philippines - kauppakamari · investment priorities plan 2013 6 board of ... • subsidiaries of...
TRANSCRIPT
Nordic Business Council of the PhilippinesSupporting Nordic Business in the Philippines
PHILIPPINESCountry Report
2014
Table of Contents
Country facts 3Regulatory bodies 4 Investmentincentives 5 InvestmentPrioritiesPlan2013 6 Board of Investments (BOI) incentives 8 Activities Eligible for PEZA Registration and incentives 9 PEZAincentives 11 ForeignInvestmentNegativeList 12TradeandInvestments 13 EuropeanUniontradewiththePhilippines 13 NordictradewiththePhilippines 15 BalticTradewiththePhilippines 17Opportunities 18 IT-BPMindustry 18 EnergyandRenewablesindustry 19 ConstructionandInfrastructureindustry 20 Manufacturingindustry 21
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
2
Country facts
Name: Republic of the Philippines
Capital: Manila
Currency: Peso
Geography:Archipelagoof7107islands–Threemajorgroups:Luzon,Visayasand Mindanao
Climate: Tropical Marine
Population:100million(2014),12thmostpopulousintheworld
Population growth:1.8%
Average age of the population:23.5years
Ethnicity:ChristianMalay91,5%;MuslimMalay4%;Chinese1,5%;Others3%
Religions:RomanCatholic83%;Protestant9%;Muslim5%
Government:Democratic,presidentialformwithabicameralcongress
Administration:17regions,80provinces,138cities,1496municipalities,and42025Barangays
Education:National(publicandprivate)–around500000graduatesannually
Economy:GDP$272billionin2013,GDPpercapita(nominal)$2765,(PPP)$6533
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
2010 2011 2012 2013GDP growth 7.6 3.6 6.8 7.2
Privateconsumptiongrowth 3.4 5.7 6.6 5.6Exports growth 21.0 -2.8 8.9 0.8Imports growth 22.5 -1.0 5.3 4.3
Averageinflation 3.8 4.6 3.2 3.0Unemployment rate 7.4 7.0 7.0 7.1
3
Regulatory bodies
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
DEPARTMENT OF TRADE AND INDUSTRY
The DTI is the government body primarily respon-sibleforexpandingPhilippinetrade,industriesandinvestments to be able to generate employees and raise income for the Filipinos.
FOOD AND DRUG AUTHORITY
The regulatory body responsible for ensuring that the food,drugandcosmeticproductsavailable tothepublicaresafeforconsumptionistheFDA.
BOARDOFINVESTMENTS
TheBOIisasubsidiaryoftheDTI.Itsmainfunctionbeingthegenerationofinvestmentsinthecountry.Businesses registeredunder theBOI enjoy addedfiscalandnon-fiscalbenefits.
BUREAUOFINTERNALREVENUE
The BIR is the government body responsible for col-lectionoftaxesandupholdingthetaxationlawsofthe country.
PHILIPPINE ECONOMIC ZONE AUTHORITY
The PEZA was established because of “The Special EconomicZoneActof1995.”BusinessesregisteredunderPEZAenjoyaddedfis-calandnon-fiscalbenefits.
BUREAU OF IMMIGRATION
TheBureauofImmigrationistheimmigrationregu-latory and control body of the Philippines. They en-sure that all foreigners entering the country comply withitsexistinglaws.
SECURITIESANDEXCHANGECOMMISSION
The SEC is taskedwith the registration, licensing,regulation and supervision of all corporations inthe Philippines, both Filipino and Foreign-owned,includingforeigncorporationsintendingtodobusi-ness in the country.
4
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
TheGovernmentofthePhilippinesoffersseriesofdifferentincentivesiftheinvestmentmatcheswiththepreferred investmentareas.Therearetwomajorgovernmentalbodieswhoarecoordinatingthe investe-ments.BoardofInvestmentsisthenumberoneinvestmentpromotionagencyinthecountry.Theagencyisdesigned to promote inward investments and assist local and foreign investors in their venture of the desir-ableareasofbusiness,definedintheannuallypreparedInvestmentPrioritiesPlan(IPP).
TheIPP,formulatedannuallybytheBOI,throughaninter-agencycommittee,andapprovedbythePresident,liststhepriorityactivitiesforinvestments.Itcontainsalistingofspecificactivitiesthatcanqualifyforincen-tivesunderBook1ofthisCode.
PEZA,attachedtotheDepartmentofTradeandIndustry,isthePhilippinegovernmentagencytaskedtopro-moteinvestments,extendassistance,register,grantincentivestoandfacilitatethebusinessoperationsofin-vestorsinexport-orientedmanufacturingandservicefacilitiesinsideselectedareasthroughoutthecountryproclaimed by the President of the Philippines as PEZA Special Economic Zones.
PhilippineEconomicZoneAuthorityPEZAregisteredcompaniesmustexportatleast70percentoftheactualproductiondoneinthePhilippines.ThemajorshareoftheNordicinvestmentstothePhilippinesfallsunderPEZAincentives.
Inaddition to these twomajor investmentpromotion incentiveprograms, thereareelevenotherzones/agencies/caseswherespecialincentivesapply.
• RegionalBoardofInvestments–AutonomousRegionInMuslimMindanao(RBOI-ARMM)• Subic Bay Metropolitan Authority• ClarkFreeportZone• Cagayan Economic Zone Authority (CEZA)• The Authority of the Freeport Area of Bataan (AFAB)• Zamboanga City Special Economic Zone Authority (ZCSEZA)• Phividec Industrial Authority (PIA)• Aurora Special Economic Zone Authority (ASEZA)• Subsidiaries of Bases Conversion and Development Authority (BCDA)• Tourism Infrastructure & Enterprise Zone Authority (TIEZA)• RegionalHeadquartersorRegionalOperatingheadquarters
Investment incentives
5
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
Investment Priorities Plan 2013
Investment Priorities Plan (IPP) lists the preferred investment areas,which are eligible to BOI incentivesspecifiedinBOIgeneralpolicies.IPPisupdatedeveryyear,butmajorupdatesareusuallycarriedouteverythree years.
I Preferred activities
1. Agriculture/Agribusiness and Fishery
Commercial production and processing of agricul-tural,herbalandfisheryproducts(includingtheirby-productsandwaste).Agriculture-andfishery-relatedactivities such as irrigation, post-harvest, cold stor-age,blast freezing,andtheproductionof fertilizersandpesticides.
2. Creative Industries/Knowledge-based Services
BPOactivities,ITandIT-enabledservicesthatinvolveoriginal content.
3. Shipbuilding
Constructionand repair of ships, shipbreaking/shiprecycling
4. Mass Housing
Development of low-cost mass housing, manufac-ture of modular housing components preferably us-ing indigenous materials
5. Iron and Steel
Basic iron and steel products, long steel products(billetsandreinforcingsteelbars),andflathot-/cold-rolled products.
6. Energy
Exploration, development, and/or utilization of in-digenousenergysourcesadoptingenvironmentally-friendly technologies.
7. Infrastructure
Transport, water, logistics, waste management fa-cilities,physicalinfrastructure(tollways,railwaysandtelecommunicationfacilities)andPPPprojects.
8. Research and Development
Researchanddevelopmentactivitiesandtheestab-lishment of testing laboratories, centers of excel-lence,andtechnicalvocationaleducationandtrain-inginstitutions.
9. Green Projects
Manufacture/assemblyof goodsandestablishmentofenergy-efficiencyrelatedfacilities(suchasdistrictcooling systems) where either utilization of whichwould significantly lead to either the efficient useofenergy,naturalresourcesorrawmaterials;mini-mize/prevent pollution; or reduce greenhouse gasemissions.
10. Motor Vehicles
Manufacture/assemblyofmotor vehicles, includingalternativefuelvehicles(AFVs)andelectricvehicles(EVs),butexcluding2-strokesmotorcycles,andman-ufacture of motor vehicles parts and components.
11. Strategic projects
Thiscoversprojectsthatexhibitveryhighsocialeco-nomicreturnsthatwillsignificantlycontributetothecountry’s economic development.
6
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
12. Hospital / Medical Services
Thiscoverstheestablishmentandoperationofmedi-calfacilitiesincludinggeneralandspecialtyhospitals,andotherhealthfacilitiespursuanttoDepartmentofHealth (DOH) AdministrativeOrder No. (AO) 2012-0012.
13. Disaster Prevention, Mitigation and Recovery Projects
Projectsthatwillpreventormitigateadverseimpactsofcalamitiesanddisasters(e.g. installationoffloodcontrol systems, installations for earlywarning sys-tems for tyohoons, earthquakeoccurrences, tsuna-mi,volcanicdisprutionsetc.).
Projectsthatrehabilitatesareasaffectedbycalami-tiesanddisasters(e.g.rebuildingroadsandbridgesafter earthquakes/flooding, volcanic eruptions, oilspill cleanups etc.)
Trainingfordisasterpreparedness,mitigationorre-covery/rehabilitation/reconstruction.
1. Industrial Tree Plantation
Extensiveplantationofforestlandoftreecrops(ex-cept fruit trees) for commercial and industrial pur-poses
2. Exploration, Mining, Quarrying and Processing of Minerals
Explorationanddevelopmentofmineral resources,mining/quarrying and processing of metallic andnon-metallic minerals.
3. Publication or Printing of Books / Textbooks
Printing, reprinting, publication and content devel-opmentofbooksandtextbooks
4. Refining, Storage, Marketing and Distribution of Petroleum Products
5. Ecological Solid Waste Management
Establishmentofwastemanagementfacilities
6. Clean Water Projects
Establishment of waste water treatment facilities,andsewagecollectionintegratedwithtreatmentfa-cilities and the adoptionofwater pollution controltechnology,cleanerproductionandwasteminimiza-tion.
7. Renewable Energy
Coversdevelopersofrenewableenergyfacilities,in-cludinghybridsystemsaswellasmanufacturers,fab-ricators and suppliers of locally produced renewable energy(RE)equipmentandcomponents.
8. Rehabilitation, Self-Development and Self-Reli-ance of Persons with Disability
Manufacture of technical aids and appliances for the useand/or rehabilitationofpersonswithdisability,and the establishment od special schools, homes,residentialcommunitiesorretirementvillagessolelytosuittheneedsandrequirementsofpersonswithdisability.
II Mandatory list (mandated by law)
7
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
13. Disaster Prevention, Mitigation and Recovery Projects
Projectsthatwillpreventormitigateadverseimpactsofcalamitiesanddisasters(e.g. installationoffloodcontrol systems, installations for earlywarning sys-tems for tyohoons, earthquakeoccurrences, tsuna-mi,volcanicdisprutionsetc.).
Projectsthatrehabilitatesareasaffectedbycalami-tiesanddisasters(e.g.rebuildingroadsandbridgesafter earthquakes/flooding, volcanic eruptions, oilspill cleanups etc.)
Trainingfordisasterpreparedness,mitigationorre-covery/rehabilitation/reconstruction.
14. Tourism
Tourism enterprises that are outside of Tourism En-terprise Zones (TEZs) and are engaged in following:
1. Touristtransportservices(land,sea,air)2. Establishmentandoperationof:• Accommodationestablishmentssuchasbutnot
limitedtohotels,resorts,apartmenthotelsetc.• Conventionandexhibitionfacilitiesor“meetings,
incentives,conventionsandexhibition(MICE)fa-cilities.
• Amusementparks• Adventureorecotourismfacilities• Sportsfacilitiesandrecreationalcenters• Themeparks• Healthandwellnessfacilities• Agri-tourismfarmsandfacilities• Tourismtrainingcentersandinstitutes3.Developmentofretirementvillages4.Restoration/Preservationandoperationofhistoricalshrines,landmark,structures
IIIExportactivities
Manufacture of export products, services exportsandactivitiesinsupportofexporters
IVARMMList
This covers priority investment areas that have been determined by the Regional Board of Investments of the Autonomous Region of Muslim Mindanao (RBOI-ARMM).
Board of Investments (BOI) incentives
Companies registered under BOI andmeeting thepreferredinvestmentarearequirement,willbeeligi-bletoincentivessuchas:
FiscalIncentives• Income Tax Holiday• Exemptionfromtaxesanddutiesonimported
spare parts• Exemption from wharfage dues and export
tax,duty,impostandfees• Reduction of the Rates of Duty on Capital
Equipment,SparepartsandAccessories• Taxexemptiononbreedingstocksandgenetic
materials• Tax Credits• AdditionaldeductionsfromTaxableIncome
Non-FiscalIncentives• EmploymentofForeignNationals• Simplificationofcustomsprocedures• Importationofconsignedequipment• Privilegetooperateabondedmanufacturing/
trading warehouse
8
Activities Eligible for PEZA Registration and incentives
1. Export Manufacturing Manufacturing,assemblyorprocessingactivityresultingintheexportationofatleast70%ofproduction.(“Manufacturing /Processing” shallmean theprocessbywhich rawmaterialsor semi-finishedmaterialsareconvertedintoanewproductthroughachangeintheirphysical,mechanicalorelectro-magneticchar-acteristicsand/orchemicalproperties.“Assembly”shallmeantheprocessbywhichsemi-finishedpartsormaterialsareputtogetherorcombinedtoformadistinctproductwithoutsubstantiallychangingitsphysicalormechanicalcharacteristicsorelectro-magneticand/orchemicalproperties.)Eligiblefirmsshallqualifyforregistrationas“EconomicZoneExportManufacturingEnterprise.”
2. IT (Information Technology) Service Export ITserviceactivities,ofwhich70%oftotalrevenuesisderivedfromclientsabroad.(“ITServiceActivities”areactivities,whichinvolvetheuseofanyITsoftwareand/orsystemforvalueaddition).AmongtheITServiceactivitieseligibleforincentivesare:IT-enabledservicessuchasbusinessprocessoutsourcing,callcenters,dataencoding,transcribingandprocessing,etc.;softwaredevelopmentandapplication,includingprogram-mingandadaptationofsystemsoftwaresandmiddlewares;forbusiness,media,e-commerce,education,entertainment,etc.;contentdevelopmentformulti-mediaorinternetpurposes;andothers.Eligiblefirmsshallqualifyforregistrationas“ITEnterprise.”
3. Tourism EstablishmentandoperationwithinPEZATourismSpecialEconomicZonesofsportsandrecreationcenters,accommodation,convention,andculturalfacilitiesandtheirspecialinterestattractionactivities/establish-ments,withforeigntouristsasprimaryclientele.Eligiblefirmsshallqualifyforregistrationas“TourismEco-nomicZoneLocatorEnterprise.”
4. Medical Tourism Medicalhealthservices,endorsedbytheDepartmentofHealth,withforeignpatientsasprimaryclientele.Eligiblefirmsshallqualifyforregistrationas“MedicalTourismEnterprise”inaMedicalTourismSpecialEco-nomicZoneParkorCenter.
5. Agro-industrial Export Manufacturing Processingandormanufacturingofagriculturalproductsresultingintheexportationofitsproduction.(“Pro-cessing”shallmeantheconversionofanyagriculturalandmarineproductsfromitsrawstateintointermedi-ateorfinalproduct,whichundergophysicaland/orchemicalchangethroughmechanicaland/orchemicalprocess.)Eligiblefirmsshallqualifyforregistrationas“Agro-IndustrialEconomicZoneExportEnterprise.”
6. Agro-industrial Bio-Fuel Manufacturing Specializedmanufacturingofagriculturalcropsandeventualcommercialprocessing,whichshallresultintheproductionofcleanenergysuchasbio-fuelsandthelike.Eligiblefirmsshallqualifyforregistrationas“Agro-IndustrialEconomicZoneEnterprise.”
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
9
7. Logistics and Warehousing Services(a)operationofawarehousefacilityforthestorage,deposit,safekeepingofgoodsforPEZA-registeredEco-nomicZoneExportManufacturingEnterprises,andor(b)importationorlocalsourcingofrawmaterials,semi-finishedgoodsforresaleto-orforpacking/cover-ing(includingmarking/labeling)cuttingoralteringtocustomers’specification,mountingand/orpackagingintokitsormarketablelotsforsubsequentsaleto-PEZA-registeredExportManufacturingEnterprisesforuseintheirexportmanufacturingactivities,orfordirectexport,orforconsignmenttoPEZA-registeredExportManufacturing Enterprises and eventual export.
8. Economic Zone Development and Operation8.a.ManufacturingEconomicZoneDevelopment/OperationDevelopment,operationandmaintenanceofaneconomiczoneforexportmanufacturingenterprises,inclusiveoftherequiredinfrastructure,facilitiesandutilitiessuchaslightandpowersystem,watersupplyanddistributionsystem,sewerageanddrainagesystem,pollutioncontroldevices,communica-tionfacilities,pavedroadnetwork,administrationbuilding.
8.b.ITParkDevelopment/OperationDevelopment,operationandmaintenanceofanareaasacomplexcapableofprovidinginfrastructuresandothersupportfacilitiesrequiredbyITEnterprises,aswellasamenitiesrequiredbyprofessionalsandworkersinvolvedinITEnterprise,oreasyaccesstosuchamenities.
8.c.TourismEconomicZoneDevelopment/OperationDevelopment,operationandmaintenanceofanintegratedresortcomplex,withprescribedcarryingcapacitiesoftouristfacilitiesandactivities,suchasbutnotlimitedto,sportsandrecreationcenters,accommodations,conventionandculturalfacilities,foodandbeverageoutlets,commercialestablish-mentsandotherspecialinterestandattractionactivities/establishments,andprovidedwithroads,watersupplyfacilities,powerdistributionfacilities,drainageandsewagesystemsandothernecessaryinfrastructureandpublicutilities.
8.d.MedicalTourismEconomicZoneDevelopment/OperationDevelopment,operationandmaintenanceofaMedicalTourismParkorMedicalTourismCenterwhichare planned and designed in accordance with the standards of the Department of Health and the DepartmentofTourismtohavesupportfacilitiesandservicesrequiredforhealthandwellness,andprovidedwithrequiredinfrastructurefacilitiesandutilities.
8.e.Agro-IndustrialEconomicZoneDevelopment/OperationDevelopmentoperationandmaintenanceofanagro-industrialeconomiczoneplannedanddesignedtohavesupportfacilitiesandservicesrequiredforprocessingandagro-basedmanufacturingfacilities,andprovidedwiththerequiredinfrastructurefacilitiesandutilities.
8.f.RetirementEconomicZoneDevelopment/OperationDevelopment,operationandmaintenanceofaRetirementEconomicZoneParkorCenter,plannedanddesignedinaccordancewiththeaccreditationstandardsofthePhilippineRetirementAuthority,andprovidedwiththerequiredinfrastructurefacilitiesandutilities.
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
10
9. Facilities Providers9.a.FacilitiesforManufacturingEnterprisesConstructionasowner/operatoroffactorybuildingsinsideaPEZASpecialEconomicZoneforleasetoPEZA-registered Export Manufacturing Enterprises.
9.b.FacilitiesforITEnterprisesConstructionasowner/operatorofbuildingsandotherfacilitiesinsideIT-parks,whichareleasedtoPEZA-registered IT Enterprises.
9.c.RetirementFacilitiesEstablishment,operationandmanagementofretirementfacilitiesandotherrelatedactivities,withforeignretireesasprimaryclientele,dulyendorsedbythePhilippineRetirementAuthority,and lo-catedinaRetirementEconomicZone.
10. UtilitiesEstablishment,operationandmaintenanceoflightandpowersystems,watersupplyanddistributionsys-tems inside Special Economic Zones.
PEZA incentives
Dependingonthetypeofenterpriseandbusinessactivity,anenterpriseoperatingwithinanEcozoneisenti-tledtoincentivesgrantedtoPEZA-registeredenterprisesundertheOICorPresidentialDecree
Theseincentivesincludethefollowing:
• Incometaxholidayoffouryearsforanon-pioneerprojectandsixyearsforapioneerproject,orthreeyearsforanexpansionproject
• 5%specialtaxongrossincomeandexemptionfromallnationalandlocaltaxesuponexpiryoftheincometax holiday
• Taxanddutyfreeimportationofrawmaterials,capitalequipment,machineryandspareparts• Taxcreditonimportsubstitution• Exemptionfromwharfageduesandexporttax,impostorfees• Value-addedtax(VAT)zero-ratingoflocalpurchasesofgoodsandservices• Tax credits for exporters using local materials as inputs as provided by the Export Development Act of
1994• Additionaldeductionforincrementallaborandtrainingexpenses• Simplifiedimport-exportprocedures• Employmentofnon-residentforeignnationalsinsupervisory,technicaloradvisorypositions
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
11
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
Foreign Investment Negative List
Ingeneral,foreignerscaninvestupto100%equityincorporations,partnershipsandotherentitiesinthePhilippines,exceptinareasincludedintheForeignInvestmentsNegativeList(FINL).TheFINLlistsinvestmentareasandactivitiesreservedtoFilipinonationalswhereforeigninvestmentsareprohibitedorlimitedtoacertain percentage.
ListA.ForeignownershipislimitedbymandateoftheConstitutionandspecificlaws List B. Foreign ownership is limitedforreasonsofsecurity,defense,risktohealthandmorals,andprotectionofSMEs
Noforeignequity1.MassMediaexceptrecord-ing2.Practiceofallprofessions• Engineering• Medicine and allied
profession• Accountancy• Architecture• Criminology• Chemistry• Customsbrokerage• Environmental planning• Forestry• Geology• Interior design• Landscape architecture• Law• Librarianship• Marinedeckofficers• Marineengineofficers• Master plumbing• Sugar technology• Socialwork• Teaching• Agriculture• Fisheries• Guidance counseling• Real Estate Services• Respiratory therapy• Psychology
3. Retail trade enterprises with paid-up capital of less thanUSD2,500.0004.Cooperatives5.Privatesecurityagencies6.Small-scalemining7. Utilization of marine re-sourcesinarchipelagicwaters,territorial sea, and exclusiveeconomiczoneaswellas
mallsmall-scaleutilizationofnaturalresourcesinrivers,lakes,bays,andlagoons.8.Ownership,operationandmanagementofcockpits9.Manufacture,repair,stock-pilingand/ordistributionofnuclear weapons10.Manufacture,repair,stockpilingand/ordistribu-tionofbiological,chemicaland radiological weapons and anti-personnelmines11.Manufactureoffirecrack-ers and other pyrotechnic devices
Upto20%foreignequity1.Privateradiocommunica-tionsnetwork
Upto25%foreignequity1.Privaterecruitment,whether for local or overseas employment2.Contractsfortheconstruc-tionandrepairoflocally-fundedpublicworksexcept:• Infrastructure/develop-
mentprojects,and• projectswhichare
foreign funded or as-sistedandrequiredtoundergointernationalcompetitivebidding
3. Contracts for the con-structionofdefense-relatedstructures
Upto30%foreignequity1.Advertising
Upto40%foreignequity1.Exploration,developmentandutilizationofnaturalresources 2.Ownershipofprivatelands3.Operationandmanage-mentofpublicutilities4.Ownership/establishmentandadministrationofeduca-tionalinstitutions5.Culture,production,milling,processing,tradingexceptretailing,ofriceandcorn and the by-products6.Contractsforthesupplyofmaterial,goodsandcommod-itiestogovernment-ownedorcontrolledcorporation,company,agencyormunicipalcorporation7.Projectproponentandfacility operator of a BOT pro-jectrequiringapublicutilitiesfranchise8.Operationofdeepseacom-mercialfishingvessels9.Adjustmentcompanies10.Ownershipofcondomini-um units where the common areasinthecondoprojectareco-owned by the owners of the separate units or owned byacorporation
Upto49%foreignequity1.Lendingcompanies
Upto60%foreignequity1.Financingcompaniesregu-lated by SEC2.Investmenthousesregu-lated by SEC
Upto40%foreignequity1.Manufacture,repair,stor-age,and/ordistributionofproductsand/oringredientsrequiringPhililippineNationalPolice clearance2.Manufacture,repair,stor-ageand/ordistributionofproductsrequiringDepart-mentofNationalDefenseclearance3. Manufacture and distribu-tionofdangerousdrugs4. Sauna and steam bath-houses,massageclinicsandotherlikeactivitiesregulatedbylawbecauseofriskposedto public health and morals5.Allformsofgambling,except those covered by investment agreements with the Philippine Amusement andGamingCorporation.6.Domesticmarketenterpris-eswithpaid-inequitycapitaloflessthantheequivalentofUSD200,0007.Domesticmarketenter-prises which involve advanced technology or employ at least 50directemployeeswithpaid-inequityoflessthantheequivalentofUSD100,000
12
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
Trade and Investments
GrossDomesticProduct(GDP)ofthePhilippinesisheavilydependentontheservicesector.In2012,servicesectoraccountedfor57.1percentoftheGDPwhileindustryaccountedfor37.1percentandagriculturefor11.8percent.ThetotalamountofexportsfromthePhilippinesin2013wasUSD56.7billion,whereastheimportstothePhilippinesequaledtoUSD62.4billion.ThetradebalanceforthePhilippineswasnegativebyUSD5.7billion.
ThePhilippinesisheavilyaconsumption-driveneconomy,with69.4%ofGDPbeingformedbyprivatecon-sumption.ThisisfuelledbyremittancesfromoverseasFilipinoscurrentlyamountingtoover20billionUSDperyear.AnotherkeydriveroftheeconomyistheBusinessProcessOutsourcingindustrywhichcontributes16billionUSDtotheeconomy.Othergrowthsectorscontributingtotheeconomyweremanufacturingandconstruction(9.5%growthin2013),aswellasrealestateservicesandfinancialintermediation,leadingtoa7.1%growthrateintheoverallservicessectorin2013.
TopPhilippineImportGroups2013 TopPhilippineExportGroups20131.ElectronicProducts 1.ElectronicProducts2.MineralFuels,LubricantsandRelatedMaterials 2.OtherManufactures3.TransportEquipment 3.WoodcraftsandFurniture4.IndustrialMachineryandEquipment 4.Machinery&TransportEquipment5.OtherFood&LiveAnimals 5.Chemicals
European Union trade with the Philippines
In2013theEU–Philippinestradeincreasedby9percentto€10.8billionmaking itsvaluethehighest ina decade. The growth was supported by the economic recovery in the EU countries as well as the strong growthofthePhilippineeconomy(7.2%in2013).EUremainstobethefourthlargesttradingpartnerforthePhilippines,accountingfor11percentofthetotaltradeamount.AheadofEUintradeamountsareJapan(14%),China(13%)andUSA(12%).
When lookingat theamountsof ForeignDirect Investments (FDI), EU remainsas the largest investmentpartnerofthePhilippineswith30percentshareofalltheincominginvestments.EUregionisfollowedbyJapan(17%),USA(17%)andASEAN(13%).WhileEUdirectinvestmentflowstoASEANregiondecreasedby68percentin2012,thoseintothePhilippinesgrewby65percent.
TheEUexportstothePhilippineshavebeengrowingfastinthepastyears.EUexportsingoodsgrewby20.6percentin2012andby18.9%in2013,equalingto5.7billioneuros.
13
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
Figure1:TradeingoodsbetweenEUandthePhilippines
Source: Eurostat
EUexportstothePhilippinesareheavilyfocusedonmanufacturing,whichrep-resent84percentofalltheexports.Whilethewholemanufacturingsectorwasgrowingby19percent,thegrowthwasespeciallyseeninexportsofaircraft(+69%),industrialequipment(+7%),garmentsandtextiles(+10%)aswellaselectronics(+16%).Toaddtothegrowthofmanufacturingexports,alsotheagriculturalproductsrecordedsameyear-on-yeargrowthrateof19percent.
Figure2.MajorEUexportstothePhilippines
Source: Eurostat
14
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
DenmarkTopExports2013(Total€83Mn)1. Medicinal&Pharma(€12.8Mn)2. GeneralIndustrialProducts(€8.7Mn)3. Chemicals(€6.6Mn)4. Dairy(€6.3Mn)5. Meat(€6.2Mn)
DenmarkTopImports2013(Total€38Mn)1. Photoequipmentandopticalgoods(€9.5Mn)2. Animal&vegetablematerials(€9.0Mn)3. Electronics(€4.6Mn)4. Textiles(€1.3Mn)5. Vegetables&Fruits(€1.3Mn)
FinlandTopExports2013(Total€139Mn)1. Paperrelatedproducts(€47.6Mn)2. MiscManufacturing(€41.6Mn)3. Powergeneratingequipment(€18.6Mn)4. Telecomequipment(€4.3Mn)5. SpecializedMachinery(€3.9Mn)
FinlandTopImports2013(Total34Mn)1. Rubberproducts(€24.2Mn)2. Electronics(€2.9Mn)3. FishandFishPreparations(€1.9Mn)4. Vegetables&Fruits(€1.6Mn)5. ProfessionalandScientificEquip.(€0.8Mn)
Nordic Trade of Goods
WhilethePhilippineserviceexportstoEUaremainlyfocusedontransport,businessprocessmanagementandtravelservices,theexportsfromEUtothePhilippinesaremorediverse.‘Otherbusiness’,transporta-tionandtravelservicesaccountfornearlytwo-thirdsoftheexportsbutalsoIT-services,licensing/royalties,communications, insurance,constructionandfinancialservicesareimportantsectors.ThebiggestgrowthsectorsinEUserviceexportswereconstruction(+150%),licensing/royalties(+36%),communications(+44%)andIT-services(+15%).
Nordic trade with the Philippines
ThetradebetweentheNordiccountries(Denmark,Finland,Iceland,Norway,Sweden)andthePhilippineshasbeensignificant.WhentheNordiccountriesarebundledtogether,theyformthesixthlargesttradepart-nerforthePhilippinesamongtheEUcountrieswithatotaltradeof526millioneuros.In2013,Finlandwasthelargestexporter(€139Mn)tothePhilippines,whenSwedenwasthelargestimporter(€52Mn).Thesmall-esttradeamountwasrecordedforIcelandwithexportsworthof€1.9Mnandimportsworthof€0.33Mn.
TheexportcategoriesoftheNordiccountriestothePhilippinesvary,butmachineryandelectronicsarethetwodominantproductgroups.Ontheimportside,sameproductgroupstopthelistamongtextiles,mineralsand food related products.
15
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
NorwayTopExports2013(Total€35Mn)1. Chemicals(€11.3Mn)2. Fish(€10.8Mn)3. Misc.Manufacturing(€2.5Mn)4. Professional&ScientificEquipment(€1.9Mn)5. Plastics(€1.6Mn)
NorwayTopImports2013(Total€32Mn)1. Misc.ManufacturingItems(€9Mn)2. Electronics(€4.9Mn)3. Textiles(€3.1Mn)4. Office&DataEquipment(€3.1Mn)5. TelecomEquipment(€1.6Mn)
SwedenTopExports2013(Total€110Mn)1. Machinery&Mechanicalappl.(€25Mn)2. Paperrelatedproducts(€24Mn)3. Electornics(€19Mn)4. PrintingIndustryProducts(€9Mn)5. Pharmaceuticals(€7Mn)
SwedenTopImports2013(Total€52Mn)1. Minerals(€22Mn)2. Machinery(€8Mn)3. Electronics(€7Mn)4. Vegetables&Fruits(€1Mn)5. Tobacco&TobaccoSubstitutes(€1Mn)
IcelandTopExports2013(tradeingeneral)1. Industrial supplies2. Food and beverages3. Capital goods (except for transport)4. Fuels and lubricants5. Consumer goods
IcelandTopImports2013(tradeingeneral)1. Industrial supplies2. Capital goods (except for transport)3. Fuels and lubricants4. Consumer goods5. Food and beverages
16
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
17
Baltic Trade with the Philippines
EstoniaTopExports2013(Total€0.4Mn)1. Organicchemicals(€0.2Mn)2. Photoequipmentandopticalgoods(€0.1Mn)3. Misc.chemicals(<€0.1Mn)4. Misc.ediblepreparations(<€0.1Mn)5. Articlesofironorsteel(<€0.1Mn)
EstoniaTopImports2013(Total€1.6Mn)1. Electronics(€0.9Mn)2. Footwear(€0.4Mn)3. Photoequip.andopticalgoods(<€0.1Mn)4. Suppliesforforeignvessels(<€0.1Mn)5. Preparationsofvegetables&fruits(<€0.1Mn)
LatviaTopExports2013(Total€0.2Mn)1. Packing(<€0.1Mn)2. Otherarticlesofironandsteel(<€0.1Mn)3. Alcoholproducts(<€0.1Mn)4. Woodandwoodarticles(<€0.1Mn)5. Containers(<€0.1Mn)
LatviaTopImports2013(Total€1.4Mn)1. Plastics&Rubber(€1.0Mn)2. Machinery(€0.2Mn)3. Armsandammunition(<€0.1Mn)4. Preparedfood(<€0.1Mn)5. Misc.manufacturing(<€0.1Mn)
LithuaniaTopExports2013(Total€2.8Mn)1. Sugarandsugarconfectionery(€1.9Mn)2. Woodandwoodarticles(€0.4Mn)3. Photoequipmentandopticalgoods(€0.2Mn)4. Dairyproducts(€0.1Mn)5. Machineryandmechanicalappliances(€0.1Mn)
LithuaniaTopImports2013(Total€1.7Mn)1. Rubberproducts(€0.4Mn)2. PreparationsofVegetables&Fruits(€0.2Mn)3. Electronics(€0.2Mn)4. Lac,gums,resinsandvegetablesaps/extracts(€0.2Mn) 5. Ediblefruitandnuts(€0.2Mn)
ThetradebetweenBalticcountries(Estonia,Latvia,Lithuania)andPhilippineshasbeengrowinginthepastyears.ThebiggesttradepartnerforthePhilippinesisLithuania,followedbyEstoniaandLatvia.Lith-uaniansugarexportsrepresentover50percentofthetotalexportsofBalticcountriestothePhilippines,while rubber one imported product from the Philippines.
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
Opportunities
AsresultoftherapidgrowthofthePhilippineeconomy,manysectorsofferopportunitiesforforeigncompa-nieswhoareeitherwillingtoinvestinthePhilippines,outsourceproductsorservices,orutilizePhilippinesasanexporttargetmarket.TheopportunitiesanddemandforwesterntechnologyhavebeenbuildingupespeciallyonEnergyandRenewables,Infrastructure,IT-BusinessProcessManagement,RealEstateandRe-tail sectors.
IT-BPM industry
InformationTechnologyandBusinessProcessManagementindustryhasbeenoneofthedriversofthePhil-ippineeconomy.Theyear-on-yeargrowthin2013was16percentwhencompoundaveragegrowthratefrom2011to2016isexpectedtobe19percent.Theindustryiscurrentlygeneratingrevenuesworthof16billionUSDandexpectedtogrowto25billionby2016.Theamountofdirectemployeesin2013was900000,upfrom770000in2012andexpectedtogrowto1.3millionin2016.Theindirectemployeecountin2016willbearound3.2million.Thegrowthoftheservicesectoriswellsupportedbythe500000newgraduatesPhil-ippines is producing every year.
TheIT-BPMindustryisdividedtovoiceandnon-voiceoperations.InvoiceoperationsPhilippinesistheglobalnumberone,mainlyduetowide,accent-neutralEnglish-speakingtalentpool(3rdlargestEnglish-speakingcountryintheworld)andcheaplaborvis-a-vistothecompetingcountries.Onthenon-voicesector,Philip-pinesistheglobalnumbertwoinrevenuerightafterIndia.Thenon-voicesectorinthePhilippinesisgrowingeven faster than the voice sector and is expected to generate higher revenue
Innon-voicesector,knowledgeprocessmanagementoperationshavebeenrecordinghighergrowthratesthanbasicback-officeoperationslikeaccountingandprocurement.E.g.SoftwareDevelopment,R&D,Cre-ative and Health InformationManagement operations have been reporting especially high year-on-yeargrowthrates.Thehigherskilllevelsoftheemployeesareneededwhenmovingfrombasicback-officetaskstomoredemandingdevelopmentandcreativetasks.StrongpublicandprivateeffortsindevelopingtheskillsoftheworkerstobetteranswerthedemandmakesthePhilippinesaninterestingcountryforthecompanieslookingforoptionstorelocatepartofthecoreoperationstomorecostefficientlocation.
Ifoffshoringisnotanoption,PhilippineshasawiderangeofexistingservicesuppliersonIT-BPMindustryofferingsolutionsforcompaniestooutsourcepartoftheiroperations.TakingadvantageofthecostarbitragemakestheSMEsmorecompetitiveandinadditionmayalsoenhancetheirservicelevel.
The Government has named IT-BPM industry as one of the priority investment areas. This guarantees spe-cialincentivesforthecompaniesinvestingintothissector.PhilippineEconomicZoneAuthority(PEZA)isof-feringbothfiscalincentivese.g.taxholidayandnon-fiscalincentivese.g.preferablevisatreatmentforthecompanieslocatedinthepreferentialzones.TwodifferentkindsofpreferialzonesexistinthePhilippines.CompaniesregisteredasPEZAcompaniescanbelocatedinspecialIT-parkorinasinglebuildingsqualified
18
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
Energy and Renewables industry
The Energy demand in the Philippines has been growing hand-in-hand with the economic growth. Due to the expandingmanufacturingandservicesectoraswellasgrowingmiddleclass,thesupplyofenergyhassome-timesbeeninsufficient.Tomeetthedemand,thegovernmenthasimplementednewlaws.ElectricPowerIn-dustryReformAct(EPIRA)addressedtheissueofcompetitivenessinthepowergenerationmarkettoattractmore private investment. Renewable Energy act aims to develop and broaden the renewable energy sources usedinthecountry.Fiscalandnon-fiscalincentivesareofferedtothecompaniesinvestingwithintheact.
ThetotalpowerproductioncapacityinthePhilippinesreaches15700MWof,which34percentisproducedbyrenewablepowerplants.21percent(3200MW)isgeneratedbyhydropowerfacilitiesand13percent(2000MW)bygeothermalfacilities.TheNationalRenewableEnergyProgram(NREP)aimstotripletherenew-ablepowerproductioncapacityto15300MWby2030.Duetothelackoffundingfromthepublicsector,theexpansion is heavily relying on private investments.
Thebiggestgrowthisexpectedinhydropower.AccordingtotheNREP,theproductionofhydropowershouldbeincreasedby5400MWby2030.Geothermalandsolarwillseeanincreaseof1500MWofwhichin-creasedgeothermalcapacityisexpectedtobeinusealreadyby2020.ThewindpowerpotentialinthePhilip-pinesisestimatedtobe7412MW,ofwhich2345MWshouldbeinuseby2030accordingtotheNREProad-map.Inadditiontothesemethodsbiomass,oceanandcleancoalarealsomentionedasadditionalsourcesin the future energy mix of the Philippines.
Thegovernmenthassetfeed-in-tariffsforrenewables: • Wind:8.53PHP/kWh • Biomass:6.63PHP/kWh • Solar:9.68PHP/kWh • Hydro:5.90PHP/kWh
SincePhilippinesisanachipelagoof7107islands,thegridcoveragecanbeaproblemiftheplantsarelo-catedinremoteareas.Totransfertheproducedpowertothenationalgridsubmarinecablesorsuchmaybeneeded.
19
Construction and Infrastructure industry
TheconstructionindustryofthePhilippinesisstillexpectedtobethesecondfastestgrowinginAsiaoverthemedium-term(afterMyanmar).Theestimatesindicateyear-on-yeargrowthof46percentfor2014.In2013,thesizeoftheindustrywas643billionpesos,(€10.9bln)expectedtogrowto938billionpesos(€16.1bln)in2014.
ManilawasrecentlylistedfourthonthelistofpreferedinvestmentdestinationforrealestateinvestorsinAsiaPacificin2014.ThepopularityofManilaisderivedfromcompressedcapratesinthedevelopedmarketsaswellas itsabilitytoprovidebetteryieldratesthanelsewhere.GrowingBusinessProcessManagementsectorkeepsthedemandforofficespacehigh.ItisexpectedthatBPMindustryasitself,willneedayearly400,000sqmincreaseintheofficespace.Ontheresidentialside,urbanizationstaysstrong,whichdrivesthedemandfornewresidentialbuildings.Alongtheresidentialandofficespace,thedemandforretailspacehasbeenstrongduetohighprivateconsumptionthatcontributesalmost70percentoftheGDP.OnthehotelsectortheconstructionstaysstrongandonlyinMetroManila,thecurrentcapacityissupposetogrowfrom17,000roomsinmid2014to25,000roomsbytheendof2015.
AccordingtotheDepartmentofBudgetandManagement(DBM),infrastructureandothercapitaloutlaysal-locationwentupby17.7percentfromP261.7billionin2012toP308.1billionin2013.Theallocationis14.8percentofthetotalP2077billionnationalbudgetin2013.Thebudgetitem“InfrastructureandOtherCapitalOutlaysAllocation”coversphysicalinfrastructuresandotheritemssuchasbuildings,vehicle,equipmentandothers.Separatingactualpublicinfrastructurespendingfrom“InfrastructureandOtherCapitalOutlaysAl-location”showsthatinthelastfiveyears(2008-2012),publicinfrastructurespendingaspartofGDPrangedbetweenalowof1.4percenttoahighof2.09percent,whichisstillfarfromthegovernment’stargetof5percentofGDPby2016.However,withgovernancereformsinplace,thegovernmentexpectstoimproveinfrastructure spending in the coming years.
Public-PrivatePartnershipprogramoffersachannel forprivate investorstotakepart inbig infrastructureprojects.Currentlysevenprojectshavebeenawardedand47projectsare in thepipeline.At thetimeofthewriting,therearetwoprojectsunderbiddingprocess-Cavite-LagunaExpresswayandLRTLine1Caviteextension.AlreadyawardedprojectsareDaangHari–SLEXLinkRoad,PPPforSchoolInfrastructureProject(Phase I),NAIAExpresswayProject,PPPforSchool InfrastructureProject (Phase II),ModernizationofthePhilippineOrthopedicCenter(MPOC),AutomaticFareCollectionSystem(AFCS)andMactan-CebuInterna-tionalAirportPassengerTerminalBuilding.
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
20
Nordic Business Council of the Philippines
19/F,AXALifeCenterSen.GilPuyatAvenue,cornerofTindaloStreet
1200MakatiCity,MetroManilatel.+6327592246|[email protected]|www.nbcp.com.ph
Manufacturing industry
PhilippinemanufacturingsectorgrewfairlyslowlyinthelasttwodecadesafterChinaassumedtheroleoffactoryof theworld.During the recent years, risingwages inChinahave resulted tomanufacturing sec-tormovingabroad,whichthenagainhaslettorevivalofthesectorinthePhilippines.TheaverageannualgrowthofthemanufacturingsectorinthePhilippineswasonly3percentbetween2004and2009.However,inthepastthreeyearstheindustryhasgrownby7.5percentonaverageandby10.5percentin2013.
ManufacturingsectorisoneofthekeysectorsthePhilippinegovernmentispromoting.Theten-yearroad-mapseekstoincreasetheGDPshareofmanufacturingfrom21percentin2012to30percent.Toboostthemanufacturingsector,incentivesareofferedforcompanieslocatedatPEZAzonesandexportingatleast70percentoftheirentireproductioninthePhilippines.ThismakesPhilippinesaninterestingoptionformanu-facturingonSoutheastAsianlevelaheadofASEANintegrationexpectedtohappenintheendof2015.
ThePhilippines’DepartmentofTradeandIndustryhasbeenactivelycoordinatingwithindustryassociationsfortheformulationofindustryroadmapssince2012.Thishasledtoanewindustrialpolicyaimedatrevivingthemanufacturingindustry.Thegovern-mentrecentlyallocatedUS$1.5milliontoanewprogramdubbedtheManufacturingResurgenceProgram,whichaimstosupporttheimplementationofthePhilippineManu-facturing IndustryRoadmap.Thegovernmenthasalsoallotted2.3billionpesos (USD50.8million) in the2014nationalbudgettofundaprogramaimedatrevivingthemanufacturingsector.
Theleadingmanufacturingsubsectorsarechemicalandchemicalproducts;basicmetalindustries,furnitureandfixtures;radio,televisionandcommunicationequipment;non-metallicproducts;footwearandleatherproducts.
21