The economic future of the Philippines is shifting away from metro Manila’s dominance, with cities like Davao, Iloilo and Cagayan de Oro emerging as talent hotspots. With significant growth in infrastructure, a competitive cost of living and a highly skilled workforce, these cities offer companies an untapped pool of potential—ready to fuel growth and innovation. Here's how businesses can benefit from the emerging cities of the Philippines, exploring both the opportunities and challenges that come with tapping into this new talent frontier.

The rise of emerging talent hubs in the Philippines

In the past decade, Davao, Iloilo and Cagayan de Oro have experienced a transformation, driven by increased investments in infrastructure, technology and education. These cities, once overshadowed by Manila, are now emerging as economic hubs, offering a wide range of opportunities for businesses looking to expand their reach.

For instance, Davao, the regional center of Mindanao, has seen its economy grow thanks to its key sectors: agriculture, tourism and business outsourcing. The city is now home to a thriving IT-BPO industry that has attracted global players. Similarly, Iloilo has become a rising star in the business process outsourcing (BPO) industry, supported by well-established educational institutions that feed the demand for skilled labour. Cagayan de Oro, the gateway to Northern Mindanao, offers businesses easy access to other regions, making it an attractive investment location.

Infrastructure and Connectivity

These cities boast strong infrastructure, which has been a crucial factor in their emergence. The Philippine Economic Zone Authority (PEZA) has incentivised businesses to establish operations in these areas, offering tax breaks and reduced business fees. The improvements in digital infrastructure—such as faster internet and better connectivity—are crucial for companies transitioning to hybrid and fully remote work environments, which are increasingly common in today’s global workforce. The Department of Information and Communications Technology (DICT)’s Broadband ng Masa initiative has especially boosted connectivity in rural and regional areas, making it easier for businesses to tap into a new talent pool.

Tapping into a diverse and competitive talent pool

A Growing Workforce of Skilled Graduates

The Philippines’ workforce has long been celebrated for its English proficiency, adaptability and technical skills. Now, cities like Davao, Iloilo and Cagayan de Oro are producing highly skilled professionals from universities like University of the Philippines Mindanao, University of San Agustin and Xavier University. These cities churn out graduates who are prepared to meet the demand for professionals in the fields of IT, business, healthcare and engineering.

According to the Philippine Statistics Authority (PSA), these regions are witnessing rising enrollment rates in universities, particularly in fields tied to technology and innovation. This pool of young talent is eager to contribute to local and international businesses, with many opting to stay in their home regions due to the growing availability of job opportunities.

Cost-effective operations and government incentives

• Reducing Operational Costs

One of the most attractive features of smaller cities like Davao, Iloilo and Cagayan de Oro is the significant reduction in operational costs. Businesses that expand into these regions can access skilled professionals at lower salary expectations compared to Metro Manila. Reports indicate that salaries in these cities can be as much as 20% lower than those in the capital, making it an attractive option for businesses looking to balance costs and talent quality. This has become increasingly important as companies look to reduce overhead costs and maximise profitability, especially in the post-pandemic world.

• Government Incentives

Beyond salary advantages, these cities benefit from government support designed to attract business investment. The Philippine Economic Zone Authority (PEZA) offers incentives such as tax breaks and reduced business fees for companies operating in these emerging areas. The local governments in Davao, Iloilo and Cagayan de Oro have also recognised the potential of these regions and have worked diligently to create favorable business environments. For example, Davao’s city government has created special economic zones, making it easier for tech and outsourcing companies to set up shop.

• A New Age of Work: The Rise of Remote Work and Digital Talent

With the shift toward remote and hybrid work, companies no longer need to be bound by location when hiring. Many businesses are now able to access talent from anywhere in the country, including smaller cities like Davao and Iloilo. The growing number of digital talent in these regions has helped businesses remain competitive, even when working remotely. Local universities and private institutions are partnering with tech companies to offer coding bootcamps, digital marketing training and even cloud computing courses to ensure graduates are industry-ready.

By utilising remote work models, businesses can tap into a global talent pool, offering employees in regional cities the opportunity to contribute to multinational teams. Whether it’s software developers working remotely for global companies or digital marketers handling campaigns for international clients, remote work has made it possible for talent in smaller cities to compete at a global level.

Engaging with local communities and building employer brands

• Local Employer Branding

To attract top talent, businesses must engage with the local communities in these emerging cities. Building an employer brand that resonates with regional job seekers is critical. Many of the best professionals in Davao, Iloilo and Cagayan de Oro may still harbour the perception that the best opportunities lie in Metro Manila, so companies must be strategic in positioning themselves as employers of choice in these regions.

This can be achieved by partnering with local universities for career fairs, offering internships, and hosting community events. Demonstrating a commitment to the region not only strengthens the company’s local footprint but also attracts the next generation of talent eager to make an impact close to home.

• Collaboration with Local Educational Institutions

Another key strategy is collaboration with educational institutions to tailor training programs to the needs of the labour market. Davao’s growing tech sector, for instance, could benefit from partnerships between businesses and local universities to offer training programs and certifications. These programs can ensure that graduates have the skills needed by employers, from software engineering to digital marketing and IT support roles.

Overcoming Challenges: Bridging gaps and improving infrastructure

While there are many opportunities in these emerging cities, there are also challenges that businesses need to address.

• Bridging the Skills Gap

Despite the rapidly growing talent pool in regional cities, there may still be gaps in specialised skills, particularly in high-demand fields such as data science, AI development  and cybersecurity. Companies looking to tap into these areas may need to invest in upskilling programs or tailored training courses to meet their specific needs. Many of the local universities are already collaborating with industry players to create programs designed to fill these gaps.

• Digital and Physical Infrastructure Challenges

Though digital infrastructure is improving, there are still challenges when it comes to reliable internet access in some rural or remote areas. Companies planning to expand into these regions must ensure they have backup systems in place to avoid disruptions. Similarly, improving transportation and logistics infrastructure can play a critical role in helping businesses operate smoothly across these emerging cities.

The future of work in the Philippines Is regional

The shift toward decentralisation is gaining momentum in the Philippines. With Davao, Iloilo and Cagayan de Oro proving themselves as key players in the economic landscape, businesses must look beyond Metro Manila to unlock the untapped potential of these cities. By tapping into regional talent pools, companies can gain a competitive advantage, reduce operational costs  and access a diverse, skilled workforce ready to contribute to the next phase of business growth.

As the world of work evolves, companies that embrace the potential of these emerging cities will be better positioned for long-term success—unlocking opportunities in some of the Philippines' most promising regions.