Officially known as the Republic of the Philippines, The Philippines, a sovereign island country, are located in the western Pacific Ocean in Southeast Asia.
The Philippines consists of 7,107 islands and is the 73rd largest country in the world. The country has many natural resources but, being situated, as it is, near to the equator and in the Pacific Ring of Fire; it is prone to Typhoons and earthquakes.
The country has a population of over 98 million and is the 12th most populated country in the world.
The economy of the Philippines is one of the emerging economies of the world and the country is considered to be a newly industrialised country. The country is still in the transition phase of moving from for an almost entirely agricultural based economy to one more based upon service industries and manufacturing. It is estimated that by the year 2050, the Philippines will become the 14th largest economy in the world and the largest in Southeast Asia.
Currently, exports in the country include electronic products, transport equipment, semiconductors, garments, fruits and coconut oil.
Although one of the fastest growing economies in Asia, there are still major growth and income disparities between different regions and experts agree that greater investment in infrastructure is still required as well as greater efforts to reduce corruption.
Despite the steady growth in the economy of the Philippines over past decades, this growth has lagged behind most of its Asian neighbours and the IMF still classes the country as an emerging market.
Classed as a newly industrialised country, the Philippines still has a heavy reliance on agriculture which makes up around 12% of GDP and employs 33% of the population. The type of agriculture ranges from large commercial operations to subsistence farming and the country is the world’s largest producer of coconuts. However, despite its large agricultural base, the Philippines are also one of the world’s largest importers of rice.
On the manufacturing side; the country is a major player world of shipbuilding and is ranked as the fourth largest shipbuilding nation, has large automotive and aerospace parts industries and the Texas Instruments plant in Baguio is the largest supplier of DSP chips.
The capital city and main central business district id Manila with a population of 12 million. Manila has an excellent port and is the chief seaport of the country. There is a diverse range of manufacturing carried out in the capital including chemicals, textiles, clothing and electronic goods and the city also attracts over a million tourists every year.
Nearby to Manila is Quezon City, one of the cities that make up Metro Manila. Located on the island of Luzon, Quezon City is the site of many government offices, and universities. The Commercial centre of Quezon City is Cubao which contains the Aurora Tower, many shopping malls and the busy Cubao commercial centre.
Also one of the cities making up Metro Manila, Makati is the financial centre of the Philippines where the highest concentration of multinational and local corporations in the country can be found including major banks, department stores, corporations and foreign embassies.
Philippines - Opportunities
Sadly, Typhoon Haiyan, the strongest ever storm to make landfall, swept through the centre of the Philippines in late 2013. The official death toll was over 5,000 and more than 4.2 million people were displaced.
Naturally, economic growth forecasts for the country have been cut but it is estimated that the Philippine economy was in a strong enough state before the typhoon to enable the country to be able to manage the economic impact of the storm.
In the short term, there will be an impact to commerce, production and supply chains but a rebound is expected and of course there be increased demand created as the reconstruction efforts begin which can even produce a boost to GDP growth.
The cost to rebuild roads, bridges, schools and houses in the affected areas are estimated to be in the region of six to seven billion dollars.
Although the disaster affected a wide area of the country, it did not affect the main industrial and commercial centres, providing hope that the economic impact will be less than it could have been.
It is hoped that the economic impact of the storm is short-lived and that the Philippines will quickly return to the dynamic market that it was before the storm and open up many new opportunities for foreign investment.
Buoyant sectors in the country have been power projects, IT and communications, healthcare, retail and tourism.
The Philippine government has identified the infrastructure development that is needed for the continued growth in the country and has identified Public Private Partnerships as a way of achieving its goals. Before the storm the government was focusing efforts on a number of projects including; education, power, airports, roads and bridges; opening up opportunities for foreign project management and technical consultancy services.
At the core of the Philippine economy is its workforce. Recent rapid increases in service sector industries such as outsourcing and call canters is leading to a need for increased education services in the country opening up immense opportunities in education and training.
The increasing level of disposable income enjoyed by the population of the main commercial centres is leading to increased demand for consumer goods and services although this demand is currently limited to the more prosperous portion of the entire population.
AT the time of writing, the full economic impact of Typhoon Haiyan has yet to be ascertained, the long term outlook for business opportunities in the Philippines remains good though more localised industries such as the coconut farmers in the east of the country, have been badly hit by the storm.
Philippines – Setting up in Business
The government of the Philippines has been actively seeking to promote economic development through foreign investment and substantial incentives are available in some areas in the form of free trade zones and economic development zones.
Reports indicate though that previous lack of investment in infrastructure, now worsted in some regions due to the recent storm, has been a hindrance to business, as has an excessive bureaucracy and corruption in some areas. But, despite this, many industries have experienced impressive growth over recent years.
However, despite the opportunities available and the government’s willingness to attract foreign investment, setting up a business in the Philippines is an arduous task and can take over a month to complete.
As always, it is best to employ the services of a reputable local legal firm to assist with navigating the hurdles to the incorporation of a new company. Below, we give a summarised list of the steps needed to register a new company.
1. Reserve a company name with the Securities and Exchange Commission (SEC)
The initial search and verification of a company name can be done on the SEC’s website but the fee must be paid for at the offices of the SEC.
2. Notarise Articles of Incorporation and the treasurer’s affidavit
Articles of incorporation need to be properly notarised before lodging with the SEC.
3. Register Company with SEC and obtain a Taxpayer Identification Number (TIN)
Online registration is available but payment of fees must be made with the SEC and the following documents delivered at the same time:
· Particulars on directors, officers, stockholders, etc.
· Undertaking to comply with SEC reporting requirements (notarised)
· Undertaking to change corporate name (notarised)
· Company name verification slip
· Articles of incorporation (notarised)
· Treasurer's affidavit (notarised)
· Statement of liabilities and assets
4. Obtain Barangay Clearance
Barangay clearance must be obtained from the local barangay where the business is located. A Barangay is the smallest administrative division in the Philippines. The documents required are: Application form, Certificate of Incorporation, approved articles of incorporation and a plan /map of the company’s office / location.
5. Pay annual community tax and obtain community tax certificate
The company will be assessed for community tax by the city Treasurers Office.
6. Obtain the business permit to operate from the BPLO
A permit to operate the business must be obtained from the BPLO (Business Permit and Licensing Office). Other permits including; sanitary permit, fire safety and inspection certificate and location clearance may also be required depending on the nature of the business.
7. Purchase special books of account or register computerised accounting system.
Manual books of account must be kept on authorised books available from stationery stores and computerised systems must be registered.
8. Apply for TIN and for Certificate of Registration (COR)
A TIN and COR must be applied for at the Bureau of Internal Revenue (BIR) and all the required documents presented.
9. Pay registration fee and documentary stamp taxes at AAB
10. Obtain authority to print invoices and receipts from the BIR
11. Print receipts and invoices at BIR
12. Have books of accounts and Printer’s Certificate of Delivery stamped by the BIR
13. Register with Social Security System
14. Register with Philippine Health Insurance Company
15. Register with Home Development Mutual Fund (Pag-ibig)
As you can see, the requirements for registration of a business in the Philippines is complex and time consuming and we strongly recommend employing a reputable local legal firm for assistance and advice.
The requirements given here are summarised and for indicative use only.