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Nordic Chamber of Commerce of the Philippines

  • Members Area
  • Services
  • Members
    • List of Members
    • Become a Member
  • Doing Business in the Philippines
    • Philippines Country Profile
    • Trade and Investments
      • Sector in Focus: Pharma & Healthcare
      • Sector in Focus: IT – BPO
      • Other Sectors
  • News & Events
  • About Us
  • Contact
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Home Trade and Investments

TRADE AND INVESTMENTS

                Considered to be the rising tiger of Asia after posting robust economic growth for the past five years backed by strong macroeconomic fundamentals, the Philippines aims to attract foreign investors on various sectors and industries. Investment opportunities are further boosted with government incentives on priority areas as identified in the IPP 2014-2016.

                In 2014, the Philippines Gross National Income (GNI) registered at 5.8% from the previous 7.5% and a Gross Domestic Product (GDP) of 6.1% from the previous 7.5%. On the supply side, the service sector accounted for 56.55% followed by the industry at 33.43%, and agriculture, hunting, forestry and fishing at 10.01%.

Gross Value Added In Services & Industry in USD Million (2014)

Industry/ Industry Group At Current Prices Growth Rate At Constant Prices Growth Rate
Service Sector 7, 245, 708 9.0% 4, 051, 499 5.9%
a. Transportation, Storage, & Communication 783, 492 7.6% 536, 562 6.2%
b. Trade & Repair of Motor Vehicles, Motorcycles, Personal & Household Goods 2, 243, 270 8.4% 1, 184, 994 5.7%
c. Financial Intermediation 988, 894 11.7% 515, 484 7.2%
d. Real Estate, Renting, & Business Activity 1, 553, 387 13.0% 803, 241 8.7%
e. Public Administration & Defense; Compulsory Social Security 503, 110 3.5% 292, 441 3.6%
f. Other services 1, 173, 555 6.1% 718, 777 3.3%
Industry Sector 3, 968, 897 10.4% 2, 394, 694 7.9%
a. Mining & Quarrying 125, 390 8.6% 76, 474 4.9%
b. Manufacturing 2, 603, 644 10.5% 1, 666, 514 8.3%
c. Construction 828, 161 13.9% 422, 150 9.9%
d. Electricity, Gas, & Water Supply 411, 702 3.6% 229, 555 2.8%

Source: Philippine Statistics Authority

On the demand side, economic activity was driven by household consumption that increased at a rate of 5.4% followed by a strong fixed capital formation and government spending. Total external trade reached USD 127.500 billion for which exports registered at USD 62.102 billion while imports at USD 65.398 billion resulting to a USD 3.296 deficit in the balance of trade.


Top Philippine Import Groups (2014) Top Philippine Export Groups (2014)
1. Electronic Products (23.4%) 1. Electronic Products (43.1%)
2. Mineral Fuels, Lubricants, & Related Materials (20.2%) 2. Other Manufactures (8.2%)
3. Transport Equipment (9.5%) 3. Machinery & Transport Equipment (6.4%)
4. Industrial Machinery & Equipment (5.0%) 4. Woodcrafts & Furniture (5.4%)
5. Other Food & Live Animals (3.4%) 5. Other Mineral Products (4.3%)

 

Opportunities and trade between EU and the Philippines

                 As for the goods imported from the EU to the Philippines, medical equipment and pharmaceutical products top the list. The combined value amounted to EUR 700 million in 2015 which EUR 412 million constitutes for the pharmaceuticals, while EUR 287 million for the equipment. The Philippine pharma market is seen to expand and achieve a market value of USD 8 billion by 2020. In 2014, the pharmaceutical industry amounted to Php 145.05 billion. In a study by the Pharmaceutical & Healthcare association of the Philippines (PHAP), the Philippines is third in being the most innovative country in Southeast Asia in the field of pharmaceuticals while Singapore and Thailand lead the list. Currently, there are 461 clinical studies being conducted. In 2014, the Philippine market for medical devices reached USD 288.9 mn and is anticipated to increase to USD 430.3 mn by 2019 which is a CAGR of 8.3%. In terms of products, the CAGR for orthopaedics and prosthetics is 17.1% while 2.4% for other devices.

                Due to the underdeveloped industry of local medical devices, the Philippines mostly rely on foreign imports. 94% constitutes of wound dressing products from Belgium and China, 82% of protective equipment are from Malaysia, and approximately 98% comprise of auxiliary devices such as pacemaker are from Hong Kong and Switzerland. In 2011, 35% of medical equipment and devices is composed of diagnostic imaging product, 21.9% for medical consumable products while 21.5% for other devices. Auxiliary devices, dental products, and orthopedic implants amount to 9.1%, 8.6%, and 3.2%, respectively. Source: Espicom (2012); ITRI IEK compiled (2012/08) Several EU medical companies have successfully penetrated the Philippine market: Local companies such as Ayala, Vitacare, and Metro Pacific Hospital Holdings have expressed in furthering their presence in the health industry. Plans of acquiring buildings and facilities in the next 5-10 years are underway. Ayala plans to build 10 new hospitals while Metro Pacific aims to construct 25-30 hospitals in the next 10 years.

                The Philippines seeks to be as competitive as other SEA countries in terms of medical treatments through improving the quality of supplies and other services. Since stem-cell therapy is the current trend, the government hopes that the country becomes the leading stem-cell research and therapy center through innovative measures and procedures. Moreover, spa & wellness industry has grown to php 5 billion in 2011 which is an 80% growth from 2006. On the other hand, the retirement industry is established but operates on a small-scale only. Retirement center choices are only limited and specific aspects need improvements.

Major Philippine Exports to EU  In % (2014)

Major Philippine Exports to EU In % (2014)

Major Philippine Imports to EU  In % (2014)
Major-Philippine-Imports-to-EU

Trade with the Nordic Countries

                Total external trade relations of the Philippines with the Nordic region composed of Denmark, Finland, Iceland, Norway, and Sweden reached € 502.692 million in 2014. The Nordic countries exports to the Philippines totaled € 314.395 million led by Finland with € 104.67 million and followed by Sweden with € 83.003 million. Imports on the other hand was € 188.297 million primarily driven by Sweden and Finland.

                Most exports and imports materials are electrical and electronic equipment; machinery, nuclear reactors, and boilers; pharmaceutical products; optical, photo, technical, and medical apparatuses; lac gums, resins, vegetable saps and extracts; and articles of apparel, accessories, knit or crochet.

Country 2014 Exports (In Euro) 2014 Imports (In Euro)

Denmark
Total: € 120.487Mn Exports: € 91.691Mn
Imports: € 28.787Mn
  1. Pharmaceutical products (21.265Mn)
  2. Machinery, nuclear reactors, boilers, etc.(12.393Mn)
  3. Meat & edible meat offal (10.653Mn)
  4. Optical, photo, technical, medical, etc. apparatus (7.037Mn)
  5. Electrical, electronic equipment (6.224Mn)
  1. Lac, gums, resins, vegetable saps & extracts (7.940Mn)
  2. Electrical, electronic equipment (4.266Mn)
  3. Optical, photo, technical, medical, etc. apparatus (4.169Mn)
  4. Machinery, nuclear reactors, boilers, etc. (2.149Mn)
  5. Articles of apparel, accessories, knit or crochet (1.189Mn)

Finland
Total: € 141.232Mn Exports: € 104.670Mn
Imports: € 36.562Mn
  1. Electrical, electronic equipment (40.947Mn)
  2. Paper & paperboard, articles of pulp (37.318Mn)
  3. Machinery, nuclear reactors, boilers, etc. (9.521Mn)
  4. Optical, photo, technical, medical, etc. apparatus (4.386Mn)
  5. Miscellaneous chemical products (2.928Mn)
  1. Machinery, nuclear reactors, boilers, etc. (24.138Mn)
  2. Electrical, electronic equipment (3.257Mn)
  3. Optical, photo, technical, medical, etc. apparatus (2.699Mn)
  4. Meat, fish, & seafood (1.930Mn)
  5. Articles of apparel, accessories, knit or crochet (0.515Mn)

Iceland
Total: € 0.996Mn Exports: € 0.616 Mn
Imports: € 0.38 Mn
  1. Machinery, nuclear reactors, boilers etc. (0.346 Mn)
  2. Articles of iron or steel (0.090 Mn)
  3. Miscellaneous chemical products (0.047 Mn)
  4. Pharmaceutical products (0.044 Mn)
  5. Tools, implements, cutlery, etc. of base metal (0.036 Mn)
  1. Lac, gums, resins, vegetable saps, & extracts (0.018 Mn)
  2. Wood & articles of wood, wood charcoal (0.005 Mn)
  3. Toys, games, sports requisites (0.005 Mn)
  4. Clocks & watches & parts thereof (0.005 Mn)
  5. Plastics & articles thereof (0.002 Mn)

Norway
Total: € 43.583 Mn Exports: € 34.415 Mn
Imports: € 9.168 Mn
  1. Fertilizers (11.788 Mn)
  2. Fish, crustaceans, mollusks, aquatic invertebrates (8.968 Mn)
  3. Plastics & articles thereof (6.588 Mn)
  4. Machinery, nuclear reactors, boilers, etc. (1.477 Mn)
  5. Organic chemicals (0.884 Mn)
  1. Electrical, electronic equipment (2.215 Mn)
  2. Fish, crustaceans, mollusks, aquatic invertebrates (0.925 Mn)
  3. Aluminum & articles thereof (0.740 Mn)
  4. Articles of leather, animal gut, harness, travel goods (0.601 Mn)
  5. Edible fruit, nuts, peel of citrus, melons (0.580 Mn)

Sweden
Total: € 196.403 Mn Exports: € 83.003 Mn
Imports: € 113.400Mn
  1. Machinery, nuclear reactors, boilers, etc. (18.978 Mn)
  2. Electrical, electronic equipment (16.706 Mn)
  3. Printed books, newspapers, pictures, etc. (13, 574 Mn)
  4. Paper & paperboard, articles of pulp, paper & board (13.338 Mn)
  5. Pharmaceutical products (6.313 Mn)
  1. Electrical, electronic equipment (99.668 Mn)
  2. Edible fruit, nuts, peel of citrus fruit, melons (2.901 Mn)
  3. Tobacco and manufactured tobacco substitutes (1.734 Mn)
  4. Machinery, nuclear reactors, boilers, etc. (1.145 Mn)
  5. Soaps, lubricants, waxes, candles, modeling pastes (1.110 Mn)

Baltic Trade with the Philippines

                The Baltic countries of Estonia, Latvia, and Lithuania total trade with the Philippines reached € 12.348 million in 2014. Total exports amounted to € 4.242 million with Lithuania’s sugar commodity contributing 85.27% or € 3.617 million. Total imports was € 8.106 million primarily driven by Lithuania.

                Commodities traded were mostly sugar and sugar confectionery; machinery, nuclear reactors, boilers; organic chemicals; electrical and electronic equipment; and lac gums, resins, vegetable saps and extracts.

Country 2014 Exports (In Euro) 2014 Imports (In Euro)

Estonia
Total: € 2.524 Mn Exports: € 0.445 Mn
Imports: € 2.079 Mn
  1. Miscellaneous edible preparations (0.339 Mn)
  2. Organic chemicals (0.080 Mn)
  3. Electrical, electronic equipment (0.014 Mn)
  4. Tanning, dyeing extracts, tannings, pigments, etc. (0.006 Mn)
  5. Optical, photo, technical, medical etc. apparatus (0.002 Mn)
  1. Electrical, electronic equipment (0.658 Mn)
  2. Lac, gums, resins, vegetables saps, and extracts (0.510 Mn)
  3. Miscellaneous chemical products (0.433 Mn)
  4. Footwear, gaiters and the like, parts thereof (0.178 Mn)
  5. Toys, games, sports requisites (0.074 Mn)

Latvia
Total: € 1.138Mn Exports: € 0.180 Mn
Imports: € 0.958 Mn
  1. Machinery, nuclear reactors, boilers, etc. (0.065 Mn)
  2. Beverages, spirits, and vinegar (0.042 Mn)
  3. Vegetable textile fibers, paper yam, woven fabric (0.034 Mn)
  4. Optical, photo, technical, medical, etc. apparatus (0.021 Mn)
  5. Articles of iron or steel (0.016 Mn)
  1. Lac, gums, resins, vegetable saps and extracts (0.339 Mn)
  2. Optical, photo, technical, medical, etc. apparatus (0.0175 Mn)
  3. Electrical, electronic equipment (0.087 Mn)
  4. Vegetable, fruit, nut, etc. food preparations (0.086 Mn)
  5. Clocks and watches and parts thereof (0.068 Mn)

Lithuania
Total:€ 8.686 Mn Exports: € 3.617 Mn
Imports: € 5.069 Mn
  1. Sugars and sugar confectionery (3.617 Mn)
  2. Fertilizers (0.211 Mn)
  3. Optical, photo, technical, medical, etc. apparatus (0.179 Mn)
  4. Dairy products, eggs, honey, edible animal products (0.071 Mn)
  5. Cereal, flour, starch, milk preparations, and products (0.056 Mn)
  1. Rubber and articles thereof (3.004 Mn)
  2. Machinery, nuclear reactors, boilers, etc. (0.773 Mn)
  3. Lac, gums, resins, vegetable saps, and extracts (0.301 Mn)
  4. Electrical, electronic equipment (0.217 Mn)
  5. Optical photo, technical, medical, etc. apparatus (0.147 Mn)

Source: ITC Trade Map



Challenges

Over the past few years, the Philippines have been improving in various competitiveness rankings most notably in the annual World Economic Forum- Global Competitiveness Report. As shown below, the country has gaining significant improvements compared to the rest of ASEAN.

challenges


Out of 144 indicators, the Philippines now has 67 indicators ranked at the upper half of world rankings as shown in the National Competitiveness Council’s report in 2014. It has also registered positive upward trends in the Ease of Doing Business as published by the World Bank.

challenges


Economic Restrictions

                The 1987 Constitution of the Philippines limits foreign participation in several industries of which majority shares must be owned by Filipinos. Take for instance Art. II, sec. 19 that mandates a “self-reliant and independent national economy effectively controlled by Filipinos,” which paves the way for several government regulations, laws, and orders that restrict foreign investors. For example, it allows only 40% foreign equity share in mining, agriculture, forestry, and transportation related undertaking while 0% foreign equity share in media. In response to this reality, the leadership of the 16th Congress has introduced Resolution of Both Houses 01, which would amend the constitution and gives congress the power to liberalize sectors, when the national interest so requires, if this resolution is carried and approved by the people through a plebiscite.

Infrastructure

                Over the last ten years, the Philippines had underinvested in physical infrastructure that resulted to limiting its growth potentials with an average allocation of 2%-3% of its GDP. In the latest WEF survey, the country ranked below Singapore, Malaysia, Thailand, and Indonesia within ASEAN-6 in terms of infrastructure quality. Thus, challenges in airports, power, roads, seaports, and telecommunications are evident that affected the overall performance of the Philippines. However, the present administration has targeted to allocate at least 5% of its GDP for infrastructure pending through PPP scheme.

Bureaucracy

                Due to repetitive, complex, and often conflicting orders and procedures of government agencies on business permits, licensing, entry approval, and an array of regulations, investments are delayed and foreign investors are discouraged. However, through the National Competitive Council (NCC) that tracks government performance and the newly establish Investment Ombudsman (IO), most government agencies are now mindful of redundant procedures and should act within a certain number of days. PEZA is an exception to this because it has often been cited by various private sector organizations as a government agency that stays true to its commitment of “No red tape, only Red Carpet.”

Corruption

                Although corruption allegations are still pervasive, the Office of the Ombudsman and the Department of Justice have been very active in investigating and prosecuting public sector officials for corruption charges. In fact, the government’s swift actions have been recognized by independent international agencies such as Transparency International (TI) when it jumped from 129th spot in 2011 to 94th spot in 2013 making it the least corrupt country in Southeast Asia ahead of Indonesia, Thailand, and Vietnam.

Low Foreign Direct Investments

                For the past decades, the Philippines has been lagging behind with its ASEAN-6 peers in terms of attracting foreign direct investments. This is largely due to regulatory restrictions in certain industries, ease of doing business, and many other factors including the aforementioned challenges. However, both public and private sectors are actively introducing policy reforms aimed at liberalizing the economy; the latest would be the enactment of the Philippine Competition Act under Republic Act 10667 approved on July 2015.

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Nordic Chamber of Commerce of the Philippines
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Senator Gil J. Puyat Avenue,
corner Tindalo Street 1200
Makati City, Metro Manila

Phone: +63 2 759 2246
Fax: +63 2 759 2247
Email: info@nordcham.com.ph

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19F Philippine AXA Life Center
Senator Gil J. Puyat Avenue,
corner Tindalo Street 1200
Makati City, Metro Manila
Phone
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Fax
+63 2 759 2247
Email
info@nordcham.com.ph

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