In this page: FDI in Figures | What to consider if you invest in the Philippines | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information
According to the UNCTAD's World Investment Report 2022, foreign direct investment inflows to the Philippines increased from USD 6.8 billion in 2020 to USD 10.5 billion in 2021, remaining above the full-year target of USD 8 billion set by the Central Bank of the Philippines. The stock of FDI also increased in 2021, reaching USD 113 billion. The United States, China, the United Kingdom, Singapore, and Japan are traditionally the main investors, while inflows are concentrated in the transportation and storage, electricity, real estate, manufacturing, and construction. Other sectors that attract the highest levels of investment are information and communication, 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. According to the Economist Business Environment, the Philippines ranks 57 out of the 82 countries reviewed for their investment climate.
Foreign Direct Investment | 2020 | 2021 | 2022 |
---|---|---|---|
FDI Inward Flow (million USD) | 6,822 | 11,983 | 9,200 |
FDI Stock (million USD) | 103,394 | 111,526 | 112,965 |
Number of Greenfield Investments* | 50 | 66 | 134 |
Value of Greenfield Investments (million USD) | 1,454 | 1,375 | 3,508 |
Source: UNCTAD, Latest data available.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Main Investing Countries | 2020, in % |
---|---|
USA | 31.5 |
China | 13.9 |
United Kingdom | 11.7 |
Singapore | 8.9 |
Japan | 8.4 |
Main Invested Sectors | 2020, in % |
---|---|
Transportation and Storage | 61.1 |
Electricity, gas, steam and air conditioning supply | 17.6 |
Real estate | 7.5 |
Manufacturing | 4.4 |
Construction | 2.5 |
Source: Philippine Statistics Authority, Latest data available.
The country's main strong points in terms of FDI attractiveness include:
The main weaknesses of the country include:
Country Comparison For the Protection of Investors | Philippines (the) | East Asia & Pacific | United States | Germany |
---|---|---|---|---|
Index of Transaction Transparency* | 9.0 | 5.9 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 4.0 | 5.2 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 7.0 | 6.7 | 9.0 | 5.0 |
Source: The World Bank - Doing Business, Latest data available.
Enterprises that locate in less-developed areas are entitled to pioneer incentives and can deduct 100% of the cost of necessary infrastructure work and labour expenses from taxable income. Moreover, an enterprise with more than 40% foreign equity that exports at least 70% of its production may be entitled to incentives even if the activity is not listed in the IPP.
Multinational entities that establish regional warehouses for the supply of spare parts, manufactured components, or raw materials for foreign markets enjoy incentives on imports that are re-exported, including exemption from customs duties, internal revenue taxes, and local taxes.
Export-related businesses enjoy preferential tax treatment when located in export processing zones, free trade zones, and certain industrial estates, known as “ecozones”.
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Latest Update: September 2023