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 UNCTAD's World Investment Report 2024, foreign direct investment inflows to the Philippines increased from USD 5.9 billion in 2022 to USD 6.2 billion in 2023. At the end of the same period, the total stock of inward FDI stood at USD 118.9 billion. In the same year, the majority of inflows were directed towards manufacturing (53%), real estate (13%), and financial and insurance (10%); whereas Japan (51%) was the main investor, followed by the U.S. (13%), Singapore (12%), and Germany (8% - data Central Bank). Preliminary figures show that the cumulative FDI level rose by 4.4%, reaching USD 8.6 billion in January-November 2024, up from USD 8.2 billion in the same period of 2023 (data Central Bank).
Despite growing FDI inflow levels, the Philippines continues 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, 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, exposure to an emerging market, and a geographical location in a dynamic region. Furthermore, the Philippines has been substantially improving its business climate in recent years. The country now permits international investors to establish and wholly own small and medium-sized enterprises, with full equity ownership also granted in sectors where foreign investment was already permissible. Previously, foreign investors were restricted to investing in small businesses only if they employed a minimum of 50 Filipino workers. The Philippines’ Strategic Investment Priority Plan (SIPP) outlines investment activities eligible for incentives from the Board of Investments (BOI). Fiscal incentives include income tax holidays, enhanced tax deductions, and a 5% corporate tax rate, while non-fiscal incentives cover employment of foreign nationals, simplified customs procedures, duty exemptions on imported capital equipment and spare parts, consigned equipment imports, and bonded manufacturing warehouses. Foreign-owned companies must meet a stricter export performance criterion (70% of production) compared to Filipino-owned firms (50%) to qualify for SIPP incentives. The Philippines ranks 53rd among the 133 economies on the Global Innovation Index 2024 and 88th out of 184 countries on the latest Index of Economic Freedom.
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 | 2011-2023, in % |
---|---|
Netherlands | 21.0 |
Singapore | 15.2 |
Japan | 14.6 |
Germany | 11.7 |
USA | 9.2 |
China | 5.7 |
Main Invested Sectors | 2011-2023, in % |
---|---|
Manufacturing | 31.9 |
Electricity, gas, steam and air conditioning supply | 29.8 |
Information and communication | 14.9 |
Real estate | 6.8 |
Administrative and support service activities | 6.6 |
Transportation and storage | 5.6 |
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: February 2025