Business with the 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.