flag Philippines (the) Philippines (the): Investing

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

 

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.

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 8,6716,82210,518
FDI Stock (million USD) 94,593103,193113,711
Number of Greenfield Investments* 1474965
Value of Greenfield Investments (million USD) 12,3571,4141,324

Source: UNCTAD, Latest available data.

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.

 

FDI INFLOWS BY COUNTRY AND INDUSTRY

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 available data.

 
Form of Company Preferred By Foreign Investors
Joint-stock company
Form of Establishment Preferred By Foreign Investors
A company
Main Foreign Companies
Lafarge, Philips, Shell, Intel, Texas Instrument, ING, Cemex, Coca-Cola, PepsiCo, Nissan, Mitsubishi, Isuzu, Kawasaki, etc.
Sources of Statistics
Philippines Statistics Authority

Return to top

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 114 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%).

Return to top

Protection of Foreign Investment

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.
International Controversies Registered By UNCTAD
Refer to UNCTAD's Investment Dispute Settlement Navigator.
Organizations Offering Their Assistance in Case of Disagreement
ICSID , International Center for Settlement of Investment Disputes
ICCWBO , International Court of Arbitration, International Chamber of Commerce
Member of the Multilateral Investment Guarantee Agency
The Philippines are a signatory of the MIGA convention.
 
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: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

Return to top

Procedures Relative to Foreign Investment

Freedom of Establishment
Philippine law treats foreign investors the same as their domestic counterparts, except in sectors reserved for Filipinos by the Philippine Constitution and the Foreign Investment Act (see below).
Acquisition of Holdings
The Philippines limits foreign ownership to 40% in the manufacturing of explosives, firearms, and military hardware. Other areas that carry varying foreign ownership ceilings include the following: private radio communication networks (40%); private employee recruitment firms (25%); advertising agencies (30%); natural resource exploration, development, and utilization (40%, with exceptions); educational institutions (40%, with some exceptions); operation and management of public utilities (40%); operation of commercial deep sea fishing vessels (40%); Philippine government procurement contracts (40% for supply of goods and commodities); contracts for the construction and repair of locally funded public works (40% with some exceptions); ownership of private lands (40%); and rice and corn production and processing (40%, with some exceptions). Retail trade enterprises with capital of less than USD 2.5 million, or less than USD 250,000, for retailers of luxury goods, are reserved for Filipinos.
Obligation to Declare
Constitutional provisions which bar investment in mass media, utilities, and natural resource extraction.
The Foreign Investment Negative List bans foreign ownership/participation in the following sectors: mass media (except recording and internet businesses); small-scale mining; private security agencies; utilization of marine resources, including the small-scale use of natural resources in rivers, lakes, and lagoons; cooperatives; cockpits; manufacturing of firecrackers and pyrotechnic devices; and manufacturing, repair, stockpiling and/or distribution of nuclear, biological, chemical and radiological weapons, and anti-personnel mines.
Competent Organisation For the Declaration
Philippine Board of Investment
Requests For Specific Authorisations
The sectors open to foreign investment after an authorization has been obtained are listed in the Foreign Investment Act.

Return to top

Office Real Estate and Land Ownership

Possible Temporary Solutions
According to the Investors' Lease Act (R.A. 7652, 1994), a foreign investor is authorized to rent private land for 50 years, renewable for a period of 25 years, provided that the land is intended for investment (industrial buildings, factories, companies, tourism, etc.).
Consult the websites Instant Offices, Coworker, Manila Office Space, etc.
The Possibility of Buying Land and Industrial and Commercial Buildings
The Constitution of 1987 forbids foreigners to buy land.
The "Investors Lease Act" of 1994 (ILA) allows foreign investors to lease a contiguous parcel up to 1000 hectares for 50 years, renewable once for 25 additional years. The 2003 Dual Citizenship Act, which allows natural-born Filipinos who became naturalized citizens of a foreign country to re-acquire Philippine citizenship, gave Philippine dual citizens full rights to possess land.
Risk of Expropriation
The law provides for protection against expropriation except for reasons of public interest, national welfare, security/defense against payment of just compensation; and it provides for protection against requisitioning of goods except in case of war or national emergency and against payment of just compensation.

Return to top

Investment Aid

Forms of Aid
Investment aids take the form of exemptions and tax relief (e.g. exemption of the cost of necessary infrastructure work and labor expenses from taxable income), administrative and customs facilities.
Privileged Domains

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”.

Privileged Geographical Zones
According to the latest Investment Priorities Plan (IPP), FDIs are incentivized in the following sectors: manufacturing (e.g. agro-processing, modular housing components, machinery, and equipment); agriculture, fishery, and forestry; integrated circuit design, creative industries, and knowledge-based services (e.g. IT-Business Process Management services for the domestic market, repair/maintenance of aircraft, telecommunications, etc.); healthcare (e.g. hospitals and drug rehabilitation centers); mass housing; infrastructure and logistics (e.g. airports, seaports, and PPP projects); energy (development of energy sources, power generation plants, and ancillary services); innovation drivers (e.g. fabrication laboratories); and environment (e.g. climate change-related projects).
For further details, consult the dedicated page on the BOI website.
Free-trade zones
Export-related businesses enjoy preferential tax treatment when located in export processing zones (Mactan, Baguio, Cavite, and Pampanga), free trade zones, and certain industrial estates, collectively known as "ecozones" under the Philippine Economic Zone Authority (PEZA), which operates 379 ecozones, primarily in manufacturing, IT, tourism, medical tourism, logistics/warehousing, and agro-industrial sectors. In 2020, the government approved 12 new economic zones, including: Davao del Sur Industrial Economic Zone, Batangas State University Knowledge, Innovation and Science Technology Park, GLAS Office Development, Bench City Centre, Ortigas Technopoint Tower 1 & 2, NEX Tower and Robinsons Luisita 2.
For a list of local investment promotion agencies, refer to the dedicated page on the BOI website.
Public aid and funding organisations
Philippines Export-Import Credit Agency
 
 

Return to top

Investment Opportunities

The Key Sectors of the National Economy
The majority of FDI investments includes manufacturing, financial/insurance activities, real estate, tourism/recreation, and transportation/storage.
High Potential Sectors
Gold and copper industry, e-commerce, biotechnology, business services (call centers and content control), education and insurance, energy sector, retail trade (the 2019 Retail Trade Liberalization Act reduced the minimum investment per store requirement for foreign-owned retail trade businesses from USD 830,000 to USD 200,000).
Privatization Programmes
The Philippine Government’s privatization program is managed by the Privatization and Management Office (PMO). At the moment, no regulations discriminate against foreign buyers and the bidding process appears to be transparent.
Tenders, Projects and Public Procurement
Tenders Info, Tenders in the Philippines
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide

Return to top

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
The "Negative List" has several economic sectors reserved entirely or partially for nationals. Among others there are: mass media, the retail trade, advertising, public services, small-scale mining, private security and utilization of marine resources.

Return to top

Any Comment About This Content? Report It to Us.

 

© Export Entreprises SA, All Rights Reserved.
Latest Update: November 2022