The Philippines is primed to be a major beneficiary of European and UK investment; however, greater adaption and adoption of trade, sustainability, technology and digital trends and reform is required to convert this potential into reality, HSBC said at a global client seminar held recently.
Speaking at HSBC’s EU Asean virtual client roadshow, HSBC Philippines President and CEO Graham FitzGerald said that Southeast Asia’s medium-term prospects, opportunities and global relevance remain intact for Multinational Companies (MNCs).
As a strategic hub in Asean with strong economic fundamentals, FitzGerald said the Philippines provides a range of investment opportunities to organisations from the EU and the UK.
“The economic reforms and stimulus packages, being implemented by the Philippine government, should encourage EU and UK corporates to take a closer look at investing here, particularly in the green and technology sectors,” FitzGerald said.
The Philippine government has recently passed into law economic stimulus and reform packages, such as the Corporate Recovery and Tax Incentives for Enterprise (CREATE) Act, with the purpose to grant tax relief for companies in financial need, and provide transparent tax provisions to further increase the competitiveness of the Philippines.
“But of course, success will require building resilience and transforming how we do things in the Philippines, now and in the future,” FitzGerald said.
Region-wide, FitzGerald said Southeast Asia’s large demographic dividend, comprising of young and relatively lower cost labour, make it a glittering prize for international companies.
Over the past year, export flows across electronics, pharmaceuticals, commodities, and mining have continued at pace, Asean’s supply chains have remained resilient, and Foreign Direct Investment (FDI) has continued. For 2020, Asean registered a growth of $70 billion in greenfield investments according to UNCTAD’s Investment Trends Monitor.
This was the biggest such FDI inflow of any developing world region.
But it’s not without its challenges including some lagging in productivity, digital and sustainable practices.
“The key for Southeast Asia is to regain its traditional growth drivers of trade and investment, coupled with capturing the opportunities emerging in the green and digital space. This will require the Asean markets to pull several policy reform levers, especially if it’s to attract overseas investment,” FitzGerald said.
HSBC noted that among the challenges include vaccinations will not be substantially rolled out across the region until 2022, which will stunt its consumption growth as lockdowns continue.
As business normalcy slowly returns, some regional companies have seen this period of digital adoption as a short-term switch rather than a strategic shift.
To remain competitive and to appeal to a growing population of online users, companies need to forge on and not let momentum stall.
Asean’s labor force also remains underutilized impacting productivity. This will be a challenge for several Asean markets particularly as their in-country labour costs begin to rise as more demand and commercial activity start to pivot to the region. Labour reforms will be critical to maintain competitiveness.
Also, Southeast Asia could also suffer an 11 percent fall in GDP by 2100 if climate risks are not addressed according to the Asian Development Bank.
HSBC said that to offset these headwinds, greater policy reform to encourage greater trade flows, technological improvements to increase manufacturing productivity,and digital and sustainability adoption is needed.
