The Philippines is well positioned to benefit from European investments; however, better adaptation and adoption of trade, sustainability, technology and digital trends, as well as reform, are required to turn this potential into reality, according to HSBC.

Graham FitzGerald, HSBC Philippines president and chief executive officer, said the Philippines offers a variety of investment opportunities to European and United Kingdom companies as a strategic hub in Association of Southeast Asian Nations (Asean) with solid economic fundamentals.

He noted that the Philippines recently enacted economic stimulus and reform measures, such as the Corporate Recovery and Tax Incentives for Enterprise Act, with the goal of providing tax relief to businesses in financial distress and transparent tax rules to boost the country’s competitiveness.

“The economic reforms and stimulus packages, being implemented by the Philippine government, should encourage EU and UK corporates to take a closer look at investing here, particularly in the green and technology sectors,” FitzGerald emphasized.

“But of course, success will require building resilience and transforming how we do things in the Philippines, now and in the future.”

On the other hand, FitzGerald added that Southeast Asia’s medium-term prospects, opportunities, and global relevance remain intact for multinational companies (MNCs).

Exports of electronics, medicines, commodities, and mining have stayed steady over the previous year, Asean’s supply chains have remained resilient, and foreign direct investment (FDI) has remained steady.

Citing the United Nations Conference on Trade and Development Investment Trends Monitor, FitzGerald said, greenfield investments in Asean will increase by $70 billion by 2020. This was the largest FDI inflow into any emerging region.

However, the region faces a number of challenges, including a slow rollout of the coronavirus disease in 2019, increased competition for private investment from other emerging economies, a tactical rather than strategic shift to digitalization, an underutilized labor force, and a projected 11 percent drop in gross domestic product by 2100 if climate risks are not addressed.

Greater policy reform to stimulate wider trade flows, technology advancements to raise manufacturing productivity, and digital and sustainability adoption are all needed to counteract these challenges, FitzGerald explained.

Ratifying free trade agreements, firms taking a more strategic approach to digital adoption, and building levers to more forcefully encourage the adoption of green and sustainability practices are all examples of policy initiatives.

“Southeast Asia’s large demographic dividend, comprising of young and relatively lower cost labour, make it a glittering prize for international companies. But it’s not without its challenges including some lagging in productivity, digital and sustainable practices,” FitzGerald highlighted.

“The key for Southeast Asia is to regain its traditional growth drivers of trade and investment, coupled with capturing the opportunities emerging in the green and digital space. This will require the Asean markets to pull several policy reform levers, especially if it’s to attract overseas investment.”