Investing in the Philippines

RECENT NEWS
Channel News Asia  8 hrs ago  Comment 
Bilateral trade between the Philippines and Singapore went up by 2 per cent on-year in 2014. IE Singapore says there is great potential for Singapore companies to partner both the Philippine government and private sector.
New York Times  Feb 4  Comment 
An exhibit opening this week in the Philippines showcases the work of street photographers, many of whom live among that country’s far-flung diaspora.
Banking Business Review  Feb 4  Comment 
International banking group Standard Chartered is planning sale of its Philippines retail business as part of its strategy to reduce costs and asset base.
Channel News Asia  Feb 4  Comment 
TODAY reports: As demand for consumer goods and infrastructure development in the Philippines rises, there will be more opportunities for Singapore companies, says Minister for Trade and Industry Lim Hng Kiang.
Reuters  Feb 3  Comment 
Standard Chartered is looking to sell its retail business in the Philippines, part of a wider bid by embattled CEO Peter Sands to cut costs and shrink the bank's asset base, a person with direct knowledge of the matter said.
Forbes  Feb 3  Comment 
Taiwan and the Philippines had never stood farther apart than in May 2013 after Manila’s coast guard fired on a fishing boat from the other side, killing a man on board. That upset put a gash in relations between two Asian democracies and...
The Times of India  Feb 2  Comment 
Philippines aim to attract nearly 70,000 Indian tourists in 2015, a senior official of Philippines department of tourism said.
Reuters  Feb 2  Comment 
The Thai index snapped two days of falls on Monday, led by energy shares, but tourism stocks slipped after small bombs hit a central shopping mall late on Sunday. Indonesia trimmed some losses after January inflation came below expectations. The...
OilVoice  Feb 2  Comment 
Polyard Petroleum International Group Limited stock code 8011 announces that the Polyard2 Well of SC49 project in the Philippines successfully completed oil testing operations on 2 February 2015.
JCN Network  Jan 30  Comment 
Mitsubishi Motors Corporation (MMC) announced that it has commenced the production at Mitsubishi Motors Philippines Corporation's (MMPC) new plant in Santa Rosa, Laguna Province, Philippines.




 


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
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