The Philippines is likely to grow an average of 6.1 percent in the next 10 years in lockstep with neighboring Vietnam, as the two countries potentially lead the growth of Southeast Asia for the period.
The growth is greater than the projected 5.1 percent growth for the region, which is seen to be fast becoming an alternative for companies diversifying their supply chain away from China, according to a study published through a collaboration between Singapore-based DBS Bank, business consultant Bain and Co. and non-profit group Angsana Council.
The study said Southeast Asia is likely to outpace China in gross domestic product and foreign direct investment (FDI) growth over the next decade.
As of last year, the top six biggest economies in the region (SEA-6) – Vietnam, Singapore, Malaysia, Philippines, Indonesia and Thailand – attracted $206 billion FDIs, eclipsing the $43 billion attracted by China – the first time in a decade, it said.
The study also noted a 37- percent growth in the FDI of the SEA-6 between 2018 and 2022 compared to China’s 10 percent.
The Philippines can ride on its momentum against the backdrop of a pro-growth administration, prioritized infrastructure investments, renewable projects garnering interest from FDI investors, and a growing population and workforce, the study said.
The region’s growth in generalwill be driven by “stronger domestic economies and a resurgence in investment catalyzed by ‘China + 1’ supply chain shifts,” the study said.
“Businesses are diversifying away from China for a range of reasons. After experiencing the disruption brought on by Covid-19, they want to avoid over-reliance on one market,” it added.
The study pointed out that rising tariffs are reducing the competitiveness of China-sourced products, and increased factor costs (labor, land, inputs) undermine China’s competitiveness in difficult-to-automate sectors, apart from political concerns.
“Southeast Asia is a fast-growing, well-located region that benefits from trade, tourism, and investment,” it said.
According to the study, Southeast Asia has ample transferable strengths to launch from.
“Malaysia has reliable infrastructure for data centers and semiconductor manufacturing; Thailand can leverage its experience in combustion-engine vehicles in the electric vehicle market; and Singapore can apply its advanced manufacturing skills to the next generation of semiconductors and pharmaceuticals,” it said.
“New sectors, such as batteries, are fertile ground for aggressive moves, like Indonesia’s efforts to link its nickel supply to downstream operations,” the study added.
