Philippine Government Investment priority Plan.

I. Philippine Investment priority Plan (IPP), 2017-2019. 菲律宾1.jpg

(1) background to the introduction of priority plans

After President Duterte took office, the new government put forward the "10 socio-economic agenda," including improving infrastructure, establishing the value chain of the agricultural industry, improving human resources and social security systems, and so on. With the aim of ultimately promoting equality poverty reduction and regional economic development one of them is to amend the Constitution to abolish restrictive foreign investment decrees and to attract more foreign investment. 

According to the Duterte government's economic blueprint, gross domestic product will grow from 6.5-7.5% in 2016 to 7-8% between 2018 and 2022, and the poverty rate will fall from 21.6% in 2015 to 16% in 2022. 

The Philippine Investment Committee (BOI) is a subsidiary of the (DTI) of the Ministry of Trade and Industry and is the main government agency responsible for promoting investment in the Philippines. With regard to the introduction of investment, the Investment Committee assisted domestic and foreign investors in the Philippines to innovate in the area of economic activity. In accordance with past practice, the investment priority plan is valid for three years. The three-year rolling plan ensures the continuity consistency and predictability of policies for domestic and foreign investors. 

(2) main elements of the priority plan. 

The theme of the 2017 Investment priority Plan is "expanding and decentralizing opportunities", which is considered to be the "preferred" investment area: 

Manufacturing includes agricultural processing; agriculture, fisheries and forestry; strategic services (integrated circuit design, creative industries, aircraft maintenance, electric charging stations, industrial waste disposal, telecommunications, etc.); medical services, including drug rehabilitation; Public housing; 

Public-private partnership infrastructure and logistics projects involving local governments; innovation-driven projects; Inclusive business models (e.g. large and medium-sized enterprises in the agricultural and tourism sectors provide business opportunities for small and micro enterprises in their value chains); projects related to the environment or climate change; and energy sectors such as power generation. 

Investment priorities also include export operations, including the production and manufacture of export products, support for export enterprises and services. 

The new investment priority plan reflects more SME orientation, innovation drive, health and environmental awareness than the 2014-2016 investment priority plan, and encourages the transfer of investment outside big cities, with the aim of expanding employment opportunities. Enable more enterprises to enter local and global value chains. The subsidy policy that investors may receive will be determined on the basis of the actual contribution of the enterprise to economic development. The duration of income tax exemption for enterprises will be based on the following factors: net additional income from investment projects, job creation, multiplier incremental effect, actual ability, etc. 

II.The Philippines is becoming a more attractive destination for investment cooperation. 

At present, the Philippines has extended an olive branch to China, Japan, Europe, the United States and the Middle East, hoping to attract more advanced technology to invest in the Philippines. 

Despite external economic challenges, the Philippines has seen strong (FDI) growth in foreign direct investment (FDI) as a result of the recovery in manufacturing and continued growth in services. The net inflow of foreign direct investment in the Philippines was a record $7.93 billion in 2016, up 40 per cent from a year earlier. Equity investments come mainly from Japan, Hong Kong, Singapore, the United States and Taiwan. The funds are mainly used in finance and insurance, arts and entertainment and leisure, manufacturing, real estate and construction. 

The Philippines has a huge domestic market and the average age of the country's population is 23.9. The governor of the central bank of the Philippines said foreign investors were bullish on the Philippines "because of the young and consumer population and the growing macro-economy." According to (PEZA) data from the Economic Zone Administration of the Ministry of Trade and Industry of the Philippines, the agency approved 51.335 billion pesos of investment in the first quarter of 2017, an increase of 50.5 percent over the same period last year. As a result of the Duterte government's commitment to increasing infrastructure spending, foreign direct investment inflows will continue to rise in 2018. 


III. Suggestions for Chinese investors. 

(I) Investment. 

The Philippines welcomes foreign investment, but has relatively strict restrictions on foreign investment in terms of the proportion of shares, coupled with adverse factors such as aging infrastructure, political instability and terrorist threats, so the scale of attracting foreign investment in the Philippines is small. Chinese investors should pay attention to the following issues in their investment cooperation in the Philippines: 

1. Familiar with Philippine laws and regulations on investment. 

Philippine investment law generally limits the proportion of foreign investment in the sale of most products in the Philippines to no more than 40% of the shares of joint ventures, and the proportion of shares in a small number of industries fluctuates to a certain extent. Foreign investment in export-oriented industries may be controlled or wholly owned. Therefore, Chinese enterprises should fully understand the relevant investment laws and regulations and actively participate in the areas where investment is encouraged in the "Investment priority Plan" promulgated by the Philippine Investment Agency. Or apply for preferential policies for enterprises in special economic zones in accordance with the Philippine Special Economic Zone Act. 

2. Conscientiously carry out on-the-spot investigation and investigation. 

There are many islands in the Philippines, and there are some differences in language and culture, religious beliefs, infrastructure, security situation, policy preferences and so on. To invest in the Philippines, we must carry out serious and meticulous field research, find the most suitable areas for investment, and avoid hearsay and blind investment. 

3. Pay attention to the selection of joint venture objects. 

There are a large number of Chinese in the Philippines and strong economic strength, which is one of the favorable conditions for Chinese enterprises to enter the Philippines. Choosing a good joint venture will do twice the result with half the effort, but the situation of "Chinese deceiving Chinese" also exists. Chinese enterprises should carefully choose their partners to invest in the Philippines, fully understand the reputation, strength and qualifications of the partners, and avoid being deceived. 

4. Rational and effective use of local human resources. 

With a large population, simple folk customs and a wide range of English, the Philippines is known as the third largest English-speaking country in the world, with relatively rich human resources. However, Filipinos are inefficient and are mostly reluctant to work overtime with pay. How to make full and effective use of local human resources on the basis of respecting local culture and tradition is also a problem that enterprises should actively consider.


(II) Trade. 

China is the third largest trading partner of the Philippines, and the Philippines is the sixth largest trading partner of China in ASEAN. With the growth of bilateral trade volume and more trade disputes, Chinese enterprises should pay attention to the following problems when doing business with Filipino businessmen: 

1. Choose a safe and secure method of payment. 

When doing business with Filipino businessmen, you should try your best to pay by documentary credit (L / C) or D / P (D / P), and you should be careful about selling on credit. You have to be careful when accepting forward cheques. I failed to cash a Chinese company in the Philippines after accepting forward cheques. Customers jumped the bill maliciously after picking up the goods, resulting in losses. 

2. Attach importance to product quality. 

Filipino businessmen are interested in low prices for importing Chinese goods, but Chinese enterprises should not unilaterally pursue low price sales at the expense of product quality, especially special goods such as food and drugs that are related to their health. Enterprises should always regard product quality as life, once a vicious event will cause great damage to the whole enterprise, and even the overall image of Chinese goods. Similarly, imports of goods from the Philippines, especially minerals, should also pay attention to whether the quality of the goods received is consistent with the provisions of the contract. 

3. Pay attention to the selection of Shipping agents. 

Choosing a shipping agency with good reputation and strong strength is also an important part that should be actively considered when doing trade, so as to avoid illegal forwarders or shipping agents colluding with illegal merchants to defraud goods. At present, large domestic shipping companies have branches in the Philippines. 

4. Fully enjoy the tariff preferences brought about by the China-ASEAN Free Trade Agreement. 

China and ASEAN countries signed the China-ASEAN Free Trade area Agreement on Trade in goods in 2004, launched a comprehensive tax reduction process in 2005, and eliminated tariffs on most goods with six ASEAN member countries, including the Philippines, in 2010. Build a free trade zone. When exporting goods to the Philippines, Chinese enterprises can receive preferential treatment for tariff reduction on the basis of the certificate of origin of the China-ASEAN Free Trade area (Form E) issued by the inspection and quarantine organ. Similarly, goods imported from the Philippines can also enjoy preferential tariff treatment if they issue certificates of origin signed by Philippine government agencies.


(III) contracted projects. 

1. Seizing the opportunity for the Development of contract Market. 

The Philippine infrastructure is too old to meet the needs of economic development and is being strengthened, including transport, water resources, energy, social infrastructure and communications. Chinese enterprises can pay attention to seize appropriate market opportunities, especially to strengthen cooperation with private owners in the Philippines. 

2. Choose the appropriate mode of operation. 

At present, Philippine contracting market projects can be roughly divided into three categories: overseas assistance projects, Philippine government-funded projects and private projects. Chinese companies should combine their own reality, according to the different nature of the project, specific problems specific analysis, broaden the mode of thinking of contracting projects, choose the appropriate mode of operation. The Philippines is a traditional aid recipient of western developed countries, and it is also home to the headquarters of the Asian Development Bank. In recent years, the Philippines has also stepped up its loans to the Philippines, and the sources of overseas loans are relatively abundant. Project collection is generally guaranteed, and Chinese companies can pay more attention to tracking such projects. In recent years, the speed of economic development is relatively accelerated, domestic government funds for infrastructure construction are also increasing, but domestic projects generally only allow domestic enterprises to participate in contracting. In recent years, the number of private projects such as real estate, small hydropower and so on is also increasing, although the scale is not large, but it has the advantages of short cycle, fast promotion and high efficiency, enterprises can actively follow up and participate. However, many private projects need to be partially contracted with capital, and attention should also be paid to risk control. 

3. Abide by the law and standardize management. 

In recent years, Chinese enterprises have encountered some setbacks and difficulties in contracting projects in the Philippines, which in the final analysis are due to a lack of in-depth understanding of the national conditions of the Philippines. 

Take, for example, the contracting of power station projects in the Philippines. Most of the power generation sector in the Philippines is private owners, paying special attention to the benefits and losses, and often observe the problems existing in the process of project implementation with a "magnifying glass". 

For example, the Philippine power transmission frequency is 60Hz, which is different from the domestic 50Hz. These unique conditions in the Philippine power market impose high requirements on the quality control capabilities of Chinese enterprises and the adaptability of Chinese equipment, such as improper response, which can lead to fines. In carrying out contracting and cooperation in the Philippines, Chinese companies should seriously study the specific national conditions of the Philippines and do as the Romans do. In addition, they should abide by local laws, regulate their operations, and avoid vicious competition. 

4. Labor service. 

The Philippines itself is one of the important labor exporters in the world, and overseas labor remittances are an important pillar of the Philippine economy. The Philippines has strict restrictions on foreigners to engage in general labor services in the Philippines. Only investors, senior managers and technicians can obtain a work or residence permit after a series of examination and approval procedures. In recent years, the Philippine Immigration Service has repeatedly arrested Chinese migrant workers in the Philippines on the grounds that they have not held a work visa or permit to work in the Philippines illegally, including construction workers from large-scale project sites and small vendors engaged in retail. Therefore, Chinese enterprises should not be greedy for temporary gain, and should pay special attention to complying with the relevant regulations of the Philippine Immigration Service and the Labor Department on residence and work in the Philippines.


(IV) other matters needing attention. 

There are more business opportunities in the Philippines, but the potential risks are also high. According to the international rating agencies and the Western Chamber of Commerce, the risk factors in the Philippines mainly come from the poor public security situation, the high proportion of bad and bad debts of banks, exchange rate risk and so on. Therefore, in the process of investment, trade, contracted projects and labor cooperation in the Philippines, there should be a strong sense of risk aversion, with particular attention to the following risks: 

1. Financial exchange rate risk. 

Chinese enterprises should pay attention to avoiding exchange rate risks in their business activities in the Philippines. 

2. Political risk. 

Chinese enterprises should carry out their activities in the Philippines on the premise of abiding by local laws, refrain from breaking the law and giving authority to others, avoid getting involved in local political struggles, and become victims of political struggles. 

3. Commercial risk. 

In recent years, commercial fraud cases have occurred from time to time in bilateral trade, and the method of payment on arrival of goods is the usual method of fraud. Usually, the first order of individual Filipino merchants keeps their promises and pays in a timely manner, without any delay or delay, so as to gain the trust of Chinese companies, and the second order begins to violate the promise of payment terms, delaying or stopping payment for various reasons. Therefore, when doing business, regardless of the size of the transaction volume of new and old customers, they must strictly pay the terms and conditions, requiring 100%T/T to pay in advance, or T / T to pay part of the payment in advance, and the rest to be paid before shipment. When signing a contract, Do not accept payment terms such as forward L / C or cash on delivery D / A, D / P, etc., in case of loss. In addition, when importing goods from the Philippines, we should beware of inferior or even shoddy products. 

4. Legal risk. 

The laws and regulations of the Philippines are very sound, but the process of implementation is arbitrary, and it is common that the law is not strictly enforced and fails to comply with the law. The Philippine court has complicated procedures, takes a long time, and is corrupt. 

5. Prevention of security risks and natural disasters. 

There are a number of illegal organizations on the island of Mindanao in the Philippines, activities by Philippine Communist guerrillas in the northern part of Luzon, and criminal cases such as kidnapping, robbery and theft in Manila, the capital. Chinese enterprises should maintain liaison and information communication with the Chinese Embassy, avoid traveling in the northern Luzon Mountains at night, pay attention to the local security situation when investing in Mindanao, and properly handle relations with the local government, the army, the church and the people. Make a contingency plan. When living in Manila or other cities, avoid going out at night and going to unsafe places, and avoid talking to strangers. In addition, with the frequent occurrence of natural disasters in the Philippines, we should enhance our vigilance and awareness of natural disasters such as typhoons, earthquakes, mudslides and volcanoes. 

In the process of carrying out investment, trade, contracted projects and labor cooperation in the Philippines, special attention should be paid to the investigation, analysis and assessment of relevant risks in advance, to do a good job in risk aversion and management, and to effectively safeguard their own interests. It includes the credit investigation and evaluation of the project or trade customers and related parties, the analysis and avoidance of the political and commercial risks of the investment or contracting countries, the feasibility analysis of the implementation of the project itself and so on. It is suggested that the relevant enterprises should actively make use of insurance, guarantee, banks and other insurance financial institutions and other professional risk management institutions to protect their own interests. Including trade, investment, contracted projects and labor credit insurance, property insurance, personal safety insurance, bank factoring and welfare court business, all kinds of guarantee business (government guarantee, commercial guarantee, guarantee letter) and so on.



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