Doing business in the Philippines: Philippines trade and export guide
Updated 17 March 2016
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1. Philippines export overview
The Philippines is one of the largest markets in south east Asia with an estimated 103 million people.
Contact a Department for International Trade (DIT) Philippines export adviser for a free consultation if you’re interested in exporting to the Philippines.
Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for the Philippines.
HSBC has forecasted that the Philippines could become the world’s 16th largest economy by 2050. The Philippines is now ranked 47th in the World Economic Forum’s Global Competitiveness Report. It has improved by 37 places in the last 5 years.
About 200 British companies are now doing business in the Philippines. They include well known brands such as Unilever, Shell, HSBC, Standard Chartered, AstraZeneca, Diageo, Arup, JCB, Marks and Spencer, River Island and Halcrow.
Benefits for UK companies exporting to the Philippines include:
- one of the largest English speaking countries
- Western goods and services are popular
- expanding consumer base
- gateway to other Asian markets, all within 4 hours flying time
Strengths of the Philippines market include:
- 12th largest country in the world in terms of population
- economy boosted by over USD 24 billion in overseas remittances
- strong services sector
- skilled workforce and competitive wages
- liberalised economy
2. Challenges
The Philippine market can present challenges for UK companies. The risks can be overcome, but they do require a commitment in time and resources.
Challenges include:
- bureaucracy, as paperwork requires many signatures before final approval
- corruption, which is improving, but remains a significant problem
- restrictions on foreign ownership of companies, land and investment in certain sectors
- restricted participation in public procurement
- restrictions on ability of foreign individuals to practise in some professions
You should hire a broker or local lawyer to help you deal with the necessary formalities.
A local partner or distributor may also be necessary.
You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.
3. Growth potential
3.1 Economic growth
The Philippines economy grew by 5.8% in 2015 following year-end strong performance in the services sector. The forecast for 2016 is 6%, the best growth outlook in Association of Southeast Asian Nations (ASEAN) according to the Organisation for Economic Cooperation and Development (OECD).
The Philippines is a consumption driven economy. It has consistently positive economic growth and an expanding middle class who like foreign consumer goods.
Remittances play a major role in the Philippines economy contributing to growth. Almost a quarter of the country’s labour force works abroad, including an estimated 250,000 Filipinos now living and working in the UK.
4. UK and the Philippines trade
UK exports of goods and services in 2013 were about £510 million. Bilateral trade in 2014 was USD 1.2 billion with UK good exports to Philippines valued at USD 601.2. Latest available information shows that UK export of goods were up by 44% for the first half of 2015.
Top 10 UK exports of goods to Philippines (2014):
- electrical, electronic equipment
- nuclear reactors, boilers, machinery etc
- pharmaceutical products
- aircraft, spacecraft, and parts
- vehicles other than railway, tramway
- iron or steel products
- optical, photo, technical, medical, etc apparatus
- essential oils, perfumes, cosmetics, toileteries
- organic chemicals
- plastics and articles thereof
The UK is one of the largest European investors in the Philippines. Shell’s most recent investment was valued at USD 5 billion.
5. Opportunities for UK businesses in the Philippines
DIT provides free international export sales leads from its worldwide network. Search for export opportunities.
5.1 Infrastructure and Public Private Partnerships (PPP)
The Philippine government has identified PPP projects in:
- rail
- roads
- airports
- power
- healthcare
- agriculture infrastructure
- education
- tourism
The National Economic Development Authority approved 10 major infrastructure projects since its launch in 2010. 15 more are in project development or tender process.
There are opportunities for UK companies in areas such as:
- advisory services
- project management
- engineering and design
- provision of specialist equipment, machinery and technology
- other supply chain requirements
Contact uktimanila@fco.gov.uk for more details on opportunities around infrastructure and PPP.
5.2 Power and renewable energy
The electricity market is unsubsidised and privatised, with the second highest electricity in the region. There are opportunities for UK companies in:
- oil and gas supply chain
- wind
- hydro
- biogas
- energy efficiency technology
Contact uktimanila@fco.gov.uk for more details on opportunities around power and renewable energy.
5.3 Education
There are a range of opportunities in the education sector, including:
- accreditation
- vocational and continuing education
- e-learning modules
- software and hardware
- partnerships with local educational institutions
- business training courses
Contact uktimanila@fco.gov.uk for more details on opportunities around education.
5.4 Pharmaceuticals and healthcare
There are a range of opportunities in the life sciences sector, including provision of:
- medical equipment and supplies
- health and wellness facilities
- e-health solutions, particularly to private hospitals
Contact uktimanila@fco.gov.uk for more details on opportunities around pharmaceuticals and healthcare.
5.5 Retail
The Philippines middle class is affluent and expanding. The last 3 years have seen a large number of well known British retail brands successfully launching in the Philippines.
There are opportunities for UK companies in the following subsectors:
- fashion
- footwear
- beauty and wellness products
- household goods
- food and drink
Contact uktimanila@fco.gov.uk for more details on opportunities in retail.
5.6 Financial and professional services
The banking sector is strong and open to companies supplying technology and services. Many of the largest Philippine conglomerates use UK financial markets to raise funds.
UK financial services including accountancy, advisory, and investment services are in high demand.
There are also opportunities for the supply of applied technology for the sector.
Contact uktimanila@fco.gov.uk for more details on opportunities around financial and professional services.
6. Start-up considerations
UK companies can approach the Philippine market in several ways, including:
- exporting direct
- appointing an agent or distributor
- partnering with a franchisee
- forming a joint venture
- setting up a local office (sole proprietors, partnerships and corporations)
- selling to the government as specified by the Republic Act (RA) No 9184
Appointing an agent or distributor is the most common method. However, partnering with a franchisee is becoming increasingly common.
A company may also choose to set-up a local office in the Philippines. Foreign ownership is generally allowed, although limited in selected sectors.
You can register a company through the Securities and Exchange Commission.
There are incentives if you are operating in sectors that are investment priorities for the Philippine government.
You should conduct due diligence checks once you have chosen your method of entry into the market. If your sole interest is in exporting, the best proof of a Philippine company’s ability to pay is whether it is able to raise a letter of credit from the bank. If so, you do not need to check the company’s financial standing as the bank will have already done so.
If you want to establish a business relationship that goes beyond exporting, you will need to carry out further research. A thorough evaluation of your potential partner may be time consuming and expensive, but doing so will greatly reduce the risk of serious problems in the future.
7. Legal considerations
The Philippines legal system largely follows the US model. The legal process can be very slow and bureaucratic. A small typographical error on a formal document can lead to disqualification or voiding. Foreign lawyers are forbidden to practice, but can act as advisers.
Resolving matters through the courts is frequently an extremely lengthy and expensive process. Court decisions have often been tarnished with accusations of corruption. Foreign businesses or individuals can feel under pressure to settle as the only way to get an acceptable outcome.
International arbitration can be an alternative outcome, if specified as a contractual option.
Contact the DIT team in the Philippines to help find tax and legal advisers before entering into agreements.
7.1 Standards and technical regulations
The Department of Trade and Industry (DTI) is the lead government agency responsible for product standards and consumer safety. Imported goods must clearly state the country of origin in English. According to the Consumer Act of the Philippines, all consumer products sold domestically should generally include the following information:
- registered brand name
- registered trade mark
- registered business name
- address of the manufacturer, importer or repacker in the Philippines
- general make or active ingredients
- net quantity of contents
- the country of manufacture, if imported
- if a consumer product is manufactured, refilled or repacked under licence from a principal
Mislabelling, misrepresentation or misbranding may subject the entire shipment to seizure and disposal.
The Food and Drug Administration (FDA) has responsibility for registration of drugs, processed foods, cosmetics and hazardous household substances.
7.2 Intellectual property (IP)
The Philippines is a member of the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO). It is also a party to the Berne Convention, an international agreement governing copyright. Good IP protection laws exist, but there are concerns about the level of consistent, effective and sustained enforcement.
The Intellectual Property Office of the Philippines has responsibility for patents, design, trademarks and copyright.
Counterfeiting is large scale and organised. Pirated computer games, business software, DVDs are readily available in both legitimate and illegitimate outlets. The same applies to:
- counterfeit clothing
- high value consumer goods
- pharmaceuticals
- industrial products
In October 2011 the Supreme Court cleared guidelines for special commercial courts to hear both civil and criminal cases involving violation of rights under the Intellectual Property Code. The new rules, which came into effect in November 2011, form part of the government’s plan to strengthen IP protection and enforcement.
8. Tax and customs considerations
The UK has signed a double taxation convention with the Philippines.
8.1 Value Added Tax (VAT)
VAT is applied at 12%. Excise tax is additionally imposed on cigarettes, alcohol and motor vehicles.
A stock transaction tax of half of one per cent of gross selling price is imposed on the sales of shares through the Philippines Stock Exchange. Documentary stamp tax at different rates is applied to bond and loan agreements, to deeds of sale and to other documents.
The Bureau of Internal Revenue provides information on VAT rates and filing procedures.
8.2 Corporate and income tax
Domestic corporations are those incorporated under Philippine laws. They are taxed on the basis of net worldwide income. The corporate income tax rate in the Philippines is 30% of the net taxable income.
Non-resident foreign corporations are taxed on gross Philippine source income.
The Bureau of Internal Revenue provides information on corporate and personal income tax rates.
8.3 Customs
Goods imported into the Philippines are subject to customs duties as set out in the Philippine Tariff and Customs Code, and regulated by the Bureau of Customs (BOC).
Tariffs are being implemented to conform with:
- the import liberalisation programme
- commitments under WTO / General Agreement on Tariffs and Trade (GATT)
Duties range from 1 to 50% depending on the type of goods imported.
You can find more about import tariffs in the Market Access Database.
8.4 Documentation
Regulated commodities need clearance from appropriate government departments. Banned items are specified in section 101 of the Philippines’ Tariff and Customs Code.
You can find details of both regulated and banned commodities on the DTI website.
A release certificate or export declaration form, signed by an authorised bank, is needed before goods can be cleared through Customs. Any product clearance or registration is usually handled by the local importer.
Imports into the Philippines are no longer subject to Pre-Shipment Inspection (PSI). All are now processed by Customs in accordance with the Automated Customs Processing System.
Low risk products, which are not subject to physical and documentary checks, are processed under an advanced processing facility. This is known as Super Green Lane (SGL) and allows for ‘ship to truck’ release. Such shipments are pre-processed and cleared before they arrive in the country.
9. Business behaviour
English is one of the Philippines’ 2 official languages and is widely used in business and government circles.
A formal introduction by a trusted third party is almost always the best way to enter this market.
Filipinos do business with people more than companies. If you change representatives during negotiations, you may have to start over.
Present and receive business cards with 2 hands so that it is readable to the recipient. Examine the card briefly before putting it in your business card case.
Sending short messages through mobile telephones has now because a routine and favoured medium of communication.
10. Entry requirements
Visa regulations vary with your intended length of stay.
The easiest procedure is to arrive without a visa, in which case you will be permitted to stay for 30 days. Your passport must be valid for at least 6 months beyond the 30 days.
A visa obtained in the UK will usually allow a 59 day stay.
10.1 Travel advice
If you are travelling to the Philippines for business, check the Foreign and Commonwealth Office (FCO) travel advice beforehand.
11. Contacts
Contact the DIT team in the Philippines for more information and advice on opportunities for doing business in the Philippines.