Investing in the Philippines

RECENT NEWS
The Hindu Business Line  Apr 6  Comment 
Southeast Asian stock markets mostly ended higher on Monday after weaker-than-expected US jobs data raised doubts the Federal Reserve would hike interest rates any time soon. The Philipp...
The Hindu Business Line  Apr 4  Comment 
Around 24,000 people from the Philippines were being evacuated today with Typhoon Maysak a day away from potentially striking the country’s northeast coast, officials said. Storm surges,...
New York Times  Apr 2  Comment 
DNA and photographs confirmed the death of Zulkifli bin Hir, a Malaysian bomb-maker, in a Jan. 25 raid that left dozens of police officers dead, experts said.
Insurance Journal  Apr 2  Comment 
The Philippines is urging tourists to take precautions or cut short Easter vacations, and may evacuate thousands of people in the path of approaching Typhoon Maysak. The storm may affect as many as a million people, the United Nation’s Global...
Insurance Journal  Apr 1  Comment 
The Philippines placed its military on its highest alert level and asked millions of people heading to beach resorts for Easter holidays to prepare for Super Typhoon Maysak, a category-5 storm expected to hit land on April 4. Maysak was … The...
Reuters  Mar 30  Comment 
Philippine conglomerate Ayala Corp's infrastructure unit intends to bid for a 170.7 billion peso ($3.8 billion) government railway contract and has started talks with potential partners, the company's president said on Monday.
Automotive World  Mar 26  Comment 
Rolls-Royce Motor Cars is delighted to announce the opening of its latest Asia Pacific showroom in Manila, the Philippines. The new facility was launched by Rolls-Royce Motor Cars Asia Pacific Regional Director, Paul Harris, Asia Pacific Regional...
Reuters  Mar 25  Comment 
The Philippines on Wednesday ordered oil companies, including Petron Corp and local units of Shell and Chevron, to sell only Euro IV-compliant fuels by July 1 in a drive to boost air quality in the Southeast Asian country.
TechCrunch  Mar 24  Comment 
 ZipMatch, an online property portal in the Philippines, is the latest startup in Southeast Asia to receive investment from Monk’s Hill Ventures and its $80 million fund. The prominent VC firm led a $2.5 million Series A round, which included...
New York Times  Mar 24  Comment 
An American Marine charged with murdering a transgender Filipino after they checked into a hotel went on trial on Monday in Olongapo city, northwest of Manila.




 


Why invest in the Philippines?

The Philippines is the third-largest English speaking country in the world, enabling its manpower to have a unique edge over neighboring countries in terms of labor quality. Its workforce is easily trainable and generally skilled. Flanked by the Pacific Ocean and the South China Sea, its strategic location makes it a critical entry point to some 500 million people in the ASEAN market - offering vast trade opportunities - and an ideal base for business. It is also the best Asian country in terms of overall quality of expatriate life, considering its cultural compatibility with expatriates, housing, sporting and recreational facilities, quality healthcare, and first-rate educational institutions.

Being an archipelago, the Philippines has a lot to offer as well in terms of natural resources. Its 7,100 islands boast numerous white and black sand beaches, making it eminently attractive to vacationers and tourists. Its amazing marine biodiversity affords abundant species of flora and fauna. Land-wise, it is also among the biggest producers of copper and gold in the world.

Considering its strategic location, unique edge as an English speaking country and rich natural resources, the cost of doing business in the Philippines is surprisingly low, with wages down to less than one-fifth of that in the U.S. Communication, electricity and housing costs can go as low as a mere half of the costs in the U.S. Foreign companies now outsourcing programming and business processes to the Philippines incur 30 to 40% business cost savings, 15 to 30% call center services, and 35 to 50% application systems and software development. However infrastructures in the Philippines lag behind those of comparable countries. Furthermore, weather conditions put a regular threat on those infrastructures with frequent typhoons.

Business policies of the government tend to be investor-friendly, but the government was plagued with intense corruption in the past. The corruption problem is now being cleaned by the new government. Investors can overshadow this problem by having the right representative in the private and public network such as a foreign investor liaison (FIL). The government has allowed more private sector participation in the development of infrastructure and services through privatization. The innovative Build-Operate-Transfer scheme has been adopted by the government. Foreign ownership of up to 100% is also allowed in almost all economic sectors, but the banking industry where a foreign company can only owned up to 60%. Attractive incentives are offered in numerous Special Economic Zones and Industrial Estates, which are being promoted as agricultural, industrial, commercial and recreational hubs.

Private consumption is the key driver of the Philippines economy as it represents more than 70% of GDP, a high level compared to regional peers. This private consumption is also fueled by the high level of remittances from Overseas Filipino Workers (OFWs). Remittances represented 10% of the GDP in 2008 with more than $16 billions.

The Philippines has a strong export sector in electronics and computers which represent 2/3 of total exports. Imports mainly concern electronic parts that are assembled and then exported, foods and commodities, and oil.

It has been speculated that the Philippines is Asia's new BIG Investment hub. According to Japan External Trade Organization JETRO 2010, the country has a lower average labor cost at $130 than China's $141 and $139. The country is also entertaining special tax credits for foreign investors for special industries.

It is highly recomended that medium to large scale foreign investors have a private foreign investor liaison (FIL) in order for them to be able to network with the perfect professional and transparent business people, government representatives and services. A good private foreign investor liaison is usually a person who has perfect business connections and industry reputation. They are highly appreciated by high networth investors when dealing with philippine government, business services (such as law firms and accounting firms) and other businesses because they know the best people to trust Philippine business investments to. A (FIL) is paid by the hour from around $200 above / hour consultancy or can be contracted for a time period for a certain contract salary. They are also entitled to take buyer and seller commissions from commercial property sale, philippines prime real estate, business services, business / investment brokerage sales, manufacturing and trade fees of 5-35% depending on the principal amount.

How to invest

The IShares MSCI Philippines Investable Market Index Fund (NYSE:EPHE) is presently the only cost-effective method of investing broadly in Philippine equities. The fund seeks to replicate investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Philippines Investable Market Index. As such, this Exchange-Traded Fund (ETF) holds securities representing ownership in 31 publicly-traded corporations domiciled and headquartered in the Philippines. The IShares MSCI Philippines Investable Market Index Fund is skewed heavily towards stocks in the financial sector, at 42.9% of its total exposure, and utilities, telecommunication services, and industrials at 18.3%, 13.0%, and 11.8%, respectively. This heavy concentration in just a few industries increases non-diversification risk, magnified by the fact that the fund’s single largest holding is Philippine Long Distance Telephone Company at a 10.5% weighting.[1]

Foreign Direct Investment

Foreign corporations must first register with the Securities and Exchange Commission before they can engage in business in the Philippines. The necessary licenses or registration certificates must be secured from the appropriate government agencies, depending on where the project is to be located.

For foreign investor liaison, representation and special services, go to the T1W Philippines and FIL Services Philippines and Philippines Foreign Investors Resources

Philippines Business Registration

For projects outside special economic zones (SEZs), go to the Board of Investments.

For projects in any of the SEZs under the PEZA, go to the Philippine Economic Zone Authority.

For projects in the Subic Bay Freeport, go to the Subic Bay Metropolitan Authority.

For projects in the Clark SEZ, go to the Clark Development Corporation.

For projects in the Cagayan SEZ, go to the Cagayan Economic Zone Authority.

For projects in the Zamboanga City SEZ, go to the Zamboanga City Special Economic Zone Authority.

References

  1. iShares MSCI Philippines Investable Market Index Fund
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki