THE PHILIPPINES should address its mounting structural issues clouding investor sentiment to reposition itself as an attractive hub for foreign investments, GlobalSource Partners said.
In an interview with BusinessWorld, GlobalSource Partners Principal Advisor Diwa C. Guinigundo said the country should heed the “wake-up call” from the recent foreign direct investment (FDI) slump by implementing structural reforms to restore its credibility.
“Foreign direct investment is ultimately a vote of confidence in a country’s future,” Mr. Guinigundo, a former central bank deputy governor, said. “While the latest numbers are disappointing, they should serve as a wake-up call rather than a cause for panic.”
“The Philippines still possesses broadly good economic fundamentals, but sustained investment will depend increasingly on good governance, policy predictability, infrastructure, and institutional credibility,” he added.
In April, FDI net inflows fell by 58.8% to $250 million, its lowest monthly level in nearly 10 years or since June 2016. It was also the steepest annual decline seen in over three years or when inflows fell by 76.1% in December 2022.
Mr. Guinigundo noted that declining FDI inflows signal that investors are now weighing political and business climate aside from macroeconomic trends.
“What concerns me more than the April figure is the underlying trend,” he said. “Investors today are not merely looking at macroeconomic fundamentals such as growth and inflation. They are also assessing governance quality, regulatory certainty, rule of law, ease of doing business, energy costs, logistics, labor productivity, and political stability.”
Political instability amid the issues pounding the Senate, including the ongoing impeachment trial of Vice-President Sara Duterte-Carpio, may now be affecting investor sentiment, Mr. Guinigundo noted.
“What is going on in the Philippine Senate is not helping any. This process strikes at the very issue of institutional integrity and fitness of elected public officials,” he said.
According to Mr. Guinigundo, a lack of sustained investment threatens to stunt long-term growth by straining the country’s capital formation, labor market, technological transfers, and export capacity.
“The immediate impact on GDP (gross domestic product) may not be dramatic because household consumption remains the principal driver of our economy,” he said. “However, the long-term consequences are more serious because lower investment today translates into lower productive capacity and slower growth in the future.”
The Philippine economy already took a hit from slower investment flows as the flood control corruption scandal that broke out late last year tainted investor confidence.
In the January-to-March period, GDP grew by 2.8%, the weakest since the COVID-19 pandemic.
Weak FDI inflows often weigh on the sectors reliant on foreign investments, such as manufacturing, infrastructure, energy, technology-driven ones including business process outsourcing, as well as real estate, and financial services.
However, Mr. Guinigundo noted that the impact hinges on whether industries will encounter delayed investment decisions.
As of April, the country’s cumulative $1.968-billion FDI net inflows went mostly to the manufacturing, financial and insurance, and real estate industries, according to central bank data.
DIM OUTLOOK
The country will likely continue to see subdued FDI inflows as prevailing uncertainty warrants caution from foreign investors, Mr. Guinigundo said.
“We should expect investment decisions to remain cautious unless the uncertainty today diminishes,” he said. “Investors dislike uncertainty more than they dislike risk. Risk can be measured and managed; uncertainty cannot.”
This comes especially as the investment climate continues to suffer from compounding global and local headwinds.
“Externally, geopolitical tensions — including the Middle East conflict, continuing trade frictions, and uncertainty over global interest rates — encourage multinational firms to delay major investments,” Mr. Guinigundo said. “Domestically, concerns over governance, institutional stability, and policy consistency also influence investor confidence.”
The GlobalSource analyst also noted that the Philippines remains a laggard in attracting FDIs relative to its regional peers.
“That said, the decline reinforces a longer-term concern: the Philippines has been underperforming in attracting foreign direct investments relative to many of our ASEAN (Association of Southeast Asian Nations) neighbors,” Mr. Guinigundo said.
“Vietnam, Indonesia, and even Malaysia continue to attract larger and more diversified investment inflows because investors see greater policy predictability, more efficient infrastructure, and stronger manufacturing ecosystems,” he added.
In 2025, the Philippines pulled only $9 billion of Southeast Asia’s $244-billion total FDI inflows during the year, ranking sixth in the region, according to the United Nations Conference on Trade and Development’s 2026 World Investment Report.
FDIs include actual flows from cross-border investments in which a nonresident investor holds at least 10% equity in a resident enterprise. These may take the form of equity capital, reinvestment of earnings, and intercompany borrowings.
To recover investor confidence, Mr. Guinigundo noted that the government must prioritize institutional integrity, strengthen its infrastructure, lower the costs of doing business, and ensure long-term stability.
“If we address these structural issues, investor confidence may recover and FDI can once again become a strong driver of inclusive and sustainable growth,” he added. — Katherine K. Chan
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