Doing Business in the Philippines: Attractiveness and Opportunities Post COVID-19

Companies doing business in the Philippines might have the cost-cutting intention as the sole reason at first, but the country actually has a lot more to offer. In fact, the Philippines is one of the best performing stock markets in Asia, with 5-6% yearly growth for the past decade. Even during the pandemic, the Philippines has shown its resilience with its strong economic fundamentals, thanks to the foreign reserves from the country’s diaspora.

With the COVID-19 outbreak grinding industries and entire economies to a halt, it is now more important than ever that business owners explore business continuity and cost-cutting opportunities. Through our webinar, our COO Viktor Kyosev discussed with Rocky Chan and RJ Ledesma from EnterPH how foreign businesses have adapted their market entry strategies since the beginning of COVID-19 and debated possible scenarios for the near future.

Doing Business in Philippines

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What makes doing business in the Philippines attractive?

  • One of the best performing stock markets in Asia
  • 5-6% growth year-on-year for the past 10 years
  • Strategically located with access to ASEAN members and East Asia countries
  • Young (24 years old median age) and educated English-speaking population with hospitality attitude
  • Resilient population as it is a country that is constantly hit with natural calamities
  • Vibrant expat life due to the overall package offered to foreigners doing business in the Philippines
Philippines GDP Annual Growth Rate
Philippines GDP Growth Forecast

Is it true that a foreigner cannot fully own their business due to the Negative Investment List?

There is a misconception about the Negative Investment List where all foreigners can only own 40% of their businesses. Yes, there are limitations. However, for the most part, the general rule is any foreigner can own their businesses 100%. Aside from the Negative Investment List, foreign companies servicing the domestic market also have some limitations.

Negative Investment List

  • Retail: 0% foreign equity, subject to exceptions
  • Land ownership: 40% foreign equity, but 100% for condominium
  • Defense/public 40% foreign equity
  • Mass media: 0%
  • Advertising: 30%

Domestic Market

  • The Philippines requires US$ 200,000 paid-up capital for foreign businesses to own 100% equity for those having more than 40% of gross revenue year-on-year servicing domestic market

What types of business can be incorporated by foreigners?

Corporation

  • Separate entity from parent (subsidiary)
  • Limited liability
  • Ease of setting up
  • Can be used as investment vehicle

Representative office

  • Extension of parent office
  • Limited to non-revenue generating activities
  • No need to pay income taxes

Branch office

  • Extension of parent office
  • No need for additional directors
  • 15% branch profit remittance tax (as opposed to dividend tax which is 30%)

Check out Greenhouse’s basic guidelines about the requirements and processes to register a company in the Philippines.

Which cities are best for registering a company in the Philippines?

Metro Manila (the National Capital Region)

  • Prime tourist destination in the Philippines
  • Center of commerce, education, and entertainment
  • Where the country’s major business centers reside:
  • Makati Business District
  • Bonifacio Global City
  • Ortigas
  • Pasay
  • Quezon City
  • Alabang
  • Rockwell

Clark Global City

  • The Philippines’s 2nd biggest commercial real estate market in Q3 2018
  • Where the BPOs (Business Process Outsourcing) and government agencies reside
  • Strategically located with excellent infrastructure and connectivity

Cebu (the Queen City of the South)

  • Has a robust and competitive local economy
  • Nestled within abundant natural resources
  • Has over 20 IT parks and 9 economic zones
  • Globally competitive infrastructure with a highly capable workforce

Metro Davao (the Crown Jewel of Mindanao)

  • One of the largest economy in the country
  • The most economically active in Mindanao
  • The premier city, the financial & trade center, and hub of Mindanao
  • The third Most Competitive Highly Urbanized City in the country
  • Common businesses here are:
  • Food processing
  • Industrial plants
  • Broadcasting companies
  • Real estates
  • Shopping malls
  • Banks
  • Schools

How does COVID-19 affect the potential of doing business in the Philippines?

What is happening in the Philippines in the COVID-19 era is rather counterintuitive, as the number of inquiries to register a company in the form of a BPO company rises. This is due to the strong economic fundamentals the Philippines has, with the government putting great policies to make sure the country can weather the recession.

In fact, the previous recession in 1997 onwards including the Dot-com bubble of 2000 is what started the BPO company trend in the Philippines. Companies started to come to the Philippines to build call centers.They register a company to the Philippines because of its value proposition. And it was possible because of the Filipino’s resilience, great attitude, diligence, and willingness to go the extra mile despite the hard time. In addition, the Filipino Bayanihan custom also takes part in getting people together supporting each other through hardships during the present crisis.

Are there any efforts to help companies doing business in the Philippines during COVID-19?

The Bounce Back PH movement is one of the modern examples of the Filipino Bayanihan custom. Entrepreneurs come together as a business support group and help the affected to rescale and repurpose people to be able to find new jobs and make new connections onwards. Also, because there are departing BPOs having to let go of their workers, it makes it easier for the new BPO company to hire the already skilled workers familiar with the jobs.

How is the BPO trend in the Philippines going forward?

BPO is a booming sector. In 2019, it resulted in about US$ 26 billion in the Philippines alone. For example in the US, companies that still want to keep running register a company over to the Philippines in order to cut costs. But onwards it would not be purely BPO company format that is just a business processing role. As technology and education evolve, eventually the BPO company will be about knowledge processing and be specified into architectural, legal, medical fields and so forth.

  • Online higher education or digital-related education
  • Travel business to cater cabin-fever people after the series of lockdowns
  • COVID-19 related products and healthcare
  • Brand franchises endorsed by the Overseas Filipino Workers (OFW)
  • Opportunities to explore and provide solutions in the strong consumption-driven economy the Philippines is

Any tips for doing business in the Philippines?

  • Choose your employees carefully
  • Take care of your employees, they will pick a bullet for you
  • Now is the best time to secure office space when the price are lower
  • Buy distressed BPOs to be part of the solution

Watch the full webinar session here:

Since April, at Greenhouse we have been working closely with our network of service providers and partners across Southeast Asia to launch a series of webinars on topics like:

  • Adaptation to COVID-19
  • Business opportunities
  • Fast-growth markets
  • Market entry strategy
  • Opportunities in emerging markets
  • Venture Capital

Reach out to us for any questions about this session!

All experts who have shared on this panel are actually partners of Greenhouse, and their company profiles are listed on our platform. To see a comprehensive profile of each company and approach them, click here.

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