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Strategies for the Market Entry Philippines

Strategies for the Market Entry Philippines. June 2011. The good news. English is widely spoken, the legal system is in English, English is the business language, English is also used in the communication with government – at all levels.

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Strategies for the Market Entry Philippines

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  1. Strategies for the Market EntryPhilippines June 2011

  2. The good news • English is widely spoken, the legal system is in English, English is the business language, English is also used in the communication with government – at all levels. • The government is accessible – up to the top; advocacy work in both Houses of Congress is possible; discussions with the Supreme Court are possible, too. • The interpretation of laws is relatively flexible; all shades of grey vs. black : white. (this can – of course - be used against foreign investors). • The 100 million people market is growing and offers business opportunites in many fields – 7 BIG WINNERS.

  3. The not so good news • Too many laws; inefficient implementation; • Too many lawyers; too many cases; justice is slow and unpredictable; arbitration outside the country is recommended; • Too much democracy; everybody has an opinion and makes it known: NGOs, the church, local governments and the press; • The Philippines – government and the private sector– is dominated by large (political) families; important when deciding on a joint venture partner; .

  4. Strategies for market entry • Market information / market analysis • who is there already • local and foreign investors in your sector • are the large families active in that sector • what are the government’s plans

  5. Strategies for market entry • Market structures • Laws dominating your potential sector • Privatisation policies by government, i.e. energy and water • Retail / wholesale / franchising • Luzon, Visayas, Mindanao – where to go?

  6. Strategies for market entry • Partner search / partner selection – very important • Cooperation agreements – local lawyers need to be involved • Talk to people already active in the Philippines – the first hour is FREE

  7. Contract structures • Partnership agreements • Technology agreements • Service agreements • Board composition – Control mechanisms • Financing • Risk distribution • Arbitration clauses in contracts • Selection of lawyers important

  8. Options for market entry • Buying a company or a share of a company • Joint ventures with existing companies • Starting from scratch/ location is important • Partner selection important

  9. What else is important? • Dialogue with the national and local governments • Dialogue with partners • Dialogue with employees • Dialogue with ‘neighbors’– NGOs, Church, etc. - CSR

  10. Investment incentives • Tax holidays – low income tax later – for priority sectors • Duty- and tax-free importation of investment equipment / machinery, etc. • Repatriation of profits (if capital inflow was registered with the Central Bank) • If 70% of production is exported – locate in an export processing zone (PEZA)

  11. …and finally… • Many investors are earning good money • Learn from the mistakes of others • Make use of partners • Build and maintain contacts to government • Industry associations are important • ECCP is super important!!

  12. …and now – 7 big winners • Agri-Biz • IT/BPO • Tourism – medical travel – retirement • Creative Industries • Manufacturing • Mining • Infrastructure

  13. Agri-Biz • To address Food Security, it becomes essential that businessmen and farmers work together • Created Agro-Industrial Zones with special incentives • Good models for agri-biz: Nestlé’s cooperation with coffee growers • Main crops: rice, corn, cassava, coconut, fruits, fish / seafood,

  14. IT / BPO • Business Process Outsourcing: in 5 years, this sector moved to 650,000 people employed and invoicing US$ 8 billion in services • Philippines bigger than India in voice; growth in future will be in non-voice • More Italian MNCs, dealing with English-speaking clients, should outsource to the Philippines • Target 2016: employment for 1.3 million / service export: US$ 20 billion

  15. Tourism / medical travel / retirement • Philippines has more than 7,000 tropical islands but 3 million visitors per year only; large potential • Medical travel is becoming a big market; the Philippines offers excellent medical services – US-trained doctors and nurses • Philippines is the destination for retirement of aging populations; a decent lifestyle at lower costs • Filipinos well prepared to deal with aging people and care for patients

  16. Creative Services • This is a sunrise industry – from animation to design, from performing arts to advertising, from multimedia to music, from architecture to film and video production, from content development to gaming, from application development to fashion • This sector is closely related to IT/BPO and can be seen as KPO – Knowledge Process Outsourcing • This is an attractive area for cooperation between international creative sectors and the Philippines

  17. Manufacturing • Philippines is a logistics hub into Asia • Export processing zones all over the country; well managed; 70% needs to be exported • Philippines: big in electronics and semiconductors • 100 million Filipinos represent an exciting market for all kinds of products; local formulation or production will improve competitiveness • Attractive incentives for manufacturing available; zero-duty within ASEAN can make RP production hub!

  18. Mining • Philippines is rich in minerals: copper, gold, nickel – with large deposits • Big copper mine – US$ 5.2 billion investment – to start production in 2015 • Substantial Chinese interest, but also from Canada and Australia • As the market develops, substantial opportunities for the supply industry – especially equipment • There are issues with local governments and the church

  19. Infrastructure I • The country only spent less than 2% of GDP on infrastructure in recent years; target 5% of GDP • Building infrastructure consequently a cornerstone of the new administration • Given the large financial requirements, the government pushes PUBLIC PRIVATE PARTNERSHIP • In 2011, the first 10 infrastructure projects will be bidded out • Many additional projects will follow in 2012

  20. Infrastructure II • The PPP ‘product’ is still being perfected • Projects are in transport (rail and road), power (LNG, coal, natural gas and renewable), airports, seaports, water... • On the European side, we have a few difficult projects that need to be resolved before PPP can fully be exploited: NAIA T3, Ro-Ro and Laguna Lake Rehabilitation • But involvement in PPPs can be on smaller scale also: Example: my weighing scale project!

  21. … let me remind you… • Many investors are earning good money • Learn from the mistakes of others • Make use of partners • Build and maintain contacts to government • Industry associations are important • ECCP is super important!! • Let‘s go!

  22. Thank you! • Hubert d’Aboville President European Chamber of Commerce of the Philippines, Inc. (ECCP) 19th Floor, Philippine AXA Life Centre, Sen. Gil Puyat Avenue Makati-City Tel: +63 2 7596680 Email: info@eccp.com d-aboville@pamatec.com.ph

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