Report: Manila Is Outperforming Its Regional Neighbors in Private Capital Growth But Needs $90B Yearly to Close the Gap

Against the backdrop of a slowing Southeast Asian investment climate, the Philippines saw its private capital market grow by 34 percent last year, outdoing regional counterparts Indonesia, which contracted by 32 percent, and Vietnam, which dropped 30 percent.

This is according to Foxmont Capital Partners and Boston Consulting Group's 2026 Philippine Private Capital Report, which showed that Manila's growth was driven by a 144 percent surge in debt financing, even as equity grew at a comparatively modest 10 percent.

ALSO READ:

Foxmont Secures $30 Million To Double Assets In Third Fund

Report: Despite Muted Investment Climate, Deals Actually Reached Record High in 2024

At the launch of the report at Palacio de Memoria in Parañaque City, Asian Development Bank Philippines Country Director Andrew Jeffries stressed that the Southeast Asian nation had all the tools to accelerate growth and development but understandably had its own perennial administrative hurdles standing in the way.

You can read the full Foxmont Capital and Boston Consulting Group report here.

"There's a lot of really good policies on paper," he said. "The implementation guidelines, the follow-through needs to happen."

Manila also has its work cut out for it in reforming infrastructure priorities, as the ADB official cited the need to slash the country's outsized logistics and transport costs. Jeffries juxtaposed the Philippines' 27 percent total cost of goods against Vietnam's 16 percent and Thailand's 11 percent, calling it a "big drag or a headwind for any company involved in manufacturing."

While the debt-structured growth in private capital made things look good on paper for Manila, the 34 percent year-on-year jump masks a quieter reality: there has been no meaningful surge in new startup activity, and no new industries have emerged to account for it.

So essentially, the Philippines is being held back by its own shortcomings in actually implementing promising investments. There is a distance between well-intentioned national policy and carrying these out down to the local government unit level. Think of businesses based outside Metro Manila and how often they come across vastly different regulatory frameworks and environments than what the central government had actually designed.

According to the report, the Philippines doesn't necessarily have a services growth issue, just a model problem. Manila's economy keeps welcoming new workers into low-productivity service activities, while traditional retail, business process outsourcing, and hospitality have yet to translate employment expansion into material gains in output per worker.

Foxmont cited e-commerce platforms Shopee and Lazada as prime examples, generating more than $135,000 in output per worker annually, roughly 50 times the rate of traditional retail and a stark indictment of just how far behind the rest of the services sector sits.

"The gap that I've been seeing for the past 10 years or so is really the lack of intellectual property creation in my country. We fell in love with services," Philippine Software Industry Association President Jonathan De Luzuriaga said at the same panel discussion.

"Out of the million workers that we're anticipating to be added to the current 1.5 million workforce, 500,000 of these would be in the countryside. So it's a challenge because we're in an archipelago," he added, citing PSIA's 2028 roadmap for the local tech industry.

The seasoned local tech leader also raised a grimmer cultural reality: Filipinos, by and large, would rather trust technology coming from foreign sources than champion what is actually built at home.

"If you look at all of the successful technology companies in the world, they're allowed to at least fail three, four, five times. Here in the Philippines, there's just not enough capital for us to afford that," De Luzuriaga said.

The report also showed that while 67 percent of local businesses have already deployed artificial intelligence tools, only 12 percent have shown "AI maturity" or use cases that are structurally conducive to productivity. Compared globally, about 95 percent of corporate AI initiatives around the world fail to deliver impact because companies layer new tools onto legacy workflows without redesigning how work is actually organized, a scale pattern that Manila is unfortunately already falling under.

"The risk of falling behind is the same we see in other countries as well. It's not a problem that is unique to the Philippines. Some firms are really making good use of it, and some firms are going to be left behind," Boston Consulting Group Manila Managing Director Anthony Oundjian said at the panel talk.

"What we see at the moment as well is investment in AI. So these are the kinds of capital development that we see or catch-up that is being done."

The BCG exec noted that AI is not the magic bullet to prosperity that we think it is. Companies that don't intelligently and strategically use these emerging platforms and tools will be left in the dust.

"The one thing that I would like to see is education and risk-taking elevated as a national priority," Oundjian said. "I think today we see some initiatives, some reforms, some intents, but I think we need something on a much bigger scale."

Manila also has bigger fish to fry when it comes to boosting capital formation. The Philippines currently invests only 21 percent of its GDP back into fixed assets, falling well short of the 30 to 40 percent average among fast-growing peers such as China and India. Closing that gap would require an additional $40 to $90 billion a year in productive investment.

Lastly, we tackle the reality of the untapped fruits from Manila's surprisingly well-oiled yet quietly underperforming $39 billion semiconductor export machine. The Philippines runs about 10 percent of the world's chip assembly but only keeps around 60 percent of the value it generates, with the remaining 40 percent flowing back out as foreign value-added. This is on top of the country having no domestic wafer fabrication capacity and limited participation in integrated circuit design, the highest-margin segment in the entire chain.

"What we don't see so much yet is investment in automation. But I think probably at the cusp of a change here," Oundjian said. "The reason why historically it didn't happen is because we were fortunate with this demographic dividend, so low-cost workforce that made the economy not stackable for that kind of investment."

READ MORE:

Foxmont Secures $30 Million To Double Assets In Third Fund