After income upgrade, what investors are waiting for Philippines to fix

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July 15, 2026 | 10:12am

MANILA, Philippines — The Philippines has moved up the World Bank's income ladder. Now it has to show investors it can compete there.

The country's recent reclassification as an upper-middle-income economy gives it a stronger marker of credibility, but it does not automatically make the Philippines a more competitive market for foreign investment, strategic advisers from global management consulting firm Kearney said.

Kearney senior partner Marco Dela Rosa and managing partner Varun Arora said the country's weak spots, including infrastructure and governance, remain key concerns for investors weighing the Philippines against its neighbors.

Last week, the World Bank reclassified the Philippines as an upper-middle-income country after it posted gross national income per capita of $4,850 this year, above the $4,636 threshold for the income bracket.

The reclassification signals that the Philippines is an "attractive market" and open for business, Arora and Dela Rosa said. But they said the higher income bracket is also more competitive, making it more urgent for the country to address the gaps that could hold back investment.

"Especially in a more competitive world, in a more uncertain world, credibility of the Philippines as a result of this re-ranking does not necessarily translate into competitiveness," Dela Rosa told Philstar.com. "Just because we're in this, we get this good ranking, which is positive, doesn't necessarily mean investors will go to us and not other countries."

Credibility, not yet competitiveness

Dela Rosa said the Philippines has moved up in income level, but that alone does not make it more attractive than its neighbors in the Association of Southeast Asian Nations.

"We are still actually, from a gross national income standpoint, lower than Vietnam, Thailand, Malaysia," Dela Rosa said.

Kearney's 2026 FDI Confidence Index showed the Philippines lagging other Southeast Asian markets in attracting foreign direct investment.

The Philippines ranked 18th out of 25 emerging markets in 2026, down two spots from 16th place in 2025. Thailand ranked sixth, Malaysia seventh, Indonesia 13th and Vietnam 16th.

Dela Rosa said upper-middle-income status should, in theory, help the Philippines' standing in the index. But any gain would still depend on how the government performs on other factors that investors consider.

"We might improve on this one dimension. But if we lose ground on another dimension, for instance, if infrastructure declines, if our infrastructure score declines, then on a net basis, the Philippines' score probably won't change," Dela Rosa said.

He said the index measures countries relative to one another, meaning improvements by other markets can keep the Philippines from moving up even if its own score improves.

"If they continue to improve, if they continue to be in front of us, then our relative position also won't change that much," Dela Rosa said.

What investors still want

For Dela Rosa and Arora, the Philippines' upgrade is not just an achievement, but also a "call to action" for the government and policymakers to fix what has weakened investor confidence.

Dela Rosa said the country needs to "invest meaningfully" in infrastructure, especially as it works to diversify its economic base.

He also emphasized the importance of stable and transparent governance in attracting foreign investors.

"It would just make it a lot easier for investors to put money with confidence if they know that there is continuing stability within a particular country," Dela Rosa said.

Arora said Philippine businesses and the government need to "think through the future" to preserve resilience amid global uncertainty, noting that resilience has become a key consideration for investors.

"Isn't it a great way to say we're getting into the higher league now, it's more competitive, but remember surprises can come our way," Arora said.