Philippines as a Business Destination
With an impressive growth of 6.9 percent in the third quarter of 2017, the Philippines remains to be one of the best performing economies in Asia and an increasingly attractive investment destination. The sustained strong growth in exports and improvements in public spending boosted economic growth performance to exceed market expectations.
The Philippines’ economic success is also attributed to its substantial domestic consumer base of 100 million and remittances from eight million Filipinos working abroad. Powered by a young, skilled, and English-speaking workforce, the country is the world’s largest center for business process outsourcing and boasts of a strong industrial sector based on the manufacturing of electronics and other technology components for overseas corporations. It is rich in natural resources with significant reserves of chromite, nickel, copper, coal, and oil.
The Philippine government continues to improve the business climate by simplifying procedures in registering a business and following through on other measures to encourage more foreign investments.
Rising Global Competitiveness Ranking
Priority Exports for Promotion in Singapore
Singapore as a major trading hub in ASEAN is a vital market for Philippine exports of goods and services.
Fresh and Processed Food
The Philippines is a major exporter of raw ingredients, fresh and processed seafood and fresh produce to the US, Japan, China, Korea, UAE and Singapore. In 2016, Singapore ranks ninth in Asia as a food export market for the Philippines, with fresh crab, lobster and prawn as major export items. Other Philippine food products are also available in FairPrice, Giant and Chinatown.
A number of Philippine companies are halal-certified. Philippine halal suppliers offer products under these food segments: Cereal, Carrageenan and other food additives, Beverage, Bakery, Grain, Chemical, Confectionary, Beauty and Cosmetic, Egg, edible fungus, Flour and Starch, Food Supplement, Gelatin, Ice Cream and Dairy, Ink and Packaging Material, Noodle and Pasta, Nut, Oil and Coconut By-Product, Poultry, Meat and Meat Shop, Processed Fruit, Meat, Vegetable and Seafood, Fresh and Frozen food, Sauce and Condiment, Candy, Sugar Product and Sweetener, Soya, Syrup, Toll Packer and Toll Manufacturer, Snack, Processing Aid, Biscuit, Pickled Seaweed and Drinking Water Treatment.
For non-food, the country produces pharmaceutical and healthcare and personal care products. It is also slowly beefing up facilities as well needed by Muslim travelers such as hotels, mosques, prayer and foot washing spaces.
The Philippines is making its bid to join this lucrative market by aligning its halal accreditation systems and institutions. A Halal Board was established in 2017 under the Philippines Halal Export Development and Promotion Act of 2016 which would be developing a comprehensive set of strategies on halal certification and export promotion.
Engineering and Architecture Services
The Philippine engineering design sector offers a large number of services for foreign companies outsourcing to the Philippines, including civil engineering, architecture, and structural-design assistance. Its growth can be attributed to a similar trend of development in closely related industries such as the construction and real estate industries. Several foreign companies are utilizing Philippine talent and resources for core research and product development purposes, planning, and procurement procedures, even for critical construction projects. Every year, over 62,000 IT-enabled and English-proficient Engineering graduates integrate into the Philippine workforce. Known for their creativity, they are also well-versed in a number of advanced engineering programs, including CAD, CAM and AutoCAD.
Maintenance, Repair and Overhaul (MRO) Service
The Philippines can support Singapore as it strengthens its aerospace industry. Key Philippine aerospace and aviation players in the fields of parts manufacturing, MRO and aviation training have chartered significant growth, with projected export revenues of up to USD 1.5 billion in the next 10 years. The country now has 75 MRO companies specializing in airframe heavy maintenance, engine and APU maintenance, component/systems maintenance, repair services, and aircraft interiors MRO. Major MRO firms that have operations in the Philippines include Lufthansa Technik, SIA Engineering (Philippines), Airbus Helicopters, Honeywell CEASA (Subic Bay) Company, Asian Aerospace Corporation, and Aerotechnok Services. The MRO sector provides services to the domestic and international commercial aviation industries, and general aviation industry.
Apart from the competitive cost and abundance of human resources, the country’s advantage is its speed of service delivery and turnaround.
A number of Philippine companies with unique and world-class products and services have found success overseas such as San Miguel Corporation, Jollibee, Universal Robina Corporation, Liwayway Marketing Corporation, United Laboratories, Manila Water, Metro Pacific Group and International Container Terminal Services.
Children clothing label Periwinkle recently expanded to Indonesia and Max’s Group brought Yellow Cab Pizza to Singapore in 2017.
According to Samie Lim, chair emeritus of the Philippine Franchising Association, the Philippines has a wealth of knowledge and expertise to lean back on. He shares that the Philippines has the second-largest pool of professionally-certified franchising executives in the world, next to the US and this, combined with the Filipino entrepreneurs’ search for growth, can be relied on to fulfill that desire to test its mettle against foreign counterparts.
Priority Sectors for Singapore investments in the Philippines
As the Philippines pursues sustainable economic growth, it is reaching out to Singapore for stronger partnerships on these key Philippine industry sectors.
To meet the rising demand as the Filipino Muslim population increases, the Philippines is open to collaborate with Singapore in bringing in more halal-certified food and non-food products and services to the country.
Investors are invited to participate in the Zamboanga City Special Ecozone 100-hectare property project to be designed exclusively for halal processing and manufacturing. The groundbreaking ceremony was held in 2016. While the Philippines is not yet considered a major player in the halal market, its tropical climate and abundant natural resources make it a viable place to become a regional center for halal food.
Information Technology and Business Process Management Services
With its highly-skilled, culturally adaptable and language-proficient professionals, the Philippines is positioned to be an important offshore IT service provider for regional and global operations of Singapore and Singapore-based companies.
The Philippine IT-BPM sector has grown at an annual rate of 30 percent over a decade, faster than the growth of the global offshore services market. As it has grown, the industry has diversified significantly in breadth, scale, and maturity of services from contact center to back office, IT, healthcare, engineering, finance and accounting, business analytics, big data, animation and game development. Over 40 of the 2014 Fortune 1000 and other large global organizations, including those from India have a Global In-House Center in the country. These have built sizeable scale in the Philippines and have been driving the growth of non-voice and complex services.
Infrastructure, Construction and Public-Private Partnership (PPP) Projects
The Philippines looks forward to the participation of Singapore in developing Philippine infrastructure and logistics that will hasten movement of people and goods and linkages with regional markets. Investors are invited to bid for major Philippine projects as the current administration hikes up infrastructure spending to improve and modernize road networks, railways, seaport systems and airport systems. The rollout of infrastructure projects would be accelerated with the revitalized PPP.
Clark Green City
For Singaporean investors looking for expansion opportunities outside the already congested Metro Manila, Clark Green City (CGC) in Central Luzon is a new investment destination, located at 80 km north of Manila. Clark is adjacent to an international airport (Clark International Airport) and seaport (Subic Bay Seaport), which are linked by Subic-Clark-Tarlac Expressway. These make for convenient import and export transactions.
The CGC is being developed by the Bases Conversion and Development Authority (BCDA) as the country’s first green and intelligent global metropolis. It enjoys natural protection from typhoons, with the Sierra Madre to the West and the Zambales mountain range to the east.
Being in a special economic zone, CGC has tax benefits which will be favorable to 100 percent foreign-owned companies. To attract more investors, BCDA will grant fiscal and non-fiscal incentives for locators.
Regional Headquarters and Regional Operating Headquarters (RHQs and ROHQs)
As a regional business hub, Singapore has attracted over 5,000 multinational companies. However, operations in Singapore are constrained by rising rental and labor costs and in recent years, tightening of flow of foreign workers.
The Philippines is poised to be a viable option for setting up RQHs and ROHQs, with its excellent track record as a back-office location for multinationals and abundance of skilled and English-speaking workers.
The arrival of foreign shipbuilders in the Philippines propelled the export growth of the Philippine-made ships and vessels. With available skilled labor and areas for shipyards, the Philippines is able to support the Singaporean shipbuilding and marine and offshore industry. An example is Keppel which has shipyards in the country.
Tourism Facilities: It’s More Fun in the Philippines
The increasing tourist arrivals in the Philippines and the corresponding requirements for tourism facilities and services offer an opportunity for Singaporean companies seeking growth prospects in ASEAN and particularly in the country.
For the month of May 2017, visitor arrivals reached a total of 532,757, an increase of 19.60 % compared to the May 2016 visitor count of 445,449. It could be noted that from 2012 to 2015, the month of May only generated more than 300,000 visitors while it produced more than 400,000 visitors last year.
For the first time this year, visitor arrivals in May surpassed the 500, 000-mark providing a bright outlook for Philippine tourism. This positive growth in arrivals can be attributed to aggressive marketing efforts and international events which included the ASEAN@50 meetings held in the country.
CapitaLand operating the Ascot, Somerset and Citadine brands, has several projects in the country. Other investors include Banyan Tree, Hong Leong Investment Holdings and Fairmont Raffles Hotel Group.
Since 2014, the DTI has been working closely with the Department of Science and Technology-Information and Communications Technology Office (DOST-ICTO) (now called Department of Information and Communications Technology) for the development of the startups and innovation ecosystem in the Philippines. During the APEC 2015 hosting, DTI launched SlingshotMNL which paved the way in gathering and development of startup community among APEC economies. It was then followed by series of dialogues and mentoring dubbed, Slingshot Philippines in April 2016, and Slingshot ASEAN in October 2017.
In one of the Slingshot events in 2017, DTI unveiled the Startup Ecosystem Development Program (SEDP), an industry cluster program to foster inter-enterprise linkages among micro, small and medium enterprises and strengthen collaborative networks. SEDP is composed of a five-point program with short, medium, and long-term impact. Some of the action points have been implemented such as the establishment of the Negosyo (business) Centers Plus which have the capabilities to service technology startups and engage the local community through relevant activities, mentoring, networking and pitching. The first center is the QBO Innovation Hub in Makati which is a partnership with the Department of Science and Technology (DOST), incubator-accelerator Ideaspace Foundation and JP Morgan.
While the Philippines can certainly learn from Singapore’s expertise and experience in this space, Singapore is also seen as a potential source of venture capital and partners. The availability of a thoroughly capable workforce in the Philippines will help Singapore companies achieve scale and speed. Philippine universities produce thousands of graduates specializing in engineering and technology annually, with majority of them skilled in app design and programming languages.
Board of Investments 2017 Investment Priorities Plan (IPP)
The IPP is a list of priority investment activities that may be given incentives. With the theme “Scaling Up and Dispersing Opportunities,” the 2017 IPP brings forth significant additions and changes, following the President’s zero + 10-point Socio Economic Agenda, the aspirations embodied in AmBisyonNatin 2040, and the Philippine Development Plan 2017-2022.
Broadly these changes include further emphasis on innovation-driven and job-generating businesses; inclusive business for agribusiness and tourism; broadened coverage of manufacturing; information technology (IT) and IT-enabled services for the domestic market and telecommunications services for new market players; environment and climate change-related projects; LGU-initiated PPP projects; drug rehabilitation centers; state-of-the-art engineering, procurement and construction (EPC) services; and the lifting of geographical restrictions for most agriculture and tourist accommodation facilities.