Few EU Firms Eye New Entry into PH; Existing Operators Keen on Expansion

MANILA, Philippines — While the Philippines remains an attractive expansion location for European companies already operating here, relatively few firms without a local presence are considering entering the market, a new regional survey showed. According to a business sentiment survey of European Union (EU) businesses in Southeast Asia released on Tuesday, only 8 percent of respondents not currently active in the Philippines reported plans to enter the market. This trailed Vietnam at 34 percent, Indonesia at 32 percent, and Malaysia and Thailand at 20 percent each. “While the Philippines also shows strong European business presence and similarly records substantial expansion intent among existing operators, they have relatively limited planned market entry,” a report from the EU-Association of Southeast Asian Nations Business Council (EU-ABC) said. That weak appetite for new entry contrasts with the Philippines’ already sizable European business footprint. About 66 percent of respondents operate in the country, while 43 percent plan to expand their Philippine operations or investments over the next five years. This placed the Philippines sixth among the 11 Southeast Asian markets in overall expansion intentions, behind Vietnam at 64 percent, Indonesia at 57 percent, Malaysia and Thailand at 49 percent each, and Singapore at 44 percent. At the same time, 41 percent of respondents said they planned to keep their Philippine investments unchanged over the next five years, while 9 percent intended to scale down their investments and 7 percent said they no longer planned to be active in the country. Across Southeast Asia, 78 percent of respondents planned to expand in at least one market. Still, the EU-ABC said future investments were increasingly favoring markets with strong growth prospects, predictable regulations and established business ecosystems. Economic recovery and growth opportunities were the biggest drivers of expansion, cited by 66 percent of respondents as one of the top three factors. Regulatory unpredictability ranked as the second-biggest challenge to trade and investment in the region, behind growing non-tariff barriers. Beyond limited appetite among potential new entrants, European businesses were also less confident that the EU and the Philippines would conclude their free trade agreement (FTA) negotiations by 2027. Only 30 percent of surveyed businesses said they were confident that an EU-Philippines deal would be concluded next year, lower than the 36 percent who expressed confidence in separate EU trade deals with Malaysia and Thailand. Pessimism over the Philippine negotiations was also the highest among the three, at 29 percent. Manila had said that negotiations with the EU may conclude in November, as the Department of Trade and Industry races to iron out contentious provisions, particularly in agriculture. The EU-ABC survey covered 148 responses from senior representatives of European businesses between April 16 and July 3. /pai