Since the early 2000s, foreign investors and multinational corporations have started to recognize the Philippines as a rich talent pool—from its young professionals with high English proficiency levels to the skilled workers in manufacturing and construction industries.
The large and young population is one of the key indicators that starting a business in the Philippines is greatly beneficial to foreign investors now more than ever. Founding partner of EnterPH, RJ Ledesma, talks to Department of Trade and Industry Secretary, Ramon M. Lopez, to shed insight on how foreign investors can profit from the Philippines’ large and young population.
“The Philippines is on a breakout, and we are experiencing a high single digit [growth]. We’re hitting 7% in terms of GDP growth,” according to Sec. Lopez. This is the big picture that the DTI secretary paints for us. Apart from low labor costs and strong consumer market, the large and young population is greatly contributing to the country’s economic growth.
1. Abundant Manpower Supply
Since a baby is born every 18 seconds, the population is expected to reach 110 million by 2020. Because of the benefit of a young population in the working age that is growing faster than the retired (65 years old and above) and dependent population (below 15 years old), the Philippines will experience a strong economic growth for the next 10 to 20 years.
Harvard demographer, David Bloom, calls this the Demographic Dividend. This demographic dividend is responsible for the abundant manpower supply and workforce in the country.
“[The] Philippines has a very young average population, 23 years old… and what we see is a young population mostly employed or have businesses,” says Sec. Lopez.
East Asian newly industrialized countries such as Singapore, Taiwan, Hong Kong, and South Korea experienced this demographic dividend in the latter half of the last century. Nobel laureate and famous commentator, Paul Krugman, attributed their economic success to the significant increase in manpower supply that their demographic dividend brought about.
2. High Literacy Rate
Filipinos place a high value in education, and the Philippines has one of the highest literacy rates in Asia at 94.6%. This makes the local workforce even more powerful, as they are armed with both knowledge and skills necessary to help advance any company or organization.
English is the medium of education in most schools, making the Philippines the world’s third largest English-speaking country. In fact, this is one of the top advantages that foreign investors see in the country, as evidenced by the growing number of BPO companies each year.
As the demographic dividend produces approximately 350,000 new graduates every year, more young professionals who are proficient in English enter the workforce.
3. Cheap Labor
The country’s large workforce population and demographic dividend is continually effecting relatively low labor and production costs for Filipino employees. In fact, Willis Towers Watson’s 2015-2016 Global 50 Remuneration Planning Report indicated that the Philippine labor cost remains the most competitive among ASEAN countries, making the country a more attractive investment location than China.
As Sec. Lopez says, “There is what we call a manufacturing resurgence [in the Philippines]. The services sector, which would include telecommunications, IT-BPM (Information Technology Business Process Management), construction, [and] logistics are also growing at a high single digit of about 8 and sometimes 9 percent.”
The industries that employ skilled workers are increasingly relying on the country’s cheap but efficient labor force, thus the increasing number of foreign investors in the BPO industry.
4. Large Domestic Consumer Base
Yet again, the large and young population of the Philippines, as shown in the demographic dividend, produced a large and diverse consumer base in the country from which foreign investors can benefit.
According to Governor Armando Tetangco of the Central Bank, another implication of the demographic dividend is that the country will “have a very dynamic consuming class that will constitute a very large domestic market for all types of manufactured goods and services.”
5. Strong Consumer Market for Goods and Services
“Many investors value a lot the kind of consumer growth that we have here. Consumer confidence has been [at an] all time high positive, coming from sometimes negative numbers,” according to Sec. Lopez.
This strong and empowered consumer market is fueling the growth of the economy and attracts both local and foreign investment. Just look at the businesses sprouting left and right. The Filipino purchasing power is stronger than ever.
According to the 2017 KPMG Philippine Consumer Market Report, the steady economic growth is outpacing the population growth, leading to the increase in general household incomes. This translates to Filipinos having the capability to spend on a wider variety of goods, from smartphones and gadgets to automobiles and homes. Travel and lifestyle activities are now within arm’s reach for Filipinos due to their increasing purchasing power.
Start a business in the Philippines today, and take advantage of the economic boom that the large and young population effectuates. The Philippines offers boundless investment opportunities, and it’s time to take part in this emerging market.
Rocky Chan is a lawyer and business consultant who excels in corporate formation, immigration procedures, and client relations. In the last 7 years, he honed his craft in the field of foreign investment consultancy.
