introduction of investment in philippines

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Introduction of Investment in Philippines

April 4, 2019

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Table of Contents

Basic situation of the Philippines

Bank of China “Going Global” service

Philippines economic development2

Philippines investment environment analysis

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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.

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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

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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)

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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

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Philippines Economic Development –GDP Growth Drivers

Government spending on flagship infrastructure projects are expected to range from Php8-9 trillion (USD180billion) from 2017-2022.

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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

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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.

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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.

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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.

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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.

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► 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

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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

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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.

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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.

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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

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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

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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

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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


BOC Manila Branch Contact person Office number / email address

Commercial Banking DepartmentDon D. Capistrano

Head, Commercial Banking

(+632) 297 7861


Transaction Banking DepartmentMin Wenchang

Head, Transaction Banking

(+632) 297 7864


Contacts

2222

Textile

industry

Power energy

industryReal estate

industry

Electronic

industry

Paper

industry

Tire manufacturingAgriculture and

Agriculture products

Photovoltaic

industry

Steel industry

Thank you ！

introduction of investment in philippines

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