Philippines: How reforms unlock economic potential

The Philippines is stepping boldly into a new era of economic openness, driven by long-overdue reforms that are finally breaking barriers to growth.

After years of hesitation, the country is shedding protectionist layers and embracing a future built on freer markets, foreign investment, and global competitiveness.

Filipino lawmakers may have finally cracked the code — passing landmark legislation designed to redefine the nation’s economic trajectory.

At the heart of these bold reforms is a historic move to ease foreign ownership restrictions in critical sectors — industries that, for decades, had been shackled by outdated caps.

It’s a long-awaited shift, signalling that the Philippines is ready to compete on the global stage.

At the heart of this shift are amendments to the 1935 Public Service Act (PSA) and the Foreign Investments Act (FIA).

Reforms amending the pre-World War II Public Service Act (Republic Act 11659) now allow 100% foreign ownership in key public services previously restricted to Filipino ownership.

This marks a significant shift in the country’s long-held policy.

Enacted in March 2022 and with implementing rules effective from April 2023, this reform opens critical areas such as railways, airports, expressways, and telecommunications to full foreign equity participation, up from the previous 40% cap.

It aims to attract more foreign capital, promote competition, accelerate innovation, and generate high-quality jobs.

The ultimate aim: boost the Philippines’ competitiveness, stimulate economic growth. By creating creating jobs, these moves are hoped to make development more inclusive. 

The amendments complement other reforms such as the Foreign Investments Act (FIA) signed in 2022 and Retail Trade Liberalisation Act (RTLA, RA 11595), signed into law on December 10, 2021 (which amended the RTLA of 2000). 

This marks a dramatic departure from decades of ultra-nationalist stance and opens the door for more FDI in critical infrastructure.

Collectively, these legislations foster a more open and investor-friendly environment

Recent reforms are also bolstered by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which cut the corporate income tax rate from 30% to 25% (and as low as 20% for smaller firms) and rationalise tax incentives to better attract targeted, high-value investments (RA 11534, enacted in 2021).

CREATE also introduced performance-based, time-bound tax incentives —making the Philippines more competitive relative to its Asean peers.

The economic logic is clear: by attracting more FDI, the country gains not just capital, but also technology transfers, global best practices, and managerial expertise.

These, in turn, drive productivity gains, support infrastructure development, and create higher-quality jobs.

Electronics, which accounts for more than half of Philippine exports, could be a net beneficiary of these reforms.

Efforts are underway to establish domestic wafer fabrication facilities to reduce dependence on imports.

Will this push lead to toward greater self-reliance and higher value-added manufacturing?

The country's leaders certainly hopes so: Besides enhancing workforce skills, it could also bolster production capacity.

Meanwhile, investments spurred by the US CHIPS and Science Act are helping expand the semiconductor supply chain in the Philippines.

While short-term growth is cautious, the sector’s long-term outlook remains positive as it adapts to global shifts and leverages emerging trends.

According to the Bangko Sentral ng Pilipinas (BSP), net FDI inflows reached $9.2 billion in 2023, and are expected to rise further in 2025 as investor confidence strengthens on the back of these reforms.

It also aligns with the Marcos administration’s "Build Better More" infrastructure agenda and the broader Philippine Development Plan 2023–2028, which envisions an innovation-driven economy.

Neighbouring Asean countries like Indonesia, Vietnam, Malaysia, and Thailand have already revised their constitutions multiple times to attract foreign capital, while the Philippines remains hesitant.

The Philippines has not done so.

While some call for opening constitutional discussions, previous moves to revise the Charter have been met with fierce resistance.

Then there are the jitters — for good reason. Tinkering with the Charter could open the floodgates to term extensions, dragging the country deeper into the quicksand of dynastic politics, and its unintended consequences.

And while one camp claims that fears of societal disruption from Charter change are overblown, another camp cautions that liberalisation may expose local firms to stiffer foreign competition.

Former Finance Secretary Gary Teves highlighted that the Philippines still remains the most "restrictive country" in Asean regarding foreign equity ownership, with constitutional restrictions in key sectors such as agriculture, mining, construction, transport, media, and telecommunications.

He urged removing these restrictions from the Constitution itself, noting the Philippines is “the only country in Asean and perhaps in the entire world with those restrictions in the Constitution.”

On the other hand, some analysts and lawmakers caution that liberalisation alone may not cut it. Economist Sonny Africa noted that the Philippines already has one of Asia’s most liberalised economies and that neighbouring countries maintain ownership caps without hindering growth. Critics that belong to his camp also warn that easing restrictions could risk local industries and inflation.

Reform advocates argue that the long-term benefits — greater investment, job creation, and regional economic integration — far outweigh short-term disruptions.

These reforms are not about giving away the economy, but about levelling the playing field so the Philippines can grow faster and compete smarter.

What has happened so far is evidence, plain and undeniable: real progress is forged not by wishful thinking or grandstanding, but by reforms grounded in grit and the discipline of hard work.

Nations are not built on speeches or fear of the unknown — they are built by those who rise each day with purpose, who labour with intent, and who return home not just weary, but fulfilled.

In the Philippines, where potential has long been promised but too often deferred, it is only through deliberate action — tempered by reflection, anchored in experience — that the path to national transformation becomes real.

This is how countries rise. Not by chance. By design.