By Pavel Fedorov
One of my venture capitalist friends recently called me. “You guys are doing a fantastic job in the Philippines with your bank; you’re absolutely killing it. But it’s time to move on and open up another market.” I was perplexed. Why move when the Philippine economy is red hot? The consumer class is emerging, foreign investment is rolling in, and there’s optimism across the board—a veritable blue ocean. “It’s the Philippines,” he confessed. “You don’t want to depend solely on the Philippines. I just can’t believe that nothing bad will happen; it’s the Philippines.”
Indeed, the economic history of the Philippines is far from straightforward. The 1950s and 1960s saw best-in-class economic growth, with Manila attracting new capital and entrepreneurial opportunity. However, this golden period was fleeting. For the next several decades, the country remained a backwater in Southeast Asia in terms of growth and investment. Indonesia, with its smarter industrial policies, grew at staggering rates, consistently outpacing the Philippines by 1-3% per annum since the 1970s. The Philippines’ mediocre growth was exacerbated by political instability, increasing poverty, and income inequality.
The last decade, however, has brought a glimmer of hope. For the first time in many decades, the Philippines grew faster than Indonesia. Yet, this has done little to change the perception that this is a temporary aberration rather than a reflection of the nation’s economic potential. My firsthand experience with funding Salmon, our neobank for Southeast Asia, shows that attracting investors to the Philippines—despite stellar macroeconomic statistics—remains an uphill struggle, whether in Silicon Valley, Singapore, the Middle East, or other capital hubs.
It is difficult to believe that this beautiful land, endowed with natural resources and some of the world’s kindest and most joyful people, isn’t on a sustained path to the success it truly deserves. Filipinos, with their excellent English skills, are ideally positioned for the global economy. As a tech entrepreneur, it hurts to see luminaries like Tim Cook visit Southeast Asia without stopping in Manila.
True, much needs to be fixed to put the economy on a more sustainable path—energy strategy and electrification infrastructure, for example. This will require years of consistent, relentless execution. Electricity prices, currently 50% above those in neighboring countries, are a significant hindrance. Then there are broader economic risks, such as AI. With around two million people employed in the BPO sector, the majority could be out of jobs within 18-36 months. While this is a global issue, the Philippines must start planning its response now.
Despite these complex economic problems, my experience investing in the Philippines has convinced me that there is a simpler and quicker recipe for success. The Philippines should woo the digital tribe, becoming a haven for digital nomads and professionals—a place where they want to live, work, innovate, and spend.
This transformation doesn’t require massive capital investments. It hinges on political will and simple, swift actions:
- Drastically Simplify Resident Visas: Make it incredibly easy for employees of reputable tech companies to obtain resident visas. Streamline the process so visas can be granted online within 24 hours, beat Korea and Portugal to it. This initiative would rapidly go viral and talent on the ground in Manila would compound faster than anyone anticipates with all the positive externalities.
- Facilitate Opening New Tech Businesses: Drastically simplify the registration and operation of new tech businesses. It should not take 2-3 months. Enable online company registration within 15 (!) minutes, complete with bank accounts and straightforward tax filings, and offer 3-5 year tax breaks. This would draw significant capital and the digital tribe to Manila.
These steps, though straightforward, could catalyze a remarkable transformation.
My journey of establishing a business in the Philippines and securing millions in investments, including from Abu Dhabi’s sovereign wealth fund and the IFC, was peppered with luck. Future entrepreneurs should not have to rely on luck to tap into the Philippines’ full potential.
Let’s make the Philippines’ economy great again, ensuring Manila becomes a must-visit stop on Tim Cook’s next Asian itinerary. It is that simple.
