Philippines ranks 2nd in Asia for improved investment climate

by Cathy Rose A. Garcia,

Posted at Jan 17 2014 04:21 PM | Updated as of Jan 18 2014 01:04 AM

But PH still not a top investment priority for MNCs

MANILA, Philippines - The Philippines ranked second in Asia for improved investment climate, according to a new survey by The Economist Corporate Network (ECN).

However, ECN's Asia Business Outlook Survey 2014 also showed the Philippines was not a top investment priority for multinational companies.

Myanmar ranked first in Asia for improved investment climate, while China ranked third.

ECN said the survey showed global multinational companies perceive the country's business environment has improved under President Aquino.

Based on the survey, 49.1% of the respondents said the investment climate is improving the Philippines, while 44% said it is staying the same. Only 6.4% said the business environment is worsening.

"The country’s macroeconomic fundamentals have strengthened, with the Philippines now enjoying one of the highest growth rates in the region, with low and stable inflation, as well as healthy government finances and positive trade balances. President Aquino has also made progress in tackling corruption, and promoting transparency and open government, which have traditionally been big deterrents for investment," the report said.

However, the report noted that the improved investment climate is coming from a low base. The World Bank ranked the Philippines 108th out of 189 countries in its last "Doing Business" report. The Philippines jumped to 108th place from its previous ranking of 138, the biggest improvement among all countries last year.

But despite the improved investment climate, only 25% of the respondent companies said they are increasing the level of investment in the Philippines, while 27% of the respondents said they had no plans of investing.

On the other hand, 45% of the respondents said they are maintaining their level of investment in the Philippines.

Topping the list of investment priorities for 2014 is China, with almost 70% of companies planning to increase investments. Indonesia ranked second, followed by India, Myanmar and Thailand.

At the same time, the Asia Business Outlook survey showed corporate expectations for growth is high this year, with 46% of the respondents saying expectations have gone up, and only 12% said their expectations have declined.

"Concerns about under-investment are greatest in industries that serve more mature market segments, the sort that flourish as economies get richer, such as financial services, pharmaceuticals and healthcare, and professional services," said Justin Wood, director, South-east Asia, of the Economist Corporate Network.

"Conversely, executives in more established sectors in Asia, such as core economic infrastructure (construction and logistics), or first-order market opportunities (consumer and retail) are most likely to feel they have the investment mix right. It could be that markets for higher-end products and services in Asia Pacific are developing more rapidly than companies had anticipated, hence a sense of under-investment to keep up with the opportunity," he added.

ECN, the business advisory service of The Economist Group, conducted the survey of 500 companies in Asia Pacific in December 2013. Some 334 respondents completed the survey.