

Under the survey, around 21 percent of Swedish companies in the Philippines expect no change in their investment plans over the next 12 months, while eight percent expect some decline.

Approximately 83 percent of Swedish companies expect increased revenues over the coming year, with 11 percent expecting the same level of turnover and five percent seeing a potential decline.

While the Philippines remains a strategic growth driver for these companies, the BCS showed that they are more cautious about the business environment compared to previous years due to continued regulatory inefficiencies.

Based on this year’s survey, the country’s business climate received a rating of 3.1 out of five, slightly below the global average of 3.2.

Corruption, in particular, continues to be the major concern for Swedish companies operating in the country, especially in their interactions with government agencies.

BCS data showed that 26 percent of companies reported experiencing corruption involving government agencies in the past year, while a larger 63 percent said they had not experienced any bribery or fraud.

While direct exposure is limited, the perceived level of corruption in the Philippines is the highest in the Asia-Pacific region, with a total of 47 percent expecting that there is corruption. 

Sweden Trade Commissioner to the Philippines Johan Lennefalk said the negative perception was driven largely by the massive corruption scandal last year, which impacted investor confidence and business sentiment.

“People read that in the news and feel that there is uncertainty [leading to] a hesitation to make decisions because people are worried what the consequences could be of doing an incorrect decision,” he told reporters.

Apart from this, Lennefalk said other persistent concerns include the country’s infrastructure, financial system, corporate taxation, customs processes, and level of digitization, among others.

Despite these concerns, he said optimism remains strong in the Philippines because of its strong work culture, which Swedish companies identified as the country’s greatest strength.

Swedish companies also favor the country because of its strong access to specialists and key personnel, as well as specialized distributors.

This year’s BCS surveyed a total of 38 firms spanning a diverse range of sectors, including manufacturing, automotive, energy, security, transportation, and healthcare.

Among the most popular Swedish brands in the Philippines are IKEA, Volvo, AstraZeneca, Ericsson, H&M, and Tetra Pak.

The BCS serves as Sweden’s key policy instrument for engaging with the government to identify solutions aimed at improving conditions for companies operating in the country and those considering entry into the market.