Closer to Europe in linguistic and traditional terms than other Asian countries – 80% of the population is Christian and English is the vehicular language – the Philippines is establishing itself as a market with great prospects for Western investment. The archipelago, home to almost 116 million people, already serves as a strategic base of operations for companies interested in doing business in Asia, offering advantages for industrial activities, support services, manpower and assistance, and providing access to the region’s major markets thanks to the free trade treaties signed within the framework of ASEAN, the Association of Southeast Asian Nations. Among other pros, the Philippines can also boast a strong banking system and attractive incentives for foreign investors (899 billion in 2023 and growing).
The predominantly young population also sustains one of the highest propensities to consume in the region, with a steadily rising level thanks to solid economic fundamentals and a steadily growing Gross Domestic Product (GDP). The Philippines is currently the fastest-developing state in the ASEAN region, an achievement that has been particularly favoured by increased spending on public infrastructure and the advancement of the service sector, as well as remittances from abroad, which reached 33.5 billion dollars in 2023.
This upward trend over the next two years will see the Philippines become the second largest economy by positive GDP variation in all of Asia after India, according to the latest projections of the World Economic Outlook 2024 by the International Monetary Fund (IMF) and the Asian Development Bank (ADB). Today the 32nd largest economy in the world by nominal GDP (USD 471.5 billion) and the 13th largest in Asia, by 2035 it could become the ninth largest on the continent and 22nd largest globally, but by 2050 it is projected to rank as high as 19th.
Manufacturing, led in part by semiconductor production, accounts for 17% of GDP, supporting exports and employment. The island State is an important link in the global electronics supply chain and participates in the assembly and export of components for products such as smartphones, computers and other electronic devices. Electronics account for about 60-65% of total goods shipments, with more than USD 40 billion inbound per year. The exports of the mineral-rich country also include commodities such as copper, nickel, abaca, coconut oil and fruit, as well as chemicals, transport equipment and clothing. In 2023, the top trading partner was China, while the European Union (EU) ranked fourth with a 6% share of total imports. The EU, on the other hand, accounted for 11% of exports, also due the fact that two-thirds of the total 6,200 products were duty-free. The Philippines’ other major trading partners include Japan, the USA, Singapore, South Korea, the Netherlands, Hong Kong, Germany, Taiwan and Thailand.
Tourism is also an important part of the economy, recovering after the COVID-19 pandemic. In 2023, the country welcomed almost 5.5 million visitors, with 1.5 million from South Korea and 1 million from the United States. This sector, together with the aforementioned manufacturing and the agri-food industry, offers important opportunities for Italian companies, which can become relevant with the supply of advanced technology and know-how. Manufacturing, in particular, is relatively less developed than services and the demand for modern machinery is therefore set to grow.
It is the construction sector, however, that is really driving the growth. In Manila and in the other major cities of the archipelago, the demand for residential housing continues to grow and new, modern buildings for residential or commercial use are under construction, also due to the high demand for office premises. In the field of construction and infrastructure, the Philippine government is continuing to promote large-scale public works projects such as roads, railways, ports, airports, with a focus on sustainability and resilience: several of these initiatives are supported by the ADB, which has committed a total of USD 20 billion over the next four years. The expansion of the infrastructure sector is also fuelling a growing demand for specialised services, including pre-feasibility and feasibility studies, drafting of tender documents, as well as legal, financial and economic advice.
Similarly, the energy sector, particularly renewables, will become increasingly important in the coming years. In fact, under the Philippine Energy Plan (PEP), the government intends to increase the share of green sources in the energy mix to 35 per cent by 2030, to 50 per cent by 2040 and to more than 50 per cent by 2050. A recent development of particular interest to international investors is the possibility, introduced in 2022, to fully own companies operating in the renewable energy sector. The government also announced the goal of commissioning the first nuclear power plants by 2032, with the aim of lowering the electricity cost, one of the highest in the region.
Although the experts’ forecasts agree on a substantial economic expansion for the country in the years to come, challenges persist due to wide disparities in income and growth between different regions and socio-economic groups, bureaucratic difficulties and administrative irregularities, as well as still insufficient investment in the infrastructure needed to sustain and secure future growth. Another significant aspect to consider is that the Philippines has been ranked as the country in the world most exposed to natural disasters. In fact, the archipelago is cyclically afflicted by typhoons, floods, droughts and heat waves, the impact of which is still significant on the Philippine economy, although the government is working to mitigate it.
In the medium term, however, the country could benefit from structural reforms designed to improve the investment ecosystem and the general perception of the country’s economic progress. These include the ratification of the Regional Comprehensive Economic Partnership Agreement (RCEP) and the implementation of strategic economic liberalisation measures in favour of foreign investors. These interventions include the introduction of the Public Services Act, amendments to the Foreign Investment Act and the Retail Trade Liberalisation Act, which now allow, under specific conditions, foreign ownership in sectors such as some public services, small businesses and retail trade. Furthermore, the new Public-Private Partnership (PPP) Code institutionalises public-private partnerships, providing a unified regulatory framework and facilitating public-private collaboration.
Italy at the Discovery of a New Market
Interview with Ambassador Davide Giglio
Italy is looking with keen interest at the strong economic progress underway in the Philippines, a country that is implementing ambitious infrastructure development programmes in the construction, transport and energy sectors, but is also engaged with the European Union in negotiations for a free trade area. This adds to the economic opportunities arising from the increasing consumption of a fast-growing urban population and the local need to implement sustainable agricultural practices and raw material processing. These and other aspects are explored in the following interview with Ambassador Davide Giglio, who represents Italy in Manila.
The Philippines is emerging as a fast-growing economy in South-East Asia. What opportunities lie ahead for Italy?
From the economic viewpoint, the Philippines is an increasingly important country for Italy. Indeed, it is the fastest growing country in the ASEAN region (Association of Southeast Asian Nations), with a 5.6% GDP growth in 2023 and a 6% one in 2024. Strong demographic expansion, urbanisation and consumption development, combined with impressive infrastructure programmes (construction, transport and energy) and the possible forthcoming European Union (EU) free trade agreement, contribute to make the Philippines a country of clear opportunities for Italian companies in a wide range of sectors.
A further asset is mineral wealth. The Philippines is one of the richest countries in the world in terms of mineral resources. In fact, the archipelago is estimated to have USD 1 trillion in untapped reserves of copper, gold, nickel, zinc and silver. Barely 5% of these reserves have been explored and only 3% are covered by mining contracts. The global need for critical minerals necessary for green transition processes – such as the development of renewable energy plants (photovoltaic, wind, etc.) and the production of lithium-ion batteries for electric vehicles (EVs) – make the Philippines a country of primary interest.
The Philippines should also be kept in mind as a reservoir of human resources. The country has an abundance of skilled labour. Italy’s demand for Filipino workers is no longer only for family assistance, but also for employment in areas such as shipbuilding, telecommunications infrastructure, construction and logistics. In the future, the medical-nursing sector will also be of interest.
On the other hand, an area in which Filipino workers are already widely employed in Italy, making the most of their advanced knowledge of English, is shipping. It is estimated that around 10,000 Filipino seafarers work on board vessels flying the Italian flag. In this context, for Italy, besides the employment of Filipino labour, opportunities lie in the training sector, particularly in the framework of projects promoted by the European Union.
Finally, the Philippines is among the world leaders in Business Process Outsourcing (BPO) services. This sector covers the outsourcing of back-office (HR, finance and IT) and front-office business processes, such as customer service and call centres in areas such as healthcare, finance, retail and telecommunications. The various factors that have contributed to making the Philippines a favoured destination include its strategic position; large availability of staff with high English proficiency; cultural affinity with Western countries; low labour costs, and strong government support. This sector is expected to continue to play a central role in the Philippine economy, considering the strong global demand and technology innovation processes.
What are the priorities on the Philippine government’s agenda?
The Philippines is strongly committed to developing its infrastructure. The current inadequacy penalises the country’s competitiveness in the movement of people and goods, with high logistics costs due to insufficient port infrastructure and inadequate road networks. Both the Administrations of President Duterte (2016-2022) and of the current President Marcos Jr. have therefore made infrastructure development their priority for action, with public-private partnerships and with the support of international donors, including the Asian Development Bank (ADB). The Philippine Development Plan (PDP) 2023-2028 defines medium- to long-term priorities. The most prominent sectoral opportunities arise in the transport and urban development sectors. Improving transport connectivity is one of the main objectives: there are currently about 200 projects to modernise the rail network, build roads and bridges, strengthen air and urban transport, and increase port facilities.
Another priority sector is energy. The national supply continues to be dominated by coal and oil. The obsolescence of the electricity transmission infrastructure negatively affects the reliability of supply, leading to significantly higher energy costs than in other South East Asian countries and hampering economic competitiveness, particularly in the manufacturing sector.
Expanding the power grid capacity, improving transmission and distribution efficiency, reducing the risk of emerging renewable technologies (including geothermal, offshore wind, and floating solar technologies), and catalysing private sector investment will be crucial. All of this presents opportunities for Italian companies.
Last but not least, the agricultural sector remains of primary importance in the country. Agricultural productivity is still low. In fact, the Philippines ranks 67th out of 113 countries in the Global Food Security Index 2022, largely due to inadequate infrastructure and logistics. Land use and unsustainable agricultural practices degrade soil fertility and increase vulnerability to climate risks. Water management is inefficient and unsustainable: only 67.5% of irrigable land receives adequate irrigation. Integrated planning and infrastructure improvements in flood-prone areas are key. Furthermore, overfishing, obsolete equipment, and inadequate post-harvest and storage facilities have led to low product quality and losses that put coastal ecosystems and communities at risk. The vast opportunities that lie ahead for Italian companies include the mechanization of processes and semi-processing of products to increase the productivity and sustainability of the sector.
What can you tell us about the Italian community in the Philippines?
Approximately 2,300 compatriots live in the Philippines. It is a presence that dates back to the period between the two world wars when a first sporadic settlement of compatriots from neighbouring countries was established to explore production opportunities in the rubber plantation sector. A more stable and consistent Italian presence began after the Second World War thanks to the work of the religious who came on mission (Salesians, PIME, Franciscan nuns). The presence of the religious is of particular importance and significance in a country where 80% of the population profess the Catholic religion.
Today, for many compatriots, the Philippines has become a stable if not permanent settlement, also due to the economic opportunities that the country has offered. Furthermore, the socio-cultural affinities and the sharing of family and religious values have also favoured the creation of numerous and stable marital bonds. The growing awareness of the importance of the Philippines in Italy following significant immigration flows, in particular since the 1980s, has also contributed to the development of the settlement of Italians.
The Italian experience in the construction sector and in the local industry (refrigeration, industrial plants, packaging, food, furniture, tobacco), with the consequent strengthening of the presence of compatriots, also contributed to the great infrastructure development program implemented in the 1970s. Many important Italian brands are represented by distributors and franchising. The companies present in the country include Maccaferri, Trevi, Renardet and Tecnimont in the construction sector,and Menarini in the pharmaceutical one.
The Italian economic and commercial presence is still quite limited, albeit diversified.
Considering the opportunities that arise, the Philippines is also a country of interest for companies in the defence sector, for those in railway infrastructure (inspection, diagnostics, etc.) and energy (high-temperature material handling; geothermal plants; efficiency). Over time, this presence has contributed to spreading an overall favourable Italian image among the Filipinos, particularly in Manila. The local environment is particularly receptive and interested in Italian culture in its various aspects such as music – opera, in particular – cinema, theatre and dance, art, restoration, design and cuisine. The Embassy is actively involved in diversified promotional activities both in terms of type of event and organization method.
What are the prospects for bilateral relations between Italy and the Philippines?
Italy and the Philippines have had diplomatic relations for 77 years. It is a complex, friendly and solid relationship, but there is still considerable room for development. Relations are also stepping up in light of the existing convergence on many issues, and the increased Italian projection in the Indo-Pacific. There is a convergence of views between Italy and the Philippines in the interest for peace and stability in this region, which is increasingly important in the global geopolitical balance. Both parties are therefore showing commitment to strengthening relations. At the beginning of November, Undersecretary Maria Tripodi carried out a fully successful mission to Manila. On 26 November, on the sidelines of the G7 Foreign Ministers’ Meeting in Fiuggi, Minister Antonio Tajani held talks with his counterpart Enrique Manalo. This will certainly give a strong boost to the relaunch of relations between Italy and the Philippines on a political level. Greater Italian attention towards the Philippines is also demonstrated by the deployment of our armed forces in the Indo-Pacific region. Air and naval transits took place in the summer. Both the Air Force and the Navy made stops in the Philippines. In particular, the Italian Carrier Strike Group (composed of the aircraft carrier Cavour and the frigate Alpino) stopped in Manila between 2 and 5 September. The training ship Amerigo Vespucci also visited Manila from 14 to 17 September.
The political momentum is matched by the strengthening of trade relations. Bilateral trade is relatively favourable even if it still appears to be undersized. Looking ahead, some structural trends are favourable for the expansion of Italian trade positions. First of all, the increase in disposable income among the middle and upper classes: in particular, the population between 25 and 34 years of age is a significant demographic segment (28% of the population). This has implications for the so-called “discretionary consumption” which is expected to be a significant share of spending over the next ten years. Furthermore, the presence of a middle class with increasingly diversified spending habits makes the Philippines a potentially increasingly receptive market for quality products, such as Italian ones.
The strong urbanization underway also contributes to the development of consumption, with a massive spread of shopping malls and retail outlets. Italian products are increasingly found in them, also thanks to the commitment of local distributors. In the Philippines, the preference for the shopping experience in a physical store remains relatively high despite the development of e-commerce. The encouraging prospects for the development of trade are further supported by the possible finalization of negotiations for a free trade area between the EU and the Philippines. Negotiations were launched in October 2024 and there is a commitment from both parties to finalize the agreement possibly by the end of the term of President Ferdinand Marcos Jr. in June 2028. The free trade area can be a powerful catalyst for trade and investment flows, leading to a desired leap forward in the quality of relations between the EU and the Philippines, with significant opportunities for Italy as well.
The Italian System is playing its part. SACE is committed to developing its push strategy and has started discussions with important local economic conglomerates. ITA Agency, which is present through the Singapore Office, has created a Desk that operates in the Embassy with liaison functions with the ADB based in Manila. Its activity is to inform Italian companies about the opportunities inherent in the impressive infrastructure development projects financed in the Philippines, particularly in the construction and transport sectors. An Italian Chamber of Commerce is also active in the Philippines whose activity is increasingly dynamic.
In your opinion, can the large presence of the Filipino community in Italy be considered an advantage for investing in the country?
The presence in Italy of one of the largest overseas Filipino communities (about 165,000 people) is certainly an asset for the Italian-Filipino relationship. It kindles constant flows between the two countries and contributes to mutual understanding. The socio-cultural affinities (Catholic religion, origins from a society with strong Western influence, etc.) facilitate not only the integration of Filipinos in Italy, but – in general – the dialogue between Italy and the Philippines. It is a positively integrated community with an employment rate of over 70% (one of the highest among foreign communities in Italy). It is also evolving, increasingly specialized and educated compared to the first generations that settled in Italy in the 1980s, mainly composed of domestic workers. This creates new interesting professional dynamics that lead to the growth of commercial contacts between the two countries. The children of second and third generation Filipinos, born and raised in Italy, are in fact more responsive to the business opportunities present in the Philippines. The entrepreneurial vocation of the community is strengthening, as demonstrated by the recent establishment of two Philippine chambers of commerce with offices in Rome and Milan.
How could Italy bring value added to cooperation in the fight against climate change that severely affects the Philippines?
The Philippines is indeed particularly vulnerable to the risks posed by climate change. The World Risk Index has constantly ranked it as the country in the world most at risk of natural disasters. The archipelago is plagued by typhoons (an average of 20 per year), floods, droughts and heat waves. The effects of sea level rise are particularly evident in the islands of Luzon and Mindanao. Climate change is estimated to have a substantial impact on annual GDP. According to the World Bank, the Philippines already sacrifices up to 1.2% of GDP due to the impact of typhoons alone. However, more pessimistic local estimates show a percentage potentially up to 8% of GDP in 2030 as a damage to the local economy. It is therefore not surprising that the challenge posed by climate change is a government priority.
At the domestic level, an effort is underway to strengthen the planning ability, prevention, reduction and preparedness for disasters in order to mitigate their socio-economic impact. This ambitious goal, however, needs to be measured against the limited resources available. It should also be noted that, during her recent visit to Manila, Undersecretary Maria Tripodi illustrated the potential commitment in the Philippines of the Italian Climate Fund. Its robust resources, for the benefit of strategic sectors such as renewable energy and sustainable infrastructure, enhances the Italian commitment in the fight against climate change, also towards the Asia-Pacific region, and can also open up prospects for bilateral collaboration for our small and medium-sized enterprises.
Italy can contribute to the Philippines’ goal of making the country more resilient. For example, in the field of space collaboration, Italy can be a valuable partner. The country has a strong need for advanced solutions for environmental monitoring, precision agriculture and disaster prevention and management, in particular. Italian expertise in the aerospace sector can effectively respond to these needs, contributing significantly to strengthening the overall resilience of the Philippine economy.
