Philippines: Investing

FDI in Figures

Foreign direct investment (FDI) had clearly decreased in 2008-2009 due to the unfavorable international economic environment; however, it has started to rebound again in 2010. The FDI flows tripled between January and August 2011. Considering the comparative advantages of the Philippines, such as: English speaking and well-skilled manpower, a strong cultural proximity to the United States, its geographical location in a dynamic area, the FDI flow in the Philippines remains rather weak. This can be partially explained by the fact that the country is evolving into a service society, with a low capital strength, which means a need of minimal equipment. In addition, the government favors subcontracting agreements between foreign companies and local enterprises rather than FDI in the strict sense of the term. Lastly, corruption, instability, inadequate infrastructures and not enough juridical security discourages investment.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	1,544	1,963	1,713
FDI Stock (million USD)	21,611	23,180	24,893
Performance Index*, Ranking on 141 Economies	122	110	-
Potential Index**, Ranking on 141 Economies	80	-	-
Number of Greenfield Investments***	140	120	-
FDI Inwards (in % of GFCF****)	6.3	11.6	-
FDI Stock (in % of GDP)	12.9	14.6	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2011, in %
Japan	36.6
The United States	19.5
Netherlands	10.6
Korea	10.1
Australia	1.9
Taiwan	1.9
Canada	1.7
Singapore	1.7
UK	1.5
India	1.5

Main Invested Sectors	2011, in %
Manufacturing sector	60.1
Real Estate	13.1
Electricity, water, gas	11.6
Services	7.1
Information and communication	2.1

Source: Board of Investment - Last Available Data.

Form of Company Preferred By Foreign Investors: Joint-stock company
Form of Establishment Preferred By Foreign Investors: A company
Main Foreign Companies: Lafarge, Philips, Shell, Intel, Texas Instrument, ING, Cemex
Sources of Statistics: Philippine Board of Investment

Why You Should Choose to Invest in the Philippines

Strong Points: The country's main strong points are:
- A skilled English-speaking workforce;
- A large domestic market;
- Its membership to ASEAN;
- A favorable investment policy;
- A very advanced legal system;
- A strategic location at the Asian gateway; and
- Considerable natural wealth.
Weak Points: The country's weak points lie in its political instability, the bad quality of its infrastructures, judicial precariousness and lack of transparency.
Government Measures to Motivate or Restrict FDI: Laws liberalizing business practices have opened up more fields to foreign investments and have provided foreign investors with the same incentives as ASEAN members, as well as simplified procedures.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By the Philippines: The Philippines have signed bilateral investment agreements with many countries, listed here.
International Controversies Registered By UNCTAD: Two cases are registered with UNCTAD, one involving the Swiss monitoring company SGS and the other involving the German airport constructor Fraport AG Frankfurt Airport Service. For further details, see here.
Organizations Offering Their Assistance in Case of Disagreement: PDRCI , Chamber of Commerce Center for conflict resolution
ICCWBO , International court of arbitration, International chamber of commerce
Member of the Multilateral Investment Guarantee Agency: Yes.

Country Comparison For the Protection of Investors

	Philippines	East Asia & Pacific	الولايات المتحدة	Germany
Index of Transaction Transparency*	2.0	5.2	7.0	5.0
Index of Manager’s Responsibility**	2.0	4.5	9.0	5.0
Index of Shareholders’ Power***	8.0	6.3	9.0	5.0
Index of Investor Protection****	4.0	5.3	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: Not guaranteed.
Acquisition of Holdings: A majority holding interest in the capital of a local company is legal in the Philippines.
Obligation to Declare: The agency for the promotion of foreign investment in the country provides information about the authorizations required for setting up business.
Competent Organization For the Declaration: Philippine Board of Investment
Requests For Specific Authorizations: The sectors open to foreign investment after an authorization has been obtained are listed in Annexe B of the Foreign Investment Act.

Office Real Estate and Land Ownership

Possible Temporary Solutions: According to the Investors' Lease Act (R.A. 7652, 1994), a foreign investor is authorized to rent private land for 50 years, renewable for a period of 25 years, provided that the land is intended for investment (industrial buildings, factories, companies, tourism, etc.).
The Possibility of Buying Land and Industrial and Commercial Buildings: The Constitution of 1987 forbids foreigners to buy land.
Risk of Expropriation: The law provides for protection against expropriation except for reasons of public interest, national welfare, security/defense against payment of just compensation; and it provides for protection against requisitioning of goods except in case of war or national emergency and against payment of just compensation.

Investment Aid

Forms of Aid: Exemptions and tax relief, administrative and Customs facilities.
Privileged Domains: Tax incentives (exemptions and tax relief) and non-tax incentives (import facilities, easy family reunification, assistance)
Privileged Geographical Zones: Priority sectors in the Investment Plan: agriculture, agrobusiness, fishing, infrastructure, tourism, research and development, engineering products, highly technological strategic activities and those creating jobs.
Free Zones: The autonomous region of Mindanao, less developed areas (LDA), "ecozones" under the Philippine Economic Zone Authority (PEZA), and the special economic zones of Subic Bay (SBF), Clark (CSEZ), Cagayan, and Zamboanga (Zamboecozone).
Organizations Which Finance: Export Financing Institution

Investment Opportunities

The Key Sectors of the National Economy: Services (transport, communications, storage), export of expert know-how (IT services consultant, IT, engineering).
High Potential Sectors: Gold and copper industries
Privatization Programs: The energy sector, retail trade
Tenders, Projects and Public Procurement: Tenders Info, Tenders in the Philippines
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: The "Negative List" gives the economic sectors reserved entirely or partially for nationals. Among others there are: mass media, the retail trade, advertising, public services.
Sectors in Decline: The agricultural and mining sectors

Finding Assistance For Further Information

Investment Aid Agency: Board of Investment
Other Useful Resources: Philippine Chamber of Commerce and Industry
Doing Business Guides: Philippines, International Tax and Business Guide, Deloitte
Doing Business in the Philippines 2011
Philippines Commercial Guide 2010 - Buy USA

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