Perks and Pitfalls of Doing Business in the Philippines for Foreigners

Thanks to the advent of technology, the world is now a global village. Hence, businessmen have begun exploring opportunities outside their home countries.

If you are a foreigner exploring how to make money in the Philippines, you must do ample research. Though opportunities abound in this developing country, you need to assess the benefits and risks before making a significant investment. If you’re an entrepreneur thinking of branching out in the Pearl of the Orient, consider these pros and cons. Let’s dive into them below. 

The Pros

Just like any venture, you’ll find that there are many advantages of doing business in the Philippine Archipelago. The following perks will surely excite and motivate you to establish your company in the country:

Access to a Broad Market

The Philippines has over 100 million people, providing many opportunities for you to sell your goods or services. Because of the Spanish and American colonization, Filipinos feel a close connection to Western culture. As such, they patronize foreign products and are updated with trends. As a foreigner, you will not have difficulty adjusting here, like in other Asian countries that have set traditions. Though there’s a vast income disparity in the population, you can still earn a considerable profit by effectively targeting specific markets. Best of all, setting up your headquarters here means you can take advantage of the country’s central location. 

Affordable Yet Talented Workforce

Filipinos are known for giving top-notch service with a smile. It is precisely this reason while overseas Filipino workers all over the world enjoy a world-class reputation for being dream employees! Every year, thousands of fresh graduates join the labor pool. You can count on most of the population to speak English as it is the medium of instruction in school. Moreover, the wages in the Philippines rate lower compared to other countries. With the power of the foreign exchange rate (1USD to 50Php) at your disposal, your money will go a long way here. 

Progressive Infrastructure

Even if the country is an archipelago comprised of more than seven thousand islands, it manages to stay interconnected. Communication abroad also remains robust. You can take advantage of air freight with various major airports on the main island or large cargo shipments in the seaports. Within the metro area, you will find a robust central business district. The government’s infrastructure program also assures that programs are in place for the fast delivery of services for both international and domestic companies. 

Enjoy Government Incentives

As a foreigner, you can enjoy government incentives exclusive to you. For example, the Board of Investments and the PEZA (Philippine Economic Zone Authority) offers you perks, allowing you to take advantage of key areas and industries marked explicitly for development. You can also enjoy tons of fiscal incentives, tax exemptions, deductions, or preferential rates. You can also take advantage of the simplified customs procedures for imported goods, issuance of resident visas to foreign investors, or the privilege to operate a bonded manufacturing facility.

The Cons

Of course, in life, nothing is perfect. These are some disadvantages of doing business in the Philippines. 

Lots of Non-Working Days

Unlike other countries, the Philippines enjoy lots of holidays. Officially, there are 18 non-working holidays because of historical and cultural significance. Apart from that, the government calls for work suspensions due to inclement weather. You may need to pay more labor wages during these days or close your shop (depending on your industry). 

Unfair Disadvantage with the Labor Laws

The labor laws in the country favor the employees and not the management. You may have trouble firing employees, even if they are underperforming. Before full termination, you need to prove that the errant party was indeed negligent in doing duties. Additionally, the law mandates that you must provide a 13th-month bonus and severance pay.

Massive Traffic

Unfortunately, if you do business in the major cities like Manila and Cebu, prepare to deal with massive traffic. The country does not have an expansive road network. On top of that, there is no efficient public transport system. The slow-moving traffic may leave you frustrated.

Face Legal and Constitutional Limitations

The Philippines has a Foreign Investment Negative List, which lists downs limitations regarding foreign ownership. There is no way around this as the constitution, and specific laws prohibit it. There is also a restriction on foreign ownership of real estate. 

That being said, don’t feel discouraged by the cons listed here, as the benefits remain supreme. You stand to earn a lot as the country is one of the fastest-growing economies. With the warm Filipinos and year-round tropical weather, you will enjoy building your business here. If you need help processing requirements, give us a call as we offer FREE 30-minute consultations