Promoting Trade and Investments between the Philippines and Brunei

The Philippine Trade & Investment Centre-Brunei represents the Department of Trade and Industry at the Embassy of the Philippines in Brunei Darussalam.

Its mission is focused on the promotion of Philippine exports of products and services to Brunei and of Brunei investments into the Philippines.

 Philippines as a Business Destination

In the World Economic Forum report released in 2014, the Philippines is the most improved country overall in terms of global competitiveness in the last four years.  With strong growth momentum, improved government finance and governance, it has gained investment-grade ratings from Fitch, Moody’s and S&P and made the country an increasingly attractive investment destination in Asia. 

To sustain this robust growth, the Philippines continues to improve the business climate in the country.  The government has accelerated infrastructure spending, while remaining focused on efforts to practice prudent economic management and good governance.  In 2015, fresh reforms that simplified procedures to register a business and a follow-through to other measures designed to encourage foreign investments were put in place.  The country’s strong macroeconomic fundamentals are supported by a diversity of natural resources and a young, highly-skilled, English-speaking population of 100 million.

Now is the best time to invest in the growing economy.  New growth is expected to be helped by the ASEAN Economic Community (AEC) which will transform the Philippines alongside its Southeast Asian neighbors into a highly competitive economic region with an effective market structure and free flow of investments, capital, goods, services and labor.

Rising Global Competitiveness Ranking

• Tagged as the “Most improved” - World Bank 2014 Report
• Jumps up 13 places, from 108th place to 95th - World Bank Ease of Doing Business 2015 Report
• One of the 10 best score improvements moving from 89th to 76th place, out of 178 economies around the world; ranks 13th out of 42 countries in the Asia-Pacific region; overall score was above the world and regional averages - Index of Economic Freedom for 2015
• Jumps up 7 places, from 59th to 52nd place, out of 144 economies -  World Economic Forum Global Competitiveness Index 2014-2015
• Drops 9 places, from 94th to 85th place, out of 175 countries - Transparency International's Corruption Percentage Index 2014
• Advances 8 places, now ranking 64^th out of 138 countries – Global Enabling Trade Report, World Economic Forum 2014

Priority Exports for Promotion in Brunei

Philippine exports to Brunei amounted to US $85 million in 2014.  The Brunei market is highly import-dependent with few tariffs or other trade barriers.  Brunei imports a substantial amount of its goods from its ASEAN neighbors, EU, Japan and the US.  Operational efficiencies, zero fiscal impositions, user-friendly laws and relatively low costs of operations combine to make business in Brunei significantly efficient and rewarding.

Fresh, Processed and Marine Food
In a region known to lead the market in global food production, the Philippines stands as a robust, dynamic and growing supplier of imported food and beverage.  The country is a major exporter of raw ingredients in the world market; as well as a top exporter of fresh and processed marine products, pineapples, bananas, papayas, mangoes, and crab. 

Strategically located in the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) region, Brunei sees itself as an ideal destination for the establishment of industries such as food and food ingredients.

The Brunei Economic Development Board (BEDB) is particularly interested in the food industry and is open to major food and food ingredients companies.  The country imports about 80 percent of its food requirements, with the government subsidizing certain staples such as rice, sugar and milk. 

The key opportunities in the Brunei food industry include pastries, baker’s wares and cocoa-based products.  There is also a huge opportunity in the Brunei halal industry that the Philippine exporters can tap.  Brunei and Mindanao are already partners in economic development through BIMP-EAGA and this makes it easier for both countries to work on a cooperation scheme whereby Mindanao can be a potential producer and supplier of halal products.

Consumer Goods
As with most food products in Brunei, consumer goods come from neighboring countries such as Singapore, Japan and Malaysia.  Philippine exporters can look into supplying house wares, fashion accessories, furniture and paper products.

Another cluster focus is the pharmaceutical industry.  Philippine companies may opt to produce halal pharmaceuticals as a value-add. Brunei has its own guidelines and standards for the handling and manufacturing of halal pharmaceutical products.

The Philippines is a source of make-up and skin care preparations as well. There are many indigenous materials within the Philippines for those that demand natural ingredients in their cosmetic products.

Construction Materials
The Brunei construction industry ranks third in the number of enterprises among Brunei’s industrial sectors.  Large construction projects come largely from the Brunei government and Brunei Shell Petroleum Co.  The country follows a policy to award construction contracts wherever possible to local firms, hence, foreign firms may have to form joint ventures with or subcontract to, a local firm in order to participate in infrastructure projects or to supply building materials. 

Brunei is proud of its natural environment.  Philippine firms that have expertise in sustainable construction procedures have an advantage in obtaining contracts.

The country also faces a shortage of skilled laborers.  Filipino engineers, surveyors and architects among others can consider this opportunity.

Opportunities for Philippine Investors

In its effort to diversify the economy away from its heavy reliance on oil and gas, the BEDB is developing several industry clusters based on Brunei’s strength:

Extending the Oil and Gas value chain: petrochemicals, oil refinery and storage facilities, metals

Building on Brunei’s Biodiversity: tourism, aquaculture, agriculture, renewable energy

Brunei Islamic brand: Halal processing hub, Islamic financial services

Waste Management: engineered landfill, recycling, composting, incineration and turning waste into energy

Education: higher education

Priority Sectors in the Philippines for Brunei investments 

As the Philippines pursues sustainable economic growth, it is reaching out to Brunei for stronger partnerships on these key Philippine industry sectors

Agribusiness 

Agribusiness is one of the preferred investment sectors in the Philippine Investment Priorities Plan (IPP) and that its continued development is important in promoting inclusive economic growth in the Philippines, particularly in Mindanao which has vast tracks of fertile land and conducive weather for agricultural production.

Tourism Facilities 

In 2014, visitors to the Philippines reached 4.8 million or 3.25 percent higher than the 2013 figure.  The Department of Tourism (DOT) projected 37,352 rooms in the critical destination clusters until 2016.  In 2015, the government is aiming six million arrivals and further to 10 million in 2016.  The DOT tagged 2015 as Visit the Philippines Year, highlighting the country’s tourism offerings that are becoming even more vibrant and enticing than before.

This increasing tourist arrivals and the corresponding requirements for tourism facilities and services offer an opportunity for Brunei companies seeking growth prospects in ASEAN and particularly in the country.

Brunei can also help the Philippines in its goal to become a Muslim-friendly destination.  Currently, the country has limited halal-certified hotels and restaurants.

Power Projects

Foreign investment in the energy sector is wide open, especially on renewable energy developments on hydropower installations, liquefied natural gas (LNG), and upstream oil and gas ventures.  The transition to LNG imports will be a necessity as the Philippines only natural gas field in Malampaya is expected to be dry by 2023, which will make the country wholly dependent on gas imports.  Investors may participate in the activities of established local service contractors.  Alternatively, areas not covered by existing contracts may be applied for at the Department of Energy. Foreign equity may be 100% for any of the service contract modes.

Islamic Banking

As of 2014, the Autonomous Region in Muslim Mindanao (ARMM) has only 20 banks and 28 ATMs or only eight percent of the municipalities of the ARMM.  The ARMM is the country’s top source of marine and fish products. It also holds large mineral deposits, including copper and gold.  This is where a significant marketing opportunity is untapped, not only for conventional banking but also and more importantly for Islamic banking.  Currently, the Al-Amanah Islamic Investment Bank of the Philippines is the only Islamic bank in the Philippines. 

Click here to visit the website of Invest Philippines. 

Department of Trade & Industry: the executive department of the Philippine Government responsible for realizing the country’s goal of globally competitive and innovative industry and services sectors that contribute to inclusive growth and employment generation. 

Board of Investments: an attached agency of Department of Trade and Industry (DTI), the BOI is the lead government agency responsible for the promotion of investments in the Philippines.  BOI assists Filipino and foreign investors to venture and prosper in desirable areas of economic activities. The BOI is your one-stop shop in doing business in the Philippines 

Philippine Economic Zone Authority: an attached agency of the Department of Trade and Industry, PEZA is tasked to promote investments, extend assistance, register, grant incentives to and facilitate the business operations of investors in export-oriented manufacturing and service facilities in PEZA Special Economic Zones.

Zamboecozone and Freeport: a decentralized, self-reliant agro-industrial, commercial, financial, investment and tourism center and Freeport with suitable retirement and residential areas in Zamboanga City

Center for International Trade Expositions & Missions: as the export marketing arm of the Department of Trade and Industry (DTI), CITEM is committed to develop and nurture globally competitive Philippine SMEs, exporters, designers, and manufacturers by implementing an Integrated Approach to Export Marketing in partnership with other government and private entities.  CITEM organizes signature Events that provide global trade platforms for Philippine exports; primarily in the design-driven (home and fashion lifestyle) and food industries.

Philippine Chamber of Commerce and Industry: the voice of Philippine business recognized by government and international institutions.  As a proactive catalyst of development, PCCI promotes and supports the drive for globally competitive Philippine enterprises in partnership with government, local chambers, and other business organizations.

Bangko Sentral ng Pilipinas: the central bank of the Republic of the Philippines. It was established on 3 July 1993 pursuant to the provisions of the 1987 Philippine Constitution and the New Central Bank Act of 1993. The BSP took over from the Central Bank of Philippines, which was established on 3 January 1949, as the country’s central monetary authority.  It enjoys fiscal and administrative autonomy from the National Government in the pursuit of its mandated responsibilities.

Bureau of Internal Revenue: mandated by law to assess and collect all national internal revenue taxes, fees and charges, and to enforce all forfeitures, penalties and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.

Securities and Exchange Commission: the government agency within the Office of the President of the Philippines responsible for strengthening the corporate and capital market infrastructure of the Philippines, and maintaining a regulatory system and promoting the interests of investors in a free, fair and competitive business environment.

Philippine Exporters Confederation: a non-stock, non-profit private umbrella organization of the Philippine exporters.  Its goal is to strengthen the country’s export industry through its export promotion and development programs. 

National Statistical Coordination Board: policy-making and coordinating agency on statistical matters in the Philippines.  Foremost among the objectives of the NSCB is to develop an orderly Philippine Statistical System capable of providing timely, accurate, relevant, and useful data for the government and the public for planning and decision-making.

Subic Bay Metropolitan Authority: a government agency that played a significant role in the development of the Subic Bay Freeport and Special Economic Zone into a self-sustainable area offering unique maritime, eco-tourism and high-tech industrial services (infrastructure) to the world as a showcase of Philippine economic progress and development.

Clark Development Corporation: a former US military base.  Its strategic location is right at the heart of growing markets in the Asia-Pacific region.  The zone’s modern infrastructure facilities, generous fiscal and non-fiscal incentives, professional support services and amenities make it an ideal place for investment. 

Metro Manila Development Authorityis an agency of the Republic of the Philippines created embracing the cities and municipalities of Metro Manila which performs development planning; transport and traffic management; solid waste disposal and management; flood control and sewerage management; urban renewal, zoning and land use planning and shelter services; health and sanitation, urban protection and pollution control; and public safety.  These functions are performed by the MMDA within Metro Manila without diminution of the autonomy of the local government units.

FREQUENTLY ASKED QUESTIONS

1. Who are qualified to invest in the Philippines?
   Anyone, regardless of nationality, is welcome to do business and invest in the country, in almost all areas of economic activities provided these are not listed in the Foreign Investments Negative List (FINL) of the Foreign Investments Act of 1991.
2. What are these areas of investments covered by the Foreign Investments Act (FIA)?
   Under the Foreign Investments Act of 1991 (Republic Act 7042 as amended by RA 8179), foreign investors are allowed to invest 100 percent equity in companies engaged in almost all types of business activities subject to certain restrictions as prescribed in the Foreign Investments Negative List (FINL).
3. The FINL is a shortlist of investment areas or activities which may be opened to foreign investors and/or reserved to Filipino nationals. The Foreign Investments Negative Lists (FINL) are classified as follows:
   1. List A - consists of areas of activities reserved to Philippine nationals where foreign equity participation in any domestic or export enterprise engaged in any activity listed therein shall be limited to a maximum of forty percent (40 percent) as prescribed by the Constitution and other specific laws.
   2. List B - consists of areas of activities where foreign ownership is limited pursuant to law such as defense or law enforcement-related activities, which have negative implications on public health and morals, and small and medium-scale enterprises.
4. Is it possible for foreigners to invest up to 100 percent capital in a domestic entity?
   Yes, it is possible to do so if it meets the following conditions:
   1. If the proposed activity he intends to venture in is not among those listed in the FINL.
   2. If the paid-up capital for domestic market enterprise is at least US$200,000.00, which may be lowered to US$100,000 if the following conditions are met:
      1. Introduction of advanced technology; or
      2. Employment of at least 50 direct employees.
   3. If product/service is for export.
5. What are the requirements in establishing a business in the Philippines?
   Doing business in the Philippines (with or without incentives) requires prior registration with the following agencies: a) Securities and Exchange Commission (SEC) for corporation or partnership; and b) Department of Trade and Industry (DTI) for sole or single proprietorship.
   
   There are other types of business enterprises that maybe set up under laws other than those of the Philippines which require SEC registration, namely: Branch office, Representative or liaison office, Regional Headquarters (RHQ) and Regional Operating Headquarters (ROHQ).
6. What are possible incentive schemes available for an investor?
   The government has come up with a liberal program of fiscal and non-fiscal incentives to attract foreign capital and technology that complements local resources.
   
   In terms of investment incentives, the following are offered:
   1. Incentives Offered Under the Omnibus Investments Code of 1987 (E.O 226)
      Projects outside of the economic zones can register with the Board of Investments (BOI) to qualify for the incentives below:

• Income Tax Holiday (ITH) or Exemption from Corporate Income Tax for four(4) years (for “Non-Pioneer” projects) or six (6) years (for “Pioneer” projects), extendible to a maximum of eight (8) years
• Duty-free importation of capital equipment (E.O. 528)
• Additional deduction for labor expense equivalent to 50 percent of the wages of additional skilled and unskilled labor force.
• Tax and duty free importation of breeding stocks and genetic materials.
• Tax credit on domestic breeding stocks and genetic materials.
• Simplified customs procedures for the importation of equipment, spare parts, raw materials and supplies and exports of processed products.
• Unrestricted use of consigned equipment.
• Employment of foreign nationals in supervisory, technical or advisory positions.  Foreign nationals may renew the visa indefinitely for the positions of president, general manager and treasurer (or their equivalent) of foreign-owned registered enterprises.
• Tax credit for taxes and duties paid on raw materials, supplies and semi-manufactured products used in the manufacture of export products and forming part thereof.
• Access to bonded manufacturing warehouse system.
• Exemption from wharfage dues and export tax, duty, impost and fees.
• Exemption from taxes and duties on imported spare parts.
• Additional deduction for necessary and major infrastructure works for those locating in less- developed areas

2. Other Incentives Offered Under the Special Economic Zone Act of 1995 and the Bases Conversion and Development Act of 1992

• The Philippine Economic Zone Authority (PEZA) grants similar incentives to those BOI-registered projects, however, upon expiry of the ITH, there is an exemption from all local and national taxes, and in lieu thereof, payment of the special tax of 5 percent on Gross Income; and Zero percent Value Added Tax (VAT) on local purchases of goods and services, including telecommunications, power and water bills.
• Enterprises allowed to operate within the Subic Bay Freeport (SBF) shall, in lieu of paying all other taxes, pay a final tax of 5 percent of gross income provided their income from local (non-export) sales shall not exceed 30 percent of their income from all sources.
• Enterprises locating within the Clark Special Economic Zone (former American Airbase at Clark Field) and Poro Point Special Economic and Freeport Zone (formerly Wallace Air Station and its adjoining areas) are granted incentives similar to those given SBF enterprises.
• Two other special economic zones were created under two separate special laws. These are the Cagayan Special Economic Zone Authority (CEZA) and Zamboanga Economic Zone Authority (ZEZA). The incentives granted to those that will locate in these ecozones are similar to the incentives granted to PEZA ecozone enterprises.

7. What are the protections to investments available to investors?
   All investors are entitled to the basic rights and guarantees provided in the Philippine Constitution. Among other rights recognized by the government of the Philippines are the following:
   1. Repatriation Of Investments
      Foreign investors have the right to repatriate the entire proceeds of the liquidation of the investment in the currency in which the investment was originally made at the exchange rate prevailing at the time of repatriation.
   2. Remittance Of Earnings
      In the case of foreign investments, investors have the right to remit earnings from the investment in the currency in which the investment was originally made and at exchange rate prevailing at the time of remittance.
   3. Foreign Loans and Contracts
      Foreign investors have the right to remit, at the exchange rate prevailing at the time of remittance, such sums as may be necessary to meet the payment of interest and the principal on foreign loans and foreign obligations arising from technological assistance contracts.
   4. Freedom From Expropriation
      There shall be no expropriation by the government of the property represented by the investments or of the property of enterprises except for public use or in the interest of national welfare and defense and upon payment of just compensation. In such cases, foreign investors or registered enterprises shall have the right to remit sums received as compensation for the expropriated property in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
   5. Right to Requisition of Investment
      There shall be no requisition of the property presented by the investment or of the property of enterprises, except in the event of war or national emergency and only for the duration. Just compensation for the requisitioned property may be remitted in the currency in which the investment was originally made and the exchange rate prevailing at the time of remittance.

In addition, under various investment agreements of the Philippines with other States, investors are accorded the following, among others:

1. Free Transaction of Capital
   The Philippines allows all transfers relating to investments to be made freely and without delay into and out of its territory, subject to compliance with certain requirements imposed by laws and regulations.
2. National Treatment
   The Philippines treats all investments equally whether made by foreign or local investors to the extent allowed by Philippine laws.

Fair and Equitable Treatment
The Philippines affords to investments fair and equitable treatment and full protection and security in accordance with customary international law.