THE PHILIPPINES must keep an eye on money laundering risks arising from online gaming and cryptocurrency, even after it has exited the dirty money watchdog’s “gray list,” an analyst said.

Choon Hong Chua, Moody’s head of financial crime practice group, Asia-Pacific and Middle East, said the Philippines’ removal from the Financial Action Task Force’s (FATF) gray list “reflects its commitment to strengthening its anti-money laundering (AML) and counter-terrorism financing (CTF) frameworks.”

“Exiting the gray list will boost investor confidence and financial stability. The Philippines has enhanced inter-agency coordination and has implemented comprehensive reforms,” he said.

“However, money laundering risks are not easy to sweep out entirely. Businesses such as online gaming and cryptocurrency would be areas beyond the financial sector that would require continuous oversight to mitigate potential risks,” he added.

Online gaming has gained popularity in the Philippines in recent years. Data from the Philippine Amusement and Gaming Corp. (PAGCOR) showed revenues reached a record-high P112 billion in 2024, with the electronic games sector accounting for half or P48.79 billion.

The FATF finally removed the Philippines from its gray list of jurisdictions under increased monitoring for dirty money following a successful on-site visit that showed the country completed its action plan.

The Philippine government is confident the removal from the gray list will help raise investments and expand trade partnerships that will drive economic growth.

However, a Citi economist said the exit from the gray list alone is not enough to spur investments in key sectors like manufacturing.

“Obviously, it’s great to be out of the gray list, but I don’t think this is necessarily going to translate to meaningful diversion opportunities in manufacturing because clearly it takes a lot more than that,” Citi Head of Emerging Markets Economics Research Johanna Chua said in an interview on Money Talks with Cathy Yang on One News on Monday.

The Philippines was on the FATF’s gray list for over three years or since June 2021.

“It’s great to get out of the gray list, but we need more than that to have a kind of ecosystem for manufacturing, including having a better-established infrastructure and supply-chain ecosystem,” Ms. Chua said.

“That’s obviously not a competitive advantage for the Philippines. The Philippines is really more for services,” she added.

The Philippines logged $37.4 billion worth of services exports in the first nine months of 2024, up 6.25% from a year earlier, central bank data showed.

In 2024, exports of services jumped by 8.3%, data from the local statistics authority showed. It also accounted for 13% of gross domestic product (GDP).

Ms. Chua cited India as an example, where there have been significant public capital expenditures for infrastructure seen in the last few years.

The government has committed to spending 5-6% of GDP on infrastructure annually.

Meanwhile, former Finance and Socioeconomic Planning Secretary Jesus P. Estanislao said the Philippines’ exit from the gray list is a “very positive development.”

“It has been a great embarrassment for the Philippines to be on that list for so many years. And now what we’re saying to the rest of the world is we want to be part of you, and we do not want to be part of the money laundering, financing or criminal activities.”

“We would like to clean up our system, and I’m glad that we have succeeded in convincing them in our efforts to clean up our system. This is great news,” he said.

This also shows that the Philippines is becoming a “much more transparent economy.”

“We’re telling the world we would like to be part of the global financial system, which fights against financing for terrorism, which fights against money laundering, and all of the shenanigans that have been going on using the international financial system,” Mr. Estanislao added.

TARIFFS
Meanwhile, Ms. Chua said the Philippines is among the economies most insulated by the United States’ tariff plans.

“In Asia, you know, I think the Philippines is kind of second to India in being relatively the most insulated from the tariff noise. One of the benefits India has is there’s been a lot of interest in diversion of investments in manufacturing,” she said.

Markets are bracing for the potential impact of US President Donald J. Trump’s trade policies, such as reciprocal tariffs on all countries that tax US imports.

Since taking office in January, Mr. Trump has already slapped a 10% tariff on Chinese goods as well as duties on all steel and aluminum imports beginning March.

“A lot of the tariff noise, aside from China, seems a lot more sectoral and targeted and is really being seen as a pretext for negotiation,” she added.

Meanwhile, Ms. Chua said it is “not far-fetched” for the Philippines to grow close to 6% this year.

“We are projecting Philippine growth will be just a tad shy of 6%, which is 5.9%, which, you know, by and large, is still a very solid growth rate that we’ve seen compared to a lot of emerging market countries,” she added.

Economic managers are targeting 6-8% GDP growth this year.

The Philippine economy grew by 5.6% in 2024, short of the government’s 6-6.5% target. — Luisa Maria Jacinta C. Jocson

By Luisa Maria Jacinta C. Jocson, Reporter

SOME SECTORS in the Philippine labor market, such as the business process outsourcing (BPO) industry, could be at risk of being displaced by artificial intelligence (AI), the International Monetary Fund (IMF) said.

“As AI systems become more capable and readily available, they are likely to replace or significantly alter many job roles, particularly those involving routine and repetitive tasks,” it said in a working paper.

“The Philippines, with its large BPO sector, faces unique challenges and opportunities. The BPO industry, a significant contributor to the country’s economy, might experience shifts as AI-driven chatbots and virtual assistants handle more customer service tasks.”

The paper said that around one-third of jobs in the Philippines are highly exposed to AI, which means that AI can perform many of the tasks in these occupations.

The IMF found that 61% of the highly exposed jobs are also considered highly complementary.

This means AI technologies are “likely to support rather than replace the worker, potentially increasing their productivity.”

“The remainder (14% of the total workforce) hold jobs with low complementarity, making them susceptible to displacement by AI,” it added.

Jobs with high exposure to AI and high complementarity include general and operations managers, first-line supervisors, teachers and teaching assistants, lawyers, civil engineers and counselors.

Meanwhile, those jobs with high exposure but low complementarity includes customer service representatives, telemarketers, accountants, auditors, secretaries and administrative clerks.

Though it accounts for just about 3% of the workforce, the IMF said BPO workers are considered highly exposed with low complementarity.

The IMF noted the Philippines’ BPO sector is a key growth engine for the country.

“The BPO industry, which predominantly focuses on routine-centric tasks and low-skilled roles such as answering phone calls and dealing with inquiries, may be adversely affected by AI,” it said.

The IMF cited data showing the Philippines’ share of the global outsourcing market is at 15%.

“The BPO sector’s significant contribution to the economy — accounting for 7.4% of GDP in 2023, similar in magnitude to remittances — means that changes within this industry are macro-critical and may have spillover effects on the broader economy.”

Data from the International Labor Organization showed 89% of the BPO workforce face a high risk of automation.

“Before, the threat of automation was contained to low-skilled, blue-collar jobs,” the IMF said.

“However, generative AI’s capabilities now pose a threat to white-collar jobs, especially for information technology and business process management (IT-BPM) workers as customer services agents, tech support, and non-university educated employees.”

Meanwhile, it also found that the most exposed workers to AI are “college-educated, young, urban, female, and well-paid workers in the service sector.”

“It will be critical for young workers to have the skills that allow them to employ AI to increase their productivity for the Philippines to capitalize on the impending demographic dividend,” it added.

The IMF said that AI preparedness will also impact the adoption of these emerging technologies.

“Despite these efforts, challenges persist, including regulatory gaps, inadequate infrastructure, workforce reskilling needs, and limited AI adoption due to cost concerns… Addressing these issues is crucial for the Philippines to fully leverage AI’s economic and societal benefits,” the IMF said.

In 2024, the Philippines ranked 56^th out of 188 countries on the Government AI Readiness Index.

When harnessed correctly, the IMF said that AI can be used to “create new opportunities, fostering growth in tech-driven industries and necessitating a workforce with advanced digital skills.”

The National Economic and Development Authority (NEDA) earlier said the economy could gain P2.6 trillion annually if domestic businesses adopt AI solutions.

The government must strategize how to minimize job displacement and maximize benefits such as increased productivity and job creation, the IMF said.

“Investments in education and training programs focused on AI and digital skills are essential to prepare the workforce for the future.”

“Furthermore, developing a regulatory framework that ensures the ethical use of AI and addresses issues related to labor market transitions is imperative, drawing on lessons from global best practices,” it added.

Analysts said the government must be proactive in the AI transition.

University of the Philippines Diliman School of Labor and Industrial Relations Assistant Professor Benjamin B. Velasco said that AI can be used to generate more jobs.

“AI will replace some forms of work, but it can also create other kinds of jobs. Upskilling is one way to deal with the ‘creative destruction’ effect of AI,” he said.

“Understandably, the government and businesses are trying to find some niche in which there are upskilled jobs that complement AI and take advantage of AI. For example, if you do not want to be replaced by AI, learn to program AI or train AI.”

Federation of Free Workers President Jose Sonny G. Matula said AI training must be aligned with development objectives.

“AI should be developed to help realize agro-industrial development, to mechanize and digitalize farms for greater productivity and contribute to national food security,” he said.

Mr. Matula also expressed concern over the widening skills and wage gap.

“Promote fair wages and equitable distribution of productivity gains from AI. This will happen if there is free, independent collective bargaining between employers and workers, through their unions,” he said.

Mr. Matula also called for expanding vocational training and lifelong learning programs focused on AI-adjacent skills.

“While AI is unlikely to replace all human jobs, its impact on the workforce must be managed carefully. The key is to ensure that AI serves as a tool to enhance human labor, not as a means to displace workers without recourse,” he added.