Philippine Investment Seminar and PPP Roundtable Conference Presentation.pdf · While it recorded volatile trend of IPA-approved investments from 2006 - 2011, Korea remains to be
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“Investment Climate and Business Environment in the Philippines” CRISTINO L. PANLILIO DTI Undersecretary Trade and Investment Promotions Group Philippine Investment Seminar and PPP Roundtable Conference
“Investment Climate and Business Environment in the Philippines”
CRISTINO L. PANLILIO DTI Undersecretary
Trade and Investment Promotions Group
Philippine Investment Seminar and
PPP Roundtable Conference
발표자
프레젠테이션 노트
Philippine Investment Climate
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
Sep-11 Oct-11 Nov-11 Dec-11
Philippines Indonesia Malaysia Singapore
Philippines = 4.07% YTD
Strongest performing stock market in Asia in 2011
Source: Presentation of Dr. Bernardo Villegas, Trade and Investments Talks, BOI, February 2012
발표자
프레젠테이션 노트
As a sign of confidence by both the local and international community on the near term prospects of the country, the Philippines was the strongest performing stock market in Asia in 2011, rising 4.1% last year. ASEAN Stock Market: Comparative Figures (Source: Presentation of Dr. Bernardo Villegas, Trade and Investments Talks, BOI, February 2012)
• 2011 OFW remittances are expected to cross the $20 Billion barrier with full year estimate at $20.1 Billion
• No expected decrease despite global slowdown due to geographically diversed sources
Continuous inflow of OFW remittances
발표자
프레젠테이션 노트
2011 Overseas Foreign Worker Remittances are expected to cross the $20 Billion barrier with the full year estimate at $20.1 Billion. Since the remittance base is geographically diverse, the economy is shielded from a showdown in any one part of the world. Continued growth of remittance over the last decade has created a sustained current account surplus and supported the build-up of foreign exchange reserves.
The Philippine economy continues to benefit from a convergence of positive influences. Continued positive perception towards the Aquino administration is contributing to a relatively benign political situation and strengthening investor confidence – both domestic and overseas. The year 2010 exhibited remarkable growth for the country as it experienced the highest GDP in the post Marcos era from 1.1 percent in 2009 to 7.3%. For 2011, the domestic economy grew 3.7 percent which is close to the revised forecast of the World Bank and International Monetary Fund of between 3.6 to 3.7 percent. The final figure however is below the growth forecast of the government of 4.5 percent. The positive, although moderate growth is still a welcome development considering the various negative external factors, including the European debt and economic woes, the weak recovery of the US economy and the supply chain disruptions due to the flooding in Thailand. In addition, the country was hit by numerous typhoons that resulted in heavy damages. Economic managers of the Aquino government are confident that this year the economy would grow by 5-6 percent in the back of the vigorous implementation of the public private partnership (PPP) program and vigorous spending of public funds. While annual inflation rate as of January is peg at 3.9 percent, well within the government’s target of 3% to 5% for the year, as indicated in the Philippine Development Plan (PDP), 2011-2016.
• 2011 Service Exports hit an all-time high of US$11 Billion
o Anchored on the BPO sector that directly employs 640,000 people
• 2010: 34% Merchandise exports growth at US$51.4 Billion • 2011: Electronics exports decreased by 23.7%, but overall
decrease was only 6.9% at US$47.8 Billion o 2011 saw the growth of other top earners: apparel & clothing
21.3% surge in Gross International Reserves to US$77.043 Billion
by January 2012 (US$13.5 billion higher than January 2011)
Steady export growth despite global economic slowdown
발표자
프레젠테이션 노트
2011 Service Exports are poised to hit all-time high of $11 Billion anchored on the strength of the BPO sector that directly employs 640,000 people. Merchandise exports broke records in 2010 growing 34% to $51.4 Billion. For 2011, although electronics exports decreased 23.7%, overall decrease was only 6.9%, bringing down exports to $47.8 Billion in 2011. Last year, there was highly encouraging growth in the other top earners. For example, articles of apparel and clothing accessories increased by 11.4% for $1.985 Billion worth of shipments in 2011. Woodcrafts and furniture surged by 56.6% to $1.849 Billion. Coconut oil exports rose by 12.6% to $1.425 Billion. Ignition wiring sets went up by 0.24% to $1.110 Billion. Cathodes and sections of cathodes of refined copper went up by 40.2% to $1.128 billion. All these contributed to the 21.3% surge of our Gross International Reserves to $77.043 billion by January 2012. This was $13.5 billion higher than the $63.54 billion booked in the same month last year. It has also eclipsed the previous all-time high of $76.206 billion recorded in November 2011. This end-January 2012 GIR could cover 11.3 months’ worth of imports of goods and payments of services and income, much more than the benchmark foreign exchange requirement of 3 months of imports. It was also equivalent to 10.8 times the country’s short-term external debt based on original maturity and 6.9 times based on residual maturity.
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0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010 2011
PEZA
BOI
In Billion Pesos
Close to 30% Increase in BOI and PEZA Investment Approvals (more than P650 Billion)
29.77%
발표자
프레젠테이션 노트
Just between BOI and PEZA and not including the other Investment Promotion Agencies, investment registrations in 2011 exceeded P 650 Billion. With P182 Billion of infrastructure investments programmed for 2012, we are close to a trillion pesos of new productive capital.
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Source: 2011 NSCB Report
Japan - Php77.36B
USA - Php70.39B
Netherlands - Php28.30B
China - Php20.65B
Singapore – Php14.93B
TOP 10 SOURCES OF FOREIGN INVESTMENTS IN Y2011
10
9
8
7
6
5
4
3
2
1 Korea - Php14.14B
Cayman Is. – Php3.27B
Taiwan – Php3.12B
British Vir. Is. – Php2.31 B
Switzerland – Php.2.04B
IPA-Approved Investments by Industry in Y2011
발표자
프레젠테이션 노트
The top 10 source of IPA-approved investments are: (read the slide …) For the period January to December 2011, the hefty investments of PhP 77.4 billion pledged by Japan placed it at number one, with a share of 30.2 percent, followed by the USA, committing PhP 70.4 billion or 27.5 percent, and the Netherlands cutting in PhP 28.3 billion or 11.1 percent. Compared to their year-ago pledges, Japan and USA recorded increases with the USA posting the highest increase, from PhP 13.1 billion to PhP 70.4 billion. The large amount of investment commitments poured into the manufacturing industry in all quarters of 2011 placed it at top post, receiving the highest pledges worth PhP 142.3 billion or 55.5 percent of total FDI during the period. However, pledges in manufacturing declined by 12.7 percent from PhP 162.9 billion in the same period the previous year.
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Korea’s Investment Performance in the Philippines
Source: 2011 NSCB Report
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
2006 2007 2008 2009 2010 2011
Php54,326.80
Php12,076.50
Php39,953.60
Php9,623.60
Php31,182.40
Php14,146.00
In Million Peso
Electricity, gas, steam & air conditioning supply
Php2,248.3
Manufacturing Php9,841.4
Arts, entertainment & recreation Php1,32.4
IPA-Approved Investments from Korea From Y2006 to Y2011
Korean Investments by Sector From Y2006 to Y2011
Other Sectors
발표자
프레젠테이션 노트
While it recorded volatile trend of IPA-approved investments from 2006 - 2011, Korea remains to be a major Foreign Direct Investor of the Philippines. In 2011, Korea was the 6th top foreign investor of the country with Php14,146.0 approved investments, representing 5.5% of the total IPA-approved investment last year. While in 2010, it was ranked 3rd after it recorded Php31,182.4 approved investment, representing 15.90% of the total IPA-approved investments for this year . Korean approved investments in 2011 went to, among others, the following sectors and/or industries: manufacturing; electricity, gas, steam and air conditioning supply; construction, real estate; and arts, entertainment and recreation. The top recipient of Korean investments is the manufacturing industry with investment commitments valued at Php9.84B approved followed by electricity, gas, steam & air conditioning supply receiving 2.24B and arts, entertainment & recreation receiving Php1.32 billion. It is noteworthy also to recall that Korea became the second top investor of the Philippines in 2008 when KEPCO SPC Power Corporation registered with the BOI its 200MW power generation project located in Brgy. Colon, City of Naga, Cebu. This project amounts to Php19.94 billion or about 49.92% of the IPA-approved investments from Korea in 2008.
• Outstanding loans of universal and commercial banks amounted to P2.79 Trillion by end of 2011, up by 19.3% from last year
• As of end November 2011, non-performing loans ratio of universal and commercial banks improved to 2.39%, lower by 0.67 percentage points from past year’s 3.06% ratio
Robust domestic financial sector coupled with credit growth
발표자
프레젠테이션 노트
Outstanding loans of universal and commercial banks in the country amounted to P2.79 trillion by the end of 2011, up by 19.3% from last year. As of end-November 2011, the non-performing loans (NPL) ratio of universal and commercial banks (U/KBs) further improved to 2.39%. This ratio was lower by 0.67 percentage point from year ago’s 3.06% ratio. In the midst of weaker global economic prospects, robust credit growth should provide adequate support to domestic production, investment, and spending.
• P96.3 Billion deficit in January to November 2011 was 64.3% lower than last year
• 2012 budget puts the government on track for a reduced deficit at 2.0% of GDP by 2013
Efficient revenue collection effort
발표자
프레젠테이션 노트
Revenue collection effort for taxes and customs duties are now much more efficient as reflected by the declining budget deficit. The government’s P96.3 billion deficit in Jan-Nov 2011 was 64.3% lower than last year’s, while the 2012 budget puts the government on track for a reduced deficit at 2.0% of GDP by 2013.
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Improving Global Competitiveness Ranking
Improvement in Rank in 2011 World Economic Forum Global Competitiveness Index
+10 (from #85 to 75;
out of 142 countries) World Bank (2010) Government Effectiveness Indicator
+1 (from #51 to 52;
out of 207 countries ) Transparency International Corruption Perceptions Index
+5 (from #134 to 129;
out of 178 countries)
발표자
프레젠테이션 노트
9. Improving Global Competitiveness Ranking as measured by the World Economic Forum, jumping 10 notches from 85 to 75, out of 142 countries in 2011. 10. The focus on governance and corruption reduction is yielding results as measured by the World Bank (WB Government Effectiveness Indicator – up by 1% percentile, 51 to 52) and as measured by Transparency International (Corruption Perceptions Index – improving 5 points from 139 to 134).
Set to become the world’s 16th largest economy, up 27
places from today One of the new emerging countries due to favorable
demographics and strong economic fundamentals ~ HSBC’s “The World in 2050” Report
12th largest population in the world
Asia’s friendliest country
8th World’s friendliest country
~ HSBC World Explorer Survey 2011 ~
Other Notable Information
발표자
프레젠테이션 노트
OTHER NOTABLE INFO The HSBC World Explorer Survey 2011 ranked the Philippines as Asia’s friendliest country and ranked 8th best in the world in the list of the “World’s Friendliest Countries”. (The survey rates countries based on the preference of expatriates to make them “their second home.” The 10 friendliest countries in the world as listed are New Zealand, Australia and South Africa, Canada, United States, Turkey, United Kingdom, Philippines, Spain, Malaysia.) The Philippines has the 12th largest population in the world, right after (9) Russia, (10) Japan, and (11) Mexico, indicating a sustained source of talent and also a very attractive ready domestic market for investors in manufacturing and services. HSBC, in its latest “The World in 2050 (2012)” report notes “the striking rise of the Philippines, which is set to become the world’s sixteenth-largest economy, up 27 places from today.” The report further notes that “increasingly attention will turn to the ‘new emergers’… countries such as the Philippines, Peru and Nigeria all demonstrate some combination of favourable demographics and strong fundamentals that should see a significant rise in their economic size… with countries such as the Philippines jumping as many as 27 places.
Investment Opportunities
발표자
프레젠테이션 노트
The next slides will show the priority industries that are being promoted by the government.
I. Preferred Activities Regular List: Agriculture/ Agri-business and Fishery Creative Industries/Knowledge-Based Services Ship Building Mass Housing Energy Infrastructure Research and Development Green Projects Motor Vehicles Tourism Strategic Projects PPP Projects Disaster Prevention, Mitigation and Recovery
Projects
II. Export Activities
III. Mandatory List
Production and Manufacture of Export Products Services Exports Activities in Support of Exporters
Investment Priorities Plan 2011
IV. ARMM List
발표자
프레젠테이션 노트
The list include the activities that are included in the 2011 Investments Priorities Plan, which are eligible for fiscal and non-fiscal incentives under the Omnibus Investments Code (EO 226). The 2012 IPP is already at works, with minimal changes to promote stability in the business environment and ensure that business plans are assisted until completion.
• Focus on infrastructure support facilities for tourism, agriculture, social services and growth centers
• Provide incentives to stimulate private resources
• Ensure competition, fairness and transparency
• Provide assistance in preparation of business case, pre-FS, full FS, detailed engineering, tender document, etc.
• Fast-track project approval process
• 2011 Rollout/Tender: 10 Projects
• 2012 & beyond: 73 projects
Public-Private Partnerships: Cornerstone Strategy of National Development
발표자
프레젠테이션 노트
I am sure that most of us here are aware of the Public Partnership Program of the government. 2012 will see the rolling-out of most PPP projects, which would stir more business activities and reinvigorate our economy.
The Philippines has been an attractive investment location for many international companies. Our major advantages, which I will discuss in detail shortly are shown on this slide: Rich talent pool Robust infrastructure Strategic business location First-class lifestyle Attractive investment incentives
Rich Talent Pool
Source: CHED 2010; CIA World Factbook 2010
Suitability rates are empirically based on a total of >80 interviews with HR professionals working in each country
College Degree Graduates 2009 Annual growth
Medical and natural sciences, allied fields
132,244
Business, accounting, and related fields 107,272
Social and behavioral sciences, education
68,764
Engineering and architecture 50,734
IT-related and mathematics 47,928
Fine arts, masscom, humanities 12,269
TOTAL Tertiary level 469,654 5.8%
Pop Labor force Unemp rate Literacy
World 6,768M 3,179M 8.7% 82.0%
India 1,130M 509M 7.8% 61.0%
China 1,330M 814M 4.3% 91.6%
Brazil 201M 102M 8.1% 88.6%
Philippines 100M 38M 7.5% 92.6%
Abundant labor force of 38 million Over 450,000 college graduates per year 21% IT, computer Science & Engineering
graduates English proficiency Affinity with Western culture Customer service orientation Highly trainable Cost effective High level of commitment and loyalty
발표자
프레젠테이션 노트
Robust Infrastructure PHYSICAL INFRASTRUCTURE - Airports: 9 international, 20 domestic - Connecting Railways: 3 (Metro Manila) - Roll off / Roll on Ports: 12 - Newly constructed (major) roads
TELECOMMUNICATIONS - Completely deregulated industry - International connectivity and expanding multimedia infra - Capable of handling volumes of data at 275 Gbps
ECOZONES AND IT PARKS - Manufacturing (64) - Tourism (12) - IT Parks (148) - Medical Tourism (2) - Agro Industrial (13)
POWER - Total installed capacity: 15,852 MW - Level of electrification: 97% - Presence of privately-owned companies providing various energy sources
TOTAL: 239
발표자
프레젠테이션 노트
On Physical Infrastructure: The 3 main islands of Luzon, Visayas and Mindanao are made accessible by a network of roads, waterways and airports. Among our major physical infrastructures are 9 international and 20 domestic airports, three connecting railways which span across the Metro, and 12 roll-on/roll-off ports. Newly constructed roads, on the other hand, include the 94-kilometer four-lane Subic-Clark-Tarlac Expressway (SCTEX), the 84-kilometer North Luzon Expressway (NLEX), and the 42-kilometer STAR Tollway. These infrastructure projects have provided communities with jobs and livelihood, have promoted stronger linkages between the country’s business hubs and other various islands, and have paved the way for a faster, safer, and cheaper transport of goods and people. On Telecommunications: Our deregulated telecom industry has paved the way for the steady and vibrant growth of a stable, robust, highly scalable and cost-competitive telecommunications infrastructure today. The country is equipped with international connectivity and expanding multi-media infrastructure such as FOBN, wireless technologies (CDMA, GSM, WAP, GPRS, 3G, wireless broadband), radio and VSAT, all of which operate 24x7x365. Telco network in the Philippines is equally capable of handling volumes of data transmitted through redundant international broadband cable at 125 GBPS. On Ecozones and IT Parks: • Special economic zones have ample and up-to-date telecommunications capabilities, a clean, uninterruptible power supply and computer security, and building monitoring and maintenance systems; not to mention one-stop shops inside the zones to make easy the way of doing business. • We have a number of operating economic zones and IT parks today where a company may locate its business with ease. As of December 2010, Manufacturing zones total 64, IT parks 148, Medical parks/centers 2 , Agro-industrial centers 13, and Tourism 12. There are also a number still currently being developed all over the country. On Power: In an environment of soaring world oil prices, the government has been pursuing programs and projects to develop alternative and indigenous energy sources and has collaborated with various stakeholders in the energy sector to increase local energy supply. • Our total installed capacity is 15,852 MW. • The level of electrification of the country’s 41,980 towns/barangays stands at 96.57%. • There are privately-owned companies that provide energy sources such as renewable, geothermal, hydro, solar, and wind energy.
Strategic Business Location • Bordered by two (2) great trade routes – Pacific Ocean and the
South China Sea
• Good access to the important 550 million people ASEAN market
• Reachable within 4 hours by plane from Asian key cities Tokyo - 4 hrs Seoul - 3.5 hrs Shanghai - 3.25 hrs Singapore - 3 hrs
• Average Flying Time from Manila to Selected Foreign Countries: London - 13 hrs USA - 16 hrs Germany - 12 hrs Canada - 14hrs UAE - 8 hrs
발표자
프레젠테이션 노트
The Philippines is strategically located in the fastest growing region and flanked by two great trade routes – the Pacific Ocean and the South China Sea – the Philippines is considered an ideal base for business. The country’s location is a critical entry point to over 500 million people in the ASEAN Market and a natural gateway to the East- Asian economies. The country is likewise placed at the crossroads of international shipping and airlines . Thus, the Philippines is readily available from major travel centers of the world. Within Asia, the Philippines is reachable within 3 to 4 hours by plane… (read from slide)… And the average flying time from Manila to selected foreign countries is 12 hours.
• Friendly people • Value-for-money housing • Modern recreational facilities • First-rate educational institutions
Presence of international schools • A growing favorite tourist destination
Expatriates’ top choice for quality of life
First-Class Lifestyle
발표자
프레젠테이션 노트
The Philippines is second home to expatriates who enjoy the company of the warmest people in the region, the country's openness to varied cultures and a decidedly global outlook. Expats enjoy accessible and affordable luxuries – value-for-money housing, modern recreational facilities, first-rate educational institutions adopting international standards, business centers, hospitals, etc. The Philippines is also a growing favorite tourist destination, as evidenced by the steadily increasing tourist arrivals.
Comparison of Incentives INCENTIVE
BOI (Executive Order No. 226, as
amended)
PEZA (Republic Act No. 7916, as
amended)
CDC / SBMA (Republic Act No. 7227 – Bases
Conversion Dev’t Authority Income Tax Holiday (ITH)
4 – 6 years (max of 8 years) Exempted from all local and national
taxes - value-added taxes, franchise taxes, excise and ad valorem taxes) ITH Bonus 3 years provided the firm meets certain conditions
Special Tax Rate of 5% on Gross Income Special Tax Rate of 5% on Gross Income
Importation of Capital Equipment, Spare Parts and Supplies
Duty-free Tax and Duty-Free
Wharfage Dues and Export Tax, Duty, Impost and Fees Exempted No exemption
Simplification of Customs Procedures Available
Employment of Foreign Nationals
Foreign nationals may be employed in supervisory, technical or advisory positions within 5 years from a project’s registration, extendible for limited periods. The positions of president, general manager, and treasurer or their equivalents, of foreign-owned registered firms may be retained by foreign nationals for a longer period.
All foreign employees may bring with them their spouses and unmarried children under 21 years of age.
Attractive Investment Incentives
발표자
프레젠테이션 노트
Capping our business advantages is government’s support through incentives. The government has come up with a liberal program of fiscal and non-fiscal incentives to attract foreign capital and technology that complements local resources. Different incentives schemes are available relative to the location and registration of the proposed business activity. Thus, there are several options for an enterprise to choose from. For projects listed on the Investment Priorities Plan, specifically infrastructure, government incentives are in the form of 4 to 8 years of Income Tax Holiday, zero percent duty on imported capital equipment, exemption from 12% input VAT on allowable local purchase of goods and services, unrestricted use of consigned equipment, and employment of foreign nationals. Our complete menu of incentives for other sectors which could locate in any of our economic zones include 5% tax rate on gross income after the lapse of ITH and tax and duty exemption on imported capital equipment.
발표자
프레젠테이션 노트
In my interactions with the private business sector, I have received positive feedbacks on how the investment climate has improved, how the government has assisted them and how their businesses have prospered in the Philippines. In fact, the Philippines has endeared to many expats who have stayed in the country while working in their respective companies. We at DTI continue to be bullish about the prospects for the Philippines, i.e., to strategically take advantage of market opportunities and propel our ranking as one of the best investment destination in the world. We hope that you would share the same optimism and take the decision of locating your business in the Philippines. We say, invest in your future, invest in the Philippines now. Not only does it pays well to invest in the country, it is also more fun to do business in the Philippines. Thank you and a pleasant day to everyone.
