The Philippines stands to benefit from increasing production costs in China, albeit potential investors may be turned off by poor infrastructure and high corporate tax rates, according to UK-based Oxford Economics.
“As supply chains adjust to rising costs in China—and given a mounting need to service Asia’s rapidly growing domestic market and an increase in trade protectionism over the past year—we expect Asia, excluding China, to be the key beneficiary. The region is already well-established in global and regional supply chains, and it looks set to remain an attractive destination for export-orientated FDI (foreign direct investment),” Oxford Economics lead Asia economist Sian Fenner said in a March 1 report titled “Asia wins as firms adjust supply chains.”
The report ranked Vietnam as the “most attractive” in its export FDI attractiveness scorecard covering 10 Asian economies, followed by Malaysia, Thailand, Indonesia and then the Philippines.
Ranked sixth to 10th are India, China, Singapore, South Korea and Japan.
“Despite positive labor metrics, we rank Indonesia and Philippines below higher-wage countries such as Malaysia and Thailand, as infrastructure and business conditions remain weak,” Oxford Economics said.
“We expect the Philippines and Indonesia to retain their low-wage advantage over the next decade. However, despite improvements over the past five years, both still suffer from relatively poor infrastructure as well as more time-consuming business environments,” it added.
Citing the recent World Economic Forum’s Global Competitiveness Report 2018, Oxford Economics noted the Philippines ranked 92nd out of 140 countries mainly due to low scores in electrification rates and road connectivity.
Moving forward, Oxford Economics said it expected both the Philippines and Vietnam “to continue to address their infrastructure deficiencies over the coming decade, which should see both continue to improve their infrastructure rankings.”