Republic of the Philippines
Location: Southeastern Asia, archipelago between the Philippine Sea and
the South China Sea, east of Vietnam.
Geographic Area: 300,000 square kilometers, slightly larger than Arizona.
Climate: Tropical marine with northeast monsoon (November to April) and
southwest monsoon (May to October).
Major Cities: Manila (10.4 million), Davao (1.3 million), Cebu (3.1 million).
Population: 81.2 million (July 2000).
Ethnic Groups: Malay (Christian and Muslim), Chinese.
Languages: Pilipino (official, based on Tagalog) and English, language
of government and higher education.
Workweek: Office hours for business and government normally are from 8
a.m. to 5 p.m. It is best to attempt to accomplish business objectives in midmorning
or late afternoon. Many business deals are completed informally during meals,
entertainment, or over a round of golf. Offices are generally closed on Saturdays
and Sundays.
Type of Government: Republic
Head of State: President Gloria Macapagal-Arroyo
Currency: Philippine Peso (P) = 100 centavos
Exchange Rate: $1US = 48.08 Philippine pesos
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Current Economic and Political Conditions: In the post-U.S. bases era,
U.S.-Philippine relations have improved and broadened, focusing more prominently
on economic and commercial ties while maintaining the importance of the security
dimension. Philippine domestic stability has elicited increased U.S. investment
in the country, and the U.S. remains the Philippines’ largest trading partner.
A strong security relationship rests on the U.S.-Philippine Mutual Defense Treaty
and the recently approved Visiting Forces Agreement. Although U.S. aid to the
Philippines has become less prominent than in the past, assistance programs continue.
This includes the highly successful AID-sponsored Growth with Equity in Mindanao
(GEM) program, which promotes development through private enterprise in a troubled
part of the country. Longstanding historical and cultural links, as well as extensive
people-to-people interaction, bolster the mutual relationship.
Economic Data
(1999, in $US)
Total GDP: Purchasing power parity = $282 billion
GDP Growth: 2.9%
Per Capita GDP: $3,600 purchasing power parity.
Inflation Rate: 6.8%
Trade Balance: $4.1 billion surplus
Trade with RI: The Philippines is Rhode Island’s 11th largest trading partner,
with $27.7 million in exports in 1999.
Exports: $34.8 billion; electronic equipment, machinery and transport equipment,
garments, coconut products. Export trading partners: U.S. (34%), EU (20%), Japan
(14%), Singapore (6%), Hong Kong (4%).
Imports: $30.7 billion; raw materials and intermediate goods, capital goods,
consumer goods, fuels. Import trading partners: US (22%), Japan (20%), South Korea
(8%), Singapore (6%), Taiwan (5%), Hong Kong (4%).
Best Prospects for Exports: Telecommunications equipment, computers and
peripherals, electrical power, food processing and packaging, building materials,
hotel and restaurant equipment, construction equipment, water resources equipment/services,
medical equipment, and pollution control equipment/services.
Tariffs, Trade, Taxes, Trademarks
Tariffs: The Philippine tariff schedule, based on the 1996 Harmonized System,
contains 5,638 tariff lines. Duty rates range from 0% to 80%. The unweighted average
tariff has been progressively reduced from 27.84% in 1990, to 11.24% in 1998,
and 9.08% in 2000. Under the current tariff schedule, commodities are generally
levied duties of 3%. The Philippines has zero duties on most information technology
equipment and inputs. Intermediate products and raw materials produced locally
are generally assessed duties of 7% or 10%. Finished products that are produced
locally are subject to tariff rates of between 15-30%. The highest rates of duty,
35-80%, are assessed on sensitive agricultural commodities.
Taxes: The Philippines has a tax treaty with the U. S. to avoid double
taxation, provide procedures for resolving interpretative disputes, and enforce
taxes of both countries. Almost all products, including imports, are subject to
a 10% value-added tax (VAT).
Foreign Investment: While progress in investment liberalization has been
substantial, important barriers to foreign entry remain. The 1991 Foreign Investment
Act (FIA) lifted the 40% foreign ownership ceiling generally imposed on domestic
enterprises, provided that no incentives are sought and the activity does not
appear on the FIA’s two “negative lists”. These lists fully or partially restrict
foreign ownership in a variety of sectors of the economy.
Free Trade Zones: Government legislation provides authority in regard to
the country’s four government-owned export-processing zones and to some 40 privately-owned
and operated “special economic zones.” Both types of zones are commonly referred
to in the Philippines as ecozones. An ecozone may contain any or all of the following:
industrial estates, export-processing zones, free trade zones, and tourist/recreation
centers.
Trade Finance: Obtaining competitive financing is a vital part of closing
business deals in the Philippines. Because the Asia financial crisis has forced
the government to raise interest rates, supplier financing and trade financing
have become more important than ever. Government and private importers of goods
and services often buy a financing package rather than the best quality or most
appropriate items.
Business Etiquette: The Philippine business environment is highly personalized.
Business matters are always best dealt with on a face-to-face basis with a warm
and pleasant atmosphere. While Americans are time-conscious and want to get directly
to the point, the Filipino likes to be indirect, talk about mutual friends and
family, exchange pleasantries, and joke. Only after establishing the proper atmosphere
will people negotiate. No matter what the final result, the discussions should
always end cheerfully.
Marketing and Selling Factors: Philippine distribution and sales channels
vary from product to product. Stocking distributors import consumer goods for
resale to retailers. Capital equipment imports usually go through an agent or
distributor before reaching the end users. Some end users, however, import directly.
The use of local agents or distributors significantly improves the chances of
selling the product or winning the project.
Direct marketing: Direct marketing is an increasingly popular method for
selling products in the Philippines. The Consumer Code of the Philippines covers
the legalities of direct marketing and restricts direct marketing, like franchising,
to 100% Filipino-owned corporations. Foreign firms can engage in wholesale activities,
however, and then sell to Philippine distributors. The Direct Sellers Association
of the Philippines has a list of members.
Patents/Trademarks/Copyrights: While substantial progress has been made
in recent years, significant problems remain in ensuring the consistent and effective
protection of intellectual property rights (IPR). A 1998 intellectual property
code improves the legal framework for IPR protection in the Philippines. It provides
enhanced copyright and trademark protection, and creates a new Intellectual Property
Office (IPO).
Patents: The Philippines has moved to a first-to-file system and has increased
the patent term from 17 to 20 years from date of filing. The patent holder is
guaranteed an additional right of exclusive importation of his invention
Trademarks, Service Marks and Trade Names: The Philippines no longer requires
prior use of trademarks in the Philippines as a requirement for filing a trademark
application. The law also eliminated the requirement that well known marks be
in actual use in Philippine commerce or registered with the Bureau of Patents,
Trademarks, and Technology Transfer. A Certificate of Registration (COR) shall
remain in force for ten years, and may be renewed for periods of ten years at
its expiration upon request and payment of a prescribed fee.
Key Contacts
Bryant College, John H. Chafee Center for International Business
RI Export Assistance Center, Raymond W. Fogarty, Director
World Trade Center, Edward Barr, Manager
RI State Directorate, Maureen Mezei, International Trade Director
Contact: Mary-Ruth Foley
Telephone: (401) 232-6566
Fax: (401) 232-6416
E-mail: mrfoley@itdn.net
Web site: www.rieac.org
U.S. Export Assistance Center, Department of Commerce
Keith M. Yatsuhashi, International Trade Specialist
Telephone: (401) 528-5104
E-Mail: kyatsuha@mail.doc.gov
U.S. Small Business Administration
Marilyn Bogue, International Trade Officer
Telephone: (401) 528-4585
E-Mail: marilyn.bogue@sba.gov
U.S. Embassy in the Philippines
1201 Roxas Boulevard
Ermita 1000, Manila, The Philippines
Telephone: (63-2) 523-1001
Fax: (63-2) 522-4361
U.S. & Foreign Commercial Service
George Ruffner, Counselor for Commercial Affairs
Robert Bannerman, Commercial Attache
Val Huston, Commercial Officer
2nd Floor, 395 Sen. Gil Puyat Ave., Makati City
Telephone: (632) 890-9717; 895-3002; 890-9362
Fax: (632) 895-3028
E-Mail: George.Ruffner@mail.doc.gov; Robert.Bannerman@mail.doc.gov; Val.Huston@mail.doc.gov
Embassy of the Republic of the Philippines
1600 Massachusetts Avenue, NW,
Washington DC 20036
Telephone: (202) 467-9300
Fax: (202) 467-9417
