The Philippines needs to strengthen its innovation capacity, improve the business environment, and provide greater policy certainty as it moves into the next phase of economic growth, experts said at the opening plenary of the 12th Annual Public Policy Conference (APPC).
The discussion examined how the Philippines and other Southeast Asian economies can sustain growth and move beyond middle-income status amid technological change, shifting investment patterns, and growing geopolitical and geo-economic fragmentation.
Dr. Bambang Brodjonegoro, dean and chief executive officer of the Asian Development Bank Institute (ADBI), said Southeast Asian economies must adapt to challenges different from those faced by earlier high-growth economies such as South Korea and Singapore.
He identified structural transformation, institutional coherence, political stability, and human capital as key elements in sustaining growth and moving beyond the middle-income trap.
For the Philippines, Brodjonegoro pointed to relatively low research and development (R&D) investment as one factor behind its weaker performance relative to some regional peers.
“I would say that, in general, why are we underperforming? Because we do not spend, or we don not invest enough in R&D,” he said.
He said the private sector should play a greater role in driving R&D and innovation, citing South Korea, where companies such as Samsung and Hyundai invest heavily in developing competitive products.
“Do not do R&D in the ministry. Do it in the firm,” he quoted a Korean speaker as saying at an international conference.
Brodjonegoro also pointed to the opportunities created by artificial intelligence (AI) and the growing demand for technologies such as semiconductors and data centers.
He cited Malaysia's longstanding semiconductor industry as one reason it has been able to benefit from the current expansion in AI-related industries.
“If you are talking about what kind of business [is] booming today, then the clear answer is anything related to AI,” he said, adding that semiconductors are “really the key… at least for now.”
He also cited South Korea's semiconductor industry as an example of how manufacturing can generate economic gains beyond commodity-based growth, noting that semiconductor companies contribute significantly to corporate income tax revenues.
The competition for investment is already evident across Southeast Asia, Brodjonegoro said.
He cited figures showing that the Association of Southeast Asian Nations (ASEAN) attracted $244 billion in foreign direct investment (FDI) in 2025, but about 62% went to Singapore. The Philippines received about $9 billion, which he said was 4% lower than in 2024.
He attributed Singapore's ability to attract investment partly to its focus on knowledge- and human-capital-intensive sectors, including semiconductors, digital infrastructure, and AI, as well as legal certainty and policy consistency.
“Investors are choosing countries that have strong institutions and are more predictable,” he said.
For the Philippines, Brodjonegoro said attracting FDI requires more than benefiting from the overall attractiveness of the ASEAN market.
“We really still need to work hard in order to make sure FDI will really come, and they will put the trust in our government,” he said.
Dr. Jaffar Al-Rikabi, senior country economist for the Philippines at the World Bank, said the country has already benefited from an investment-led growth model that has lifted millions of Filipinos out of poverty and contributed to its transition to upper-middle-income status.
The challenge now, he said, is to move increasingly toward technology adoption and innovation.
Al-Rikabi cited the World Bank's framework of “three I's”—investment, infusion, and innovation. While investment in capital and infrastructure helped drive the Philippines' earlier growth, the country now needs to encourage private firms to adopt more technology.
“The institutional aspects matter,” Al-Rikabi said.
He noted that the Philippines ranks relatively high in the quality of its regulations compared with other East Asian economies, but has weaker implementation.
“So there is an institutional gap,” he said, referring to the gap between good rules and their implementation.
He cited the need to streamline business processes, noting that firms sometimes have to submit the same information to multiple national and subnational agencies.
“These are the kinds of things that drive costs for firms,” he said, calling for simpler ways of doing business.
The institutional challenge also extends to human capital, Al-Rikabi said.
He added that the Philippines has historically underinvested in education, describing this as “a legacy problem that we now need to fix.”
He said workforce development will become increasingly important as businesses adopt new technologies.
“Technological adoption does not just happen with firms; it happens through workers. And that is where the upskilling agenda is key,” Al-Rikabi said.
Meanwhile, Dr. Jesus Estanislao, professor emeritus of the University of Asia and the Pacific and founding dean of ADBI, stressed that institutional transformation must begin with the people and organizational culture.
“They do not look at the bottom line immediately. First, they look at what we are doing with our people,” Estanislao said.
He cited professional qualifications, personal dignity, career development, skills, and work values as foundations of institutional transformation. He also called for organizations to break down internal silos and align different functions toward common goals.
Professor Emerita Solita Collás-Monsod of the University of the Philippines School of Economics emphasized the role of values in making institutions work effectively.
Asked whether good values or good systems should come first, she said, “I think the good values are first. Then the good systems will come later.”
The opening plenary of the 12th APPC was held under the theme “Reshaping Economic Institutions for Transformational Partnerships in Human Capital Development.”
The APPC is the flagship activity of the Development Policy Research Month.
Catch the playback of the 12th APPC here: https://bit.ly/pidslive091726. ### — MJCG
