High power costs, corruption scandal to affect PHL role in global supply chain

By Beatriz Marie D. Cruz, Senior Reporter

THE PHILIPPINES risks losing ground in global supply chains unless it addresses high energy costs and unresolved corruption issues surrounding infrastructure projects, which continue to weigh on investor sentiment, according to UK-based risk intelligence firm Verisk Maplecroft.

“The Philippines’ biggest infrastructure challenge is its relatively high cost of energy, which has been exacerbated by the Hormuz crisis,” Laura Schwartz, a senior Asia analyst at Verisk Maplecroft, said in an e-mailed reply to BusinessWorld.

“Following the onset of the crisis, there was some movement in fast-tracking renewable energy projects, but more will be needed,” she added.

The Philippines, which sources at least 90% of its oil supply from the Middle East, has been one of the most affected by the global oil crisis.

Ms. Schwartz also said last year’s corruption scandal — which linked state officials and contractors in substandard or nonexistent flood control projects — may deter companies that are seeking to diversify their supply chains from investing in the Philippines.

“High-profile governance issues, particularly the widespread public works corruption allegations and political jockeying, are one of the top factors leading to investor hesitation in the near term,” she said.

In its 2026 Supply Chain Risk Outlook, Verisk Maplecroft identified the Philippines, Thailand, Argentina, Chile, and Uruguay as “rising stars” in the global supply chain.

“Relative to the established hubs, these ‘rising stars’ offer different mixes of sector capability, market openness, regulatory strengths, and labor-risk trajectories for organizations looking to realign their supply chains,” it said in the report released on June 23.

“The businesses that move first — screening these markets now, building supplier relationships before demand spikes, and stress-testing entry strategies against external risk data — will find themselves better positioned to act when faced with disruptive geopolitical realignment, trade restrictions, or conflict outbreaks,” Verisk Maplecroft said.

A third of the world’s busiest ports and airports are vulnerable to disruption amid ongoing geopolitical conflicts, environmental challenges, and domestic security threats, the firm noted.

The closing of the Strait of Hormuz has created near-term headwinds for the Philippines and Thailand, Verisk Maplecroft said.

Despite this, “procurement teams willing to take a longer-term view will find these markets worth their attention,” the company added.

The report cited the Philippines’ strong potential in the global supply chain due to improvements in its market openness, its competitive labor costs, and its young, English-fluent workforce.

“The Philippines performs second-best across the Southeast Asian economies analyzed due to significant improvement in our market openness pillar,” it said.

“Despite lower infrastructure quality and governance challenges, including recent corruption scandals, the Philippines shows notable opportunities in sectors like electronics, auto parts, and food manufacturing,” Verisk Maplecroft said.

Other Southeast Asian economies assessed in the report were Singapore, Cambodia, Indonesia, Malaysia, Vietnam, Thailand, and Myanmar.

Ms. Schwartz also noted the government’s efforts to broaden its trade relationships, attract investments, and reduce the regulatory burden in key sectors.

She cited the need for more renewable energy (RE) projects to boost the Philippines’ competitiveness as a supply chain hub. 

As of end-May, the Department of Trade and Industry has endorsed 13 RE projects worth P344.62 billion to the “green lane” system of expedited permits.

“Recent government efforts to attract more investment in energy infrastructure across a broad swath of domestic energy sources and grid infrastructure may help in the longer term,” Ms. Schwartz noted.

Investor confidence in the Philippines will also depend on the government’s commitment to investigate the corruption scandal, ease regulatory burden, enforce labor rights, the report added.

“Given the prominence of major corruption allegations in the narrative surrounding the Philippines at present, robust and credible investigations with clear follow-through may help allow investors to look more toward future potential,” Ms. Schwartz said.

Sought for comment, Former Tariff Commissioner George N. Manzano said the Philippines’ growing electronics and automotive manufacturing industry makes it a promising market for companies looking to diversify their supply chain.

“To fully take advantage of the situation, the Philippines has to improve infrastructure and regulatory efficiency, reduce corruption and find ways to address the high electricity prices,” he said in a Viber message.