Assessing the first half of the Marcos Jr. administration: Investments
(Part 3)
As regards the sectors of the economy that attracted foreign direct investments (FDIs) during the three most recent administrations (Aquino, Duterte, and Marcos Jr.), the Benigno “Noynoy” Aquino administration brought in the greatest number of enterprises in the service industry, with manufacturing recovering slowly by the end of the period.
Financial and insurance activities likewise recorded large inflows, especially in 2014 as confidence in the capital market improved and the banking sector was liberalized. A drop in the interest rate to a low of 4% encouraged more investments in general. A marked increase in real estate investments reflected the continuing growth of the business process outsourcing – information technology (BPO-IT) industry and increased urban development.
The FDI inflow during this administration had a distinct bias in favor of services and finance rather than infrastructure. The manufacturing moment was real but not yet entrenched.
FDI during the Duterte administration was highly volatile and project driven, with sharp swings that reflected infrastructure bets, regulatory uncertainty, and the negative effects of the COVID-19 epidemic. Electricity and energy in general marked a structural break with P1.39 trillion reflecting power-related investments aligned with the administration’s infrastructure program (Build, Build, Build). Inflows into transport and storage increased but remained modest. Information and communication spiked in 2019, driven by telecom and digital infrastructure investments.
At the beginning of the Marcos Jr. administration, FDI was showing a recovery and some rebalancing, with manufacturing emerging as the strongest and most consistent driver, rising steadily and reaching P1.4 trillion in 2024 — the clearest signal of a renewed interest in industry.
Real estate rebounded strongly in 2022-2023, supporting construction and services as the economy opened after months of lockdown. Transportation and storage inflows stabilized, suggesting a recovery in logistics and mobility. Health and social work initiatives surged in 2023, reflecting post-pandemic restructuring and private healthcare investment.
To its credit, the Marcos Jr. administration built on the strong foundations set during the previous two administrations in further strengthening the two saving sectors of the Philippine economy, OFW remittances and the IT-BPM sector. Even amid global volatility, OFW remittances remained a critical stabilizing force for the Philippine economy. In 2024, remittances reached $38.2 billion. The persistence of remittance inflows — particularly during periods of elevated domestic inflation — suggests a countercyclical role, as overseas workers support household consumption and cushion real income pressures at home.
Alongside remittances, the IT-BPM sector has served as a second major external earnings pillar. Prior to the pandemic, the industry grew at a steady 3-6% annually. Post-pandemic growth accelerated to 9-10%, driven by digital demand for e-commerce, healthcare, and financial services. By 2023, the second year in the term of President Marcos Jr., industry revenues reached $35.5 billion, generating 130,000 new jobs and bringing employment to 1.7 million. In 2024, industry revenues reached $38 billion. Before the end of the Marcos Jr. administration, earnings from the IT-BPO sector will surpass the $40-billion mark.
Despite the seemingly good start, the Marcos Jr. administration has done poorly in attracting FDIs. While ASEAN neighbors like Vietnam, Indonesia, and Malaysia are attracting FDI flows of $15-$30 billion annually, the Philippines’ figures remain below $10 billion, suffering a disastrous drop of 50% in 2025 as a result of the flood control corruption scandal.
The Philippines can foster more FDIs in the immediate term by addressing governance lapses. The recent flood control scandal demonstrated that governance issues are significant in foreign investors’ willingness to put in equity capital in the country’s businesses. A stable and effective rule of law can rally investor’s appetite and attract more of the investments already pouring into the ASEAN region. On this front, the Marcos Jr. administration should devote the rest of its term to strengthening the rule of law and thus fostering transformative economic growth.
While a good number of improvements in the Philippine investment climate have materialized (e.g., greater openness to foreign investments, higher investments in infrastructure, greater emphasis on technical skills in human resource development), the country remains a laggard in investment-led growth. Compared to its peers, especially in the ASEAN, the Philippines has been registering a low of 20-23% investment-to-GDP ratio, much lower than the 25-30% average in East Asia. This has led to lackluster economic growth (from its potential of 8-10% growth) in the post-pandemic period, resulting in a slow offtake of higher value-added industries compared to its neighbors.
As the experience in 2025 showed, there must be greater political will to improve the quality of governance.
Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.
