Inversió estrangera directa (IED) a les Filipines

FDI in Figures

According to the UNCTAD's World Investment Report 2021, foreign direct investment (FDI) inflows to the Philippines fell to USD 6.5 billion in 2020, down from USD 8.7 billion in 2019, thus remaining below the full-year target of USD 8 billion set by the Central Bank of the Philippines. The stock of FDI was about $103 billion in 2020. Japan, the United States and Singapore are traditionally the main investors, while inflows are concentrated in the manufacturing and the real estate. The other sectors that attract the highest levels of investment are information and communication, electricity, gas, steam and air conditioning supply, manufacturing, and administrative and business support services activities. Moreover, the country relaxed the local employment requirement for workers of foreign investors.

Despite growing FDI inflow levels, the Philippines continue to lag behind regional peers, in part because the Filipino constitution limits foreign investment, and also due to the threat of terrorism in some parts of the country. This can be partially explained by the fact that the country is evolving into a service society with low capital strength, which means that it needs only minimal equipment. In addition, the government favours subcontracting agreements between foreign companies and local enterprises rather than FDI in the strict sense of the term. Lastly, factors such as corruption, instability, and inadequate infrastructure, high power costs, lack of juridical security, tax regulations and foreign ownership restrictions discourage investment. Nonetheless, the country offers many comparative advantages, including an English-speaking and well-skilled workforce, a strong cultural proximity to the U.S., exposure to an emerging market, and a geographical location in a dynamic region. Furthermore, the Philippines have been substantially improving its business climate in recent years: starting a business is now easier due to the abolishment of the minimum capital requirement for domestic companies; dealing with construction permits has been improved (improvement of coordination, standardisation of the process for obtaining an occupancy certificate); and minority investor protection has also been strengthened. As such, the country is ranked 95th out of 190 economies in the last Doing Business Report, published in 2020, gaining as many as 29 ranking points compared to the previous year.

What to consider if you invest in the Philippines

Strong Points

The country's main strong points in terms of FDI attractiveness include: 

• A skilled young English-speaking workforce
• A large domestic market (with a population of over 108 million people)
• A gateway to other countries in the region facilitated by the country's membership in ASEAN
• An economy that has successfully integrated enterprise outsourcing (BPO)
• A very advanced legal system
• Considerable natural wealth

Weak Points

The main weaknesses of the country include:

• Political instability
• Poor quality of its infrastructure  
• Restrictions on foreign investment in certain sectors
• Legal uncertainty and a lack of transparency of procedures (total banking secrecy favouring money laundering) generating tensions and a lack of confidence of the business community towards the legal system
• High level of corruption in the administration and various state agencies 
• Strong disparities in development according to the regions: income and security inequalities (problematic security situation in the Muslim regions of the South)

Government Measures to Motivate or Restrict FDI

Legislation liberalising business practices has opened up more areas for investment, granting foreign investors the same incentives as other ASEAN members while simplifying procedures. The government has planned to increase investments to improve infrastructure (roads, bridges, railways, health and education) and to encourage social programs (child vaccinations, support for poor families, extension of health insurance coverage, primary education).
Recent changes to the Foreign Investment Negative List (FINL) allow foreign companies to have a 100% investment in internet businesses (not a part of mass media), insurance adjustment firms, investment houses, lending and finance companies, and wellness centres; as well as 40% in construction and repair of locally funded public works (the previous cap was at 25%).

Bilateral investment conventions signed by the Philippines

To see the list of investment treaties signed by the Philippines, consult UNCTAD's International Investment Agreements Navigator.

Find out more about Investment Service Providers in the Philippines on GlobalTrade.net, the Directory for International Trade Service Providers.