While some industries are still reserved for Filipinos, restrictions are slowly being removed as the government seeks to open the economy to international competition and thereby introduce a greater level of competitiveness. Increasingly foreigners are moving into such areas as retail trade and service industries.

However, while formal restrictions to investment and local operations are slowly being lifted, foreign entrants to the local market will still need to come to terms with entrenched local interests and in many instances development of a joint venture arrangement with a local partner may produce the win-win situation necessary to ensure a viable long-term market.

As a developing country, the Philippines is still lacking in much basic infrastructure particularly outside of the National Capital Region. Major investments are occurring in energy development, agribusiness and in mining although often problems of land tenure and other factors have served to deter a number of projects from coming to fruition. Projects that involve a degree of technology transfer or the upgrading of rural communities have a greater chance of success than projects that merely serve to exploit the local consumer market.

Upgrading of land transportation systems including rail and refrigerated transport as well as the value added processing of agricultural and other native products offer opportunities for both large and small-scale investment. Increasingly the government is looking to Build, Operate, Transfer (BOT) solutions to finance major investment projects.

Often Filipino products fail to make an impact in international markets because of misperceptions of what is required by specific consumer groups . In this area there are opportunities for foreign companies to work with reliable local partners in areas of marketing, of quality control and in packaging.

Similar opportunities exist in the development of education and training services and especially in areas of skills upgrading - both within the private sector as well as in all levels of government. Modern western concepts of "service delivery" as well as the notion of "cost recovery" by government departments and utilities service providers have yet to make any real impact in the Philippines although the need has been identified and is being prioritized by donor agencies such as the World Bank, the Asian Development Bank and the Japan International Cooperation Agency all of which have been providing funds for service upgrading.

The Arroyo government is also prioritizing tourism development although the US World Trade Center bombing of 11 September 2001 and the ongoing problems with local security have deterred many international tourists from visiting the Philippines. Yet, the long-term potential of the country to develop as Asia's holiday playground has hardly been tapped. In particular and unlike countries such as Indonesia that have developed circuits for backpackers, this segment of the market has not been touched. Yet, backpackers tend to spend as much money as normal vacationers but over longer periods of time and distributed over a wider geographic area so there are obvious opportunities at all levels for investment and operation of tourist and tourist related facilities.

Trade with Government

The Philippine Government is itself the largest trader in the country. More than 20 executive departments and bureaus of government hold public biddings on the procurement of important items needed to implement government programs and services. Among the items open to internationally competitive bidding are infrastructure equipment, road building and maintenance equipment, cement, machinery and equipment for various government projects, and military and defense equipment.

Government agencies pattern their regulations and procedures after those of the Bureau of Supply and Coordination of the U.S. Government's General Services Administration. Locally, major government purchasers include the National Power Corporation, National Electrification Administration, National Housing Authority, National Irrigation Administration, Local Water Utilities Administration, Department of Transportation & Communication, Department of Public Works & Highways, and the Department of National Defense (DND).

A foreign company can join the bidding on a government contract only if it has a registered branch office or a registered resident agent in the Philippines. First, the interested party must be placed on the Bidder's Mailing List of the agency conducting the bidding. The party must submit a sworn application accompanied by certified copies of the company's application for the Certificate of Registration issued by the Philippine Bureau of Commerce, local Articles of Incorporation, a receipted franchise tax bill, an up-to-date financial statement, and other attachments, if and as required.

Transactions with the government require registration and accreditation for manufacturers and suppliers. A list of accredited suppliers is published annually and updated quarterly. Foreign contractors must also apply to the Philippine Contractors Accreditation Board (PCAB) for a special license issued on a project-by-project basis.

Export Subsidies

Firms engaged in activities under the government's "Investment Priorities Plan" may register with the Board of Investments (BOI) for fiscal incentives, including three to six year income tax holidays and a tax deduction equivalent to 50 percent of the wages of direct-hire workers. BOI-registered firms located in gazetted less-developed areas of the country may be eligible to claim a tax deduction of up to 100 percent of outlays for infrastructure works and deduct 100 percent of incremental labor expenses.

Export-oriented firms located in government-designated export zones and industrial estates registered with the Philippine Economic Zone Authority (PEZA) enjoy basically the same incentives as BOI-registered firms. Additionally, firms that earn at least 50 percent of their revenues from the export of goods or services may register for certain tax credits under the "Export Development Act" (EDA). These include a tax credit for imported inputs and raw materials not readily available locally.

How To Export

Trade negotiations or a contract with a foreign buyers begins with a business offer detailing key details such as product, price, quantity, packing, shipment, availability, and terms of payment. Negotiation will also often involve the shipment of product samples, which when found acceptable, may lead to a purchase order.

The Department of Trade and Industry has listed the following guidelines for local firms to follow in negotiating for an export contract:

1. Upon receipt of a purchase order, the exporter should send a pro-forma invoice to the foreign buyer for confirmation. An order is confirmed when the pro-forma invoice is signed and returned by the buyer.

2. When goods are ready for shipment, the exporter completes the Export Declaration (ED) Form.

3. The exporter then secures either an export commodity clearance or an export permit from the government commodity office if the product is included in the list of regulated products for export, or if the buyer requires it.

4. The ED form together with supporting documents is submitted to the Bureau of Customs (BOC) Processing Unit for approval of the Authority to Load (AL).

5. Wharfage fees and arrastre charges are paid for cargoes transported by ship;

6. Upon loading, the customs inspector at the port signs the Report of Loading (for sea freight) or a Report of Lading (for airfreight). The exporter also secures the Bill of Lading (B/L) from the shipping line or the Air Waybill (AWB) from the airlines.

7. After loading, the BOC will issue the following documents upon request:

- Certificate of Origin, Form A - for export products covered by the Generalized System of Preferences (GSP).

- General Certificate of Origin - for export products not availing of preferences under GSP.

- Certificate of Origin, Form D - for export products covered by the ASEAN Common Effective Preferential Tariff Scheme (ASEAN - CEPT).

- Certificate of Shipment.

8. The exporter furnishes the Authorized Agent Bank (AAB) for record purposes a copy of the approved ED form together with other shipping documents, if export negotiation or payment is coursed through them.

9. For shipments that are prepaid, the original commercial and shipping documents are sent to the buyer.

In the case of export of plant or animal products, a phytosanitary certificate is also required from the Department of Agriculture.

How to Import

The Department of Trade and Industry has listed the following guidelines for local companies negotiating an import contract:

1. Only companies with a registered business name are allowed to import.

2. The necessary business permits for importation are issued by the Bureau of Trade Regulation and Consumer Protection (BTRCP) (for sole proprietorship businesses) and by the Securities and Exchange Commission (SEC) for partnerships or corporations.

3. The products to be imported should be classified according to one ore other of the following categories:

a. Liberalized;
b. Regulated;
c. Prohibited items.

4. An "Application for Importation" then needs to be made. An Importer can apply for importation through a Letter of Credit and Non-L/C Import Arrangement, namely: Open Account (OA), Documents Against Acceptance ((D/A), Documents Against Payment (D/P), Direct Remittance (D/R), Self-Funded (S/F), No-Dollar Import Arrangement and Importations on Consignment basis. Many of the larger local banks handle the necessary documentation for their customers.

5. Release of Shipment is usually affected by the Bureau of Customs.

Unsolicited Imports and Packages

In many instances, smaller packages and parcels are received through the commercial post including commercial samples and gifts. In such instances the postal authorities will notify the recipient by mail that a package has been received and the name of the office at which the package has been stored. In order to collect such a package it is necessary to appear in person (or send a representative) together with the notification and proof of identity such as a passport or residence card in order to make a claim. The counter staff will assess any duty to be paid on the spot and a receipt issued.

Within the Makati CBD, the Makati Central Post Office located next to the PS Bank Tower offers such facilities.



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