Why European companies are betting billions on the Philippines now
Europeans double down on Philippines: 6 reforms turning it into Asia’s next factory hub
MANILA — European companies are taking a closer look at the Philippines.
The country combines a large consumer market and a huge land area, equivalent to 7 times the size of the Netherlands.
A new investment drive by the Manila government includes incentives, longer land leases, expanding economic zones and a growing network of roads, ports, airports and industrial corridors.
Official data from the Philippine Statistics Authority show that approved foreign investment reached ₱115.2 billion ($2 billion) in the second quarter of 2026, up 68.2% from a year earlier.
The Netherlands accounted for ₱50.74 billion, or 44% of the total, followed by Germany at ₱18.05 billion, or 15.7%. Manufacturing attracted 78.81 billion pesos, or 68.4%, of approved foreign investment.
These are approved commitments, not necessarily capital already invested, but the direction is notable: European capital is increasingly tied to manufacturing, logistics, energy and industrial services.
Six changes making the Philippines more attractive
#1. CREATE MORE is changing the investment equation
The CREATE MORE Act has expanded and refined the Philippines' fiscal-incentive system while giving investors greater clarity over tax incentives and qualifying activities.
The government is pairing CREATE MORE with the 2026-2028 Strategic Investment Priority Plan, which prioritizes advanced manufacturing, critical minerals and green metals, renewable and emerging energy technologies, artificial intelligence, data science, cybersecurity, quantum technologies and other future industries.
For European manufacturers facing higher costs and geopolitical supply-chain risks, that matters because the Philippines is increasingly trying to compete for production capacity rather than simply service-sector jobs.
#2. The ARROW Act tackles one of infrastructure's biggest bottlenecks
The Accelerated and Reformed Right-of-Way Act, or ARROW Act, is designed to speed up land acquisition and right-of-way procedures for major infrastructure projects.
Right-of-way delays have historically held back Philippine infrastructure. The new framework establishes clearer acquisition and compensation rules and provides mechanisms intended to reduce delays, including for qualified private-sector infrastructure projects.
That could be particularly important for factories, power projects, railways, ports and logistics facilities whose economics depend on reliable connections.
#3. Foreign investors can now lease land for up to 99 years
The Philippines still does not allow foreigners to own private land, but Republic Act 12252, signed in 2025, extended the maximum lease period for foreign investors to 99 years, replacing the previous 50-year term plus a 25-year renewal.
That is significant for capital-intensive projects such as factories, industrial parks, processing facilities and logistics hubs, where investors need decades to recover large upfront investments.
#4. Economic zones are becoming a manufacturing platform
The Philippines is expanding its network of PEZA economic zones and other freeport and special economic zones, offering investors infrastructure and incentive packages while connecting factories to export markets.
PEZA approved 216.46 billion pesos in investments covering 196 projects through August 2026, already reaching 72% of its full-year target. Manufacturing accounted for 80 projects, the largest category. Most projects were in Luzon, while Dutch companies were among the largest foreign investor groups.
That is increasingly important as multinational companies seek alternatives and additional production locations outside China.
#5. The Luzon Economic Corridor (LEC) is turning geography into an investment advantage
The Philippines, United States and Japan are developing the Luzon Economic Corridor, linking Subic Bay, Clark, Manila and Batangas.
The corridor is being built around transport, energy, digital infrastructure and advanced manufacturing. The US and Philippines also announced plans for a 4,000-acre industrial hub in New Clark City focused on semiconductor, artificial intelligence and other strategic supply chains.
Technical assistance is also being developed for a proposed Subic-Clark-Manila-Batangas railway, which would further connect ports, airports, industrial estates and major consumer centers.
For manufacturers, the appeal is straightforward: factory + workforce + port + airport + domestic market in one connected corridor.
#6. Manila is trying to reduce the security risk in areas once affected by insurgency
The Philippines is also trying to convert long-running security problems into a development opportunity.
The government has expanded its amnesty and reintegration program for former communist rebels while the National Task Force to End Local Communist Armed Conflict is pushing development funding, infrastructure and governance programs in conflict-affected communities.
More than 16,000 former rebels and combatants had availed themselves of the national amnesty program by March 2026, while the government has proposed extending the program for another two years.
The objective is not simply military: the government says roads, schools, livelihoods, social services and economic activity are part of the strategy to address the roots of the decades-old insurgency.
For investors, sustained improvements in security and connectivity can open locations outside the traditional Metro Manila-Luzon industrial core.
Infrastructure is becoming part of the investment pitch
The Philippines' infrastructure build-up is occurring alongside these reforms.
The government's "Build Better More" program encompasses hundreds of infrastructure projects covering transport, energy, water, digital infrastructure and other sectors.
201 infra "flagships"
A Bangko Sentral ng Pilipinas overview lists 201 Infrastructure Flagship Projects worth about $174.2 billion.
The emphasis is increasingly on infrastructure that supports economic activity: railways, airports, ports, renewable power, industrial estates, logistics and digital connectivity.
That is important because one of the Philippines' longstanding disadvantages has been the cost and reliability of moving goods around an archipelago of more than 7,000 islands.
Domestic market: Key attraction
European manufacturers do not have to view the Philippines solely as an export platform.
Household consumption accounts for more than two-thirds of Philippine economic activity, according to recent national accounts data.
Growth has slowed — household spending rose 2.8% year-on-year in the second quarter of 2026 — but the size of the consumer market remains a major attraction.
That creates a different proposition from smaller Southeast Asian economies: a company can potentially manufacture locally, sell locally and export regionally.
Companies are already putting money behind the story
Several European companies have moved beyond exploratory talks:
Lufthansa Technik — broke ground in August on a second Philippine base-maintenance facility at Clark. The three-digit-million-dollar project is expected to create about 1,200 highly skilled jobs, with operations scheduled for 2028.
ALPLA — opened its first Philippine manufacturing plant in Calamba, Laguna, in March 2026. The Austrian packaging company began production there in 2025, adding the Philippines to its Asia-Pacific manufacturing network.
TotalEnergies — together with Philippine renewable-energy developer Nextnorth, began construction of a $300 million, 440-megawatt-peak solar project. Half its output is expected to serve industrial customers.
Nestle — announced plans to invest about 2 billion pesos annually through 2027 in the Philippines to expand production capacity, upgrade technology and improve factory efficiency.
Schneider Electric — has continued investing in its Philippine manufacturing and logistics operations, including its Cavite facilities. Its smart distribution center expansion involved an investment of about 86.5 million pesos.
OSM Group — The Swedish company announced in March 2025 the expansion of its Philippine industrial footprint, involving consumer electronics and soft-goods operations, to tap the country’s skilled workforce.
Unilever — The Anglo-British consumer-goods company said it was considering strengthening Philippine production facilities, following discussions with the Department of Finance on potential green-manufacturing investments. This is an exploratory commitment, not a confirmed project.
Swedfund — In May 2026, Swedfund announced a ₱74 million grant for feasibility studies covering signaling systems and operating models for the proposed Subic-Clark-Manila-Batangas freight railway under the Luzon Economic Corridor (LEC). About SEK10 million since 2018, plus SEK3 million in 2025 for feasibility work, technical review, engineering and PPP advisory support for the EDSA Bus Rapid Transit project.
UK MOBILIST program — In November 2025, it announced a $10 million / ₱586 million cornerstone investment in Maynilad Water Services’ IPO, tied to upgrading Metro Manila water infrastructure (as a a portfolio investment, not a greenfield company facility).
Copenhagen Infrastructure Partners (CIP) — This Danish renewable energy giant committed a $3 billion offshore wind farm project in Camarines Sur (a province bigger than Dubai, and about 410km south of Manila) in partnership with ACEN Renewable Energy Solutions, its maiden venture in Southeast Asia. CIP holds multiple offshore wind service contracts totaling up to gigawatt-scale capacities.
Acciona — The Spanish giant partnered with Metro Pacific Toll Roads on the €465-million Cebu-Cordova Bridge Project.
Infrastructure, railways, tourism — Spain has also offered financing facilities of up to €300 million to support Philippine infrastructure, railways, and tourism projects.
Renewable Energy and Green Transition — Spanish firms specializing in offshore wind, coastal engineering, and port development (such as PROES Consultores and GEOMYTSA) are actively collaborating on the Philippines' renewable energy deployment and supply ports.
The list is significant because it spans aviation, packaging, renewable energy, food manufacturing and industrial technology rather than a single sector.
A notable project is the Impact Fund Denmark (formerly IFU), Denmark's investment arm for sustainable development, which aims to support small-scale organic farming transitions, rural livelihoods, and clean energy financing partnerships in the Philippines.
The Philippines and Denmark have also signed a memorandum of understanding on developmental cooperation to expand concessional and blended financing for infrastructure, climate action, maritime development, transportation, and agriculture
Europe is looking beyond the Philippines' traditional strengths
The Philippines has long been associated with business-process outsourcing, electronics assembly and overseas-worker remittances.
The emerging investment story is broader.
PEZA said more than 190 companies with European equity already operate in its zones, representing more than 400 billion pesos in cumulative investments and more than 430,000 jobs.
The Philippines and EU are also negotiating a free trade agreement. The sixth round of negotiations was held in Manila in May 2026, with both sides seeking deeper market access and investment ties.
That combination — a large domestic market, ASEAN access, industrial incentives, longer land leases, expanding infrastructure and closer EU trade ties — is making the Philippines harder for European companies to ignore.
But there is an important caveat.
The country still faces high electricity costs, infrastructure gaps, regulatory bottlenecks and political and governance risks.
The economy also slowed sharply in the second quarter, with GDP growth falling to 2.3% and investment contracting for a fourth consecutive quarter.
So the Philippines has not suddenly become the easiest place in Asia to do business.
What has changed is the direction of travel.
For European companies looking to diversify production, secure access to a growing consumer market and build supply chains less dependent on China, the Philippines is increasingly offering something it lacked in previous decades: a combination of policy reforms and physical infrastructure capable of supporting much larger industrial bets.
