HONGKONG and Shanghai Banking Corp. (HSBC) said investments from Singapore are expected to increase in the Philippines due to its growing consumer market, though investors also had more bullish plans for other Southeast Asian markets.
According to a report by the Singapore Business Federation commissioned by HSBC, investment from Singapore is expected to rise in Southeast Asia overall, with, 21% of survey participants expecting to expand into the Philippines in the next two years, lower than the percentage planning to go into Indonesia, Malaysia, Vietnam and Myanmar.
It added that 74% of survey participants already had operations in the Philippines.
The survey covered 1,036 firms, 86% of which were considered as small and medium enterprises (SMEs), defined as “those with annual turnover of S$100 million or less than 200 employees.”
In a statement, HSBC President and Chief Executive Officer Jose Arnulfo A. Veloso said Singapore-based SMEs can make a significant contribution to the Philippine economy.
“These firms are looking to expand beyond their domestic markets and can benefit from the cross border activity that was previously seen as the domain of larger corporates,” Mr. Veloso was quoted as saying in the statement sent Thursday.
The study indicated that 81% of Singapore firms who expressed interest in entering or expanding in the Philippine market cited “potential customer demand.”
Other factors that were top considerations included the overall investment climate (71%) and business costs (63%).
“While the Philippines’ growing consumer base is already well recognized by Singapore corporates, the report shows that many businesses need to really double down on our demographic dividend,” Michael Brennan, HSBC head of wholesale banking for Philippines, said.
“Beyond the consumer prices, [the country’s] manufacturing continues to rise. So while many corporates may base their treasury and other back-office functions in Singapore, a lot of revenue-making operations are also seen going to the Philippines.”
In 2017, Singapore ranked third among investment sources for the Philippines after Japan and Taiwan, according to the Philippine Statistics Authority. Last year, Singapore entities committed P10.2 billion, or 9.6% of the total applications for foreign direct investment.
According to the report, most Singapore SMEs considering the Philippines are seeking an in-country relationship, with 68% already having a distributor or joint venture agreement in the country, the largest total in ASEAN.
“To fully capture the potential investment opportunities, Philippine SMEs should reach out to expanding Singapore-based SMEs at the point of entry or even before,” Mr. Veloso said. — Karl Angelo N. Vidal