I. The Philippine Advantage
The Philippines has emerged as among the world’s most promising destinations of foreign investments in the next three years, according to the United Nations Conference of Trade and Development. Philippines joined the top 15 destinations, placing 10th, which in the previous survey round ranked 11th.
1. Fastest-growing among major economies in Asia
According to the World Bank’s latest edition of Global Economic Prospects, the Philippines is the world’s 10th fastest growing economy for 2017. Growth is projected to remain robust at 6.8% in 2017 and 6.9% in 2018. This growth is led by strong domestic demand, recovery in exports and implementation of planned infrastructure projects which spur additional business activities, create more jobs and increase household consumption and reduce poverty.
2. Philippines in a Demographic Sweet Spot
Filipinos are younger than the rest of the World. The median age in the Philippines is 23.1 years old. This is equivalent to the age of someone who recently graduated from college. All of this translates to the country having very young competent and reliable human resources.
3. Rich Talent Pool
The workforce is highly educated and English Proficient, strongly customer-oriented, highly trainable with fast learning curve, adaptable to universal cultures and high level of commitment and loyalty.
4. Unrivaled Access to Key Markets
The country’s location is a critical entry point to over 600 million people in the ASEAN Market and a natural gateway to the East- Asian economies.
The country is likewise placed at the crossroads of international shipping and airlines.
5. Infrastructure Development
Philippines has a number of operating economic zones and IT parks today, equipped with support capabilities, where a company may locate its business with ease.
6. Resilience Amid External Shocks
The Philippines has been enjoying a steady trend in economic and financial gains as backed up by good governance and sound economic reforms, which gave them ample space to overcome challenges such as weather-related disasters, global economic slowdown, as well as domestic uncertainties, especially those associated with the change in administration. The country’s domestic economy is much more robust and there is plenty of room for growth.
7. The Foreign Investment Act
The basic law that liberalized the entry of foreign investments into the country up to 100% ownership unless restricted by the constitution and other special laws as enumerated in the Foreign Investment Negative List (FINL).
II. Investment Incentives
The Philippines offers a wide choice of opportunities into which prospective investors can channel funds and technology.
1. 1999 Investment Priorities Plan (IPP)
The IPP identifies priority economic areas entitled to incentives under the Omnibus Investments Code of 1987. The 1999 IPP includes preferred sectors being promoted to direct capital flows to the best locations in the countryside. Among these:
support industries (e.g. autoparts, electronic components, R&D, education and training and health/medical services)
Investors may also buy into established Filipino firms to access an expanding market.
2. Agriculture Modernization Program
The Medium-Term Philippine Development Plan for 1999-2004 stresses agricultural modernization as the 'linchpin' in the country's overall development initiatives. Consistent with this thrust, the 1999 IPP lists major agriculture and fishery projects and services which offer opportunities to enterprising investors.
Among these areas: large-scale plantations or nucleus estates with warehousing and processing facilities, swine or cattle-breeding, feeds and feed mill projects and post-harvest facilities.
Market-driven, competitive agricultural industries are seen as a way to broaden the country's export base.
3. Incentives to Manufacturing Investors
Minimum 3-year corporate tax exemption or minimum 30% corporate investment tax allowance
100% foreign equity ownership
Duty-free imports of capital goods
Domestic market access
Minimum 30-year industrial land leasehold
Employment of foreign personnel
Speedy customs clearance
4. Economic Zones and Industrial Estates
Numerous Special Economic Zones equipped with excellent infrastructure and communication facilities are ready for use by new industrial locators.
The Philippine Export Zone Authority (PEZA) manages 56 such zones while 50 others are in various stages of development.
Leading these zones are Subic Bay Metropolitan Authority (SBMA) and the Clark Development Corporation. Two more free ports are being developed- Cagayan Economic Zone and Free Port in northern Luzon and the Zamboanga Economic Zone in southern Mindanao.
5. Foreign Investments Act of 1991
The Foreign Investments Act of 1991 (R.A. #7042 as amended by R.A. 8179) liberalized the entry of foreign investments into the Philippines.
Its passage by Congress marked the end of decades of protectionism for local businesses.
Restrictions were relaxed on the participation of foreigners as equity shareholders in local firms, using the Foreign Investment Negative List (FINL) as a guide to levels of foreign equity allowed in specific activity areas. This has made the rules for entry of foreign investments into the Philippines clear and less cumbersome.
6. FIA -Selected Features
No restrictions on 100% ownership of export enterprises
No restrictions on ownership of domestic enterprises except those in the Foreign Investments Negative List (FINL)
Waiver of FINL restriction if 60% of total capacity is exported
Selected investment rights to former natural-born (former Filipino) citizens
The infrastructure sector is a key investment area in the Philippines that has the potential to facilitate the development of other sectors.
1. Transport Infrastructure
Efficient transport systems facilitate the seamless movement of people, goods and services, hence, improvements in infrastructure sector result to enhanced efficiency of the business sector, reduced costs of goods and improved access to basic services and development opportunities, among others.
Based on the Global Competitiveness Report 2016-2017, the Philippines ranks 106 out of 138 countries in terms of quality of road infrastructure. In terms of physical accomplishment, as of 2016, a total of 30,363 km out of 31,242 km or 97.19% of national roads; 9,503 km out of 15,377 km or 61.80% of city roads and; 8,904 km out of 31075 km or 28.65% of provincial roads have been paved. Further, all of the bridges along national roads, with a total of 341,160 km, were made permanent.
The Philippines has only a total of 245 km of Philippine railway infrastructure consisting of the four (4) urban lines in Metro Manila and the Philippine National Railway (PNR) line in Southern Luzon. The development of mass transit systems connecting Mainland Luzon and in emerging cities in Visayas and Mindanao is still at the conceptualization stage.
Due to the rapid urbanization and overpopulation, the mass transit systems in the country have been operating beyond their capacities. The Metro Rail Transit (MRT) Line 3, for in instance, which has the capacity to serve 350,000 passengers per day, has been servicing an average of 500,000 passengers per day.
Meanwhile, air transport provides the fastest and most convenient mode of interisland travel. There are 86 airports in the Philippines, 11 of which are classified as International, 14 are Principal Class 1, 19 are Principal Class-2, and 42 are Community. The performance of the air transport subsector may be attributed to the expansion of airport facilities and air services coupled with the introduction of low-cost fares by airlines and cheaper tourist destinations. In 2015, the sector exceeded its overall target in terms of increasing the annual international and domestic passenger volume with 66,055,500 passengers transported via air versus its target of 52,512,604 passengers.
Interisland water transport is an equally important component of the national transport system as the other modes. It is most relevant in the pursuit of an interconnected archipelago through which efficient flow of passengers and cargo is facilitated. In 2015, a total of 62.76 million passengers were recorded. In terms of cargo, 223 million metric tons were transported through the country’s port system in 2015.
With regard to costs, the Philippines remains to have high electricity rates, which was ranked 3rd most expensive electricity in ASEAN16. The primary factor contributing to the high cost of power is the absence of state subsidy rates on privately generated, transmitted and distributed power supply. In addition, the few players in the market results in minimal competition. There is also an alleged market manipulation and other unforeseen disruptions in power supply which resulted to spikes of electricity prices in the wholesale electricity spot market (WESM).
3. Information and Communications Technology (ICT)
With the private sector continuing to lead the development of the ICT sector in the country, there have been notable improvements in ICT services in the country.
Despite the rapid developments in telecommunication technologies that transpired in the past years, the cellular mobile telephone system (CMTS) has been the most dominant means to access ICT services in the country. According to the National Telecommunications Commission (NTC), 99.38 percent of cities/ municipalities have been reportedly covered by CMTS as of 2015. Meanwhile, 76.44 percent cities/municipalities have access to broadband in the country in the same year.
In terms of broadband speed, the country has been continuously outperformed by its ASEAN counterparts, the Asia Pacific region and the rest of the World.
The existing submarine cables are connected to the Philippines through the 22 submarine cable landing stations. Out of the 22, 11 are in Luzon, 8 are in Visayas, and 3 are in Mindanao.
Source: 1. Philippines Board of Investment
2. Philippine Consulate General in Chicago, Illinois