1 month ago
12
There are now a lot of articles on the internet about how investors are looking at ASEAN for manufacturing, fleeing China to escape the Trump tariffs. Unfortunately, the Philippines is hardly mentioned. They are excited about Vietnam, Thailand and Malaysia. Indonesia is starting to spark interest. But it looks like the Philippines will once again be the wall flower as our neighbors and investors have a ball.
Sorry, Sec. Ralph Recto but your exuberance about the potential contribution of CREATE MORE seems to be unjustified.
The articles which mention the Philippines point out governance issues and high labor costs as significant negatives to investors. No surprise. It’s also the bad reputation for red tape and corruption that scares investors away.
The favorite in ASEAN is Vietnam. It is good and bad for Vietnam because all the foreign investments pouring in are straining their existing infrastructure. Yes, they are building new infrastructure fast, faster than us, but still not fast enough.
The other negative is that Vietnam is doing so well exporting to the United States that it had a trade surplus of $123 billion last year. It is among the top countries with trade surpluses to include China, Mexico and Canada.
Trump will soon notice Vietnam and include it in the list of countries that will face higher tariffs. That makes them less suitable for investors fleeing China manufacturing to avoid Trump’s tariffs.
I asked ChatGPT to compare us with Vietnam in terms of desirability for foreign direct investors.
Ease of doing business: Philippines ranks 95, Vietnam is ranked 70.
Business regulations: Philippines is seen as “complex, bureaucratic, longer processing times” compared to Vietnam which is seen giving “faster approvals, more streamlined…”
Foreign investment policies: Philippines is “more restrictive, but improving with laws like CREATE.” Vietnam is seen as more “open to FDI, strong government support.”
As a whole, “Vietnam has an edge with faster business setup and more investor-friendly policies. The Philippines is improving but still lags in efficiency.”
For workforce size, we are even at around 50 million. We are higher for monthly average wages in manufacturing, ours is $250 to $350. Vietnam is lower at $150 to $250. We are rated high in English proficiency with Vietnam noted as “low but improving.”
Overall, “Vietnam wins on labor costs and vocational skills, making it a better fit for manufacturing. The Philippines wins in English proficiency and service industries (BPO, IT, finance).”
For ports and connectivity, ours were noted as congested but improving. Vietnam is well developed and closer to the China supply chain.
Our electricity cost was noted to be among the highest in Asia while Vietnam’s is lower and more stable.
For road and rail, ours was noted to be still underdeveloped while Vietnam has better logistics and road network.
Export processing zones – Philippines has PEZA incentives but scattered locations. Vietnam has “more efficient industrial zones, well-planned SEZs.”
Overall, “Vietnam has a clear advantage in logistics, proximity to China, and industrial zones. The Philippines is improving but still struggles with infrastructure bottlenecks.”
In terms of trade and market access, Vietnam is better integrated into global trade due to multiple FTAs and stronger manufacturing exports. Vietnam has stronger supply chain links, key partners for global brands while we are less integrated into global supply chains. We, however, excel in services (BPO) but lag in industrial exports.
For electronics and semiconductors, “the Philippines is strong but the supply chain is weaker than Vietnam. Vietnam is also the leading destination for this sector, and is part of Apple & Samsung supply chains.”
For textiles and garments, our participation is limited due to high labor costs while Vietnam is a major global exporter.
For BPO and IT services, we are the global number two outsourcing hub after India. Vietnam is growing but still behind us.
For manufacturing, ours was considered growing but slower due to high costs. Vietnam dominates in low-cost manufacturing.
In conclusion, who wins?
ChatGPT says “Vietnam is the better choice for manufacturing, especially for companies seeking alternatives to China due to lower costs, better logistics and stronger trade agreements. The Philippines is better for high-value industries like BPO, IT services, fintech and specialized manufacturing (semiconductors, aerospace) due to a highly skilled, English-speaking workforce.”
Which country should investors choose?
ChatGPT says, for large-scale, cost-driven manufacturing? Vietnam. For high-tech, skilled workforce-dependent industries? Philippines. For companies needing both? Some are splitting operations—manufacturing in Vietnam, and the back-office and services are in the Philippines.
Vietnam enjoys a trade surplus of $123 billion with the United States while the Philippines has typically run a trade deficit. In 2023, the Philippines had a trade deficit of $-52.59 billion with the United States.
We are unlikely to catch up with Vietnam, who not too long ago, was recovering from a war that pulverized the country. Kaya ba natin? Siguro hindi, with the kind of governance we are getting from our officials.
As I have written before, we need to get reassurance na kaya natin. After all, we have highly talented Filipinos working worldwide.
Maybe we need an experiment with good governance… offer one of our 7,000 islands to Singapore’s Temasek to develop as an economic zone. In China’s and Vietnam’s early days of development, Singapore developed SEZs there.
Marinduque and Guimaras come to mind but Guimaras seems a better bet as it is next door to Iloilo where infrastructure is much improved with an airport having direct flights to Singapore. An agro-industrial hub is ideal. Singapore needs land to grow food, assuring a ready market. But it must be managed free from traditional Filipino politics and governance. We may be surprised na kaya ng Pilipino basta there is good leadership.
Boo Chanco’s email address is [email protected]. Follow him on X @boochanco
