Strategic collaborations to shape Philippines' future in 2025

Investments are crucial for job creation, poverty reduction, consumer spending, productivity, and overall economic growth and development.

With its geostrategic location, abundant natural resources, and large, young population, the Philippines holds strong potential as a top investment destination for foreign investors looking to diversify supply chains.

For years, the country’s economic growth has been primarily fueled by consumer spending. Now, there is an opportunity to shift toward investment-led growth, which can further enhance this economic driver.

Foreign direct investments (FDIs) have played a key role in the country’s economic progress, providing capital and technology transfer.

In 2022, the Philippines attracted US$ 9.5 billion in net FDI, though it lagged behind Singapore's US$ 148.8 billion. In 2023, data from the Bangko Sentral ng Pilipinas (BSP) shows that FDI inflows totaled US$ 8.9 billion, primarily from Japan, the United States, Singapore, and Germany, focusing on manufacturing, real estate, and financial services.

The Philippine Statistics Authority (PSA) reported that foreign investment commitments in the second quarter of 2024 reached P189.50 billion, a 220.7% increase from P59.09 billion in the same period of 2023.

Switzerland accounted for 90.8% of this total with P172.04 billion, followed by Japan and Malaysia.

The largest investment commitments were in the electricity sector at P172.74 billion, with Negros Island garnering the most with P86.46 billion. These pledges are expected to materialize in a few years and are projected to create over 18,000 jobs.

In the third quarter of 2024, the BSP’s Business Expectations Survey found that business confidence in the Philippine economy remained optimistic, growing slightly to 32.9% due to increased demand, easing inflation, and seasonal uptick in business activities, though it still lags behind the pre-pandemic average of 41.6%.

Geopolitical developments offer an opportunity for the Philippines to establish itself as a significant player in the Indo-Pacific region. By addressing issues such as bureaucratic red tape and policy inconsistencies, the country can enhance its role in influencing the economic landscape of the region.

Notably, the Philippines is actively enhancing its investment climate through reforms such as promoting ease of doing business, institutionalizing public-private partnerships, establishing "green lanes" for strategic investments, and liberalizing key economic sectors by amending the Public Service Act, Retail Trade Liberalization Act, and the Foreign Investments Act to ease foreign ownership restrictions.

The Luzon Economic Corridor also offers opportunities for investments in improving infrastructure and supply chains.

However, persistent challenges continue to impact the country’s ability to consistently attract and retain foreign investment. These include bureaucratic red tape, inconsistent policies and regulations and corruption.

The upside is the presence of many opportunities to tap and empower the private sector, which can drive innovation, create jobs, and ensure sustainable economic growth.

A recent survey commissioned by Stratbase to Pulse Asia Research, Inc. in September 2024 found that Filipinos view the private sector as vital for achieving economic security, expecting it to work alongside the government to drive growth by expanding livelihood opportunities (52%), making goods more affordable and accessible (51%), and creating higher quality jobs (48%).

However, Filipinos cite complicated rules and regulations (52%), changing government policies and regulations (51%), and public sector corruption (46%) as key barriers to foreign investment. Addressing these concerns could enhance investor confidence and boost economic growth significantly.

The Philippines will hold its midterm elections in May 2025, and the next leaders will have the power to shape the policy landscape.

A recent survey by Pulse Asia Research Inc. highlights the top issues that candidates in the May 2025 elections should prioritize, with job creation, livelihood generation, and financial literacy (57%), investment-led economic growth (44%), and combating corruption (41%) topping the list.

This indicates that while the electorate is focused on economic growth, there is also a strong recognition of the need to tackle corruption, which undermines economic development. Corruption erodes public trust, worsens poverty, and hampers effective service delivery of the government, and addressing this issue could enhance trust in government and improve citizens' lives.

In this light, the Stratbase Group will be hosting its ninth annual Pilipinas Conference on November 6 to 7, 2024 as it celebrates its 20thyear.

Themed "Navigating a Complex Geostrategic Landscape: Building Resilience Through Cohesive Cross-Sectoral Collaboration in 2025," this two-day conference serves as a vital platform for generating ideas and fostering discussions on critical issues in Philippine society.

It aims to gather and strengthen collaboration among stakeholders in government, private sector, and diplomatic community to develop policies that address the complex social, political, and economic challenges facing the Philippines and the broader Indo-Pacific region.

Deep-rooted issues cannot be addressed by a single stakeholder alone. Collaboration is imperative to maximize resources and enhance efficiency.

While the private sector has the capability to drive progress, government support is important for fostering their growth.

A collaborative effort is necessary in creating a business-friendly environment grounded in transparency, innovation, adherence to the rule of law, and good governance. These factors will enhance the trust that businesses need to thrive and stimulate an investment-led growth in the country.

The Philippines has entered its demographic golden age, where most of its population is in its economically productive years. We should take advantage of this ideal and enviable situation so that the country can move forward with confidence and sustain a bright future ahead.
 

Venice Isabelle Rañosa is the research director of the Stratbase Group.