Doing Business In The Philippines

BUSINESS OPPORTUNITIES WITH THE PHILIPPINES

The Philippines Land Area:

300,000 sq.km.

Population:

96 Million (July 2008)

Government:

Democracy –

Presidential Economic Overview: The Philippine economy grew at its fastest pace in three decades with real GDP growth exceeding 7% in 2007. Higher government spending contributed to the growth, but a resilient service sector and large remittances from the millions of Filipinos who work abroad have played an increasingly important role. Economic growth has averaged 5% since President MACAPAGALARROYO took office in 2001.

The Philippine Advantage: Why the Philippines? THE ECONOMY Economy has remained stable over time, 7.5% GDP for 2nd Quarter (highest in 20 years) Philippine Peso is one of Asia’s best performing currencies Ranked RP 2nd among 32 economies in level of business confidence

a slower yet STABLE ECONOMY amidst the global financial crisis Y2008 Forecast 5.5% - 6.4%

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GDP growth remains fundamentally sound


1st semester growth of 4.6% is better than others in Asia-Pacific




Forecast year-end average growth of above 5% is very respectable

OFW remittances continue to be strong


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2008 year-to-date total registered 17.2% higher for the same period Jan-Aug at US$10.9 billion

Inflation reached 9.4% year to EO October 2008 (NSO Report of 05 Nov 2008)


Peak of 12.2% in August has bottomed out to realistic levels

Source: NSO

a slower yet STABLE ECONOMY amidst the global financial crisis

SOURCE : BSP

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Sub-prime exposure estimated at less than 1% of total assets

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Gross International Reserves (GIR) is solid


US$36.69 Billion covers 5.8 months of imports or 4 times short-term external debt




a small US$50 Million decline from previous month’s level

The Philippine Advantage (cont.) Strategically located in Asia Within 4 hours flying time to any Capital in Asia

The Philippine Advantage Greatest Asset: Human Resource

Available quality human resource 35.2 Million Labor Force 94.6% Literacy rate 70% fluency in English

405,000 University/ College graduates per year English speaking – The Philippines is the world’s third largest english speaking nation.

The Philippine Advantage (cont.) Reliable Infrastructure Support Excellent Telecommunications Infrastructure Airports and Seaports Economic Zones & IT Parks

The Philippine Advantage (cont.) Hospitable lifestyle A survey conducted in March 2005 by ECA International (Employment Conditions Abroad Ltd.) of 32 countries said: “The Philippines has the lowest living costs for expatriates … The Philippines is the cheapest country to live in followed by Argentina, Thailand and Malaysia”.

The Philippine Advantage (cont.) Attractive Investment Incentives Philippine Economic Zone Authority (PEZA) Board of Investments (BOI)

INVESTMENT OPPORTUNITIES

2009 Investment Priorities Plan I. Preferred Areas •

Agriculture/ Agri-business and Fishery

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Infrastructure

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Tourism

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Research and Development

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Engineered Products

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Strategic Activities

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Business Process Outsourcing

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Creative Industries

II. Export Activities •

Manufacture of Export Products/Services

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Activities in Support to Exporters

Infrastructure • Physical infrastructure – development and/or operation of toll roads, highways, railways, roads and bridges

• Power generation – activities as specified in the Power Development Plan, e.g., those utilizing indigenous and renewable energy sources, other energy sources adopting environmentally-friendly except oil-fired projects, and those under the NPC privatization plan

• Mass housing – low-cost and socialized housing projects • Bulk water supply – any kind of water supply except deep wells and limited to supply to “waterless” areas as listed by NAPC

• Mass rail transport – for passengers and cargoes including LRT in line with the transport development plans and programs of the DOTC

• Pipeline projects for oil and gas – transport of petroleum products and natural gas, petrochemicals, and similar products

• Projects under Build-Operate-Transfer (BOT) Law

Infrastructure • Logistics –

Passenger and cargo shipping

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Overseas shipping

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Passenger and cargo air transport

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Regional international airports and terminals

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Sea Ports and terminals

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Warehousing

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Post-harvest facilities

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IT-enabled logistics services

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IT services rendered to government agencies and LGUs

Energy Generation Indicative Capacity Additions

Luzon 550 MW Combined Cycle Natural Gas Plant (2011) 300-500 MX Natural Gas Expansion (2011) 600 MW Coal-fired Thermal Power Plant (2010) 200 MW Hydro Expansion Project

Visayas 200 MW Toledo Coal Expansion in Cebu(2010) 100 MW Coal-Fired Plant in Panay (2009)

Mindanao 46 MW SibulanHydropower by Hedcor/AEV (2009) 21.8 MW MinergyDiesel Plant Expansion (2010) 50 MW Mindanao 3 Geothermal (2010) 200 MW by MG Mining & Energy Corp. (2012)

Renewable Energy Geothermal Energy - The Philippines is 2nd only to the US in terms of Geothermal Energy potential reserves. With only 1,931 MW installed out of 2,047 MW proven geothermal reserves and 4,790 MW potential reserves, there are obviously plenty of opportunities for expansion and private sector involvement. Wind Energy - Comprised of 7,107 Islands, the Philippines has maximum potential for wind energy generation. 16 wind power sites were offered to private investors during the 1st wind contracting round with a potential capacity of 345 MW. Hydropower - Indicative Hydropower potentials are currently at 2,400 MW. Compressed Natural Gas - Minimum investment of about $4.0B between 2006 –2014 Biodiesel and Bio-Ethanol - The government targets to implement a 1% CME blend with diesel fuel for vehicles in 2007, to reach 2% in 2009; and 5% ethanol blend with gasoline fuel for vehicles within 2007-2009, to reach 10% in 2011.

Tourism • Tourist accommodation failities – hotels, apartels/serviced residences, condotels, tourist inns, and pension houses as classified and endorsed by DOT

• Resorts –special interest activities such as but not limited to eco-tourism, agritourism, theme parks, conventions and exhibition/trade

• Retirement villages • Medical tourism –

Hospital/medical services

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Ambulatory surgical services

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Dental services

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Other human health and wellness services including rehabilitation and recuperation services, e.g., health spa and rehabilitation and recuperation services

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Healthcare and wellness products

Research and Development •

Commercial and In-house R&D activities

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Establishment of Centers of Excellence, innovation and skills development training institutions

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Knowledge and skills development through the provision of training facilities and programs

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Research and development and other productivity enhancement activities

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Technology scanning, selection and adoption

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Incubation program

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Common service facilities

Training and learning institutions

Engineered Products •

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Basic iron and steel products -

Long steel products

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Flat hot-/cold-rolled products integrated with basic iron and and steel production

Manufacture/assembly of motor vehicles -

Assembly of motor vehicles

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Manufacture of parts and components

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Manufacture of machinery and equipment

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Shipbuilding

Iron & Steel •

Basic Iron and steel products, refined iron ore and primary steel products in the form of slabs

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Long steel products (billets, and reinforcing steel bars)

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Production of flat hot/cold-rolled products integrated with basic iron & steel production

Motor Vehicles • Manufacture/ Assembly -

Passenger Cars Commercial Vehicles Motorcycles

• Manufacture of parts & components

Machinery and Equipment 

Manufacture of machinery and equipment including their parts and components

Shipbuilding / Shipping •

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Shipbuilding -

Shipbuilding (design, construction, outfitting & launching any type of ship)

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Ship repair – conversion, overhaul, alteration, modification or repair of hull, machinery, equipment, outfits and components of any type of ship

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Shipyard operations (excluding shipbreaking)

Shipping -

Domestic shipping

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Overseas shipping

IT and IT-Enabled Services • IT and IT-enabled Services - Contact Centers - Business / Knowledge Processing (BPO / KPO) - Software Development - Data Transcription (Medical / Legal Corporate) - Animation - Engineering Design

• IT Support Activities (except internet & cyber cafes)

The Philippines is a BPO Leader!

Electronics •

Manufacture and test of electronic products

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Manufacture of parts and components of electronic products

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Manufacture of production supplies for the exclusive use of the electronics industry

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Research and development

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IC design/ other design engineering services

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Establishment and operation of Centers of Excellence

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Original Design Manufacturing (ODM)

Logistics / Activities in Support of Exporters •

Sub-assembly / fabrication of parts / components of the final export products located in EPZ or to exporters operating in BMW

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Manufacture of supplies directly / reasonably needed in the production of non-traditional export products to exporters located in EPZ or to exporters operating in BMW

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Services comprising a portion of the manufacturing process

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Product testing and inspection

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Repair and maintenance

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Logistic services rendered to exporters

Mining

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Located in the “Ring of Fire” 5th most mineralized country in the world - 2nd in Gold - 4th in Copper - 5th in Nickel - 6th in Chromite

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Established reserves of 13 known metallic and 29 nonmetallic minerals (Mines & Geosciences Bureau)

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RP has 9 million hectares of mineralized land - Only 420,000 hectares – with mining permits - 8.6 million hectares – still awaiting investors! Activities under RA 7942 - Exploration and development of mineral resources - Quarrying, and - Processing of metallic and non-metallic minerals

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BUSINESS PROCESS OUTSOURCING

OFFSHORING and OUTSOURCING INDUSTRY •

Contact Center

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Business Processing

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Software Development

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Engineering Design Services

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Medical/Legal Transcription

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Computer Graphics/Animation

Philippine O&O industry earned USD 4.9 billion in revenues (as of end 2007)

Sector Contact Centre

Source: BPAP

2007 Revenues ($000,000) 3,600

% change vs. 2006 53

Back Office (nonvoice bpo) Transcription (non-voice bpo) Animation

398

32

197

24

105

8

Software

423

56

Engineering Svcs

152

124

4,875

50

TOTAL Philippine O&O (export)

Source: Joint BPAP/BOI/PEZA/CICT Task Force; 2008 – BPAP analysis

Export Revenues ($000,000) Year

Growth Rate (%)

2005

2,420

64

2006

3,257

35

2007

4,875

50

2008 (forecast)

6,760

39

12,999

39 p.a.

2010 (target)

Source: Joint BPAP/BOI/PEZA/CICT Task Force; 2008 – BPAP analysis

BUSINESS OPPORTUNITIES WITH THE PHILIPPINES

Michael Alfred V. Ignacio Commercial Attaché & Director Philippine Trade & Investment Center Embassy of the Philippines – London Email: [email protected] Website: http://pticlondon.weebly.com