Key trends to propel PH growth

·3 min read

ATTRACTING foreign investments will enable the Philippines to capture opportunities created by five key trends which could be an engine propelling its growth in the coming years, including advancing as manufacturing hubs and digital


“Foreign direct investment (FDI) into the country has not grown in the past five years as structural challenges remain,” McKinsey & Co. Philippines acting managing partner Jon Canto said during a virtual forum.


FDI net inflows, according to the Bangko Sentral ng Pilipinas, have sustained their uptrend for the fifth consecutive month in October 2021, registering a 98.9 percent growth year-on-year to US$855 million from the $430 million net inflows in the same month in 2020. The FDI net inflows for the first 10 months of 2021 rose to $8.1 billion, higher by 48.1 percent than the $5.5 billion net inflows in January to October 2020.

To accelerate FDI growth, Canto recommended that the Philippines reassess its FDI strategy and priority sectors, build unique deal-focused value propositions, focus on investment promotion activities, and ensure end-to-end support for investments.

He said the country can look into a potential niche as a manufacturing hub amid the planned shift of 67 percent European and 80 percent United States companies from China to other Asian countries, which Vietnam, Thailand and Malaysia are already preparing for.

“What does this mean for our country and what we could achieve here knowing our starting point?” he added.

Green infra, digital financial services

Canto also cited opportunities for growth in increasing the country’s share of renewables in the power mix.

To ramp up investments in green infrastructure, he said it is imperative to reconsider foreign ownership limitations, put money on a broad range of sustainability levers, enhance financial incentives that encourage consumer and business investment, coordinate complicated and interdependent infrastructure rollout and accelerate public sector uptake.

Canto likewise underscored the significant increase in penetration of active digital financial services.

“We have seen in our research that over the last four years alone, the regular use of digital banking and e-wallets in the country has increased (by) sevenfold and twofold, respectively,” he said. “So we think about not just from the consumer lens but from the small and medium (SME) enterprises angle, how do we develop digital capabilities of companies?”

He added there is a need to redirect SME support toward digital capability-building programs, digitalize government processes to encourage adoption by companies and citizens, and provide financial incentives to boost digital adoption, such as tax incentives, grants and loans.


Further, Canto highlighted the importance of intensified re-skilling and redeployment at scale to address job disruptions as the future of work will accelerate skill shifts all around the world. He said growth areas include healthcare; transport and logistics; and science, technology, engineering, and mathematics.

Partnerships between businesses, government and educational institutions can offer specialized courses to get individuals started along new skill paths, he added.

Canto said building high-value food industries also offers opportunities.

“Raise farmers’ productivity to aid competitiveness of local upstream production e.g. via technology, connectivity,” he said. “Expand the agricultural sector into the downstream parts of the value chain, such as processing, packaging, and retail, to enable greater value creation.” (KOC WITH PHILEXPORT NEWS AND FEATURES)

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