Invest Asia Group in The Philippines
Last Update: 24th September 2020
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El Nido in Palawan, The Philippines
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The Philippines is the third largest economy in the ASEAN region (behind Indonesia and Thailand) and is classified as a newly industrialized country. Historically, the country has been based on an agricultural economy but the transition to both services and manufacturing is continuing.
During the years of rapid economic growth experienced in East Asia (Japan, South Korea, Hong Kong etc.), the Philippines
In terms of future prospects, the Philippines growth lagged. However, projected growth rates through until 2050 are strong with some analysts predicting is being one of the strongest economies in Asia by then. With a positive future outlook and opportunities across a range of asset classes, investing in the Philippines offers excellent prospects for qualified investors.
During the years of rapid economic growth experienced in East Asia (Japan, South Korea, Hong Kong etc.), the Philippines
In terms of future prospects, the Philippines growth lagged. However, projected growth rates through until 2050 are strong with some analysts predicting is being one of the strongest economies in Asia by then. With a positive future outlook and opportunities across a range of asset classes, investing in the Philippines offers excellent prospects for qualified investors.
The Philippines: Overview
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The Philippines is one of the world's largest 'island countries' and as an archipelago, comprises 7,641 different islands. Like most countries, there are substantial differences between regions as well as wealth disparity. This is particularly recognized when comparing the capital city of Manila with other cities throughout the country, despite many areas of Manila also experiencing poverty. Metro Manila contributes by far the largest percentage of GDP.
Whilst the capital city offers the most skilled talent pool of employees to choose from, being one of the world's largest English speaking countries, language communication is less of an issue (compared to neighboring East Asian countries). Salaries are also very competitive within the Asian region, especially with English speaking employees widely available. Depending upon your proposed business type, we recommend a thorough analysis to determine the best location to establish within The Philippines. |
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The Philippines Regions
The Philippines Regions are divided into 17 specific administrative regions and are as part of the traditional island groups of Luzon, Visayas and Mindano. Details of these 17 regions are outlined below:
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Luzon Island Group
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Visayas Island Group
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Mindanao Island Group
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The Philippines Top 10 Largest Cities
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There are a number of different cities throughout the Philippines with the top 10 (by population size) outlined as follows:
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Business Operations in The Philippines
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Operating a business in The Philippines presents a range of different opportunities and challenges. Like any business, aside from the business related risks, understanding and working within the Philippines presents various challenges to foreign investors.
However, with a relevant strategy, professional advice and local team, these risks can be mitigated. Whilst details are quite complex, we’ve summarized accordingly so readers can gain an understanding of the different options and processes involved in operating a business in The Philippines. |
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Forming a Company in The Philippines
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Establishing and incorporating a company in The Philippines is not a simple process and upon your specific business objectives, there can be alternative options to establishing a Philippines domiciled company.
There are 5 x main different business structures within The Philippines and these are detailed as follows:
Typically, most foreign investors choose to incorporate a Corporation in The Philippines as whilst the required capital is higher, limited liability applies. Ultimately, the best structure depends upon goals |
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Company Formation Procedure
Each type of company structure formation requires different procedures and processes accordingly. For the purposes of this article, we've outlined the formation procedure for Corporations within The Philippines. Details are outlined below as follows:
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International Investors
Whilst there are certain restrictions, international investors/companies can operate businesses in The Philippines. Moreover with ongoing reforms, the number of restricted industries that foreign investors are able to operate is continually being reduced on an annual basis.
Corporate Taxes
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There are a number of different corporate taxes within The Philippines as outlined below:
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Where to establish
This depends upon your business type and goals for doing business in The Philippines. Metropolitan Manila offers the best and most skilled labor force but with much higher competition, resulting in higher costs. As an English speaking country, translation and communication difficulties experienced in other East Asian countries are less of an issue. Please advise your business type and specific goals for The Philippines when contacting our team so we can gain an understanding of goals and industry to provide the most relevant advice.
Tax-Friendly Policies
Yes – a number of tax-friendly investment policies exist to encourage investment within specific sectors and industries. Further details can be provided, depending upon your specific inquiry.
Financial Markets in The Philippines
The Philippines stock markets are relatively young, compared to their international peers and was founded in August 1927 as the Manila Stock Exchange before merging with the Makati Stock Exchange to form the Philippine Stock Exchange in 1992. An overview of the Philippine Stock Exchange is outlined below.
Philippines Stock Exchange (PSE)
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The Philippine Stock Exchange (PSE) is the only stock exchange in the Philippines with a market cap of approximately USD $275 billion. Within the PSE, there are 8 x indices as follows:
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Philippines Stock Exchange Products
On the Philippines Stock Exchange, there are a number of different listed securities available to trade including the following different products:
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Other ways to get exposure to Philippines Stocks
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Aside from the aforementioned ways to gain exposure to Philippines companies via the PSE, investors also have options to invest in Index Funds and Philippines stocks listing in US markets. There are some Philippines related Exchange Traded Funds (ETFs) such as Emerging Markets ex China etc. and some of the larger individual Philippines stocks listing on American stock exchanges include San Miguel, Jollibee Foods etc.
Most brokers will offer access to Philippines exposure (emerging markets) ETFs and individual stocks listed on the US markets. Despite its challenges, the Philippines offers substantial prospective growth opportunities over the next few generations according to most economic forecasters. Economic growth should continue to outpace the developed economies and offer a number of attractive investment options for investors. |
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Foreign Exchange
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The Philippine Peso is the national currency of The Philippines and since 1993 has been a free floating currency determined by market forces. Moreover, whilst currency controls have been prevalent throughout history, currently the policy is very relaxed in the Philippines - in a bid to attract foreign investment inflows into the country.
Throughout its recent history, post world war 2, the Philippines economy endured persistent high inflation through until the early 1990s. However, outside of the Asian financial crisis and other 'shock' periods, the currency has remained fairly stable. |
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Commodities
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The Philippines exports a variety of different commodities and products but overall, runs a negative trade balance. Whilst the economy has developed across a number of different sectors, agricultural exports are still a large contributor to exports. The economic growth over the past few years and future outlook forecast offers numerous opportunities across a range of industries.
Some of the top commodities The Philippines exports include:
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Other notable exports from The Philippines includes integrated circuits, computers, semiconductors and office machine parts. Due to historical relationships, Japan and the USA are the top export destinations whilst Hong Kong and China are third and fourth respectively.
In regards to oil, during 2019 The Philippines' top 6 crude oil suppliers were the following countries:
Alternatively, some of the major commodity imports into The Philippines includes petroleum, wheat, coal briquettes and soybeans. Other non-commodity imports are integrated circuits, cars and corn, among others. |
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Cryptocurrency in The Philippines
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Cryptocurrency is regulated within The Philippines whereby they're legal and cryptocurrency exchanges are regulated by the Central Bank of the Philippines. However, cryptocurrencies (which are referred to as virtual currencies) aren't recognized as a currency, meaning they're not issued or backed by any commodity within the country. Bitcoin and other cryptocurrencies are becoming more widely used throughout the country with a number of different exchanges available. For specific details and opportunities within The Philippines in regards to cryptocurrency, please contact the team at Invest Asia Group.
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Property in The Philippines
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The Philippines property market is diverse and varied from the capital city of Metropolitan Manila to the Island resorts and Southern Cities in Mindanao, among others.
Despite no private land ownership permitted within The Philippines for foreign investors, lease rights and 'right to use' options are available for foreigners. There are also some exemptions that permit land ownership, whilst condos/apartments/houses that are built can be owned without having rights to the land underneath. Due to the size of the country and differences in development across regions, the property market within The Philippines is fragmented across provinces and islands. Pricing is highly urbanized areas is obviously substantially different to other areas. Therefore, the best way to analyse the property market is on a local level as opposed to via a country-wide analysis. |
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International Investors & Philippines Property
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Yes and no. The Philippines has strict land ownership laws for foreign investors, however, there are options available. Some of the exceptions include the following:
Foreign investors can also agree to long-term land lease with right of usage. Moreover, a corporation with 60% Filipino ownership is considered as a 'Filipino National' for purposes of land ownership. |
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Property Taxes in The Philippines
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The property market in the Philippines is multi-tiered with residential and commercial property market differentials as well as between cities/regions. In recent years, the Metropolitan Manila residential housing market boomed whilst the rest of the country was sluggish. However, in 2019, this has changed, providing a diverse range of options for investors. Combined with positive demographics and projected future economic growth, the Philippines presents an excellent opportunity to invest in property.
When purchasing an apartment or condo in The Philippines, there are a number of fees associated in doing so. Generally, the buyer needs to pay for the following fees:
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Best Locations to Purchase Property
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Overall, most investors choose to purchase properties within the highly urbanized areas, however, a wide range of choices is available throughout the Philippines depending upon investor's timeline. For the purposes of this article, we've outlined a number of different cities throughout the country that Invest Asia Group clients have purchased property and have provided the best medium term returns.
Invest Asia Group has been recommending and assisting clients invest in Davao City in recent years. For further details or to find out more, please contact our team directly. |
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Venture Capital/Private Equity in The Philippines
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Venture Capital and Private Equity has been prevalent in Manila since the start of the 21st century and provided a platform for a number of successful and promising startups. With a focus on innovation, English speaking populace, future economic outlook forecast to be strong and demographics to match, the Philippines will be home to a number of successful startups in the future.
Some of the most successful startups from the Philippines include the following:
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