Philippines income upgrade raises investor bar

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MANILA, Philippines — The Philippines’ move to the upper-middle income grouping has raised investor standards for the country, making it necessary to undertake more reforms to improve ease of doing business and enhance competitiveness.

“The Philippines’ upper-middle income status under the World Bank’s latest income classification is more than a statistical milestone. It is a signal that the country has entered a new stage of economic development – and with it, a higher level of expectation from investors, enterprises and global partners,” Philippine Economic Zone Authority (PEZA) director general Tereso Panga said in a Viber message.

While the milestone validates the reforms being undertaken to improve the investment climate and attract more investments, he said that it also poses a challenge for the country in terms of meeting the higher investor standards.

“Investors will expect more from the Philippines. They will expect faster government services, more reliable infrastructure, clearer regulations, stronger digital systems, better logistics, a deeper talent pool and a more predictable business environment,” he said.

Panga said the government must improve service delivery to position the country not just as a low-cost destination, but also as an upper-middle income investment hub.

This will require faster issuance of permits, improved inter-agency processes and interoperable digital systems.

Panga said the government also needs to plan infrastructure development around industry needs and ensure that reliable power, water, transport, telecommunications and logistics systems are in place to support firms locating and expanding in the country.

“For PEZA, the task is clear: continue strengthening the ecozone model as a platform for high-quality investments, exports and jobs. But for the whole of government, the responsibility is larger: to make sure that the country’s public services, infrastructure and regulatory environment match the expectations that come with upper-middle income status,” Panga said.

He said the milestone also provides the PEZA an opportunity to continue to support economic growth by attracting high-value investments in advanced manufacturing, semiconductors, electronics, green industries, logistics, artificial intelligence-enabled services and other strategic industries.

From 2022 to 2025, PEZA maintained an upward trajectory in investment approvals, posting an annual average growth of 22.9 percent.

For its part, the Securities and Exchange Commission (SEC) has committed to advancing more business and capital market reforms as the Philippines moved to the  upper-middle income status.

“The Philippines’ entry to the upper-middle income category is a testament to the government’s overall efforts to drive and sustain economic growth despite downward pressures brought by global and local challenges,” SEC chairperson Francis Lim said.

Lim said the SEC remains steadfast in implementing reforms that would enhance the ease of doing business and reinforce capital market activity.

The SEC has been rolling out policies that streamline business formation and stimulate capital market activity. It is drafting rules on market making and reforms on the public offering framework for debt securities.

“By encouraging more businesses to formalize and by creating an environment that empowers them to expand, we are helping create sustainable job opportunities for more Filipinos,” Lim said.

Moving forward, the SEC committed to introduce more policies to boost market liquidity and activity. 

“We will remain relentless in pursuing reforms that will not only create an environment conducive to business and economic growth, but will also align our practices with international standards, in line with our vision of establishing the Philippines as a highly attractive, world-class hub for investments,” Lim said.

 Meanwhile, both the American Chamber of Commerce of the Philippines (AmCham) and the European Chamber of Commerce of the Philippines (ECCP) said the achievement sends a positive signal to global investors and reinforces the Philippines as a competitive location for investments.

 “Many American companies continue to view the Philippines as one of the most promising markets in Southeast Asia,” AmCham said, citing the country’s young and skilled workforce, strong English proficiency, economic ties with the United States and growing consumer market as advantages.

 For her part, ECCP president Diana Edralin said the ascent to upper-middle income status makes the timely conclusion of the ongoing free trade agreement negotiations between the Philippines and European Union (EU) more important. 

If the country maintains upper-middle income status for three consecutive years, Trade Undersecretary Allan Gepty said it would no longer qualify for the EU Generalized Scheme of Preferences Plus, which allows duty-free entry of Philippine exports to the bloc.