Press Release (February 13, 2013)

Aug 14, 2013

JETRO SURVEY SHOWS PHILIPPINES STILL A TOP INVESTMENT DESTINATION

The Japan External Trade Organization (JETRO) Manila, a semi-governmental agency that promotes business between the Philippines and Japan through inviting Japanese investment into the country, has once again proved that the Philippines are a desirable investment and business destination for Japanese companies as compare to other Asian countries, as according to the result of their latest survey.

Conducted from October to November 2012 on Japanese-affiliated companies in Asia and Oceania, the survey primarily aims to compare the business competitiveness of the Philippines against other Asian economies such as China, Myanmar, Indonesia, Thailand, Vietnam, Malaysia, and India. Comparison was made in terms of profitability, good management, and reasonable salary. It also shows why the Philippines are appreciated by the Japanese business people. Result shows that this year, Philippines have bested once again its competitors.

Philippines have emerged to be a profit center for Japanese companies after gaining the top spot for being the most profitable. Philippines and Indonesia has outdone their competitors in all industry with a total of 71.9% and 74.4% profitability respectively. This result came about specifically because of the very promising performance of the Philippines in export oriented business with a 72.4% profit as oppose to China in 5th place with a 54.6% profit and India at last with 55.3% revenue.

In terms of good management, the Philippines have also performed well. Survey shows that the Philippines has the least difficulty when it comes to recruiting general staff having only a 4.3% rating, followed by Indonesia with 6.8% and Vietnam at third with 13.8%. China tops it with a 35.5% rating, this result being primarily because of the stricter working environment in China as compare to the Philippines and other countries. Another aspect where the Philippines fair well was the number of strikes and/or lockouts. Philippines compare to Vietnam and India has the least number of strikes and/or lockouts from year 2008 to 2011, with only 2 accounts on 2011, as reported by the National Conciliation and Mediation Board, while Vietnam has 857 according to their Ministry of Labor, War Invalids & Social Affairs and a total of 389 for the same year in India according to their Ministry of Labour & Employment, Labor Bureau. The appreciation the Philippines gets from foreign investors and business ventures also came from the not so time-consuming customs and administrative procedures. The survey shows that most Japanese companies found Thailand to be the least troublesome on time-consuming customs and administrative procedures with 24% and 20.6% rating respectively and Philippines came in second with 27.3% rating in customs procedures and 34.5% in administrative procedures. However, Myanmar with 55.6% and 85% rating respectively found customs and administrative procedures most time-consuming. PEZA on the other hand, has played a vital role in providing assistance and smooth procedure in doing business resulting to the good ratings by the Japanese respondent companies in the Philippines

The survey results highlighted once again the competitiveness of the Philippines in access to reasonable salary, attracting more foreign investors as it also means low financial cost. Philippines top it in terms of salary base up rate as against the previous year with a 5.2% rating with Malaysia coming in close with 5.3%, while Vietnam rank low with a 17.5%, and Indonesia with 17%, India with 11.8%, China with 9.4%, and Thailand with 6.5%.

In terms of annual salary which is the total amount each employee received which includes the base salary, allowances, overtime incentives, bonuses, social security, and etc., the Philippines has remained in second lowest group. Philippines placed in the middle with a USD 4,581 annual salary for manufacturing staff while China came with the highest labor cost with a 6,734 US dollar and Vietnam as the cheapest with only 2,602 US dollar annual salary. Philippines and Vietnam stayed at a cheaper labor cost in annual salary payout for manufacturing engineer with USD 7,636 and USD 5,441 respectively as well as for the manufacturing manager with USD 17,498 and Vietnam giving USD 12,245; Malaysia coming in with the highest labor cost both for the manufacturing engineer and manager with USD 14,451 and USD 30,083 annual salary. For non-manufacturing manager, Philippines and Vietnam remained with the cheap labor cost at USD 20,169 and USD 16,422 respectively.
Moreover, for non-manufacturing staff annual salary Philippines has a cheaper labor cost compared with India by 17.3%, this is the main reason why BPO companies shifted from India to the Philippines in year 2011.

Furthermore, among the eight countries subject for comparison in the survey, Japanese businesses in the Philippines came out to have the least challenges. It was shown that Japanese companies find difficulty in local procurement of raw materials and parts the most challenging with 67.7%. Furthermore, the survey result also depicted Filipino career perception of going abroad to work rather than stay as lack of employee awareness for localization is also a challenge for these Japanese investors. On one hand, this still is a good performance for the Philippines as Japanese businesses in other countries had to deal with a lot more challenges such as wage increase and time consuming administrative procedures.

On the business development plan however, Philippines landed on the last rank with 48.2% rating for expansion plan, while India, Indonesia, and Vietnam emerges as the target domestic markets with 83.6% , 77.3% and 65.9% respectively.

JETRO Manila received a total of nine (9) investment missions, 168 persons and 1,572 visitors in doing business in the Philippines, a 31% increase for the year 2012. Japanese businessmen in Japan were opted to look for a new business site abroad mainly because of the hardships that the Japanese companies encounter due to the strong yen, no flexibility on labor recruitment, high rate of corporate tax, severe condition of Co2 emission, delay of Economic Partnership Agreement (EPA) negotiation and shortage of electricity due to the halting operation of nuclear plant. Likewise, the Japanese companies in Asia avoid the concentration of production base, or the so called “China +1”. Needless to say, the good economic fundamentals that the Philippines enjoy have put a weight on how these Japanese companies sees the country as an investment destination. As a commitment, JETRO will continue to promote investment missions and open the door for more investment opportunities all year around.