Manila, on the island of Luzon, is the financial centre and capital of the Philippines.  It is the country’s main commercial centre and market where more than 50 percent of total business is done in and around the National Capital Region. 

It is home to key government offices including the Central Bank, Supreme Court, the Court of Appeals and government departments such as finance.

Quezon City (often called QC) is the most populous city in the Philippines with 2.7 million inhabitants. About half are under 24 years of age.

As the former capital, some government offices are still located in the city, including the House of Representatives. It is also home to the country’s national university – the University of the Philippines.

Another common entry point is Metro Cebu in the Central Visayas region.  Cebu City, and other cities included in what is otherwise known as Metropolitan Cebu, is the country’s second largest commercial centre.  It is the main commercial and financial hub and market for major cities and provinces in the Central Visayas area and Mindanao.

Locating in government or privately owned economic zones is often the best way to establish a foreign operation in the country, especially if the foreign-owned business is geared towards exports, ICT and manufacturing/technology.  There are a number of special economic zones that cater and promote sectors such as “agro-industrial, IT, manufacturing, tourism and medical tourism.

The Philippines Economic Zone Authority (PEZA) offers ready-to-occupy locations for foreign exporters.  Incentives are also available. The Authority has more information, and a list of the zones and contacts. 

The structure you choose should be based on research specific to your industry and product.

How hard

The World Bank’s Doing Business in 2010 has ranked the Philippines the 144th  easiest place in the world (183 economies) to do business. Specific rankings in terms of ease include:

• Starting a business (162nd).
• Dealing with construction permits (111th).
• Employing workers (115th).
• Registering property (102nd).
• Getting credit (127th).
• Protecting investors (132nd).
• Paying taxes (129th).
• Trading across borders (58th).
• Enforcing contracts (118th).
• Closing a business (153rd).

The options

The main business structures used for foreigners investing in the Philippines are:

• foreign-owned company - either majority or wholly foreign owned.
• domestic joint venture company – (60 percent local and 40 percent foreign). This is the easiest to set up.

Companies

The Securities and Exchange Commission (SEC) requires the initial subscription of foreigners to be fully paid up at the time of incorporation.

There may be five to 15 founders/shareholders, the majority of whom must be residents of the Philippines, unless other laws allow otherwise.

Each director must own at least one share of capital stock of the corporation.

Capital may be divided into multiple classes of shares, with varying property and voting rights, which may be assigned par or no-par values. Typical classifications are common and preferred, as well as “A” and “B” shares. Only Filipinos may hold “A” shares; foreigners may hold “B” shares.

Issues of B shares are subject to foreign-equity limits imposed on the particular activity of the corporation and with respect to the government’s foreign-investment negative list.
 
Branches

In general, branches and subsidiary corporations are subject to the same registration fees, the same requirements for business licenses and investment and the same taxation. However, a 15 percent branch profits tax is levied on the after-tax profits remitted by a branch to its head office.

Approvals

The SEC requires foreign subscribers to a share corporation to provide photocopies of their passports and proof of inward remittance of investment by non-resident foreign subscribers, which may be a certification from a bank.

In addition, the company must submit a statement of assets and liabilities executed under oath by the treasurer, if the paid-up capital consists of properties and cash.

After obtaining a Certificate of Registration from the SEC, a business must also apply for a business permit with the local government in the city or municipality where its main office is to be located.

Routine registrations are also required by other government bodies, the Department of Labour and Employment, the Social Security System, the Department of Finance and the Bangko Sentral ng Pilipinas (BSP, the central bank). If the corporation is being organised as either a bank or other financial intermediary, a certificate of authority is necessary from the central bank’s Monetary Board.

Restrictions

Foreign ownership of mass media and use of marine resources (except deep-sea fishing) is banned. Foreign participation in advertising and management or operation of public utilities is also restricted along with ownership of private lands and educational institutions. 

Learn how to access internet and other telecom services in the Philippines.

The Philippines Economist Intelligence Unit 2009 e-readiness ranking was 54th. E-readiness is a measure of the quality of a country’s information and communications technology infrastructure and the ability of its consumers, businesses and governments to use ICT to their benefit.

Telecommunications researcher Paul Budde Communication says fixed-line teledensity stands at less than 5 percent, only a little more than half of all Philippine towns and cities have a telephone service.

“The country’s mobile market has been a totally different story. No doubt contributing to the problems experienced in the fixed-line sector, the Philippines has witnessed a strong focus on and a rapid take-up of mobile services. Mobile penetration has grown quickly to reach the significant 80 percent milestone, 73 million subscribers by early 2009.”

It says the Philippines has been “lagging badly” in its roll-out of Internet and broadband services. “Despite the fresh new round of growth, overall broadband penetration remains relatively low; there were only two broadband services for every 100 people in the country early in 2009.”

The mobile network has Global System for Mobile Communications (GSM) technology.  3G High-Speed Downlink Packet Access (HSDPA) and Universal Mobile Telecommunications System (UMTS) technologies are also available.

In 2009 less than a quarter of the population had access to the internet, though internet penetration increased 1100 percent between 2000 and 2009.

Buyer Report has reported a forecast for Philippines computer hardware spending of around US$1.6 billion in 2010, which is expected to rise to US$2.5 billion by 2014. Consumer demand exceeded expectations in 2009.

(Additional source Economist Intelligence Unit.)

The Philippines ranks 44th of the 155 countries in the World Bank’s 2010 Logistics Performance Index. The index is based on a survey of operators on the ground worldwide (global freight forwarders and express carriers), providing feedback on the logistics “friendliness” of the countries in which they operate and those with which they trade.

An introduction to securing commercial property in the Philippines. More

Tips on how to research the market:

• use local expertise.
• check titles and leases carefully through a law office in the Philippines.
• do due diligence on agents.
• do a careful inspection of properties.

Abacus Real Estate has a list of serviced offices and contacts. 

In the World Bank 2010 Doing Business report, the Philippines ranked 115th out of 183 economies in terms of ease in hiring employees, including the regulation of fixed-term contracts, flexibility in work schedules and procedures for redundancy and firing.

The World Bank 2010 Doing Business report – the Philippines

Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The Rigidity of Employment Index is an average of the other three indices.

Deloitte Touche Tohmatsu says the Philippines is rich in human resources, with highly trainable, hard-working, and English proficient professionals and workers.

Employment of locals can be undertaken on a direct hiring basis or through an agency. Direct employment is normally done through advertising or word of mouth.

Foreign personnel

All foreign nationals intending to work in the Philippines need an Alien Employment Permit (AEP) from the Secretary of Labour and Employment through the DOLE Regional Director.

There is a PhP8,000 fee for each application for an AEP of one year; if employment is more than one year, an extra PhP3,000 is charged for every additional year.

(Additional sources used on this page: Deloitte Touche Tohmatsu, Alas, Oplas & Co, Economist Intelligence Unit.)