As Philippines aspires for post-pandemic economic recovery and growth in the process, both of these are not beyond our reach according to the investment experts.
The investors remain optimistic but at the same time cautious given the many economic global challenges such as heightened geopolitical tensions, disrupted supply chain, and increases in the prices of commodities, according to the 2023 Kearney Foreign Direct Investment Confidence Index (FDICI).
Just like any investors, transparency in government regulations, technological and innovation capabilities of a market are part of the wishlist of both European and American investors. And transparency means no corruption, clear and accessible information on policies, and accessible data. For the technological and innovation capabilities including the creation of new business models, maximizing tech to create new products and services, and strong digital foundations and infrastructure. While Asian investors appear to prioritize tax rates as a decision-making factor. Notably, reasonable tax rates and ease of payment make it easier for investors to comply with regulations.
Investors’ optimism in APAC and SEA
The APAC region continues to be the second most attractive market for investors amidst global macroeconomic challenges. This optimism for the APAC region is driven by Singapore’s tech exports, strong commodity exports in Australia, and the reopening of China.
The FDICI also recognizes SEA’s strong performance, with four countries included in the top 10 most appealing markets for investors among emerging markets: Malaysia at 4th, Indonesia at 5th, the Philippines at 6th, and Vietnam at 7th.
Global Investors Eyeing the Philippines
The 2023 FDICI recognizes the Philippines’ strong performance among emerging markets, ranking it 6th in terms of its appeal to investors.
In addition, based on Kearney’s 2021 Global Services Location Index, which measures financial attractiveness, people skills and availability, business environment, and digital resonance, the Philippines ranked #1 as the most financially attractive location for delivering global services in SEA due to lower talent costs, infrastructure costs, and tax & regulatory costs. In the FDI Confidence Index, the Philippines landed the 6th most appealing for investors among emerging markets.
Kearney sees several industries with huge growth potential. These include financial services, healthcare, telecommunications, and consumer goods. Recognizing the potential and the emerging challenges for Philippine industries, especially in these industries, Kearney aims to partner with potential clients to offer actionable insights that will help overcome these challenges and maximize value for the country.
Below are the top annual revenue of top players in the mentioned key sectors:
Consumer Industries and Retail Consulting, and Healthcare: US$18.6 billion
Communications, Media, and Technology: US$9 billion
Financial Consulting: US$8.1 billion
Kearney sees key industries in the Philippines emerging: consumer goods with USD 18.6 billion in top players’ revenue, telecommunications with USD 9 Billion, and finance with USD 8.1 Billion. The healthcare industry is also a strong performer, and with all of these industries’ potential, Kearney aims to capture them and offer insights and action.
Rapid Digitalization creating a Talent Shift
Amidst rapid global digitalization, Kearney anticipates that new job opportunities will be created but some current jobs might be put at risk. Talent demand will primarily focus on tech-savvy and digital literate individuals.
Despite the Philippines’ commendable performance in terms of financial attractiveness, there is a notable underdevelopment in its digital foundations, leading to gap in digital resonance – a metric which measures the digital skills of the labor force and digital outputs. The emergence of accessible and advanced technology has made it more cost-effective and efficient to replace jobs that are traditionally done by humans with new tools, and one of the industries we see that is vulnerable to this is the Business Process Outsourcing (BPO) industry.
In addition, the Philippines currently has 10-15% of the global BPO workforce, and this industry will be hard-hit by the change in employment trends. If the country wants to retain its spot in the BPO global market, it needs to re-strategize its overall approach.
To address this gap, the Philippines needs to improve its digital foundations to adapt to rapid digitalization and it is important for the government and academics to collaborate and recalibrate the educational foundation to meet the needs of the global talent demand, while enterprises should re-strategize operations and their hiring approach.
The government also needs to provide incentives and create an attractive working environment to increase sector attractiveness, leverage private-public partnerships to develop future talent, and leverage key success factors from other leading countries