The Philippines Market

When compared to many other developed nations, the Philippines has a smaller proportion of wealthy citizens and a less complex financial services industry. A more recognizable bond market coexists with minimal participation in the mutual fund markets and many local equities. Because the Philippines is constantly a disaster-prone country, consumption of FMCG goods may abruptly decline or surge. A growing middle class in the Philippines with high disposable income and a base of youthful consumers govern the country's retail business (Bulter, Johm, Andy & Deniz 83). The population expansion and other social and economic trends in the Philippines are still propelling the industry forward. The main factors in the growth of the market opportunity in the Philippines are rising purchasing power, changing consumer trends, growing youth segment, and increasing population.

In the Philippines, consumers prefer best and cheap goods. The traditional convenience stores dominate the market because cheap goods are mostly in high demand. Most Philippines have low income because of disaster prone location and less agricultural production. Thus, many people prefer to spend less and save more money (Bulter, John, Andy & Deniz 84).

The main market opportunities of Philippines is determined by the oil gas trends. The oil industry in the country is undergoing rapid transformation. The Philippines is expected to attract new investments because of the predicted significant growth in the long term future. The report on oil and gas industry in the Philippines provides full information on the developments to 2025, competition, investments, infrastructure and the industry trends.

In 2015, 1.12 percent of the adult population in the Philippines was considered affluent, and the study indicates that the figure will grow by 50 percent in the next five years. This segment of the population holds approximately a third of the country’s wealth. The retail investment market in the country has doubled over a period of five years. The Verdict Financial has forecasted the annual growth rate of 9.2 percent in assets of the market.

Challenges and Opportunities faced in Philippines Today

The Philippines faces numerous challenges and opportunities in the business sector which in turn affects its market share. Some of the biggest challenges in doing business in the country are culture, paying taxes, starting a business, and accessing credit and protecting investors. Business culture in the Philippines poses many obstacles to successful business endeavors. Most firms in the country are hierarchically-oriented where senior management makes every major decision. Every year 193 business hours are spent on the massive 47 tax payments (International Business 36). The VAT consumes the longest time to process, while a 30 percent corporate income tax is charged. In the Philippines, starting a business involves numerous procedures that take 36 days on average to be completed. Setting a corporate entity in the country is a long and complicated process. The World Bank and IFC rank the Philippines poorly in accessing loans and credit. Also, the country has issues in the investor protection policy (Mordor Intelligence 1).

The presence of various business opportunities in the Philippines is advantageous to the market share of the country. First, Philippines enjoys a favorable economic setting for the last 20 years. The government of Philippines introduced incentives to create a climate that is investor friendly and attract foreign investors. These incentives include non-fiscal incentives, special economic zones, income tax holidays, and tax deductions and exemptions (International Business 38). The government also introduced a cross-cultural awareness training programs that are ideal for people doing business in the country. Training provides investors with an in-depth understanding of perceptions, specific behavior patterns, and the culture of the surrounding people, for them to be aware of challenges they may face and how to avoid them while doing business in the country. An example of challenges caused by cultural differences is the great amount of administration preferred in German countries which indicate the tendency to avoid risk and uncertainty keeping control of details.

The Philippines has large workforce consisting of highly skilled and trained people. Philippines was colonized by the U.S for approximately 50 years leaving a strong American influence with a high proficiency in English creating a strong and capable workforce.

Political and Economic Environment

Despite the occasional shocks, Philippines’ economy has strengthened over the last decade. In 2016, the country registered a 6.8 percent economic growth, which was the fastest in Asia. Reconstruction in the infrastructure sector and the surge in consumption and investment were the main reason for the economic growth. Domestic consumption accounts for 70 percent of the GDP, and it is the primary driver of the economy.

In 2016, the political environment was affected by the general elections after President Aquino Benigno left office. In his regime, the country experienced a long period of political stability and achieved the highest growth rates in the continent. A change in administration posed fears and risks of policy instability that would slightly affect investment. However, the new President, Rodrigo Duterte, had populist views that enhanced the progress of liberal economic reforms which raised the confidence of the investors.

The 2016 budget aimed at fighting poverty, as a third of the budget was allocated for labor, unemployment, and security. The goal of the government was to reduce the rate of poverty to 16 percent by the end of 2016. A significant amount of the budget was allocated to basic education. The challenges faced by the government are job creation, improving infrastructure, and increase in social spending (Sawada, Yasuyuki, Jonna & Estudillo 92).

Trade Regulations and Standards

Despite having large market opportunities in the Philippines, the trade-related and custom rules remain complicated. It is important for exporters to understand the relevant practices and regulations, for them to save a significant amount on costs by avoiding penalties that may arise. The entry of goods in the Philippines is monitored by the Philippine Bureau of Customs (BOC). The Philippines reduced the import tariff rates, as a way of liberalizing its trade regime to pave the way for foreign investors to access their fast-growing market effectively. Philippines signed numerous free trade agreements and implemented more trade liberalization trade measures, as one of the members of the ASEAN bloc (International Business 38).

The BOC’s categorization system classifies shipments as a red lane, yellow lane, and green lane. High-risk shipments are subjected to both physical and documentary inspection in the red lane, and only documentary examination is done in the yellow lane. The low-risk goods are often cleared without being subjected to inspection through the green lane.

All imported goods in the Philippines are subjected to customs fees, value-added tax (VAT), excise duties, and import tariffs. Some non-tariff obstacles still exist despite the tariff requirements being straightforward, posing challenges to overseas exporters. In 2013, the average applied MFN rate was reduced from 7.3 percent to 6.3 percent.

Leading Sectors for Internal Business and Attractive Industries

The growing manufacturing sector of Philippines has attracted various investors. Most Japanese multinational companies are exiting China because the Chinese government and Japanese business security and interest relations are affected by the political posture of the Chinese government. These multinational corporations have considered shifting operations to the Philippines (Gropello, Emanuela, Hong & Tandon 1).

The tourism sector in the Philippines is still developing and promising to many investors. The tourism sector is prioritized by the Philippines government. The government is improving the transport system and airports to accommodate the growing number of overseas travelers. Moreover, the Disneyland announced its entry with a planned site for the domestic market. In the tourism sector, investors can invest in theme parks, convention centers, restaurants, and hotels.

The agricultural sector is another leading sector that attracts foreign investment. For instance, the presence of abaca, coconut oil, and tobacco, attracts foreign investors to create companies that use these farm products as raw materials. The multinational corporations act as enablers in offering farmers favorable contractual terms, mentorship for quality products, and financing. Therefore, success is in the partnership and not in the supply contract between multinationals and the farmers (Gropello, Emanuela, Hong & Tandon 1).

In conclusion, Philippines has a lot to offer the foreign investors. A continuous growth trend in the GDP, reform-minded government, a business-friendly environment, and an English-speaking workforce that is popular with both Western and Asian values, make the Philippines attractive for foreign investment.

Works Cited

Butler, John E, Andy Lockett, and Deniz Ucbasaran. Venture Capital and the Changing World of Entrepreneurship. Greenwich, Conn: Information Age Pub, 2006. Pg 83-85.

Di Gropello, Emanuela, Hong W. Tan, and Prateek Tandon. Skills for the Labor Market in the Philippines. World Bank Publications, 2010.

International, Business P. U. Doing Business and Investing in Philippines: Strategic, Practical Information, Regulations, Contacts. Place of publication not identified: Intl Business Pubns Usa, 2015, 36-40

Sawada, Yasuyuki, and Jonna P. Estudillo. "Trade, migration and poverty reduction in the globalizing economy: the case of the Philippines." Globalization and the Poor in Asia. Palgrave Macmillan UK, 2008. 90-114.

Mordor Intelligence. Retail Industry in Philippines - Major trends, Growth and Opportunities (2016 - 2021). Industry Reports, 2016, print.