strategies for the market entry philippines

Strategies for the Market Strategies for the Market EntryEntry

PhilippinesPhilippines

June 2011June 2011

The good newsThe good news

English is widely spoken, the legal system is in English, English is widely spoken, the legal system is in English, English is the business language, English is also used English is the business language, English is also used in the communication with government – at all levels.in the communication with government – at all levels.

The government is accessible – up to the top; advocacy The government is accessible – up to the top; advocacy work in both Houses of Congress is possible; work in both Houses of Congress is possible; discussions with the Supreme Court are possible, too.discussions with the Supreme Court are possible, too.

The interpretation of laws is relatively flexible; all The interpretation of laws is relatively flexible; all shades of grey vs. black : white. (this can – of course - shades of grey vs. black : white. (this can – of course - be used against foreign investors).be used against foreign investors).

The 100 million people market is growing and offers The 100 million people market is growing and offers business opportunites in many fields – 7 BIG business opportunites in many fields – 7 BIG WINNERSWINNERS..

The not so good newsThe not so good news Too many laws; inefficient implementation; Too many laws; inefficient implementation; Too many lawyers; too many cases; justice Too many lawyers; too many cases; justice

is slow and unpredictable; arbitration is slow and unpredictable; arbitration outside the country is recommended; outside the country is recommended;

Too much democracy; everybody has an Too much democracy; everybody has an opinion and makes it known: NGOs, the opinion and makes it known: NGOs, the church, local governments and the press; church, local governments and the press;

The Philippines – government and the The Philippines – government and the private sector– is dominated by large private sector– is dominated by large (political) families; (political) families; important when important when deciding on a joint venture partner;deciding on a joint venture partner;

..

Strategies for market Strategies for market entryentry

Market information / Market information / market market analysisanalysiswho is there alreadywho is there already local and foreign investors in local and foreign investors in

your sectoryour sectorare the large families active in are the large families active in

that sectorthat sectorwhat are the government’s planswhat are the government’s plans


Market structuresMarket structuresLaws dominating your potential Laws dominating your potential sectorsector

Privatisation policies by Privatisation policies by government, i.e. energy and government, i.e. energy and waterwater

Retail / wholesale / franchisingRetail / wholesale / franchisingLuzon, Visayas, Mindanao – Luzon, Visayas, Mindanao – where to go?where to go?


Partner search / partner Partner search / partner selection – very importantselection – very important

Cooperation agreements – local Cooperation agreements – local lawyers need to be involvedlawyers need to be involved

Talk to people already active in Talk to people already active in the Philippines – the first hour is the Philippines – the first hour is FREEFREE

Contract structuresContract structures

Partnership agreementsPartnership agreements Technology agreementsTechnology agreements Service agreementsService agreements Board composition – Control Board composition – Control

mechanismsmechanisms FinancingFinancing Risk distributionRisk distribution Arbitration clauses in contractsArbitration clauses in contracts Selection of lawyers importantSelection of lawyers important

Options for market entryOptions for market entry

Buying a company or a share Buying a company or a share of a companyof a company

Joint ventures with existing Joint ventures with existing companiescompanies

Starting from scratch/ Starting from scratch/ location is importantlocation is important

Partner selection importantPartner selection important

What else is important?What else is important?

Dialogue with the national Dialogue with the national and local governmentsand local governments

Dialogue with partnersDialogue with partnersDialogue with employeesDialogue with employeesDialogue with ‘neighbors’– Dialogue with ‘neighbors’– NGOs, Church, etc. - CSRNGOs, Church, etc. - CSR

Investment incentivesInvestment incentives

Tax holidays – low income tax later – for Tax holidays – low income tax later – for priority sectorspriority sectors

Duty- and tax-free importation of Duty- and tax-free importation of investment equipment / machinery, etc.investment equipment / machinery, etc.

Repatriation of profits (if capital inflow Repatriation of profits (if capital inflow was registered with the Central Bank)was registered with the Central Bank)

If 70% of production is exported – locate If 70% of production is exported – locate in an export processing zone (PEZA)in an export processing zone (PEZA)

……and finally…and finally…

Many investors are earning good Many investors are earning good moneymoney

Learn from the mistakes of othersLearn from the mistakes of others Make use of partnersMake use of partners Build and maintain contacts to Build and maintain contacts to

governmentgovernment Industry associations are importantIndustry associations are important ECCP is super important!!ECCP is super important!!

……and now – 7 big and now – 7 big winnerswinners

Agri-BizAgri-Biz IT/BPOIT/BPO Tourism – medical travel – Tourism – medical travel –

retirementretirement Creative IndustriesCreative Industries ManufacturingManufacturing MiningMining Infrastructure Infrastructure

Agri-BizAgri-Biz

To address Food Security, it becomes To address Food Security, it becomes essential that businessmen and essential that businessmen and farmers work togetherfarmers work together

Created Agro-Industrial Zones with Created Agro-Industrial Zones with special incentivesspecial incentives

Good models for agri-biz: Nestlé’s Good models for agri-biz: Nestlé’s cooperation with coffee growerscooperation with coffee growers

Main crops: rice, corn, cassava, Main crops: rice, corn, cassava, coconut, fruits, fish / seafood, coconut, fruits, fish / seafood,

IT / BPOIT / BPO

Business Process Outsourcing: in 5 years, this Business Process Outsourcing: in 5 years, this sector moved to 650,000 people employed sector moved to 650,000 people employed and invoicing US$ 8 billion in servicesand invoicing US$ 8 billion in services

Philippines bigger than India in voice; growth Philippines bigger than India in voice; growth in future will be in non-voicein future will be in non-voice

More Italian MNCs, dealing with English-More Italian MNCs, dealing with English-speaking clients, should outsource to the speaking clients, should outsource to the PhilippinesPhilippines

Target 2016: employment for 1.3 million / Target 2016: employment for 1.3 million / service export: US$ 20 billionservice export: US$ 20 billion

Tourism / medical Tourism / medical travel / retirementtravel / retirement

Philippines has more than 7,000 tropical Philippines has more than 7,000 tropical islands but 3 million visitors per year only; islands but 3 million visitors per year only; large potentiallarge potential

Medical travel is becoming a big market; the Medical travel is becoming a big market; the Philippines offers excellent medical services – Philippines offers excellent medical services – US-trained doctors and nursesUS-trained doctors and nurses

Philippines is Philippines is the the destination for retirement of destination for retirement of aging populations; a decent lifestyle at lower aging populations; a decent lifestyle at lower costscosts

Filipinos well prepared to deal with aging Filipinos well prepared to deal with aging people and care for patientspeople and care for patients

Creative ServicesCreative Services This is a sunrise industry – from animation to This is a sunrise industry – from animation to

design, from performing arts to advertising, from design, from performing arts to advertising, from multimedia to music, from architecture to film multimedia to music, from architecture to film and video production, from content development and video production, from content development to gaming, from application development to to gaming, from application development to fashionfashion

This sector is closely related to IT/BPO and can This sector is closely related to IT/BPO and can be seen as KPO – Knowledge Process be seen as KPO – Knowledge Process OutsourcingOutsourcing

This is an attractive area for cooperation This is an attractive area for cooperation between international creative sectors and the between international creative sectors and the PhilippinesPhilippines

ManufacturingManufacturing Philippines is a logistics hub into AsiaPhilippines is a logistics hub into Asia Export processing zones all over the country; well Export processing zones all over the country; well

managed; 70% needs to be exportedmanaged; 70% needs to be exported Philippines: big in electronics and Philippines: big in electronics and

semiconductorssemiconductors 100 million Filipinos represent an exciting market 100 million Filipinos represent an exciting market

for all kinds of products; local formulation or for all kinds of products; local formulation or production will improve competitivenessproduction will improve competitiveness

Attractive incentives for manufacturing available; Attractive incentives for manufacturing available; zero-duty within ASEAN can make RP production zero-duty within ASEAN can make RP production hub!hub!

MiningMining

Philippines is rich in minerals: copper, gold, Philippines is rich in minerals: copper, gold, nickel – with large depositsnickel – with large deposits

Big copper mine – US$ 5.2 billion investment – Big copper mine – US$ 5.2 billion investment – to start production in 2015to start production in 2015

Substantial Chinese interest, but also from Substantial Chinese interest, but also from Canada and AustraliaCanada and Australia

As the market develops, substantial As the market develops, substantial opportunities for the supply industry – opportunities for the supply industry – especially equipmentespecially equipment

There are issues with local governments and There are issues with local governments and the churchthe church

Infrastructure IInfrastructure I

The country only spent less than 2% of GDP on The country only spent less than 2% of GDP on infrastructure in recent years; target 5% of infrastructure in recent years; target 5% of GDPGDP

Building infrastructure consequently a Building infrastructure consequently a cornerstone of the new administrationcornerstone of the new administration

Given the large financial requirements, the Given the large financial requirements, the government pushes PUBLIC PRIVATE government pushes PUBLIC PRIVATE PARTNERSHIPPARTNERSHIP

In 2011, the first 10 infrastructure projects will In 2011, the first 10 infrastructure projects will be bidded outbe bidded out

Many additional projects will follow in 2012Many additional projects will follow in 2012

Infrastructure IIInfrastructure II The PPP ‘product’ is still being perfectedThe PPP ‘product’ is still being perfected Projects are in transport (rail and road), Projects are in transport (rail and road),

power (LNG, coal, natural gas and power (LNG, coal, natural gas and renewable), airports, seaports, water...renewable), airports, seaports, water...

On the European side, we have a few On the European side, we have a few difficult projects that need to be resolved difficult projects that need to be resolved before PPP can fully be exploited: NAIA T3, before PPP can fully be exploited: NAIA T3, Ro-Ro and Laguna Lake RehabilitationRo-Ro and Laguna Lake Rehabilitation

But involvement in PPPs can be on smaller But involvement in PPPs can be on smaller scale also:scale also:

Example: my weighing scale project!Example: my weighing scale project!

… … let me remind you…let me remind you… Many investors are earning good Many investors are earning good

moneymoney Learn from the mistakes of othersLearn from the mistakes of others Make use of partnersMake use of partners Build and maintain contacts to Build and maintain contacts to

governmentgovernment Industry associations are importantIndustry associations are important ECCP is super important!!ECCP is super important!! Let‘s go!Let‘s go!

Thank you!Thank you! Hubert d’AbovilleHubert d’Aboville

PresidentPresidentEuropean Chamber of Commerce of the European Chamber of Commerce of the Philippines, Inc. (ECCP)Philippines, Inc. (ECCP)1919thth Floor, Philippine AXA Life Centre, Floor, Philippine AXA Life Centre, Sen. Gil Puyat AvenueSen. Gil Puyat AvenueMakati-CityMakati-CityTel: +63 2 7596680Tel: +63 2 7596680Email: [email protected]: [email protected]

[email protected]@pamatec.com.ph

strategies for the market entry philippines

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