I. Philippine Economy

II. Build, Build, Build

III. Investment and Incentives

IV. Growth Sectors

V. Doing Business in the Philippines

VI. Why the Philippines?

Source : EU-Philippines Busines Network

GDP grew 6.9% at

$ 304,905 million

(Q3 of 2017)

Growth is driven by strong domestic consumption,

boom of BPO industry, OFW remittances, and increase in

public infrastructure spending

Ranks as the 3rd largest economy in ASEAN based

on GDP

Industry registered the fastest growth at 7.5%

followed by services with 7.1% growth

GNI grew by 6.7%(based on current pesos)

GDP per capita grew by 5.4% in Q3 of

2017.

Philippine Inflation settled at 3.5%(last quarter of 2017)

BUILD, BUILD, BUILD Campaign

Excellent Filipino Workforce

Foreign investor-friendly policies and

incentives

Source : World Bank and CIA World Fact Book

GDP Growth(2012-2015)

Population Median Age

Philippines 6.63% 100,000,000 23.5

Singapore 3.57% 5,469,700 33.8

Thailand 3.67% 67,725,979 36.2

Malaysia 5.40% 29,901,997 27.7

Indonesia 5.53% 254,454,77 29.2

Vietnam 5.53% 90,730,000 29.2

ASEAN-6 5.06% 91,236,857 29.93

•Fastest Growing Economy (6.8% GDP Growth in 2016 and 6.7% in 2017)

•100 Million Population

•Youngest Population

The Philippine economy is poised for a sustained burst of growth that we have not seen

since the 1950s; the greater cost is not in making a mistake but missing an opportunity

9.4%

6.7%

4.3%

5.1%

3.8% 3.9%3.1%

3.5%

4.7%

6.2%6.8%

Average GDP growth (%), 1948-2016

The Philippine economy is starting to grow

to the levels that it did back in the 1950s.The Philippines is currently supported by

numerous drivers to spur on growth

Source: BSP, PSA, World Economic Forum, World Bank

• Throughout these years, consumption as remained resilientand a major driver behind growth, comprising an average of

73.3% of GDP.

2016 GDP (6.8%) growth is the fastest in 50 years. ThePhilippines posted among thefastest GDP growths in Asia, along with China (6.7%) and Vietnam (6.2%)

Fastest growing GDP

Standard and Poor’s, Moody and Fitch maintained the Philippines’ investment grade rating of BBB, Baa2 and BBB-respectively owing to a stable and positive outlook.

A positive outlook

In 2018, the Philippinesranked 113th (out of 190countries in the report of ease ofdoing business annual ratings

provided for by the WorldBank.

Ease of business

In 2017, the Philippinesranked 56th (from a high of 87in 2010) out of 138 countriesin the Global CompetitivenessIndex published by the WorldEconomic Forum.

Competitive country

In June 2016, Rodrigo Duterte was sworn in as the 16th

President of the Philippines. Moving forward, growth is

expected to accelerate, primarily driven by infrastructure.

Source: Department of Budget and Management

Source: Department of Budget and Management

31• Roads and Bridges

12• Rail and urban transport

6• Air transport

4• Water transport

4• Flood management projects

11• Water and supply irrigation

4• Power projects

3• Other public infrastructure projects

PPP Projects - Awarded

LRT Line 1 Cavite Extension & O&M

MRT Line 7 Automatic Fare Collection System

Southwest Integrated Transport

System

South Integrated Transport

System

Mactan-Cebu International

Airport

PPP for School Infrastructure (Phase I)

PPP for School Infrastructure (Phase II)

Bulacan Bulk Water Supply

Civil Registry System IT (Phase II)

Muntinlupa-Cavite Expressway

NAIA ExpresswayPhase (II)

Metro Manila Skyway Stage 3

Cavite-Laguna Expressway

NLEx-SLExConnector

Road

Transport-Related Projects

Clark Airport -EPC

• An agency under the Department of Trade and Industry, is the lead investmentspromotion agency of the country.

• The agency is designed to promote inward investments and assist local and foreigninvestors in their venture of the desirable areas of business, defined in the annually-prepared Investment Priorities Plan (IPP).

• The BOI is mandated through the Omnibus Investments Code (or Executive Order 226) to encourage investments through tax exemption and other benefits in preferred areas of economic activity specified by the BOI in IPP.

Source: BOI Own

263

19

• Three (3) to eight (8) year income tax holidays

• Four (4) to six (6) year exemption from localbusiness taxes for pioneer and non-pioneerindustries;

• Exemption from Taxes and Duties on ImportedSpare Parts

• Exemption from Wharf Dues and Export Tax, Duty,and Impost Fees

• Tax Exemption on Breeding Stocks andGenetic Materials

• Tax Credits

• Additional Deductions from TaxableIncome

Source: BOI-OWN

263

19

• Simplification of customs procedures for theimportation of equipment, spare parts, rawmaterials and supplies and exports ofprocessed products.

• Employment of foreign nationals

• Importation of consigned equipment for a periodof 10 years from date of registration, subject toposting of a re-export bond equivalent to 100% ofthe estimated taxes and duties.

• The privilege to operate a bondedmanufacturing / trading warehouse subjectto customs rules and regulations

Source: BOI-OWN

PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA)

• The BIGGEST investment promotion agency OPERATING NATIONWIDE;

• Registers economic zones of different types;

• Registers export-oriented industries that are into MANUFACTURING,PROCESSING, REFINERY, ASSEMBLY, TOURISM;

• Registers IT INDUSTRIES and BPOs;

• Registers UTILITIES, FACILITIES enterprise operating inside ecozones;

• Gives INCENTIVES to Ecozone Developers (public & private land owners)and Registered Industries located in ecozones.

• PEZA is a ONE-STOP SHOP and NON-STOP SHOP.

PEZA

Source: PEZA

74 Industrial and Export Processing Zones

263 IT Parks and Centers

19 Tourism Ecozones

2 Medical Tourism Parks

22 Agro-Industrial Parks

As of December 2017Source: PEZA

4,147

As of December 2017

22.81 % Filipino

15.15 % American

7.38 % British

12.51 % Dutch

3.63 % Singaporean

1.57 % German

3.83 % Others

3.60 % Korean

0.81 % Swiss

0.89 % Taiwanese

27.82 % Japanese

Locator investments by nationality

36.79 %

Electronics /

Semiconductors

Metals/Fabricated Metal Products

Transport (Shipbuilding, Aerospace, Car Parts, Equipment)

Electrical Machinery and Apparatus

Medical, Precision and Optical Instruments

Tourism

Rubber and Plastic Products

Other Manufactures

5.80 %

4.70 %

2.07 %

7.77 %

1.64 %

18.17 %

Information Technology Services

Medical Tourism1.16 %

8.63 %

11.16 %

Food Products and Beverages2.11 %

Locator investments by product sector(1995 – 2017) (1995 – 2017)

Source: PEZA

263

19

• INCOME TAX HOLIDAY• 6 to 8 years for pioneer project

• 4 to 6 years for non-pioneer project

• After the ITH - Special 5% tax on gross income lessallowable deductions in lieu of all nationaland local taxes

• Tax and duty free importation of capitalequipment, spare parts, supplies and rawmaterials

• Domestic sales allowance of up to 30%of total sales

• Zero Value Added Tax (VAT) Rate on all localpurchases directly related to its registeredactivity to include telecommunications, powerand water bills.

• Exemption from payment of localgovernment taxes and fees

Source: PEZA

263

19

• Special visa for foreign investors andimmediate family members

• Employment of foreign nationals

• Long-term land lease of up to 75years

• Unequalled service by PEZA

Source: PEZA

263

19As of April 2018

40 = Non-EU Member Companies

Austrian 8

Belgian 14

British 148

Bulgarian 1

Cypriot 1

Czech 2

Danish 9

Dutch 117

Finn 2

French 24

German 44

Irish 6

Italian 14

Luxembourger 5

Maltese 2

Polish 3

Spanish 5

Swedish 8

(Note: 18 out of 28 EU Countries have PEZA Investments)

413 = EU Member Companies

Azerbaijani 1

Channel Islander 2

Liechtensteiner 2

Macedonian 1

Norwegian 6

Swiss 28

Source: PEZA

Source: ICCPI Sectoral Briefer - Agriculture

• Despite its diminishing contribution to thenational revenues (accounting for barely 9.3% ofthe total 2017 GDP), Agriculture remains to be animportant sector for the Philippines.• The sector employed 25.4% or approximately 10million of the 40.3 million total work force for 2017.

OVERVIEW MAJOR EXPORT COMMODITIES• The country’s agriculture sector is made up of 4sub-sectors: livestock, fisheries, farming andforestry.• The Philippines exports its agricultural productsaround the world.• The major export commodities mainly coconut oiland fresh bananas contribute 23% and 13%to thetotal value of agricultural exports.

ONGOING & FUTURE PROJECTS• The Department of Agriculture (DA) is “reformatting Philippineagriculture” through its 10 Foundations of a sound agricultureand fisheries program under President Duterte.• DA also initiated Philippine Rural Development Project (PRDP),a PHP 27.48B (USD 526M) project and a six-year nationalproject that aims to establish a modern, value-chain oriented,and climate resilient agriculture and fisheries sector, alsothrough training of sector’s operators.

Source: ICCPI Sectoral Briefer - Agriculture

OPPORTUNITIES

• The export Agreement with EU includes>6000 products with reduced customs. Inparticular in the following sectors:

– Agriculture, fish and livestockimport/export

– Relevant Production and Processingmachinery and industries

– Energy efficiency, biomass, biochemistry,etc.

– Production data analytics and systems– Food retail– Food service– Food processing

• Northern Luzon is identified as an agri-businesscenter and referred to as the “agro-businessQuadrangle”.

• It is also very important to take note that thePhilippines has yet to maximize the potential of itsbreadbasket, the Mindanao region.

Source: ICCPI Sectoral Briefer – Food and Beverage

• The Food and Beverage (F&B) industry is one of the drivers ofthe economic growth, contributing to 10% of the GDP in 2016.The sector benefits from increasing investments as well as itsstrong and young consumer base (105+ M population)• Expansion of F&B processing creates an opportunity forexporters of agricultural raw materials and high-valueingredients. In 2015, this sub-sector gross value-added outputreached USD 27.8 B.

OVERVIEW RECENT TRENDS• Consumer is shifting to healthier choices, choosing “lite” or“less sodium” options and products such as cereal or yogurt.• Energy drinks grew16% y-o-y.• According to Euromonitor International, there has been agrowing interest in wine.• 2017 revenue in the F&B sector: USD 26M. Annual growthforecast (CAGR 2017-2021) 16.7 %. 2012 market forecast: USD49M in 2021.

ONGOING & FUTURE PROJECTS

• Food and Beverage Roadmap – a project by theDepartment of Trade and Industry (DTI) which targetsto bolster the country’s processed F&B industry. “Aroadmap for the industry is being crafted to chart thedirection, goals, and strategies the industry will beheading to sustain development and growth” formerBoard of Investments director Arcansalin said

Source: ICCPI Sectoral Briefer – Food and Beverage

OPPORTUNITIES

• The export Agreement with EU includes >6000products with reduced customs, and thetechnology investment enhance theopportunities in the following sub-sectors andareas of the F&B sector:

– Import F&B, top level and consumer in certainniche products

– Food-processing and packaging machinery andindustry

– Food-processing plant investments in thePhilippines

– Technical assistance on product developmentand innovation, automation of the productionprocess, product reservation, and packaging

• Furthermore, the EU-Philippines Business Network has cited thefollowing opportunities for EU companies in the Philippines:

– Filipino consumers are constantly looking for new flavors andseasonings to expand the Filipino taste. The trend is being drivenby street trucks and chefs in the restaurant industry.

– Frozen processed food benefits from being viewed as a healthieroption than packaged food products such as preservedfood/canned.

– Artificially powdered-fruit juices and coffee are also one ofFilipinos’ favorite product due to their cheaper price.

– Iced carbonated drinks and fruit juices are preferred by Filipinosand widely purchased as well due to the country’s hot and humidclimate.

– Filipinos are wide consumers of beers, spirits and brandies.While the consumption of wine remains relatively low. However,the demand for wine products might increase in a matter of yearsas more Filipinos search for varied drink options.

Source: ICCPI Sectoral Briefer – Infrastructure and Construction

• Duterte administration has committed to prioritize Infrastructureamong its 10-point agenda. Through the Build Build Build Campaign,they aim an PHP 8-9T (approx. USD 155-174B) public spending from2017-2022 to create the “golden age of infrastructure”.• Most of the government’s infrastructure projects focus on MetroManila, specifically to address the population’s traffic woes as poortransport facilities hinder utilities provision and economicdevelopment. Infra projects in Central and Southern Luzon, as well asMindanao are also targeted by the administration.

OVERVIEW

FORECAST

• GII Research and BMI Research forecast an 11.8% growth inthe infra-construction industry, driven by the ambitiousinfrastructure development plans of the government.

ONGOING & FUTURE PROJECTS• According to Sec. Diokno, at least 75 legacy projects can beexpected throughout the Duterte administration’s golden ageof infrastructure. Some of the big-ticketed projects are MegaManila Subway and New Clark City.

• Aside from these, here are other ongoing infrastructureprojects to look forward to in the next five years:

Project Name Sector Budget Start Date Status

PNR North 2 Railways PHP

150,000,000,000

(USD 2,888,000,000)

11/30/201

6

Project

Developme

nt

Modernization of RORO

Transport System in the

Philippines

Seaports PHP 5,700,550,000

(USD 110,000,000)

09/01/201

7

Project

Developme

nt

Mindanao Logistics

Infrastructure Networks

Roads and

Bridges

PHP

80,410,0000,000

(USD 1,548,000,000)

01/01/201

5

Project

Developme

nt

Mactan-Cebu

International Airport

Project

Airports PHP 17,520,000,000

(USD 337,000,000)

11/01/201

0

Project

Developme

nt

BGC to NAIA Bus Rapid

System

Mass Transit PHP 44,025,000,000

(USD 848,000,000)

10/20/201

6

Project

Developme

nt

Source: ICCPI Sectoral Briefer – Infrastructure and Construction

OPPORTUNITIES

• The country’s young and large force is considered favorable to the industry, the growingconsumer base as well as the assurance of a bigger market followed from the ASEANintegration.

• In the next decade, infrastructure spending in the Philippines is expected to grow atapproximately 10% to €22,43B annually by 2025, as the demand for infrastructure stemsfrom a need to keep pace with the Philippines’ rapid growth in the prior years.

• Other growth opportunities also exist in other regions such as Visayas and Mindanao tofurther advance development outcomes.

GROWTH SECTOR: INFRASTRUCTURE AND CONSTRUCTION

Source: ICCPI Sectoral Briefer – Manufacturing

• Comprises more than half of the Philippines's industrial sector andaccounts for almost a quarter of the country's Gross Domestic Product(GDP).• The Philippines’ is at advantage, thanks to its large, relatively low-costyet highly educated labor force.• According to Kittelson&Carpo Consulting,the Philippines is nowconsidered to be one of the most competitive areas for manufacturing.• Philippines’ manufacturing industry is concentrated in its capital city –Manila – which has a competitive workforce and a large local market,and Manila bay which is the main entry point of goods and rawmaterials. Northern Mindanao (around Iligan), Cagayan de Oro, CebuCity, and Davao are among the other important manufacturing zones inthe Philippines

OVERVIEW ONGOING & FUTURE PROJECTS• CARS Program – also known as the ComprehensiveAutomotive Resurgence Strategy Program, a PHP 27B (USD518M) project that is being implemented in order “to attractnew investments, stimulate demand and effectively implementindustry regulations that will revitalize the Philippineautomotive industry, and develop the country as a regionalautomotive manufacturing hub.”

• Manufacturing Resources Program (MRP) – in order to achieveinclusive growth, the Department of Trade and Industry isimplementing MRP to “rebuild the existing capacity ofindustries, strengthen new ones, and maintain thecompetitiveness of industries with comparative advantage”.Philippine Manufacturing - Priority Industry

Sectors

Aerospace Furniture

Agroprocessing Iron & Steel

Autoparts Metalcasing

Automotive Motorcycle

Biodiesel Natural Health

Products

Ceramic Tiles Paper

Chemicals Petrochemicals

Copper Plastics

E-vehicles Rubber

Electronics Tool and Die

Source: ICCPI Sectoral Briefer – Manufacturing

OPPORTUNITIES

• The Philippines is the fifth most mineral-rich country in the world forgold, nickel, copper, and chromite. This presents a huge opportunity forforeign companies who are looking for raw materials formanufacturing.

• According to EU-Philippines Business Network, these are the majoropportunities for EU businesses to supply machineries on:

o For ‘nearby’ products (essentially these are low-hanging products because the requirements for operating in these products are already present in the country):

– complete digital processing machines

– Cameras

– appliances and parts

– woven fabrics of synthetic material

– precious jewelry

– refined sugar

– Jewelry

– Woodworks

– Clocks

– Watches

– packaging

• For “middle” products (some of the required capabilities arepresent in the country):

– angles, shapes, sections and sheet filing of iron and steel– chemical products such as salts of metallic acids– phenoplasts– aminoplasts– felts and articles of felts and bonded fiber fabrics– fiber building board of wood or other vegetable material

• For “far-away“ products (requirements are still not developed inthe country):

– printing and writing paper– chassis fitted with engines for vehicles– bodies for vehicles– other parts and accessories of vehicles– paper and paperboard products– salts and derivatives– special products of textile materials

GROWTH SECTOR: MANUFACTURING

Source: Department of Tourism; CNN Philippines; Business Mirror

• The Philippines, with its strategic location, is agateway to the huge Asian market.• The Department of Tourism (DOT) said as of May2017, the country had 532,000 visitor arrivals,representing a 19.6 percent increase compared toMay 2016 figures.• Tourism contributed 8.6 percent to the Philippineeconomy in 2016, and was the third biggestcontributor to the country's gross domestic product.• The Tourism department projects that in the nextfive years, revenues from the industry will be valuedat P3.9 million, and employment will climb to 6.5million.

OVERVIEW ONGOING AND FUTURE PROJECTS

• “It’s more fun in the Philippines” campaign -introduced in 2012 and has helped travel agencieslure more tourists to visit the country's amazingdestinations.• 2016-2022 National Tourism Development Plan - themedium-term framework was set to enhance thecompetitiveness of the country’s tourism sectorthrough marketing diverse destinations and products,improving international and domestic access, as wellas connectivity and destination infrastructure,addressing policy and institutional reforms andimproving the tourism sector’s human resource skillsand capabilities.• The "Bring Home A Friend" (BHAF) program,launched on October 15, calls on Filipinos, whetherresiding in the country or abroad, to encourage theirforeign friends to visit the Philippines.

Source: Department of Tourism

OPPORTUNITIES

• The need for improved accessibility will likewiseopen investment opportunities in air, water andland transport operations.

• In response to worldwide demand for integratedtourism development, the Department of Tourismlikewise encourages investments in tourism estatesand ecozones, historico- cultural heritage projects aswell as ecotourism, agritourism, and health andwellness projects.

• Hotels, resorts and other types of accommodation facilities especially in the regions will have to be built to address the lodging requirements of both foreign and domestic travelers.

• Destinations to invest– Laoag / Vigan– Banaue / Baguio– Subic / Clark– Metro Manila and Environs– Palawan– Cebu / Bohol– Davao

GROWTH SECTOR: TOURISM

Source: National Competitiveness Council

Source: National Competitiveness Council

Source: National Competitiveness Council

Source: PEZA

GSP + granted to Philippines by E.U.

Parliament on Dec. 19, 2014

Philippines is the only E.U. GSP+ beneficiary country

among ASEAN

Zero Tariff on 6,274 products destined for Europe with 40% local

content

U.S.A. listed the Philippines as GSP-Eligible Beneficiary

on October 2015

Zero Tariff on 3,500 products lines destined for the USA except textiles and apparel, watches, footwear,

work gloves, and leather apparel.

Investment Grade Credit Rating

Source: PEZA

High literacy rate of 94.6%

English Speaking Easy to train and hardworking

Responsible and Loyal

Very friendly Global Knowledge Workers

1 million Filipinos reach working age every year, and

half of them are college graduates.

Source: PEZA

Basic rights of Investors are guaranteed:

• Right to remit profits

• Right to pay foreign obligations

• Right to repatriate investments

100% Foreign ownership of companies

Source: PEZA

- Center of Asia and the Pacific

- Ideal distribution hub for investors

Source: PEZA

Hospitable and comfortable second home (Very friendly

attitude of Filipinos)

Housing at very reasonable rates

International schools for expatriates' children

Best sporting and recreational facilities

World Class Health Services

(Result of a survey conducted on expatriates in Asia)

CAMERA DI COMMERCIO ITALIANA NELLE FILIPPINE INC.

Italian Chamber of Commerce in the Philippines

Suite 442, 4th Floor, Dusit Thani Manila, Ayala Center, 1223 Makati City, Philippines

(+63) 2 978 0279 | (+63) 2 541 2567 | (+63) 917 563 8633

info@iccpi.org.ph

www.iccpi.org.ph

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