1
Introduction of Investment in Philippines
April 4, 2019
2
Table of Contents
Basic situation of the Philippines
Bank of China “Going Global” service
Philippines economic development2
Philippines investment environment analysis
1
3
4
3
Basic situation of the Philippines
The Philippines is strategically located in the middle of Southeast Asia and is an ideal trade hub for the region.
It is an archipelago composed of over 7,100 islands with total land area of 300,000 sq. m.
4
Basic situation of the Philippines – Economic Data
6.2 %(2018, 2000=100)
GDP Growth
3.8 %(Feb 2019, 2012=100)
Headline Inflation
-3.2 %(2018, % of GDP)
Fiscal Balance
15.8%(UBs and KBs, Sep
2018)
7.6%(January 2019, %
Growth)
23.9%(end-Dec 2018, % of
GDP)
US$28.9bil(2018)
Overseas Filipino
Cash Remittances
US$82.9bil(end-Feb 2019;
7.3 months import
cover)
Gross Reserves
Sources: BSP, PSA
Capital Adequacy
RatioDomestic Liquidity External Debt
106.9mil(13th most Populated
Country in the world)
Population
5
Philippines Economic Development – GDP
3.14.4
2.9 3.65.0
6.74.8 5.2
6.6
4.2
1.1
7.6
3.7
6.7 7.16.1 6.1 6.9 6.7 6.2
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Real GDP Growth (%) Average: 6.4% (2014-2018)
Positive economic growth for 20 consecutive years
Main drivers of Philippines GPD growth are Consumer Spending and Capital Expenditures from government and private infrastructure projects.
The Philippines has a young and fast growing population with a growing middle class which spurs consumer spending.
The current government’s “Build Build Build” Program seeks to accelerate infrastructure spending and develop industries.
Source: Philippines Statistics Authority (PSA)
66
Philippines Economic Development –GDP Growth Drivers
YOUNG AND SKILLED WORKFORCE SUPPORTS THE ROBUST ECONOMIC MOMENTUM
The Philippines currently has a population of 106.9 million and is the 13th most populated country in the world. Population growth rate averages at around 1.5%. Population is forecasted to stand at 125 million by 2030. The Philippines has the youngest median compared to is neighbors and the rest of the world even up to 2030.
THE PHILIPPINES’ WORKFORCE IS:
Highly educated and English proficient Strongly customer-oriented Highly trainable with fast learning curve Adaptable to universal cultures High level of commitment and loyalty
Source: United Nations World Population Prospects 2017
77
Philippines Economic Development –GDP Growth Drivers
Government spending on flagship infrastructure projects are expected to range from Php8-9 trillion (USD180billion) from 2017-2022.
88
Philippines Economic Development - FDIs
RISING INVESTMENTS HIGHLIGHT CONFIDENCE IN THE PHILIPPINES GROWTH PROSPECTS
Net Foreign Direct Investment (FDI) Flows(In USD Billions)
Slide Sourced from DOF Philippine Economic Briefing presentation in Beijing March 20, 2019
99
Philippines Economic Development –Foreign Exchange
Slide Sourced from DOF Philippine Economic Briefing presentation in Beijing March 20, 2019
Current peso movement affected by factors from both external and domestic environment.
Peso outlook is generally stable with pressures to slightly depreciate vs. the USD by end 2019.
The Government’s Build Build Build program requires large import of materials to support infrastructure development, thereby increasing USD demand and widening of Balance of Payment (Import vs. Export) gap.
1010
Philippines Economic Development –Foreign Exchange
Sustained structural flows from remittances and BPOsOverseas Filipinos' cash remittances and BPO revenues
(USD bn)
FX reserves (USD bn) and months of import cover
Ample cushion from external headwinds
Factors that cushion the depreciation are the significant foreign currency remittances from Overseas Filipino Workers (OFWs) at USD28.9 billion and Business Process Outsourcing (BPO) revenues at USD 29.2 billion in 2018. Moreover, the Philippines has dollar reserves of USD82.9 billion which covers 7.3 months of the country’s imports.
1111
Philippines Economic Development –Foreign Exchange
RMB trading community was established in October 2018 and was participated in by 13 local banks and Bank of China.
Establishment of the RMB trading community intends to promote the use of RMB for trade between China and the Philippines and allows the direct RMB/PHP (no USD currency intervention) conversions thereby reducing cost foreign exchange costs.
1212
Comparison of tax rates in ASEAN countries
Income Tax VAT
Cambodia 20% 10%
Indonesia 25% 10%
Laos 24% 10%
Malaysia 24% Sales tax 10%
Myanmar 25%
Philippines 30% 12%
Singapore 17% 7%
Thailand 20% 7%
Vietnam 20% 10%
Tax in Philippines
The Philippines currently has one of the highest
corporate income tax rate in the ASEAN region.
However, the current administration has started
to implement a comprehensive tax reform
program which will include the reduction in
corporate income tax from 30% to 25% and
eventually to 20%. Package 2 of the tax reform
program, which includes the reduction in
corporate income tax rate is expected to be
passed into law later this year.
The government offers tax holidays and
incentives to encourage foreign investments.
Tax benefits may vary depending on nature of
the investment and business to be established.
Certain tax benefits may also be obtained if your
operations will be located in special economic
zones.
1313
► The Philippines is a founding member of Association of Southeast Asian Nations (ASEAN)
and is a beneficiary of the ASEAN Free Trade Area (AFTA) which reduces inter regional
tariffs among the member nations (Philippines, Brunei Darussalam, Indonesia,
Singapore, Malaysia, Thailand, Myanmar, Vietnam, Laos and Cambodia).
► The ASEAN has existing Free Trade Agreements (FTA) with China, Korea, Japan, Australia,
New Zealand and India.
► The Philippines signed a FTA with the European Free Trade Association (EFTA) .
Member states include Iceland, Liechtenstein, Norway and Switzerland.
► The Philippines has a comprehensive bilateral agreement with Japan through the
Philippine-Japan Economic Partnership Agreement (PJPEPA).
Free trade agreement and industrial park
1414
Free trade agreement and industrial park
The Philippines currently has 379 Special Economic Zones• 74 Manufacturing Economic Zones• 262 Information Technology Parks/Centers• 22 Agro-Industrial Economic Zone• 19 Tourism Economic Zones• 2 Medical Tourism Parks/Centers
1515
Philippines investment environment analysis
Advantages
• Sound macroeconomic fundamentals and growth prospects
continues to boost investor confidence and, in turn, FDI growth.
• Opening up to foreign investors and limiting constraints in
doing business has become a priority of the Duterte
administration.
• Increased foreign investors participation in the telecom and
power sectors.
• The Philippines maintains investment grade ratings with
positive or stable outlook.
• Strengthening business and consumer spending.
• Declining poverty rate and estimated labor rate of 94.6
contribute to the Philippines’ sustainable growth trajectory.
• Rising population makes the country attractive for foreign
investment due to its young, well-educated and dynamic
workers.
Disadvantages
• Political and social instability due to upcoming
elections.
• Complex and slow judicial systems/ regulatory
inconsistency.
• Poor infrastructure in most areas, including high power
costs pose major disincentives to investors.
1616
Philippines investment environment analysis
1. Infrastructure, construction of electricity plants, roads and bridges, ports, airports, etc.
2. Industrial transfer of labor-intensive processing and manufacturing industries such as garment and textile
3. Construction and upgrading of Industrial park, warehousing and logistics facilities
4. Integration of the purchase, storage, processing and export of agricultural products
5. Tourism industry including accommodation, F&B, resort, theme park, etc.
6. Construction materials including cement, steel, tile, paint, etc.
17
China-Philippines relations
Good friendship built by both countries’ leaders and has
significantly improved Philippines – China relations
In October 2016, President Duterte made his first state visit
to China and met with President Xi Jinping. Both leaders
agreed to hold bilateral talks on issues related to the South
China Sea. In addition, 13 bilateral cooperation agreements
were signed.
In May 2017, President Duterte joined 27 other
government leaders in Beijing to attend a forum on China’s
Belt and Road Initiative. He also met with President Xi. 3
Memorandum of Understanding (MOUs) were signed
during this visit.
In November 2017, Premier Li Ke Qiang visited to the
Philippines and signed 14 deals with President Duterte
including the 2017 Renminbi Bond Issuance Underwriting
Agreement.
In November 2018, President Xi made a historic visit to the
Philippines as the first Chinese President to hold a State
Visit in the Philippines in 13 years. 29 deals were signed
including an MOU on the cooperation for oil and gas
development.
BOTH THE PHILIPPINES AND CHINA ARE LEADING THE REGION IN GROWTH
18
Bank of China Limited Manila Branch
Started Manila Operations in 2002
Full Commercial Banking License
Headquartered in Bonifacio Global City, Taguig
More than 100 employees
With over 300 local and Chinese corporate clients
19
Bank of China Manila Branch has
established good business relationships
with the top tier Philippines clients,
especially the top 10 conglomerates in
the past years. Bank of China Manila
Branch also plays an active role in the
local syndication market.
Bank of China Manila Branch maintains strong relationships with Chinese enterprises and projects. 43 among 67 (64%) registered members of Chinese Enterprises Philippines Association (CEPA) have
maintained accounts with us.
Bank of China Manila Branch closely monitors projects. All the projects sponsored or subsidizedby the Chinese government are as follows: Davao drug rehabilitation
center Two bridges in Manila Chico River Pump Irrigation CTG CNOOC Makati Subway
Leading Chinese Companies banking with BOC Manila Branch
Bank of China Limited Manila Branch
2020
Bank of China “Going Global” service
Investigation Phase
Preparation Phase
Construction Phase
Operation Phase
Investment Proposal Company Registration Service Certificate of Registered Capital
Referral to Consultants• Legal Consultants• Tax Consultants
Project Financing Syndicated Loans Outbound Guarantee
Letter of Guarantee/Letter of Credit Trust Receipt Financing
Cash Management• Payroll• Global Cash Pooling• Remittances
Working Capital Financing Import/Export Financing Supplier/Customer Matchmaking
Car/Office Rental/Leasing Introduction of Investment Environment
Matching of Investment Opportunities Customer Credit Survey
2121
BOCHK Contact person Office number / email address
Business Development Division
Commercial Banking Department
Ron Chan
Team Head
(852) 3982 7939
Email: [email protected]
Business Development Division
Commercial Banking Department
Benny Law
Relationship Manager
(852) 3982 8941
Email: [email protected]
BOC Manila Branch Contact person Office number / email address
Commercial Banking DepartmentDon D. Capistrano
Head, Commercial Banking
(+632) 297 7861
Email: [email protected]
Transaction Banking DepartmentMin Wenchang
Head, Transaction Banking
(+632) 297 7864
Email: [email protected]
Contacts
2222
Textile
industry
Power energy
industryReal estate
industry
Electronic
industry
Paper
industry
Tire manufacturingAgriculture and
Agriculture products
Photovoltaic
industry
Steel industry
Thank you !