Philippines

Originally published: Aug-29-2007

Official Name: Republic of the Philippines

Internet Domain: .ph
International Dialing Code: +63

Table of Contents

Government

The Philippines has a representative democracy modeled on the U.S. system. The 1987 constitution, adopted during the Aquino administration, reestablished a presidential system of government with a bicameral legislature and an independent judiciary.

• Executive branch: President, who is both chief of state and head of the government, and cabinet selected by the President. The current President is Gloria Macapagal-Arroyo.
• Legislative branch: bicameral Congress (Kongreso) consisting of the Senate (Senado) - 24 seats and the House of Representatives (Kapulungan Ng Mga Kinatawan) - 212 members representing districts plus 24 sectoral party-list members.
• Judicial branch: Supreme Court (15 justices appointed by the president on the recommendation of the Judicial and Bar Council), Court of Appeals, and Sandigan-bayan (special court for hearing corruption cases of government officials)

Legal System

The legal system is based on Spanish and Anglo-American law. The Philippines accepts compulsory ICJ jurisdiction with reservations.

People

• Population: 91.1 million (2007 estimate)
• Population growth rate: 1.764% (2007 estimate)
• Languages: Filipino and English (official); eight major dialects

With 91 million inhabitants, the Philippines is the world’s fourth largest English-speaking nation, and the 14th largest labor force in the world.

Economy

Despite some political instability, the Philippines has experienced strong economic growth over the last two years. Growth has been driven by robust consumer demand, stronger exports and agricultural output, investment in information technology, and a 20% increase in remittances from overseas workers. Unfortunately, current growth is not sufficient to curb the country's high level of poverty -- 40% of the population earns less than USD 2.00 a day.

The U.S. remains the Philippines' largest trading partner with over $16 billion in two-way trade. Increased foreign capital inflows made the Philippine stock market among the top performers in East Asia during 2006. Similarly, the Philippine peso appreciated about 7.5% to the U.S. dollar, making it East Asia's best performing currency in 2005-2006.

Currency: Philippine Peso (PHP)

• PHP per USD: 46.78699 (as of 8/28/07)
• PHP per EUR: 63.93115 (as of 8/28/07)

Leading Markets (2006): China 24.5%, US 15.2%, Japan 12.2%, Singapore 8.3%, Hong Kong 7.6%, Malaysia 4.4%, Netherlands 4%

Leading Exports-commodities: semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, fruits

Leading Suppliers (2006): Japan 15.9%, US 13.7%, China 10.1%, Singapore 8.9%, Taiwan 7.2%, Saudi Arabia 4.8%, South Korea 4.7%, Hong Kong 4.6%, Thailand 4.6%

Leading Imports-commodities: electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, plastic

Top Industries: electronics assembly, garments, footwear, pharmaceuticals, chemicals, wood products, food processing, petroleum refining, fishing

Economic Indicators

(f) forecast

Comparative Economic Indicators - 2006
(members of ASEAN)

*Population figures are 2007 estimates

Credit and Collections

• Collection Experience: Fair-Good
• Exchange Delays: 3 months
• Preferred Credit Terms: Unconfirmed letter of credit
• Minimum Credit Terms: Unconfirmed letter of credit

Dispute Resolution (information from the U.S. Department of State)

In order to reduce the backlog of civil cases, the President signed the Alternative Dispute Resolution (ADR) Act into law in April 2004. This institutionalizes the use of ADR and creates a Philippine Center for Alternative Dispute Resolution.

The Philippines is a member of the International Center for the Settlement of Investment Disputes (ICSID) and of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. However, Philippine courts have shown a reluctance to abide by the arbitral process or its resulting decisions. Enforcing an arbitral award in the Philippines can take years.

Risk Assessment

Coface Country Risk Rating: B -- An unsteady political and economic environment is likely to affect further an already poor payment record

Ducroire Delcredere Political Risk Rating: 2 – low risk
Ducroire Delcredere Commercial Risk Rating: B – moderate risk

Business Climate

Over the last two decades, the relatively closed Philippine economy has opened significantly. The recent appreciation of the Peso against the dollar has made imports more attractive, driving new business into the country. The training, productivity, and adaptability of the Filipino workforce, have been assets, particularly for multinational companies. However, the level of infrastructure has lagged behind other Asian emerging countries, and the country struggles with corruption, regulatory transparency and, in some areas, violence.

English is the language of most business transactions and practically all business or government correspondence in the Philippines.

Judicial System: According to the U.S. State Department, many foreign investors view the inefficiency and uncertainty of the Philippines judicial system as a significant disincentive for investment. Although the judiciary is constitutionally independent of the executive and legislative branches, it faces many problems, including understaffing and corruption.

Transparency of Regulatory System: Agencies are required to develop regulations via a public consultation process, often involving public hearings. In most cases, this ensures some transparency in the process of developing regulations. However, many investors find business registration, customs, immigration, and visa procedures burdensome and a source of frustration.

Patents and Brands: The Philippines has made progress in recent years in protecting intellectual property rights, but enforcement continues to be problematic. U.S. manufacturers and suppliers should register their copyrights, trademarks, and patents with The Intellectual Property Office.

Conversion and Transfer Policies: There is no currency exchange control in Philippines. Foreign investments must be registered with the Central Bank in order to repatriate capital and dividends.

Corruption: Corruption is a pervasive and long-standing problem.

Political Violence and Terrorism: Terrorist groups, criminal gangs, communist insurgents, and Islamic separatists operate in many regions of the country. The Department of State urges American citizens to consider carefully the risks of travel to the Philippines and continues to warn against all but essential travel throughout the country in light of heightened threats to Westerners.

For more detailed information on these topics, visit the 2007 Investment Climate Statement – Philippines, of the U.S. Department of State.

Business and Cultural Practices

Appointments: Business travelers are expected to be on time.

Business Cards: It is not necessary to have your business cards translated; English-only versions are acceptable. As in other Asian countries, exchanging business cards is an important part of establishing working relationships. Therefore, bring a good supply and make sure to include your title, as this will help Filipinos determine your influence and decision-making capabilities.

Business Attire: Dressing well is an intrinsic part of being respected and taken seriously in this culture. Dress conservatively until you are certain of the degree of formality expected.

Names and Titles: Practically everyone you encounter should be addressed with a title and surname. You'll observe an unusually high proportion of titled professionals, as Filipino companies often reward employees with titles rather than increased responsibilities and salary. People without a professional title should be addressed in English, with courtesy titles such as “Mr.”, “Mrs.” or “Miss”, followed by their surnames. When you do not know a person's last name, confer respect by using the terms “Sir” or “Ma'am.”

Conversation: Interrupting while someone else is talking and raising your voice are considered offensive. As a “face-saving” measure, Filipinos will often say “yes” when they don't actually mean it.

Gifts: Giving gifts, particularly flowers and food, is especially popular in Filipino business culture. Exchanging gifts is an essential step in solidifying business ties; however, gifts should not be so extravagant as to indicate a bribe.

Doing Business: Maintaining cordial relations at all times is essential. In the beginning, try to make only positive comments as negativity can result in “loss of face”. Filipinos must get to know and genuinely like and feel at ease with you before they will engage in a business relationship.

Acceptable Public Conduct: Visitors should avoid staring at Filipinos, who can easily interpret a stare as a hostile gesture. If you are stared at, look away. Pointing a middle finger at a person or thing is considered the most obscene gesture in the Philippines.

For more detailed information on these topics, visit Philippines, on the Executive Planet web site.

Articles of Interest on the Philippines

• Gold from the storm, Economist, June 28, 2007
• Philippines, Index of Economic Freedom

Sources for further information on doing business in the Philippines

• Doing Business: Philippines, The World Bank Group
• Embassy of the United States in Manila
• July Market of the Month: The Philippines, U.S. Commercial Service
• Philippines, Asian Development Bank

*****

This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including COUNTRY. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources including: the U.S. Department of State, U.S. Commercial Service, CIA World Factbook, Federation of International Trade Associations, and Economist Country Briefings.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere

Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," September 2007.