Pros and Cons of Starting Foreign Companies in the Philippines

Infographic summarizing the Pros and Cons for foreign companies in the Philippines

Like it or not, today’s business landscape is incredibly competitive and will continue to be so. It’s no wonder that companies scramble to build, maintain, and expand their edge over competitors. To get that proverbial edge, the savviest of entrepreneurs are exploring strategies that they have never pursued before.

Among these strategies is establishing businesses overseas. After all, one can make money anywhere in the world. In recent years, the Philippines has become a favored destination for aspiring moguls and tycoons. Opening foreign companies in the Philippines allows them to be successful even outside of their home countries.

Any businessman worth his salt would do his research before investing his hard-earned money in another country. After all, doing business in the Philippines is not for the faint-hearted. If you have ever thought of branching out abroad, you must be aware of the benefits and risks of doing so. To guide you, here is a short list of the pros and cons of starting your own business in the Philippines as a foreigner:

Pros:

Cons:

Pros of Starting Foreign Companies in the Philippines

A Large Market

With a population of over 100 million, the Philippines offers numerous opportunities for any enterprising businessman to sell his products and services. Filipinos have an affinity for Western culture and are famously consumer-driven. Foreigners would have an easier time adjusting here compared to other Southeast Asian countries like Thailand and Indonesia.

Despite the great income disparity between population sectors, a smart entrepreneur can profit by honing in on and marketing to specific segments. In addition, locating your business in the Philippines allows you to take advantage of the greater ASEAN and Asia-Pacific markets.

Low-Cost, Talented Labor

Naturally hardworking, Filipinos are the dream employees of every company. Each year, the country’s universities and colleges add thousands of graduates to an already large labor pool. This has been – and still is – a boon to the business process outsourcing (BPO) sector, with the average Filipino’s good command of the English language and excellent communication skills.

Salaries in the country are also much lower compared to North America and European countries. With the exchange rate hovering at around PhP 50 to USD 1, foreign companies in the Philippines definitely get more bang for their (payroll) buck.

Good-Enough Infrastructure

Despite being an archipelagic country, the main islands of the Philippines are surprisingly well-connected to each other and the outside world. Large cargo shipments mostly utilize the seaports, while smaller ones go through the various airports dotting the major cities.

Within the greater metropolitan Manila area, the key business hubs are Makati City, Bonifacio Global City (BGC), and Ortigas Center. Rivaling the likes of Hong Kong and Singapore, these places boast of state-of-the-art, eco-friendly communities that bring residents and businesses together.

While there remains a lot to be done to improve the country’s infrastructure, President Rodrigo Duterte has recently initiated the “Build, Build, Build” program to fast track major infrastructure projects that would benefit both local and foreign companies in the Philippines.

Incentives from the Government

The Philippine government, through the Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA), provides several incentives to attract foreign investments, especially into priority areas and industries marked for development.

Fiscal incentives include income tax holidays, tax exemptions and deductions, and preferential rates on the final tax of gross income (for PEZA-registered companies). Among the non-tax incentives are simplification of customs procedures for imported products, issuance of resident visas to foreign investors and their families, and the privilege to operate a bonded trading or manufacturing warehouse.

If it’s your first time to open an foreign-owned company in the Philippines, don’t forget to avail of these goodies!

Cons of Starting Foreign Companies in the Philippines

More Holidays in the Philippines

The Philippines has 18 official non-working holidays. Many of these are of great cultural significance, such as Christmas, New Year, the Christian Holy Week, and All Souls’ Day.

On the other hand, these holidays provide a ready-made, annually-occurring boon to consumer-oriented businesses. Marketing your products and services could not become any easier, with the extended Christmas season in the Philippines that unofficially starts in September and ends in February.

The Law Favors the Laborer

Most of the labor laws in the Philippines are geared to favor employees over management. For example, companies cannot simply fire underperforming employees at will. Before fully terminating someone, the employer has to prove first that the staff member concerned was at fault or failed to pass the standards of his/her probationary period. Companies are also mandated by Philippine law to provide severance pay and 13th-month pay.

These conditions may seem unfair to some, but overall such laws have contributed to higher morale and a lower turnover rate among Filipino employees compared to their foreign counterparts. That is something any smart businessman would appreciate.

Heavy Traffic

Sad to say, the Philippines lacks any kind of efficient mass transportation system. According to the Asian Development Bank, Metro Manila tops the list of 278 most congested cities in developing Asia. The sheer volume of public utility buses, jeepneys, and private vehicles on its roads during work hours leads to slow-moving traffic at best and outright gridlock at worst.

The good news is that various skyways and expressways, as well as a new train line in the northern part of Metro Manila, are being built to ease the traffic situation. It may take some time, but things are bound to get better.

Despite the government-provided incentives mentioned above, some foreign businessmen still hesitate to shortlist the Philippines as an investment destination because of the restriction on foreign ownership of land. They may, however, own 40 percent of a corporation that owns land. Most businesses are allowed to be 100% foreign-owned. The Foreign Investment Negative List contains the limitations of foreign ownership mandated by the constitution and specific laws.

It must be noted that 100% foreign ownership of a company catering to the Philippine local market is allowed, subject to having a minimum paid-in capital of USD 200,000.00. An exemption may be obtained for foreign companies in the Philippines that employ a minimum of 50 direct employees or use advanced technology, for a minimum paid-in capital of USD 100,000.00.

Need Help with Starting Your New Business?

You may be discouraged by some of the cons we enumerated, but don’t be. The Philippines has been one of the fastest-growing economies in Asia, and it will continue to expand in the coming years. With its friendly people and climate, you have even more incentives to build your dream business here.

If you don’t know where (and how) to start, we at DAYANAN Business Consultancy are here to help. Contact us today.

Doing Business in the Philippines

Philippines Business Registration
Ayala Avenue Makati City Central Business District

Dayanan Business Consultancy assists individuals and foreign companies of all sizes in setting up their business operations in the Philippines. Doing business in the Philippines has many advantages as well as a large amount red tape.

Once we know your goals and the kind of business you want to launch in the Philippines,  DBC will recommend the best structure for your KPO, Call Center, IT or Web Development Outsourcing, Back Office Operation or Import and Export. DBC will advise you how to register your investment with PEZA or BOI to obtain tax incentives.

Get the Leading Business Process Outsourcing in the Philippines

We will also ensure that you will get the best Business Process Outsourcing in the Philippines. BPO is a cost-saving measure which is a method of subcontracting business-operations to a third party. One category of BPO is outsourcing of back office services, and Dayanan can help you starting from your business registration in the country.

DBC’s knowledge of the Philippine’s business environment and government agencies allows DBC’s clients to reach their objectives quickly. Personalized service is our commitment, whether your intention is to establish a:

Once the SEC has issued your License to Transact or Certificate of Incorporation, DBC will still be there to help get local business permits and licenses and register with other government agencies when necessary.

Other services DBC provides Business Development and Marketing, Business Plans, Visa Processing, Bookkeeping and Payroll.

Your Business Registration in the Philippines will be done quickly and professionally through Dayanan Business Consulting services.

Contact the DBC Team now for a free consultation.

Philippines BPO KPO Registration Incorporation

Philippines Business Process Outsourcing Registration Incorporation

Starting a Back Office, KPO, Business Process Outsourcing or Call Center in the Philippines requires that you register your operations with the SEC. Outsourcing is deemed an export business and can be one hundred percent (100%) foreign owned (Fully Foreign Owned Domestic Corporation). To qualify as an export oriented enterprise at least 70% of its products/services must be exported.

Philippines offers tax incentives for companies providing outsourcing services. The benefits of tax breaks are given to outsourcing business once their application for registration with either PEZA (Philippines Economic Zone Authority) or the BOI (Philippines Board of Investments) has been approved.
The Philippines is recognized as being the leading outsourcing destination for:

• Cartoon 3D Animation
• Call Center (Inbound, Outbound, Chat)
• Website Design and IT Development
• SEO Search Engine Optimization
• Legal Process Outsourcing
• KPO (Knowledge Process Outsourcing)
• BPO (Business Process Outsourcing)
• Architecture (Cad Cam)
• Computer Programming
• Data Entry
• Human Resources (HR)
• Financial & Accounting Outsourcing
• Medical Transcription
• Virtual Assistants

Filipinos are well educated and speak excellent English with minimal accent. By setting up an outsourcing company for others or your own back office operation in the Philippines you will benefit from a highly trainable workforce at salaries which will give you considerable savings.

Dayanan Business Consultancy is at your service to recommend the best corporate structure for your operations in the Philippines and assist with the registration of your company with the appropriate government authorities to avail of tax incentives.

Philippines Incorporation

Philippine Branch Office

Constitution de Société aux Philippines

Incorporation aux Philippines, Enregistrement et Formation d’Entreprise

Toute entité exerçant une activité commerciale aux Philippines est maintenu d’obtenir une licence  d’opération. La SEC des Philippines octroi un certificat d’incorporation Compagnies Domestiques (Filiale) ainsi que les licences requises pour les: Partenariats, Succursales, Bureau de Représentation et Siège Social Régional.

Dayanan Business Consultancy offre ses services aux Sociétés Étrangères, Petites et Moyennes Entreprises (PME) et aux Particuliers qui souhaitent étendre leurs activités aux Philippines . Nous prenons note de vos besoins et vous recommandons la meilleure structure corporative à utiliser tout en vous informant des divers avantages et désavantages que présentent les différentes options envisageables.

Former votre société peut se montrer une procédure difficile et longue semée de paperasse administrative… Profitez des services de Dayanan Business Consultancy pour constituer votre société et obtenir vos permis d’opération avec rapidité et professionnalisme.

L’équipe de DBC est toujours à vos côtés.


LES SERVICES DE DBC

Incorporation, Enregistrement de Succursales et de bureaux de représentation, Licence d’opérer (business permits)  (BIR),  Autorisation Barangay, Permis du Maire, Applications BOI et PEZA, Comptabilité, Administration de la paie et Services de Consultant en Affaires.

Philippine Real Estate Services

Dayanan Philippines Business Consultancy Experts can provide you with real estate development, investment analysis and market research reports encompassing the following:

1.    Real Estate Development Market Studies

a.    Regional analysis covering economic and demographic factors including population, income and employment growth, available infrastructure, public services, regional accessibility and other factors.

b.    Site analysis to determines your site’s allowable land use and zoning, availability of utilities, vehicle and pedestrian accessibility, access to mass transportation and provides a general context of the locale/neighborhood.

c.    Competitive analysis identifying specific competing developments within your market area and provides an in-depth assessment of pricing, product features, amenities and the overall competitive market.

d.    Market potential defined by interpreting the various supply and demand factors and identifying the types of buyers drawn to your site. We then identify the highest and best use for your site, outline several strategies and propose the best type of project that would be apt for your market.  Sophisticated statistical analyses are employed to determine which factors would contribute most to your property’s value and what price levels would be attractive to your market, ultimately defining the best pricing for your product that the market would accept.

e.    Financial proforma modeling and investment analysis determines what kind of returns your project can attain.

f.    Data presentation using Geographic Information Systems (GIS) to give a visual understanding of the market.

2.    Development advisory – sharing our deep understanding of the Philippine real estate development industry, we provide advice on the local development process, particularly on procuring the required permits from various government agencies.

3.    Representation and brokerage services – we help you identify a property, conduct due diligence, negotiate with the different parties and eventually acquire the property.

4.   Joint venture/real estate syndication – we can assist you in structuring joint venture/real estate syndicates and identifying potential partners and investors. Financial waterfall structures can be employed to determine the distribution of funds.