It’s a matter of curiosity that the Philippines was selected as a hub for Pax Silica, given that the nation is, in some respects, underqualified to benefit from advances in AI technology.
On the other hand, the selection appears to reflect the nation’s strategic location, mineral resources, supply-chain diversification, political alignment, and potential for industrial upgrading.
In a recent study the Philippines landed near the bottom of a global ranking that measures how well economies are positioned to benefit from artificial intelligence, a result that economists say could carry outsized consequences for a country whose growth engine leans heavily on labor that AI is increasingly capable of replacing — call centers and other types of BPOs.
According to the AI Economic Impact Index compiled by London-based think tank Capital Economics, the Philippines placed 43rd out of 47 economies assessed, scoring just 21 out of 100.
The index gauges a country’s capacity to innovate with AI, adopt it across industries, and translate that adoption into tangible economic gains. Among the Asian economies included in the study, the Philippines finished dead last.
The country also trailed every other member of the ASEAN-5 grouping. Singapore, a regional and global leader in digital infrastructure, ranked second worldwide. Malaysia came in at 31st, Thailand at 37th, and Indonesia at 41st — leaving the Philippines as the weakest performer among its closest economic peers.
Globally, the Philippines shared the bottom five with Mexico, South Africa, Ukraine, and Argentina. Capital Economics economists noted that the lowest-ranked economies tended to cluster around a few recognizable groups: Latin American economies such as Argentina, Mexico, and Brazil; lower-income Asian economies including the Philippines and Indonesia; and countries like Russia, Ukraine, and South Africa that face their own structural or geopolitical headwinds.
What makes the ranking particularly consequential for the Philippines is the size and importance of its business process outsourcing industry. The BPO sector directly employs roughly 1.8 million Filipino workers, generates about $40 billion in annual export revenue, and accounts for an estimated 7 to 8 percent of the country’s gross domestic product. Much of that workforce performs exactly the kind of English-language, process-driven tasks — customer service, back-office support, data processing — that generative AI tools are now automating at a rapid pace.
Economists behind the report drew a comparison to India, another major BPO hub whose economy faces similar exposure because of its reliance on English-speaking outsourcing labor. The report also flagged that AI-driven automation in manufacturing, including software that operates industrial robots, threatens to displace assembly-line workers across many emerging markets, a risk that compounds the pressure already facing service-sector employment.
Notably, the Philippines was not part of Capital Economics’ original AI Economic Impact Index, which covered 33 countries. Its inclusion in the expanded 2026 edition means this is the first time the country has been formally benchmarked on the index, offering an initial — and sobering — baseline for policymakers to work from.
The findings have added urgency to conversations already underway among industry leaders and government officials about how to prepare the Philippine workforce for an AI-driven economy.
Earlier this year, the National AI & Skills Summit, organized by human resources firm Viventis in partnership with the Department of Information and Communications Technology, brought together executives, policymakers, and educators to discuss strategies for closing the gap identified by the index.
Other assessments paint a more mixed picture of the country’s broader innovation standing. In the World Intellectual Property Organization’s Global Innovation Index 2025, the Philippines ranked 50th out of 139 economies, an improvement from prior years, and placed third among lower-middle-income countries.
Separately, a Google-commissioned economic impact study projected that AI adoption could generate roughly 2.8 trillion pesos, or about $50.7 billion, in economic benefits for Philippine businesses by 2030, with professional services and IT-BPM sectors positioned to gain the most if the technology is embraced rather than resisted.
Taken together, the numbers suggest a country at a crossroads — possessing pockets of innovation potential and a workforce with real digital literacy, but lagging badly in the systems, investment, and infrastructure needed to convert AI’s disruptive force into an economic advantage rather than a threat to its largest source of export income.
Bryce McIntyre, PhD, resides in San Andres. He holds a doctoral degree from Stanford University, Palo Alto, California, USA.
Claude AI aided in the research for this article.