Doing Business In Philippines: 20+ Pros and Cons (You Must Know)

The Philippines is blessed with massive natural resource reserves and is one of the world’s top ten gold, copper, and chromite producers. Over the past few years, the economic upsurge has made the Philippines a thriving nation that is one of Asia’s fastest-growing economies.

It aims to promote economic growth by attracting international investment and promoting regional and global market integration. 

In this article, we will discuss the major advantages and disadvantages of doing business in the Philippines.

Benefits of Doing Business in the PhilippinesThe Drawbacks of Doing Business in the Philippines
Location is a plusGetting Credit and Protecting Investors is difficult
Skilled Labour ForceGetting Electricity
Good IncentivesStarting a Business

Advantages of Doing Business in the Philippines

Ideas and Opportunities Oriented Nation

The Filipinos are more geared towards the short term and are more open to improvements and new ideas. Here too the idea of fatalism plays its part. Challenges and issues are generally embraced and dealt with simply because the Filipinos consider them dictated by destiny and so little can be done about it.

Capable Workforce

The philippine workforce consists of a wide pool of highly trainable and skilled people.

Being a U.S. colony for almost 50 years left heavy American influences and high English proficiency. While distinct in terms of accent and wording, Filipinos are able to adapt their style of communication to the given situation.

High-personalized Network

Companies in the Philippines are highly customized and spend a lot of time establishing and maintaining relationships. In reality, the majority of business contacts are formed in the Philippines through friends or intermediaries.

Engaging in business in the Philippines and joining the personal networking community thus opens the doors to a large array of additional opportunities.

Strategic Location of Business

Filipinos are a demographic which is very consumer-driven, with almost 90 million people. Therefore the domestic market provides many business prospects for sales.

Additionally, the Philippines works as a strategic location for business for expansion programs in Asia Pacific. Trade opportunities with East-Asia are of particular interest along with the profit-making market.

Favorable Incentives by the Government

The Philippine Government has implemented numerous incentives since the early 1990s to create an investor-friendly environment and attract foreign business projects. Some of the incentives include a deduction in tax or exemption for foreign investors along with special economic zones, income tax holidays, and non-fiscal benefits.

Friendly Economy

The Philippines being an open economy creates complete foreign ownership in its multiple sectors and assists the investment scheme Build-Operate-Transfer (BOT) that other Asian countries imitate. Government companies are being privatized and the finance, insurance, telecommunications shipping, and energy sectors have been deregulated.

Exemption in Tax

Incentive packages include corporate income tax, which is lowered to a nominal 32 percent, with businesses in the Special Economic Zones subject to maximum tax rates of just 5 percent.

Multinationals seeking regional headquarters are entitled to benefits such as tax exemptions and the importation of particular equipment and products free of duty.

Excellent Infrastructure

The nation is, now, greatly attainable by air, sea, and cyberspace, the liberalization of inter-island shipping and domestic aviation spurred further improved facilities and services. The container terminals are ideal for handling freight traffic to the highest efficiency standards.

Communication offers 24/7 secure international access with fiber optic cable as the main backbone network and backup satellite. Economic reforms accentuate regional development, turning rural areas into business centers.

The landmark BOT law requires private investors to develop and run infrastructure, and then turn it over to the government of the Philippines after a defined time.

Hospitable Life

In the tropical setting, you can discover the mind-blowing western amenities of sun, sea, style, and sand.

The Philippines is a second home to expatriates who appreciate the company of the region’s warmest people, the country’s openness to diverse cultures, and a certain global perspective.

Expats enjoy inexpensive and convenient luxuries – business centers, homes, schools, hospitals, shopping centers, hotels and restaurants, beach resorts, and leisure centers.

Good Business Opportunities

With the integration of Asian economies into the huge ASEAN Free Trade Agreement (AFTA) system, the Philippines is the most beautiful and lucrative location for companies seeking entry to the broad ASEAN market and its vast trade opportunities.

The Philippines has enhanced and grown numerous investor areas, offering a diverse consumer market that is accustomed to a variety of product choices generated by a competitive domestic economy.

Disadvantages of Doing Business in the Philippines

Commencement of Business

During the commencement of business in the Philippines, you need to navigate the number of procedures defined by the Government. The completion of all the procedures takes more than a month on average.

Construction Permits

It is a lengthy, difficult, and costly process to receive building permits. On average, there are 29 navigation procedures which take 84 days. Most contact will be with the Community Planning and Development Office (CPDO), but during the process, there are other government agencies that need to consult.

Availability of Electricity

The Philippines’s local electric distributor performs the electrical connexions and inspects the site before the execution of the work. Once work is finished, a licensed Master Electrician or a Professional Electrical engineer must perform an inspection and sign the “Completion of Electrical Installation Certificate”

Cultural Barriers

If not carefully considered, the nuances of business culture in the Philippines can pose many obstacles to successful business endeavors. Companies are hierarchical driven and all the responsible decisions are under the senior management. Filipinos have a habit of engaging in personal small talk.

However, it is good to not get irritated due to the delays in meetings that are not running efficiently because time is spent building relationships and nurturing them.

Insolvency

Insolvent companies should expect just 4.9 cents on the dollar to recover, compared with the OECD average of 70.6.

Enforcing Contracts

Contract compliance takes 842 days (2.3 years) on average to complete. There are almost 37 processes, and several cases may be kept up before stepping into the judicial stage in the filing and operation.

Tax Payments

Employee-paid tax provisions include the most taxes per year, and corporate income tax, which is a flat rate of 30 percent, and VAT takes the longest period.

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