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.

Seminars

In today’s fast-paced world, companies need to be flexible in responding to various challenges. This is where the importance of training and development programs come in. By investing in employee training, companies improve capacity, productivity, and leadership across the board.

At DAYANAN International Business Consultancy Services, Inc. (DIBCSI), we pride ourselves in being your one-stop partner for customized business solutions. With our experience in establishing new businesses and strengthening existing ones, we understand what clients need to reach the next level of growth.

This is why we are proud to offer seminars — both in-house / corporate training and public learning events — geared towards developing your company’s next batch of leaders.

The DAYANAN Advantage

  • Value for money: Your learning investment helps your employees become leader-employees, ready to echo what they learned to colleagues
  • Customized training modules at a time, venue, and budget of your choosing
  • Public seminars that double as networking opportunities for potential partners
  • A pool of trainers with expertise in their respective fields
  • Instructional frameworks that address practical needs of target attendees
  • Well-organized logistics: venues, meal choices, delegate kits, certificates of participation, and detailed handouts
  • Availability of ongoing mentoring / coaching on seminar topics at reasonable consultancy fees

List of Public Seminars Offered (also available for In-House Training):

  • Public Relations for Business and Government: A Crash Course for Professionals – Oct. 24, 2019
  • FROM ZERO TO HERO: A Crash Course on Online Reputation Management – Nov. 20-21, 2019
  • How to Position Your Company As An Industry Influencer – TBA
  • Finding and Interviewing Online Influencers for Your Company – TBA
  • Customer Lifecycle Marketing: How To Win More Customers and Keep Them For Life – TBA
  • Building an Anti-Fraud Corporate Culture – TBA
  • Accounting for Non-Accountants – TBA
  • How to Pass a Government (COA) Audit – TBA

Terms and Conditions:

1. REGISTRATION: Please fill up the online registration form at bit.ly/2XJW4JF. We will then be in touch you within 24 hours to confirm your registration. Alternatively, you may contact us at +632 576-8476 or +63 956-661-9253. We will then guide you through the online registration process.

2. RATES AND DISCOUNTS: Learning investment is PhP 4,000.00 per participant (inclusive of VAT) unless otherwise stated for a particular seminar. This is inclusive of AM and PM snacks, buffet lunch, ID tag, delegate kit, learning handouts, and certificate of participation. You may also choose to avail of our discounts:

  • Early Bird Discount: Registration fee will only be PhP 3,500.00 if you register at least fifteen (15) working days before a seminar.
  • Group Discount: Registration fee will only be PhP 3,000.00 per participant if there are at least 3 attendees from your company / organization.

Per National Budget Circular No. 563 issued by the Department of Budget and Management (DBM), government attendees can exceed the PhP 2,000.00 limit set for registration fees of trainings conducted by private institutions. Click this link for a copy of the DBM circular dated April 22, 2016.

3. PAYMENT METHOD: We accept company checks or cash as valid forms of payment. Personal checks are not accepted. All payments must be deposited on or before ten (10) working days to finalize your slot.

For your convenience, payment shall be deposited to :

Account Name: DAYANAN INTERNATIONAL BUSINESS CONSULTANCY SERVICES INC.  
PHP Account Number:  007198009353  
BDO UNIBANK INC.MAKATI - ESTEBAN BRANCH (Ground Floor A & V Crystal Tower, 105 Esteban St., Makati City, Philippines)

Please email the deposit slip to seminars@dayananconsulting.com. Official receipt shall be given to attendees during the seminar itself.

For walk-in attendees on the day of the seminar, we will only accept cash payment. We may also charge additional fees to guarantee seats, learning materials, and food in coordination with our venue partners.

4. SALES TAX: Training fees are inclusive of 12% value added tax. If the participating organization / company withholds tax due to DAYANAN IBCSI, we will then require you to email to seminars@dayananconsulting.com a copy of BIR Form 2307 (Certificate of Tax Withheld) reflecting the amount deducted from the payment due. Please withold only 2% as we are classified as suppliers or contractors of service. Bring the original BIR Form 2307 as well to the seminar for our copy.

DAYANAN INTERNATIONAL BUSINESS CONSULTANCY SERVICES, INC. is a VAT-registered company (TIN# 008-734-419-000 VAT Registered). For zero-rated or VAT-exempt enterprises / companies, please include your Certificate of Exemption in your email to us.

5. CANCELLATION: Once you have registered and confirmed, cancellation made seven (7) working days or less before the seminar date will still be charged full payment. Cancellation made more than (7) working days before the seminar date will be charged 50% of the payment amount. Replacement or substitution of attendees from the same company is allowed any time before the seminar date though.

We reserve the option to cancel or reschedule a learning event if the minimum number of participants is not met. DAYANAN IBCSI is not liable for any expense incurred by seminar registrant resulting from cancellation of any of our events.

6. NO-SHOWS: Certificates of participation will be given only to those who have actually attended the seminar. Those who have registered and paid but were no-shows during the seminar can be given the delegate kit and learning handouts, but not a certificate of participation.

7. LEARNING MATERIALS: All materials for this seminar are copyright protected. Participants will be given handouts based on the speaker presentations, but not the original PowerPoint or PDF file. Any form of audio or video recording of the seminar is strictly prohibited.

8. MEALS: Food for participants is pre-ordered. If you have restrictions on certain foods such as allergies or other medical / religious reasons, please indicate in the online registration form so we can adjust.

9. DATA CONSENT CLAUSE: By registering online, you authorize DAYANAN IBCSI to use any personal data or information for improvements to the quality of our seminars and for marketing / research purposes only.

10. NON-EMPLOYMENT DISCLAIMER: Registration and participation in our seminars shall not be construed as constituting a promise for or contract of employment of any kind, either express or implied, by DAYANAN IBCSI and its third-party clients.

HR Consulting

A company’s most important resource is its people. To fully harness their productivity and avoid labor issues, your human resources system must be up to par. DAYANAN can help strengthen your existing HR infrastructure or even set it up from scratch.

We offer the most comprehensive HR Templates Pack optimized to Philippine labor conditions and regulations. The package includes the following:

  • Employee Handbook
  • Compensation Details
  • Proprietary Information and Confidentiality
  • Application for Employment
  • Probationary Employment Contract
  • Probationary Evaluation Form
  • Notice of Termination of Probationary Employment
  • Regularization Letter
  • Release Waiver and Quitclaim
  • Trainee Contract
  • Equipment Release Form
  • Certificate of Employment
  • Certificate of Employment and Compensation
  • SL-VL form
  • Employee Clearance
  • DOLE-Required Policies:
    • Alcohol-free Workplace
    • Drug-free Workplace
    • Hepatitis B
    • HIV / AIDS
    • Sexual Harassment
    • Smoke-free Workplace
    • TB

These documents come with our guarantee of iron-clad provisions that uphold employee rights while protecting businesses from legal liabilities. We can further customize these documents according to your company’s needs.

DAYANAN also provides ongoing HR support such as guidance on relevant laws, resolution of employee issues, and implementation of company-wide policies. Contact us today and get started on your way to HR success.