For a country whose population is one of the largest in the world, currently at around 100 million, it is about time that the Philippines showcases its true potential to the world as far as international trade and investment is concerned. Specifically, exporting more knowledge-based goods and services and also playing a role in the foreign direct investment community by Filipino companies appears to be on the rise.
The Philippines has historically, in the realm of international trade, exported much of its mainly agricultural and low-and mid-range manufacturing components. In addition, the services sector, such as with mainly English call centers, has seen massive growth in the country both as a recipient of FDI and also exporting cheaper services.
What the country is still known for in many parts of the world is exporting Filipinos themselves. The Overseas Filipino Workers (OFW) can be found across many parts of the world, bringing in remittance which, from January-May last year, was estimated to be at $13.7 billion. Although there are many Filipinos who do work overseas in their job skill, many in the past were lured to work basic-skilled work such as domestic workers even though they might have a college degree. While much of Asia-Pacific has transformed, the Philippines seemed to be lagging economically.
In recent memory, the country has, in many aspects, impressed the world with its economic growth, where last year the economy was projected to grow over 6 per cent. With regard to FDI, various Filipino companies and entrepreneurs have been active in expanding their portfolio of goods and/or services.
From a survey conducted by PwC/Isla Lipana for the Management Association of the Philippines, 45 per cent of chief executive officers in the Philippines said they were keen on expanding to overseas markets. Many do expand to neighboring countries as a first step to exporting and investment but some have had success beyond South East Asia and the Pacific.
One of those has been the fast-food giant Jollibee. What was an unknown brand for non-Filipinos and outside the country, Jollibee’s success in expanding overseas is one to showcase to the world the potential of Filipino multinationals. From its humble expansion overseas, first opening a branch in 1987 in Brunei to today, where the chain can be found across much of the world – from Dubai to London to Los Angeles – is impressive. What is even more remarkable is the company is not only expanding abroad with its brands but also playing an increasingly leading role in the global mergers & acquisitions (M&A) market. Recently it has invested in the US-based Mexican chain Tortas Fronteras.
Other prominent companies are also actively expanding overseas through various means. For example, San Miguel Corp in 2018 announced it was investing $1 billion to build new breweries both in the Philippines and abroad, including a planned facility in the US. Also, SM Investments Corporation (also known as SM Group, which was founded by Henry Sy) has heavily invested abroad, particularly in mainland China at the turn of this century. SM Group has seven shopping malls in the world’s largest country by population.
Despite the country’s economic growth, the country still has a negative legacy of the days when the country was perceived to be lagging economically compared to its neighbors such as Singapore, Hong Kong, and South Korea. Much has improved but there are still areas for improvement, particularly in the tech and startup space. For instance, in 2018 the country’s startups have raised around $29 million, whereas Singapore has raised nearly $5 billion.
The hope is that future Filipino-born startups and tech companies not only thrive in the Philippines, but also export their goods and services overseas. For example, last year some 2,000 local and international investors attended Ignite, a conference in Manila that scouted the latest innovations and potential partners.
There is also a positive outlook for exporting more knowledge-based and high-value exports of goods and services. For instance, earlier in April last year, Ayala Corporation’s Chairman and CEO Jaime Augusto Zobel de Ayala announced it was setting up a $150 million venture future to invest in disruptive technologies. This is predicted to significantly help the local startup and tech community in the Philippines.
Finally, as mentioned with the OFWs who in the past have left the country to pursue greener pastures abroad, the changing Filipino economic landscape brings hope. It shows not only the world but, importantly for Filipinos themselves, that the once economically developing Philippines can bring highly-skilled jobs not just from an increase in FDI, but, home-grown innovation. One day, perhaps, the Philippines can transition to an established developed economy. In the past, it was a model for the rest of Asia, such as after World War II when the country was Asia’s second richest economy after Japan. It is also home to some of Asia’s oldest companies, such as Asia’s first airline, Philippine Airlines. And of course, the Philippines’ historic trading importance is well-known from its days as part of the Spanish Empire (and later with the Americans) just how geographically and economically the country has been vital in linking east and west. “Las Filipinas” (Philippines) continues to play that role in the global economy even today and has the opportunity to accelerate that.
The Philippines to continue economic growth should have the mechanisms in place to foster that talent and innovation. In other words, have an economy that not only is increasingly offering highly-skilled work but also the ecosystem to one day become entrepreneurs as well.
The Philippines is undergoing a massive economic transformation and much of that is demonstrated in the international trade and foreign direct investment aspect. It is not just a place that is also attracting FDI and an emerging market for other nation’s goods and services, but increasingly, an innovator where Filipinas lead globally on innovation and investing overseas.