The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
Executive Summary
The Philippines remains committed to improving its overall investment climate and sustaining economic growth. While global economic headwinds continue to impact the economy, sovereign credit ratings remain at investment grade, supported by the country’s sound macroeconomic fundamentals. Despite increased public debt and rising inflation, Philippine gross domestic product (GDP) grew by 7.6 percent in 2022. The Philippines is a net commodity importer and Russia’s invasion of Ukraine contributed to record fuel and food prices in 2022. Foreign direct investment (FDI) inflows shrank to $9.2 billion in 2022, down 23 percent from $11.9 billion in 2021. Since 2010, the Philippines has lagged regional peers in the Association of Southeast Asian Nations (ASEAN) in attracting foreign investment. The majority of FDI equity investments in 2022 targeted the manufacturing, information and communications technology (ICT), financial services, and real estate sectors.
Poor infrastructure, high power costs, slow broadband connections, regulatory inconsistencies, a cumbersome bureaucracy, and corruption remain disincentives to investment. The Philippines’ complex, slow, redundant, and sometimes corrupt judicial system inhibits the timely and fair resolution of commercial disputes. Traffic in major cities and congestion in the ports remain barriers to doing business.
The Philippines made progress this year in addressing foreign ownership limitations that constrained investment in many sectors. Amendments to the Public Services Act (PSA) opened previously closed sectors of the economy to 100 percent foreign investment. The PSA maintains foreign ownership restrictions in six “public utilities:” (1) distribution of electricity, (2) transmission of electricity, (3) water and wastewater pipeline distribution systems, including sewerage, (4) petroleum/m and petroleum products pipeline transmission systems, (5) seaports, and (6) public utility vehicles. The Retail Trade Liberalization Act (RTLA) reduced the minimum per-store investment requirement for foreign-owned retail trade businesses, from $830,000 to $200,000, and the quantity of locally manufactured products foreign-owned stores are required to carry. Amendments to the Foreign Investment Act (FIA) eliminated restrictions on foreign ownership of export enterprises and opened up most areas except those subject to nationality requirements outlined in the Constitution and in the Philippines’ Foreign Investment Negative List (FINL).
In addition, the 2021 Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act reduced the corporate income tax rate from 30 percent to 25 percent for large firms, and 20 percent for small firms. The rate for large firms will be gradually lowered to 20 percent by 2025. CREATE also mandated fiscal incentives to be performance-based and time-bound and granted more authority to the Bureau of Internal Revenue (BIR), which narrowed eligibility for Value Added Tax (VAT) exemptions.
While the Philippine bureaucracy can be slow and opaque, the business environment has been notably better in special economic zones, particularly those available for export businesses operated by the Philippine Economic Zone Authority (PEZA). PEZA has received positive feedback for its regulatory transparency, no red-tape policy, and one-stop shop services for investors. Finally, the Marcos Administration, under its “Build, Better, More” infrastructure agenda, committed to maintain infrastructure spending to 5-6 percent of GDP and to encourage more public-private partnerships in infrastructure development.
To access the Philippine ICS, visit the U.S. Department of State Investment Climate Statements website.
The Philippines remains committed to improving its overall investment climate and sustaining economic growth. While global economic headwinds continue to impact the economy, sovereign credit ratings remain at investment grade, supported by the country’s sound macroeconomic fundamentals. Despite increased public debt and rising inflation, Philippine gross domestic product (GDP) grew by 7.6 percent in 2022. The Philippines is a net commodity importer and Russia’s invasion of Ukraine contributed to record fuel and food prices in 2022. Foreign direct investment (FDI) inflows shrank to $9.2 billion in 2022, down 23 percent from $11.9 billion in 2021. Since 2010, the Philippines has lagged regional peers in the Association of Southeast Asian Nations (ASEAN) in attracting foreign investment. The majority of FDI equity investments in 2022 targeted the manufacturing, information and communications technology (ICT), financial services, and real estate sectors.
Poor infrastructure, high power costs, slow broadband connections, regulatory inconsistencies, a cumbersome bureaucracy, and corruption remain disincentives to investment. The Philippines’ complex, slow, redundant, and sometimes corrupt judicial system inhibits the timely and fair resolution of commercial disputes. Traffic in major cities and congestion in the ports remain barriers to doing business.
The Philippines made progress this year in addressing foreign ownership limitations that constrained investment in many sectors. Amendments to the Public Services Act (PSA) opened previously closed sectors of the economy to 100 percent foreign investment. The PSA maintains foreign ownership restrictions in six “public utilities:” (1) distribution of electricity, (2) transmission of electricity, (3) water and wastewater pipeline distribution systems, including sewerage, (4) petroleum/m and petroleum products pipeline transmission systems, (5) seaports, and (6) public utility vehicles. The Retail Trade Liberalization Act (RTLA) reduced the minimum per-store investment requirement for foreign-owned retail trade businesses, from $830,000 to $200,000, and the quantity of locally manufactured products foreign-owned stores are required to carry. Amendments to the Foreign Investment Act (FIA) eliminated restrictions on foreign ownership of export enterprises and opened up most areas except those subject to nationality requirements outlined in the Constitution and in the Philippines’ Foreign Investment Negative List (FINL).
In addition, the 2021 Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act reduced the corporate income tax rate from 30 percent to 25 percent for large firms, and 20 percent for small firms. The rate for large firms will be gradually lowered to 20 percent by 2025. CREATE also mandated fiscal incentives to be performance-based and time-bound and granted more authority to the Bureau of Internal Revenue (BIR), which narrowed eligibility for Value Added Tax (VAT) exemptions.
While the Philippine bureaucracy can be slow and opaque, the business environment has been notably better in special economic zones, particularly those available for export businesses operated by the Philippine Economic Zone Authority (PEZA). PEZA has received positive feedback for its regulatory transparency, no red-tape policy, and one-stop shop services for investors. Finally, the Marcos Administration, under its “Build, Better, More” infrastructure agenda, committed to maintain infrastructure spending to 5-6 percent of GDP and to encourage more public-private partnerships in infrastructure development.
To access the Philippine ICS, visit the U.S. Department of State Investment Climate Statements website.