When Bongbong Marcos assumed office as President of the Philippines, he promised to create a “globally competitive and investment-led Philippine economy.” His administration focused on transforming the investment climate through four key strategies:
- Lowering corporate taxes
- Streamlining investment procedures
- Offering enhanced fiscal incentives
- Proactively courting foreign investors through high-profile diplomatic trips
Reports have suggested that Marcos’ foreign trips have resulted in trillions of pesos worth of investment pledges. The Department of Trade and Industry (DTI) even published a report at the end of 2023 detailing the staging of over PHP 4 trillion in pledged investments. Some of these commitments are signed under memorandums of understanding, while others have been formally registered as businesses.
However, the crucial question remains: Have these investments truly materialized, and have they had a meaningful impact on the lives of Filipinos?
Examining Foreign Direct Investments (FDI)
According to data from the Bangko Sentral ng Pilipinas (BSP), as of November 2024, the Philippines recorded over $901 million in monthly foreign direct investment inflows. However, when analyzed in the broader context, the total FDI for the year is approximately $9 billion—significantly lower than previous years. In 2021, under former President Rodrigo Duterte’s administration, the country recorded nearly $12 billion in FDI.
Does this indicate that Bongbong Marcos is failing to attract foreign investments? Not necessarily. While annual FDI inflows appear lower compared to Duterte’s tenure, it is essential to consider the quality and nature of these investments.
The Global Investment Climate
The economic landscape today is vastly different from Duterte’s era. The world is facing post-pandemic economic slowdowns, rising interest rates in major economies, and geopolitical uncertainties, all of which have impacted global FDI flows. Many nations, including the Philippines, have experienced fluctuating investment figures due to these external factors.
For instance, China, historically a major recipient of FDI, has seen a dramatic decline in foreign direct investment inflows. While some attribute this to U.S.-China geopolitical tensions, the reality is that the world is operating in a high-interest-rate environment. The U.S. Federal Reserve has aggressively raised rates to combat inflation, making capital more expensive globally. Consequently, investors have become more cautious, leading to an overall slowdown in FDI—not just in the Philippines but across many emerging markets.
Despite this, the Philippines’ foreign investments have remained relatively stable. While they have not significantly increased, they have also not plummeted like those of China.
The Role of Domestic Investments
Apart from foreign investments, domestic investments have surged. In 2024, the Philippines recorded an all-time high of total approved investments exceeding PHP 1.9 trillion, marking a 29% increase from 2023. In contrast, in 2022, the figure was significantly lower at just PHP 927 billion. This new record also surpassed the pre-pandemic level of PHP 1.3 trillion in 2019.
Leading Foreign Investors in 2024
A significant portion of the foreign investments in 2024 came from Switzerland, followed by South Korea and the Netherlands. Switzerland’s dominance was largely driven by major renewable energy projects. Notably, two Swiss companies—Jet Stream Windkraft Corporation and Triconti Southwind Corporation—each pledged approximately $2 billion, totaling a massive $4 billion investment in the Philippine energy sector.
The Renewable Energy Reform: A Duterte Legacy
It is important to note that the groundwork for these investments was laid during Duterte’s administration. In 2022, the Philippine government amended the Renewable Energy Act, allowing 100% foreign ownership in renewable energy projects. This policy shift attracted substantial foreign investment, particularly from Swiss firms. While Bongbong Marcos’ administration has benefited from these investments, the structural reforms enabling them were initiated before his tenure.
The Impact of High Interest Rates
While investment levels have remained strong, the Philippines is facing an economic challenge due to high interest rates set by the Bangko Sentral ng Pilipinas. Similar to the U.S. Federal Reserve, BSP has kept interest rates high to control inflation. High borrowing costs generally discourage business expansion, yet domestic investments have surged despite these challenges. This indicates strong confidence in the Philippine economy.
The CREATE MORE Act and Corporate Tax Reforms
One of Marcos’ significant economic policies was the signing of the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE MORE Act) in November 2024. This law:
- Reduced the corporate income tax rate for registered business enterprises from 25% to 20%, aligning with other major Asian economies.
- Provided a 100% additional deduction for power expenses to address one of the primary cost concerns for investors.
- Extended tax incentives for strategic investments, allowing some businesses to enjoy up to 27 years of tax benefits.
- Simplified local taxation by replacing multiple taxes, fees, and charges with a streamlined system.
These reforms aim to make the Philippines more attractive to both foreign and domestic investors.
Future Outlook
As global and local interest rates stabilize, investment levels—both foreign and domestic—are expected to increase further. While foreign investment inflows remain consistent, it is clear that some of the investment momentum seen in 2024 was a result of policies enacted under Duterte’s administration.
The question remains: Will Marcos’ policies be able to sustain and accelerate investment growth in the coming years? Only time will tell. What is evident is that while the Philippines has successfully maintained investment levels amid global economic challenges, much of this success can be attributed to prior policy changes rather than new initiatives under Marcos.