Investment in Philippines
Insert Full Title – Introduction
Trydell is a consulting company that deals with exploring investment opportunities for its clients at different locations across the world.The company is considering investing in the Philippines in order to ensure that its clients can reap the required financial benefits.The Philippines has significant investment potentials that can achieve profit maximization and lead to the initiation and establishment of solid trade relationships.
The Philippines’ Capital City is Manila and is located in South Eastern Asia with neighbouring countries Vietnam, Thailand, Malaysia (East), and Indonesia (South). There’s a strong sense of Spanish tradition in the Philippines; this is because they were once colonized by Spain (CIA, 2008).
The Philippines is noted for the export of materials such as semiconductors, electronic products, transport gadgets, garments, copper products, coal, petroleum products, coconut oil, and fruits (CIA, 2008). The major natural hazard that affects the area is the astride typhoon belt. It is normally affected by at least 15 of these and attacked by five to six storms annually. Other natural disasters that affect them include landslides, volcanoes, earth quakes and tsunamis (CIA, 2008).
Philippine farms grow crops for their own consumption and export some to generate revenue. The agricultural sector employs more than one-third of the work force and represents a profitable sector to invest in (Global Edge, 2008). Other sectors that augur well for investment include mining and energy. The Philippines ranks as the fifth most mineralized country in the world. It is possible for the mining industry to meet all the investment needs of the country and the present administration is working hard towards developing policies and facilities that can attract more investors into the country.
Investors in the Philippines are offered a lot of incentives like tax holidays, tax reduction, duty-free importation, especially for companies investing in specific areas. Most people within the country however, are clamoring that these incentives should be removed. Land lease contracts for foreigners are also available for 50 years and renewable after 25 years (Economy Watch, n.d.).
There are however, certain restrictions placed on investment in the Philippines. No foreign participation is allowed in the media and professional services like accountancy and law. The possible forms of companies that may be set up by foreign companies and investors are corporations, partnerships, sole proprietorships, branches, representative offices or regional headquarters.
Also read about negative effects of globalization in the Philippines
Investigate the economy of the Philippines and its neighbors
The Philippine economy has improved at the fastest rate ever recorded in the previous 30 years with a record Gross Domestic Product (GDP) of over 7% in 2007 (Economy Watch, n.d.). Increased Government expenditure and remittance of money from Filipinos working abroad have all significantly contributed to achieving this (CIA, 2008). There is however, still a lot of work to be done in terms of poverty alleviation and general economic development. The current reforms being implemented by the present administration must be continued and duly concluded in order to catch up with regional competitors and remain relevant.
The Philippines has been ravaged by abject poverty and weak economic indices for many years. After experiencing many decades of corruption and neglect, some signs of improvement are being seen and long-term investment opportunities can only be profitable if the positive trend of reforms is sustained (Economy Watch, n.d.).
Presently, neighbouring countries of Philippines like Thailand and Japan, have twice the per capita income of the Philippines. 40% of the population in the Philippines is in the Agricultural Sector. 20% of the country’s GDP is derived from Agriculture (Economy Watch, n.d.). These figures show that development is quite minimal within the region. Landed families and private companies account for most of the wealth causing prevailing cases of poverty.
The country was also adversely affected by economic recession between 1984 and 1985. This led to a reduction in economic conditions by as much as 10%. Political unrests, rallies and dissent have also had a cumulative negative impact on the economy. Previous military regimes were alleged to have been responsible for misappropriating and looting large sums of money from the treasury, leaving the country as one of the poorest in Asia (Economy Watch, n.d.).
Most Filipinos have migrated from their homes, in search of greener pastures. There are over 4 million Filipinos in the United States and over two million in Saudi Arabia. Current statistics, however, reveal that the Philippines is the 37th largest economy in the world and the recent growth of 7.3% is the best the country has experienced in decades (Economy Watch, n.d.). Recent years have also been marked by a reduction in national debt. Investments may also be seen in infrastructure and social services within the country. National policies that are receptive to investors are being developed and these can help to sustain economic growth.
The economy is well-grounded in manufacturing of automobile parts, electronics, garments, textiles, food processing, mining of chromate, copper and nickel. It also has coal reserves and natural gas. It is noted for implementing the world’s first geothermal energy installation and makes revenue from exporting different commodities to East Asia. This is made possible by its high number of skilled workers who are assets to multinational companies all over the world (CIA, 2008).
In what economic sectors is each country strong?
Indonesia struggles with almost the same economic problems as the Philippines such as poverty, corruption and unemployment. However, the Agriculture and mining sectors of the economy generate significant revenue for its people. Indonesia also has natural resources like petroleum, tin, natural gas, copper, fertile soils, coal, gold and silver (CIA, 2008).
Thailand has well-developed infrastructural facilities and numerous policies that encourage foreign investment. The country generates revenue mostly from the tourism, manufacturing and agricultural sectors (CIA, 2008). It has natural resources like tin, rubber, natural gas, lead, and fertile land. Vietnam also has similar natural resources like coal, manganese, offshore oil and gas deposits, forests, and hydropower.
The economy of Malaysia has extremely strong indices, compared with the other countries. Policies have been set up to attract investments in high technology industries, medical technology, and pharmaceuticals in order to diversify the economy from only exports. The country also generates significant revenue from oil exports and tourism.
Malaysia generates significant revenue from rubber and oil palm processing, electronics manufacturing, tin mining and smelting, timber processing, petroleum production and food processing (CIA, 2008).
Do the strengths of each country really complement one another, or do they compete directly with one another?
There is significant competition from other Southeast Asian countries. The Philippines will have to work on improving the international perception of its anti-corruption campaign in order to attract investors and improve the present level of international trade. Philippines are constantly buying smuggled rice from Indonesians are willing to sell to them at higher prices.
The fact that Philippines and her neighbouring countries are blessed with almost the same set of natural resources implies that there’s a direct competition between them. For the Philippines to have a positive investment climate, the government has to commit itself completely and transparently into making the economy conducive for international trade. The common economic and political challenges that these countries face can however, create opportunities for setting up alliances, learning from each other and establishing mutually beneficial relationships.
As you consider investing in the Philippines, what management issues concern you? Be specific.
Management concerns regarding investment in the Philippines would be law and order, inadequate infrastructure, policy and regulatory instability, and governance issues. Although the Philippines has a lot of agricultural potential, poor infrastructure, inadequate financing, and unfavourable government policies have limited productivity gains (Global Edge, 2008). Other concerns are low rate of investments recorded from countries abroad, instability, business environments marked by corruption, lack of monitoring within the banking sector, and the insecurity caused partly by the Islamist rebellion.
Labour is cheap in the Philippines and the workers are well-educated, adaptable and trainable. Their people are one of their greatest resources. The number of strikes in the country has also reduced in recent years and this will not pose a threat to investing companies (Global Edge, 2008). Mining industry is a profitable sector within the economy. It however takes considerable time and finances to bring a mine into operation. With the right consortium coming together to invest, mining may just be what may salvage the Philippine economy.
Economy Watch. (n.d.). Economy of the Philippines. Retrieved October 14, 2008, from Economy Watch: http://www.economywatch.com/world_economy/philippines/
Central Intelligence Agency (CIA). (2008). Philippines. Retrieved October 15, 2008, from The World Factbook: https://www.cia.gov/library/publications/the-world-factbook/geos/rp.html
Global Edge. (2008). Philippines: Introduction. Retrieved October 15, 2008, from Global Edge: http://globaledge.msu.edu/countryInsights/country.asp?countryID=35&RegionID=3