Professional Documents
Culture Documents
Doing Business in The Philippines PDF
Doing Business in The Philippines PDF
in the Philippines
MALACAÑAN PALACE
MANILA
MESSAGE
This issue of “Doing Business in the Philippines”, published by SGV & Co., offers only a snapshot of
the immense growth potential of our country – the competitiveness of our industries, the resilience
of our talented workforce, the richness of our resources, and our revitalized political will, which are
all vital to our nation’s progress. I wish to invite the international business community to join me
and our people as we tread the path to economic resurgence.
MANILA
MESSAGE
As we accelerate our efforts of promoting the country in the global community, a corresponding
surge of enthusiasm resounds in the private sector. We laud SGV’s unabated commitment in coming
up with this publication, Doing Business in the Philippines, to prime potential investors for the
numerous opportunities that await them the moment they set foot on Philippine shores.
We are confident that with the active participation of the private sector, the government will sustain
economic development as the Philippines attains a high level of growth.
GREGORY L. DOMINGO
Secretary
Table of contents
Why you should invest in the Philippines 1 Special Economic Zone Act of 1995 18
The Philippines at its Finest 1 Bases Conversion and Development Act
Technology and Innovation Stronghold 2 of 1992 23
Steadfast in Tough Times 3 An Act Providing for the Terms, Conditions,
Prime Location 4 and Licensing Requirements of RHQs,
Living Made Easy 5 ROHQs, and RWs 24
Schools 5 Investors’ Lease Act 25
Graduate School 6 Export Development Act of 1994 26
Rest and Recreation 7 Amended Build-Operate-Transfer Law 26
The Best of Pinoy Creativity 8 Registration with government offices 27
Offshoring and outsourcing 8 Securities and Exchange Commission 27
Tourism 9 Department of Trade and Industry 27
Manufacturing 10 Bureau of Internal Revenue 28
Construction 10 Local Government 28
Mining 11 Taxation 28
Renewable Energy 11 Income Taxation 28
Agriculture 12 Withholding Tax 32
Information and Communications Value-Added Tax 32
Technology (ICT) 12 Excise Tax 32
Percentage Tax 33
How to operate in the Philippines 13 Stock Transaction Tax 33
General policy on investments 13 Initial Public Offering Tax 33
Omnibus Investments Code of 1987 13 Documentary Stamp Tax 33
2012 Investment Priorities Plan (IPP) 14 Customs Duty 34
Foreign Investments Act of 1991 18 Local Taxes 34
Table of contents
Those who long to unwind and Princesa Underground River Top Philippine Tourist Spots
escape from the hustle and bustle in Palawan which was officially
Beaches
of the daily grind may relax in spas inaugurated as one of the New
Boracay (Aklan)
that have sprouted all over Manila. Seven Wonders of Nature in 2012. Pagudpud (Ilocos Norte)
Tourists and locals can indulge in Mactan Island (Cebu)
a few hours of pampering from The Philippines has something for Panglao (Bohol)
inexpensive day spas to high-end thrillseekers as well. Visit Donsol, Dakak (Zamboanga del Norte)
Honda Bay (Palawan)
luxurious ones. Long weekends can a small seaside town in Sorsogon,
El Nido (Palawan)
be spent basking in the sunshine and take a dip with whale sharks. Pearl Farm (Davao)
in beaches just a few hours’ drive Extreme water sports are slowly Siargao (Surigao del Norte)
from Manila. One can drive up to gaining popularity in the country Heritage Tours
Tagaytay to catch a glimpse of such as white water rafting and Puerto Princesa Underground River
the world’s smallest volcano, Taal. scuba diving. Surfing enthusiasts (Palawan)
Those who want a piece of the frequent prime surf spots in La Tubbataha Reef Marine Park
(Palawan)
ultimate beach experience can Union and Siargao. One can go Ifugao Rice Terraces (Banawe)
visit Boracay in Aklan, El Nido in trekking in the immense rice Vigan Heritage Village (Ilocos Sur)
Palawan or the idyllic Pagudpud in terraces around Banaue and Philippine Baroque Churches
Ilocos Norte. One can also wonder Bontoc in North Luzon’s Cordillera (Manila, Bulacan, Ilocos Norte,
Iloilo)
at the natural beauty of the Puerto Mountains.
Why you should invest in the Philippines 7
animators are recognized not only
for their creativity and artistic skills
as an important factor in animation,
but also for the consistent quality
and speed by which they can
deliver their output. Filipinos have
the innate ability to comprehend
concepts and storylines better
than most.
Offshoring and outsourcing
Manufacturing
Mining
Investment Policy and • Right to repatriate the proceeds Investments (BOI), the Omnibus
of the liquidation of investments Investments Code of 1987 provides
Laws • Right to obtain foreign a comprehensive set of incentives
exchange to meet principal and for local and foreign enterprises
General Policy on Investments
interest payments on foreign engaged in activities considered
obligations by government as high priority for
Investments are most welcome
national development.
in the Philippines. In general, There are a number of laws
anyone, regardless of nationality, governing investments in the To qualify for BOI incentives, an
is welcome to invest in the country. Philippines. Presently, there enterprise must engage in an area
For most economic activities, are moves to consolidate all of activity listed in the current
restriction on foreign investments the incentive laws into one law Investment Priorities Plan (IPP).
is on the extent of ownership to rationalize the grant and
allowed for a particular activity. administration of fiscal and If not listed in the IPP, an
nonfiscal incentives given by enterprise is also entitled to
Philippine laws and regulations various incentive bodies. incentives if either of the following
guarantee the basic rights of all
criteria is met:
investors and enterprises, including The major investment laws are
• At least 50% of production is
the following: discussed as follows.
for export (for Filipino-owned
• Freedom from expropriation
Omnibus Investments Code of enterprises)
without just compensation
1987 or Executive Order (EO) No. • At least 70% of production is
• Right to remit profits, capital
226, as amended by Republic Act for export (for enterprises with
gains, and dividends within
(RA) No. 7918 more than 40% foreign equity)
the guidelines of the BSP, the
country’s monetary authority Implemented by the Board of
LIST A: Foreign Ownership is Limited by Mandate of the Constitution and Specific Laws
Hours of Work
The Philippines 43
2. Philippine Demographics 34.5 million or 37.5% of the total below 15 years old (see Table A2).
population. Meanwhile, regions
2.1 Population. The Filipino with above-average growth rates There are about 57.4 million
population grew from 76.5 million include the CALABARZON (3%), people or 62.1% of the population
in census year 2000 to 92.3 SOCCSKSARGEN (2.5%), Central between ages 15 to 64 years old.
million in census year 2010 for Luzon (2.1%), Northern Mindanao Those 14-years-and-below and
an average growth rate of 1.9% (2%), and the Davao Region (2%). 65-years-and-older add up to 34.7
a year. The three largest regions, million or 37.6% of the population.
namely, CALABARZON (12.6 The Philippines is comprised of a In census year 2010, the country
million), the National Capital Region relatively young population. The had a dependency ratio of 60.5%,
or NCR (11.8 million), and Central median age is about 23 years old which has decreased from 69% in
Luzon (10.1 million), added up to and one-third of the population is 2000.
44 The Philippines
2.2 Minimum wage rates. The Table A3 Summary of current regional daily minimum wage rates
minimum daily wage rates for As of December 2012
workers are set by Wage Boards at
the different regions of the country
(see Table A3). For example, at Region WO No./ Non-Agriculture Agriculture
the National Capital Region (NCR), Date of Effectivity
Plantation Non-plantation
the daily wage rates range from
NCR a/ WO 17/June 3/Nov.1, PhP 419.00 - PhP 419.00 PhP 419.00
PhP419.00 to PhP456.00 or 2012 456.00
US$10.25 to $11.16 (at PhP40.87
CAR b/ WO 15/June 18, 2012 263.00 - 280.00 246.00 - 262.00 246.00 - 262.00
= US$1). In the less urbanized areas
I c/ WO 15/July 25, 2012 233.00 - 253.00 233.00 205.00
like Cordillera Autonomous Region
(CAR), the daily wage rates range II d/ WO 15/May 16, 2012 247.00 - 255.00 235.00 - 243.00 235.00 - 243.00
from PhP246.00 to PhP280.00 or III e/ WO 17/October 11, 285.00 - 336.00 270.00 - 306.00 258.00 - 290.00
US$6.03 to US$6.86. 2012
IV-A f/ WO 15/May 15, 2012 255.00 - 349.50 251.00 - 324.50 231.00 - 304.50
2.3 Labor force and employment. IV-B g/ WO 05/Nov. 11, 2010 252.00 - 264.00 210.00 - 219.00 190.00 - 199.00
The Philippines had a 40.4-million V h/ WO 15/ April 7, 2012 228.00 - 252.00 228.00 228.00
strong labor force by July 2012, a
VI i/ WO 20/ May 31, 2012 235.00 - 277.00 245.00 235.00
1.2% increase from July 2011. This
places the country among the top VII j/ WO17/December 7, 282.00 - 327.00 262.00 - 309.00 262.00 - 309.00
2012
10 developing economies with a
VIII k/ WO 17/October 16, 260.00 235.00-241.00 220.50
large labor force.
2012
IX l/ WO 17/ Nov. 25, 2011 267.00 242.00 222.00
With the growth of the economy,
the number of unemployed X m/ WO 16/July 24, 2011 271.00 - 286.00 259.00 - 274.00 259.00 - 274.00
The Philippines 45
Chart A2 Labor force and unemployment Chart A3 OFW remittances
34 6.0
2005 2006 2007 2008 2009 2010
32 5.5
Source: NSCB, NSO
30 5.0
2005 2006 2007 2008 2009 2010
2.4 Overseas Filipino workers. The National Statistics Office 2012, making the Philippines the
Over 9 million Filipinos have sought reported in June 2012 that from fourth largest recipient behind
employment or residence abroad April to September 2011, over 2 India, China, and Mexico. On
as production workers (including million overseas Filipino workers average, the overseas remittances
unskilled construction workers), (or OFWs) were deployed, with were larger than foreign direct
service workers (e.g., entertainers, more than half going to Saudi investments, and easily offset
sales clerks, and domestic helpers), Arabia (22.6%), United Arab the country’s trade deficits.
and professionals (e.g., doctors, Emirates (14.6%), Qatar (6.9%), More importantly, the monthly
nurses, and teachers). While Singapore (6.3%), and Hong Kong remittances enable the recipient
OFWs come from all over the (5.3%). households to meet basic needs
country, the majority are from the as well as education and health
CALABARZON (16.5%), Central Overseas remittances increased expenses, microenterprises, and,
Luzon (14.3%) and NCR (12.5%). by 6.3% in the third quarter of in recent years, housing.
46 The Philippines
3. Philippine Economy Chart A4 Growth of real output, %, 2007-2012, first semester
The Philippine economy grew 6.6% Table A4 Growth of real output by sector, %, first semester
in 2012 following a growth of 3.7% of 2011-2012
in 2011. This came as a pleasant
surprise because of the weak, if not Sector 2011 S1 2012 S1
deteriorating, economic conditions Agriculture 6.3 0.8
in the global environment,
particularly in Europe. Industry 2.7 4.9
Services 4.7 7.8
The growth performance translates
to an estimated annual per capita GDP 4.2 6.1
income of about US$2,450, GNP 3.0 5.4
putting the Philippines among the
middle income developing Asian Sources: National Accounts, NSCB
economies.
The Philippines 47
Consumer spending, OFW economic activities have expanded 3.3 Trade performance.
remittances, and the offshoring to neighboring provinces, Merchandise exports rebounded
and outsourcing sector have been particularly those in Central Luzon 8% to US$27 billion while imports
consistently driving Philippine and CALABARZON. The three barely moved from US$31 billion
economic growth in the last five regions, which are increasingly in the first semester of 2012.
years. linked by improvements in the The turnaround in merchandise
transport and communications exports, together with minimal
In addition, other factors that infrastructure, account for 37.5% change in imports, contributed
were sorely missed in earlier years of the country’s population, to the higher growth rate of the
came to the fore and boosted the and over half of the country’s economy.
economic performance in 2012. output and consumer spending.
Government spending accelerated Meanwhile, the Visayas and Electronics and semiconductor
and complemented consumer Mindanao regions account for exports remained erratic but
spending. Public investment 15% and 17%, respectively, of the other commodities like transport
rebounded and led the resurgence country’s output and consumer and machinery (76%), processed
in capital formation. market. food and beverages (12%), and
chemicals (8%) improved.
Other sectors such as transport, The government has formulated a
trade, banking and other services strategy of putting the country’s Coconut exports fell 31% while
revved up and grew at par, if not 16 regions into four “Super sugar exports rose 6%. Fruit
faster, than business process Regions.” The Metro Luzon Urban exports rose, particularly
outsourcing. Finally, exports Beltway puts together NCR, Central pineapple (42%), bananas (18%)
of commodities other than Luzon, and Calabarzon to focus on and mangoes (6%). Coffee exports
electronics and semiconductors industrial and commercial activities. also rose by 61%.
improved. The northern regions will comprise
the Northern Luzon Agribusiness Raw material imports, such as
3.2 Regional performance. Metro Quadrangle. The Visayan regions wheat (5%) and corn (128%) rose.
Manila or NCR is the center of plus Palawan will form Central Dairy product imports fell 9% while
economic and financial activities Philippines Super Region to focus rice imports dropped by 30%.
in the country. It hosts 12.8% on tourism and other services.
of the country’s population, Finally, the Mindanao Super Region The key markets for both exports
particularly the middle class. It will concentrate on agribusiness and imports are Japan, USA and
contributes over one-third of the development. China.
country’s output. Moreover, its
48 The Philippines
Chart A5 Philippine markets in the first semester of 2012
The importation of consumer ASEAN-Japan Comprehensive Exchanges (WFE) listed the PSE as
products continued at double-digit Economic Partnership. Finally, the third best performing broad
rates. The USA was a leading import the country is consulting and market index in the first semester
supplier with $3.5B followed by studying the ASEAN-EU Free Trade of 2012 and the best performing
Japan ($3.0B), and China ($2.7B). Agreement, East Asia Free Trade in the Asia-Pacific region.
Area, Pakistan-Philippines Free
The Philippines is now implementing Trade Agreement, and United Foreign direct investment (FDI)
the ASEAN Free Trade Area (AFTA) States-Philippines Free Trade increased ten-fold in the last five
and ASEAN-China Free Trade Agreement. years. The big prospects (worth
Area. The country has signed the at least US$ 1 billion each in
ASEAN-Korea Free Trade Area and 3.4 Foreign direct investments. investment) that have emerged
the Japan-Philippines Free Trade The strong economic results and include BHP Billiton’s nickel project
Economic Partnership agreement. It stable outlooks have renewed in Davao, China Ocean Shipping
is negotiating the ASEAN-Australia investor interest in the country. Group’s shipping complex in Cavite,
and New Zealand Free Trade Portfolio investments have risen Hanjin Heavy Industry’s shipbuilding
Agreement, ASEAN-India Regional and perked up the Philippine stock project in Subic, Sumitomo Metal
Trade and Investment Area, and market. The World Federation of Mining’s nickel project in Surigao,
The Philippines 49
Chart A6 Total approved FDIs by country in first semester of 2012 Texas Instruments’ microchip plant
in Clark, and Xstrata Copper’s
copper project in South Cotabato.
Many of the global business process
outsourcing (BPO) players are
steadily expanding their operations
in the Philippines, which, coupled
with increasing housing demand,
fueled private construction to a
growth rate of 25% in the third
quarter of 2012.
50 The Philippines
Table A6 Total approved FDI by promotion agency in PhP million during the first semester of
2011 and 2012
PEZA with pledges amounting to spending and other projects for 3.6 Inflation. Inflation moderated
PhP49.5 billion (see Table A6). the second semester of 2012 and to 3.0% in the first semester of
All promotion agencies registered 2013, an election year. 2012 compared to over 4.0% last
increases except for the Clark year. Food price increases slowed
Development Corporation (CDC) More importantly, consumer and down to below-average at 2%.
and BOI which suffered declines of business confidence improved There were higher price increases
87.0% and 7.3%, respectively. markedly. The PSE has been (see Chart A7) in clothing (4.4%),
growing at record levels and restaurants (3.2%), household
3.5 Fiscal performance and credit the major credit rating agencies furnishings (2.9%), and recreation
ratings. The Philippines continues gave successive upgrades and (2.5%).
to strengthen its external position positive outlooks to the country’s
with over US$79 billion in gross economy. The Philippines is now 3.7 Exchange rates. Like other
international reserves or the just one rung below investment Asian currencies, the Philippine
equivalent of more than one year grade following Standard & Poor’s Peso has been strengthening
in import cover. Fiscal deficit was BB+ with stable outlook in July against the US dollar. The average
still at PhP34 billion, giving the and Moody’s Ba2 with positive monthly peso-dollar rate improved
government more flexibility in its outlook in May. from PhP43.31 per US$ in 2011
The Philippines 51
Table A7 Growth prospects, 2011-2013 in US$ and percentage
Sources: NSCB
52 The Philippines
to PhP 42.23 per US$ in 2012. half of the ladder. The country unemployment rate and upper
With the global financial turmoil, has achieved important strides in 30% ranking by 2016.
the peso-dollar rate weakened improving competitiveness with
from PhP43.62 per US$ in respect to its public institutions, Priority areas include
January to PhP41.04 per US$ by the macroeconomic environment, agriculture and fisheries,
the end of 2012. and market size, among others. business process outsourcing,
The country aims for 7%-8% GDP general infrastructure,
3.8 Economic prospects. growth, which it has met during semiconductors and electronics,
The World Economic Forum’s the third quarter of 2012. It has as well as tourism. The plan
Competitiveness Report 2012- also set medium-term targets of involves stabilizing the macro
2013 cited “the Philippines as one 22% investment ratio, 1 million environment, being self-sufficient
of the countries showing the most generated jobs per year, 2% deficit in rice and food, investing in
improvement,” jumping 10 spots ratio by 2013, 16.6% poverty infrastructure and promoting
to the 65th position or upper incidence by 2015, and a 6.8% education for priority areas.
References
• Forbes Best Countries for Business (www.forbes.com/best-
• 2012 World Federation of Exchanges Market Highlights countries-for-business)
• AT Kearney’s Global Services Location Index (www. • Highlights of the Philippine Results in the 2012 IMD World
atkearney.com/gbpc/global-services-location-index) Competitiveness Rankings
• Board of Investments website (www.boi.gov.ph) • Information and Communications Technology Office
• Commission on Audit (www.coa.gov.ph) website (www.cict.gov.ph)
• Commission on Filipinos Overseas (www.cfo.gov.ph) • Mines and Geosciences Bureau website (www.mgb.gov.ph)
• Department of Agriculture website (www.da.gov.ph) • National Statistical Coordination Board website (www.nscb.
• Department of Environment and National Resources gov.ph)
website (www.denr.gov.ph) • National Statistics Office website (www.nso.gov.ph)
• Department of Labor and Employment website (www. • National Wages and Productivity Commission website
dole.gov.ph) (www.nwpc.dole.gov.ph)
• Department of Science and Technology Information and • Philippine Economic Zone Authority website (www.peza.
Communications Technology Office gov.ph)
and the Business Process Outsourcing Association – • Tholons Top 100 Outsourcing Destinations
Philippines IT-BPO Investor Primer • Central Intelligence Agency World Factbook 2012
• Department of Science and Technology website (www. • US Department of State website (www.state.gov)
dost.gov.ph) • World Bank Philippine Economic Update, released in
• Department of Tourism website (www.tourism.gov.ph) December 2012
The Philippines 53
Cirilo P. Noel
Chairman and Managing Partner
J. Carlitos G. Cruz
Vice Chairman and Deputy Managing Partner
Wilson P. Tan
Head of Assurance Services
Emmanuel C. Alcantara
Head of Tax Services
Winston A. Chan
Head of Advisory Services
Renato J. Galve
Head of Transaction Advisory Services
SGV & Co. is the Philippines’ largest professional services firm with
Gerard B. Sanvictores
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