Why you should invest in the Philippines

With the goal of attracting and guiding foreign investors looking to set up business operations in the Philippines, SGV’s Doing Business in the Philippines brochure presents an overview of the country’s economy, labor force and laws relevant to investors, with updates and trends on various industries.

The Philippine economy grew 6.1% in the third quarter of 2018. The posted growth is fueled by higher investment opportunities and consumption as well as the growth of manufacturing, trade, real estate and renting business activities. It has enjoyed a string of upgrades in recent years from credit raters recognizing the country’s improving fundamentals. The Philippines continues to enjoy investment grade status since its upgrade by Fitch Ratings, Standard & Poor’s (S&P), and Moody’s Investor Service in 2013.

In December 2017, growing domestic demand was attributed as  the main growth driver which was backed by steady remittances  from foreign workers. In terms of major sectors, the industries is still the fastest growing sector at 6.2% followed by services, which grew by 6.9%. In September 2018, Philippine external trade in goods reached US$15.58 billion, a 13.5% increase from the recorded value in September 2017. Electronic products continue to lead as the country’s top export growing 7% in August 2018. Other products also increased including mineral products (21.8%), special transactions (5.8%) while forest products increased by 7.5%. Hong Kong is now the top destination of Philippine-made goods, followed by the United States and Japan. The Cordillera Administrative  Region’s (CAR) economy grew the fastest at 12.1% in 2017. National Capital Region (NCR), Region IV-A: CALABARZON, and Region III: Central Luzon largely contributed to the 6.7% GDP growth rate — with NCR’s share accounting for 36.4%. The top five residential and commercial project list are CALABARZON, Central Luzon, Region VII: Central Visayas, NCR and Region IX: Zamboanga Peninsula.

Investment Policy and incentives

Investments are most welcome in the Philippines. There are only certain areas of economic activity where foreign ownership restrictions apply. Philippine laws and regulations guarantee the basic rights of all investors and enterprises, including the following:

• Freedom from expropriation without just compensation
• Right to remit profits, capital gains, and dividends within the guidelines of the Bangko Sentral ng Pilipinas, the country’s monetary authority
• Right to repatriate the proceeds of the liquidation of investments
• Right to obtain foreign exchange to meet principal and interest payments on foreign obligations

There are a number of laws governing investments in the Philippines. At present, there are proposals to consolidate all the incentive laws into one law to rationalize the grant and administration of fiscal and non-fiscal incentives given by various incentive bodies.

Investment Priorities Plan

The 2017 Investments Priority Plan (IPP) was approved by the President Rodrigo Duterte in Memorandum Order No. 12 dated 28 February 2017 and is effective beginning 18 March 2017 until 2019.

Significant adjustments from the 2014 IPP have been introduced in the new IPP with the inclusion of more Micro-Small-Medium Enterprise (MSME)-oriented, innovation-driven, and health and environment conscious activities. The 2017 IPP also reflects the administration’s industrial policy to bring investments outside of Metro Manila, to favor new players in the industry, and to promote inclusive and participative economic growth across various sectors.

The list of preferred activities continues to prioritize investments in manufacturing particularly in industrial goods and agro-processing.  Commercial production includes not only agriculture and fishery, but also forestry products. Priority strategic services now include telecommunications and state of the art engineering, procurement and construction (EPC) with the exclusion of ship repair. For housing, the price ceiling was reduced from PhP3 million to PhP2 million. Priority on health facilities now include drug rehabilitation centers. Pipeline projects for oil and gas were also added in priority infrastructure.

Setting up a business in the Philippines

The current administration is committed to setting up businesses in the Philippines by reducing red tape and streamlining processes, making it faster and easier. The requirements for setting up a business will depend on the type and location of the entity. It will also require registration with various government agencies, including the Securities and Exchange Commission (SEC), the Department of Trade and Industry (DTI), the Bureau of Internal Revenue (BIR) and local government units, as appropriate. If the business qualifies for incentives, it must also be registered with incentives promotion agencies such as the Philippine Economic Zone Authority and the Board of Investment.