Capital goes where it’s welcome — our neighbors

The Philippines is not losing the investment race because of geography or bad luck. It is losing because of structures it has the power and the obligation to fix.

The numbers are not comfortable. Vietnam now exports over US$475 billion worth of goods annually, powered by a manufacturing base that produces roughly half of Samsung’s smartphones sold globally, backed by more than US$20 billion in Samsung investment alone. 

Apple manufactures in China, India, and Vietnam. Google has built data centers across Singapore, Taiwan, Malaysia, and Thailand. Intel closed its Philippine assembly plant in 2009 and moved to Vietnam and China. The Philippines, meanwhile, continues to rely on business process outsourcing (BPO) and OFW remittances. This model is built on exporting labor rather than building an industry.

This is not a story about Vietnamese superiority. It is a story about policy choices and the compounding cost of inaction. Global companies do not invest in sentiment or simply because Pinoys speak good English. They invest where they find cheap and reliable power, fast approvals, dense supply chains, and long-term policy stability. In almost all of these dimensions, the Philippines has fallen behind, and the gap is widening.

A significant part of that inconsistency originates at the local level. The Local Government Code was designed to decentralize power and make LGUs compete for investment. In practice, results have shown that it is a failure. What was meant to bring government closer to the people has, in too many cases, brought bureaucratic friction and confusion closer to the investor. 

Clearances and permits at the local level frequently encounter delays that are not incidental; they are systemic. When the same political families control local councils and administrative bodies across generations, transparency and competition are the first casualties. Investors do not only calculate tax rates when assessing a location. They calculate governance risk, and in too many Philippine localities, that risk is priced too high.

The PEZA framework offers a partial answer, but only if it is allowed to function as originally intended. Economic zones work when they offer investors the certainty that the broader environment cannot: predictable taxes, streamlined compliance, and a stable operating climate. 

What undermines that promise today is that corporations in PEZA zones remain fully exposed to labor arrangements that investors in competing jurisdictions simply do not face. The right to organize and the right to strike, while legitimate in principle, create operational uncertainty that manufacturers, particularly in high-volume, time-sensitive industries, price as unacceptable risk. 

Vietnam, Thailand, and Malaysia have structured their special economic zones with labor frameworks calibrated to attract and retain capital. The Philippines has failed in that aspect. The result is that PEZA, rather than functioning as the country’s competitive edge, functions instead as a slightly more convenient version of the same environment investors are avoiding. 

True reform means giving PEZA zones parity with the best investment destinations in the region, not just on paper, but in practice. Until then, the export processing zone (EPZ) is a promise the country keeps walking back and forth on.

The SEC’s mandate is capital markets. But capital markets do not exist apart from the broader investment climate. FDI flowing into manufacturing creates the supply chains, employment base, and productive capacity that deepen any capital market worth its name.

When investment transfers from the Philippines to its neighbors, it is not an economic planning problem. It is a structural warning that cannot be managed away with incentive packages or investor roadshows alone.

The Philippines has real advantages — a young population, English fluency, and a large consumer market. But advantages are not destiny. Vietnam had fewer of these twenty years ago, and made deliberate, sustained structural choices that compounded into a US$475-billion export economy. 

Those same choices remain available to the Philippines. What is no longer available is time.   

As we keep debating whether to make them or not, the factories going up in Vietnam today keep on producing products for export, even as the Philippines only exports its labor!