GLOBAL technology giants like Google, Microsoft and Meta are making significant investments in Southeast Asia, but the Philippines seems to be missing out.
Google, for instance, is pouring $1 billion into Thailand to build a new data center and expand its cloud infrastructure. Similarly, Microsoft has committed $2.2 billion to Malaysia, investing heavily in AI and cloud technologies while also fostering talent development and partnerships with the government. Meta Platforms has announced plans to manufacture its latest mixed-reality devices in Vietnam, further embedding itself into the region's rapidly evolving tech landscape.
These strategic investments are reshaping the digital landscapes of Thailand, Malaysia and Vietnam, positioning them as hubs for technological innovation. However, the absence of comparable investments in the Philippines raises a fundamental question: Why are these global tech companies skipping the Philippines in favor of other Asean nations?
Several factors can help explain why the Philippines has been passed over in these massive investments. One of the most pressing issues is the country's underdeveloped digital infrastructure. While the Philippine government has made strides to improve internet connectivity and technological infrastructure, the country still lags behind its neighbors in terms of broadband speed, coverage and reliability.
The Philippines ranks poorly in global internet speed indexes, and this slow, inconsistent internet access can be a significant deterrent for tech giants looking to set up data centers or expand cloud services. Building high-tech facilities like data centers requires not just large-scale infrastructure but also stable and fast internet connectivity to handle large volumes of data. Without a reliable digital backbone, companies like Google, Microsoft and Meta may see more promise in investing in countries like Thailand, Malaysia and Vietnam where the infrastructure is already in place or rapidly improving.
Another key factor is the Philippines' regulatory environment, which can be perceived as complex and difficult to navigate. For multinational corporations, clarity and consistency in regulations are crucial when making large investments.
When viewed against other Southeast Asian countries, the Philippines has been criticized for its bureaucratic red tape, which can delay projects and increase the cost of doing business. Although there have been efforts to streamline processes, foreign companies may still find it more challenging to operate in the Philippines vis-à-vis other countries like Singapore or Malaysia, where ease of doing business is ranked higher than ours.
In the tech industry where speed and efficiency are critical, regulatory hurdles can discourage companies from considering the Philippines as a viable investment destination.
Political stability and government support also play an essential role in attracting foreign investments. While the Philippines has maintained relative political stability in recent years, concerns about governance, corruption, and the rule of law continue to affect the country's business environment.
Countries like Malaysia have made concerted efforts to partner with global companies, as evidenced by Microsoft's collaboration with the Malaysian government to establish a national AI Center of Excellence. Such initiatives demonstrate the proactive role governments can play in attracting big-ticket investments.
The Philippine government, while supportive of technological development, may not yet offer the same level of engagement or long-term strategic vision that multinational companies look for when committing billions of dollars in investment.
Another aspect is the country's talent pool. While the Philippines has a highly educated workforce with a strong command of English — a key advantage in the global marketplace — it faces stiff competition from other countries in the region when it comes to specialized tech skills, particularly in artificial intelligence, machine learning and data science.
Microsoft's investment in Malaysia includes skilling 200,000 people in AI technologies, which indicates a strong focus on human capital development. Countries like Singapore and Malaysia have already established robust programs to upskill their workforce in cutting-edge technologies, ensuring that they remain competitive in the global digital economy. While the Philippines has made efforts to promote STEM education, it may not yet offer the same scale or depth of technical expertise that tech companies require to support their operations.
Furthermore, the geographical risk posed by natural disasters also plays a significant role. Typhoons, earthquakes and volcanic eruptions are commonplace in the Philippines, making it one of the most disaster-prone nations in the world. For tech companies that are highly sensitive to operational disruptions, these risks can make the country less attractive for setting up data centers or cloud infrastructure, which require a stable environment for continuous operations. Thailand, while not immune to natural disasters, presents fewer risks in this regard, and this may have influenced Google's decision to build its new data center there.
The high cost of energy in the Philippines is another factor that deters tech investments. Running a data center requires a massive amount of electricity, and the cost of energy in the Philippines is among the highest in the region. This can significantly raise operational costs for companies like Google and Microsoft, which depend on cost-efficient energy solutions to run their cloud and AI operations. In contrast, countries like Malaysia and Thailand offer more competitive energy rates, making them more attractive locations for energy-intensive projects.
Finally, also worth considering is the overall market potential in the Philippines compared to its neighbors. While the Philippines has a large, growing population and a booming digital economy, it may not yet match the market size or growth trajectory of countries like Indonesia, Thailand or Vietnam. For global tech giants, return on investment is a critical consideration, and they may perceive greater long-term opportunities in countries that are further along in their digital transformation journeys.
In conclusion, while the Philippines has many strengths, including a large English-speaking population and a vibrant digital economy, it still faces significant challenges that may discourage global tech companies from making major investments.
Inadequate digital infrastructure, regulatory complexities, political uncertainties, and high operational costs create hurdles that are hard to ignore. As Google and Microsoft continue to expand their presence in Southeast Asia, the Philippines must address these concerns if it hopes to attract similar investments in the future.
The author is the founder and CEO of Hungry Workhorse, a digital, culture, and customer experience transformation consulting firm. He is a fellow at the US-based Institute for Digital Transformation. He teaches strategic management and digital transformation in the MBA Program at De La Salle University. The author can be emailed at [email protected].