2006 Edition

Ye a r s

Doing Business in the

Philippines

!SGV & Co
A MEMBER PRACTICE OF ERNST & YOUNG GLOBAL

Quality In Everything We Do
©2006 SGV & Co. All rights reserved.
©2006 SGV & Co. All rights reserved.

Doing Business in the

Philippines
 MALACAÑAN PALACE
MANILA

Despite enormous challenges in 2004, the Philippine economy had

posted a year-on-year growth of 6.2% exceeding our target of 5.8%.

We began 2005 with greater promise, with our sovereign currency

and stock market soaring to record highs. The drop in nonperforming
loans in the private sector from 19% to 13% as a result of the Special
Purpose Vehicle Act of 2002 has helped in mitigating the fiscal deficit.
Meanwhile, we continue to improve our fiscal situation and enhance our
revenue performance with the encouraging support and vital participa-
tion of Congress.

The rebirth of the Philippine mining industry continues to attract foreign

investors. As we anticipate more activities in this sector, proper steps
are being taken to ensure sustainable development as we explore the
mining prospects in such locations as Benguet, Albay, Palawan, Surigao,
Zomboanga del Norte, and Davao.

Apart from these developments, the Philippine accounting industry

targets its full transition to International Financial Reporting Standards
(IFRS) in 2005. This will bring about greater transparency and compa-
rability in financial reporting and push forward the adoption of uniform
financial reporting standards not only across the region, but throughout
the world.

All these developments and more are featured in this latest edition of
Doing Business in the Philippines, published by SGV & Co. This pub-
lication is a credible and up-to-date source of information on our fiscal
reform agenda and accelerated growth. With the turnaround of our econ-
omy, coupled with our fiscal reforms and revitalized revenue program,
we believe we have set up the environment for more jobs and better lives
for our people. We invite the international community to move forward
with us as we strengthen our presence in the Asian and global market.

MABUHAY!

GLORIA MACAPAGAL-ARROYO
©2006 SGV & Co. All rights reserved.

MANILA
 Recent developments present vibrant
prospects for the Philippine economy in
2005. For one, mining has become an
attractive prospect after the Philippine
Supreme Court ruled that foreign inves-
tors can now fully own a mining business.
More call centers are emerging all over
the country as demand for information
technology services continue to grow.
Critical infrastructure projects are being
fast-tracked, enabling businesses to oper-
ate more efficiently. These developments,
coupled with the country’s impressive
investments and exports performance,
make the Philippines an even more attrac-
tive investment location in the heart of the
ASEAN region.
Combined investments registered with the
Board of Investments and the Philippine
Economic Zone Authority grew 286% in
2004, reaching PhP183.88 billion. This
amount is more than a three-fold increase
from PhP64 billion in 2003. Notably, the
PhP151.05 billion foreign component
(accounting for 82% of the total) reflects
strong foreign investor confidence in the
economy.
Merchandise export earnings for the
whole of 2004 grew by 9.3%, reaching
US$39.6 billion from only US$36.2 bil-
lion in 2003. This performance is higher
than the Asian Development Bank’s
projection of 8.5%, and a significant im-
provement over the actual growth of 2.9%
©2006 SGV & Co. All rights reserved.
recorded in 2003. Philippine merchandise
and services exports this year are expected
to reach US$43.84 billion.
To enhance the investment climate, we
are working closely with Congress to
rationalize the fiscal incentives. We aim to
make the country’s perks for industries at
par with those of our Asian neighbors to
capture a considerable amount of invest-
ments that developed countries have allot-
ted for their expansion projects.
The export targets, on the other hand,
can be realized through stronger market
penetration and promotion strategies, di-
versification and expansion of the exports
beyond traditional products, promotion
of dollar-earning services, and inflow of
export-oriented investments. We will seek
to develop a compendium of industries,
particularly SMEs which can widen the
export base or serve as suppliers of inputs
required by big companies. We will also
focus on special culture-based markets
such as those for halal and kosher foods—
which when tapped will offer billions of
dollars in potential income.
We invite you to come to the Philippines
and see what we have to offer in terms
of investment and trade opportunities
that can expand your business interests.
Together, let us embark on a host of
mutually beneficial collaborative endeav-
ors towards sustained economic growth,
progress, and prosperity.
Mabuhay!
PETER B. FAVILA
Secretary
Department of Trade and Industry

In 2005, the Philippines continues to
strengthen its emerging industries and
enhance the quality of its business
environment. Rich in skilled human
resources, the Philippines is a preferred
site for foreign direct investments in busi-
ness process outsourcing (BPO) services
such as contact centers, medical tran-
scription, research and development, and
information technology services. This
is affirmed in the IMD Competitiveness
Yearbook 2005, which cites the
Philippines as one of the top 10 countries
with competent senior managers and
skilled workers. Further, the Philippines
is the third largest English-speaking coun-
try in the world. Philippine government
has shown its strong support for offshore
services by enhancing the incentives for
investors.
As a result, the Philippines has experi-
enced the continuous growth of informa-
tion and communication technology (ICT)
companies that are locating in several
parts of the country. There are currently
over 70 contact centers in the Philippines;
most are subsidiaries of US-based com-
panies. This number is expected to double
in the next year. Competitive operating
costs, the Filipinos’ excellent grasp of the
English language, and satisfactory work
relationships with expatriates are distinct
advantages in setting up ICT-related ser-
vices in the Philippines.
©2006 SGV & Co. All rights reserved.
This rise in BPO-related businesses has
opened doors to emerging industries such
as educational and medical tourism, and
mining. Cost of education, especially for
!SGV & Co
courses on English as a second language,
are relatively lower in the Philippines,
and many of its Asian neighbors come
to the country for these courses. Medical
tourism has also taken off in the country.
With technology transference and a pool
of experienced and efficient health pro-
fessionals, hospitals such as St. Luke’s
Medical Center, Asian Hospital, and
Medical City are able to offer cost-effec-
tive medical treatment for patients need-
ing surgical and other forms of specialized
treatment.
Aside from increasing opportunities in David L. Balangue
BPO services, perhaps the most excit- Chairman and Managing Partner
ing growth area for the Philippines is the SGV & Co.
mining industry. The country has esti-
mated mineral resources valued at US$1
trillion. It is the fifth largest mineralized
country in the world. The Philippines is
in a strong position to offer viable busi-
ness opportunities in response to renewed As the premier professional services
investment interest in this industry caused firm in the country, we at SGV & Co. are
by the Supreme Court ruling on the committed to assist investors in setting
Philippine Mining Act of 1995. up, operating, and cultivating their busi-
ness. Our partners and principals have the
To complement its rich pool of quali- expertise and experience to provide infor-
fied workers and the sunrise industries, mation to address investors’ needs and
the Philippines’ strategic location offers concerns. You can learn more about SGV
investors a window for trading with the by visiting our website: www.sgv.com.ph
560 million-strong ASEAN market and
just as importantly, a gateway to dynamic Welcome to the Philippines. We are most
China. eager to help your business thrive and
succeed in today’s knowledge economy.
With this issue of Doing Business in the
Philippines, we invite you to explore the Mabuhay!
infinite investment possibilities as our
country ushers in a new era of growth and
development.
 Table of Contents

Why You Should Invest in the Philippines

Matching Strengths and Opportunities 8
The Country’s Bests 9
At the Right Time and Place 10
Competencies and Skills 10
Executive Caliber 11
Creative Forces 11
Hospitable Lifestyle 12
Unlimited Business Opportunities 15
Partial List of Approved/Proclaimed Ecozones 24
What the Philippines Can Offer Your Business 25

SPECIAL SECTION
Enabling Laws for Investments
Maritime Industry 26
Mining Industry 27
Agriculture and Fisheries Industry 28
Electric Power Industry 29

How to Operate in the Philippines

Investment Policy and Laws 30
General Policy on Investments 30
Omnibus Investments Code of 1987 30
Foreign Investments Act of 1991 32
Special Economic Zone Act of 1995 33
Bases Conversion and Development Act of 1992 35
An Act Providing for the Terms, Conditions, and Licensing
Requirements of RHQs, ROHQs, and RWs 36
Investors’ Lease Act 37
Export Development Act of 1994 37
Amended Build-Operate-Transfer Law 37
Registration Procedures with Government Offices 38
Securities and Exchange Commission 40
Department of Trade and Industry 41
Board of Investments 42
Philippine Economic Zone Authority 43
Subic Bay Metropolitan Authority 44
Clark Development Corporation 45
©2006 SGV & Co. All rights reserved.

Bangko Sentral ng Pilipinas 45

Taxation 46
Income Taxation 46
Withholding Tax 50
Value-Added Tax 50
Excise Tax 52
 Percentage Tax 53
Stock Transaction Tax 53
Initial Public Offering Tax 53
Documentary Stamp Tax 54
Customs Duty 55
Local Taxes 55
Labor Requirements 56
Hours of Work 56
Work Day 56
Overtime Remuneration 56
Night-Shift Differential Pay 56
Service Incentive Leave Pay 56
Meal and Rest Periods 56
Minimum Wage 56
Employees’ Compensation Program 57
National Health Insurance 57
Emergency, Medical, and Dental Services 57
Woman and Child Labor 58
Paternity Leave 58
Termination of Employment 58
Unions 59
Financial and Monetary Policies 59
Other Business Regulations 59
Immigration and Employment Regulations for
Foreigners in the Philippines 59
Philippine Environmental Laws 60
Philippine Laws on Intellectual Property Rights 61
Costs of Doing Business in Metro Manila 62
Costs of Doing Business in Clark, Subic, Cebu, and Davao 64
The Philippines
The People 66
The Land 67
The Resource Base 68
Currency 68
The Philippine Economy in 2005 69
The Political System 74
©2006 SGV & Co. All rights reserved.
SGV & Co.
Services 77
Partners and Principals 78
Offices 78
Glossary/Abbreviation

Charts
No.
1 Growth of Output, % 69
2 Growth of Output by Sector 69
3 Consumer Spending 70
4 CPI and Inflation by Commodity Group 70
5 OFW Remittances 71
6 Key Export Products 72
7 Key Export Markets 72
8 Key Import Products 73
9 Key Import Suppliers 73
10 Approved Foreign Direct Investments 74
Tables
No.
1 Sixth Regular Foreign Investment Negative List 34
2 Some Incentives of RHQs and ROHQs 37
3 Incentives of Exporters Registered under EDA 37
4 Income Tax Rates on Passive Income of Domestic/
Resident Foreign Corporations 47
5 Preferential Income Tax Rates for Nonresident Corporations 48
6 Rates of Income Tax on Citizens, Resident Aliens, and
Nonresident Aliens Engaged in Trade or Business 49
7 Income Tax Rates on Passive Income of Individuals 49
8 Payments Subject to CWT 50
9 VAT-Exempt Transactions 51
10 Zero-Rated Sales of Goods and Services 53
11 Selected Percentage Tax Rates 54
12 Some Documents Requiring Documentary Stamps 55
13 Overtime Rates 57
14 Minimum Wage Rates by Region (Nonagricultural Jobs) 57
15 Partial List of National Health Insurance Program Benefits 58
16 Key Features of BSP Circular No. 5 59
 Why You Should Invest in the
Philippines

Significant reserves. Substantial finds. Rich deposits. Without doubt, the Philippines is
a resource-rich country. However, all these riches of the land and sea pale against the
country’s most precious resource—its people. Filipinos are friendly, warm, and tolerant,
qualities which make them easy to live and work with.

They are also open to foreign ideas, and flexible and adaptable when faced with
new challenges.1 With their competence and skills, they make excellent workers and
managers.

Fast Facts
How the Philippines ranks:*
#2 Skilled Labor
#8 Senior Managers
#12 Language Skills
#13 Finance Skills
#19 Information Technology Skills
#20 Engineers
* IMD World Competitiveness Yearbook 2005
Matching Strengths and
Opportunities
The authoritative World Investment Report
2004 published by the United Nations
Conference on Trade and Development
(UNCTAD) 2 gives an optimistic outlook
for flows of foreign direct investment
(FDI) in 2004 and takes note of the “dra-
matic shift” of FDI to the services sector.
The services sector has become the larg-
est productive sector in most economies.
In 2001, it accounted for an average of
72% of gross domestic product (GDP) in
developed countries and 52% of GDP in
developing countries. With new technol-
ogy making it easier to digitize informa-
tion, services can be produced in one
location and consumed elsewhere—they
have become “tradable.”

The Philippines stands to gain from this
shift in investment flows. In surveys con-
ducted by UNCTAD in the first quarter
of 2004 with 335 of the world’s largest
transnational corporations (TNCs) and
87 international site-selection experts,
the Philippines is identified as one of the
Asian countries expected to have higher
FDI inflows in research and development
(R&D), information and communications
technology (ICT), and corporate services
(such as business processing operations
©2006 SGV & Co. All rights reserved.
Newly tradable services can be simple,
low value-added activities like data entry
or those with higher value-added like
architectural designs, financial analysis,
software programming, and R&D. More
and more companies—whether large or
small, from both developed and develop-
ing countries—are offshoring the produc-
tion of these services to countries with
the right mix of costs, skills, and infra-
structure. The Philippines is one of these
countries.

and call centers).

1
IMD World Competitiveness Yearbook 2005, (Switzerland: IMD); available from http://www.imd.ch/wcy.
2 World Investment Report 2004. (New York : United Nations Conference on Trade and Development);
available from http://www.unctad.org/en/docs/wir2004_en.pdf.


 The country’s strengths match the oppor-
tunities opened by the shift to services.
Telecommunications is the infrastructure
that allows services to become tradable
and, with deregulation, the country’s tele-
communications infrastructure has leaped
to world-class standards. Moreover, band-
width costs have dipped by 70% in the
last four years. Filipinos’ inborn artistry
and flexibility have made them naturals in
design and software development, skills
that are highly tradable. Familiarity with
American culture, learned from textbooks,
bestsellers, magazines, television, and
movies, makes it easy for Filipinos to
adopt American accents for back office
services.

The Country’s Bests

The 2005 edition of the IMD World
Competitiveness Yearbook covers 60
economies, including regional econo-
mies. Back in 2002, only 49 economies
were covered. In this expanded list, the
Philippines comes out with high ratings
for skilled labor (#2), competent senior
managers (#8), language skills (#12),
finance skills (#13), information technol-
ogy (IT) skills (#19), and qualified engi-
neers (#20).
In the 2002 Global New Economy Index
©2006 SGV & Co. All rights reserved.
after India, Israel, and Ireland. Philippine
workers were cited for being highly profi-
cient in mainframes, minicomputers, and
microcomputers as well as in technical
and business skills for ICT projects.
A study on the Competitiveness of
the Philippines’ IT sector conducted
by Gartner Research in March 20023
confirmed the competitiveness of the
Philippines in world-class English lan-
guage proficiency. “…verbal skills in
are superior to that of India, Ireland, or
other offshore destinations,” the study
noted.
The study also showed that the Philippine
workforce is technically proficient in
computer science and programming, and
many can achieve the desired level of
expertise in US business processes (such
as accounting and human resources) and
knowledge specific to an industry (for
example, medical terms for transcrip-

the Philippines with regard to clarity and tions).

(GNEI) of the META Group, a US-based
research firm, the Philippines was given
the highest rating in Southeast Asia for
the “excellent availability” of skilled IT
workers. The Philippines ranked fourth
understandability to a United States buyer
3
The study was initiated by the Philippine Department of Trade and Industry (DTI) with funding from the
Board of Investments (BOI) and private companies. The researchers visited IT companies and met with IT
practitioners from government agencies, private sector groups, IT associations, and IT firms to arrive at an
analysis of the Philippine market’s strengths, weaknesses, opportunities, and threats.


 Average Flying Time from Manila
to Selected Foreign Cities:
(in hours)
Hong Kong 1:40
Taipei 1:40
Shenzhen 2:00
Singapore 3:00
Shanghai 3:10
Kuala Lumpur 3:15
Jakarta 3:25
Seoul 3:25
Tokyo 3:40
Guangzhou 4:20
Macau 4:20
Bangkok 4:30
Beijing 5:15
Brisbane 5:35
Vientiane 6:00
Yangon 7:00
Sydney 7:30
Melbourne 8:00
Auckland 11:30
Wellington 13:50
Conversion to International Financial
Reporting Standards (IFRS) is a global
trend which will bring about greater
transparency and a higher degree of
comparability in financial reporting, both
of which will benefit investors worldwide.
The Philippines chose a gradual transition
approach to IFRS (previously referred to
as International Accounting Standards or
IAS) to ensure greater transparency and
globally accepted quality in local financial
reporting. The Philippine transition to
IFRS formally started in 2001, ending in
the full adoption of IFRS in 2005. Many
companies have already undergone
intensive training of officers and person-
nel to prepare them for the challenges
©2006 SGV & Co. All rights reserved.
The Organization for Economic Co-opera-
tion and Development (OECD) reports
that the Philippines represents “a large
supplier of English-speaking college-edu-
cated accountants, software writers, archi-
tects, telemarketers, and graphic artists.”
The country is one of the major suppliers
of information processing services and
has become a “prominent hub for shared
financial and accounting services.”4
At the Right Time and Place
The Philippines’ strategic location places
it at the crossroads of international ship-
ping and air lanes. United Parcel Service,
the world’s largest package delivery com-
pany operates its intra-Asia hub in the
Clark Special Economic Zone, a mere 1½
to 4 hours away from major Asian desti-
nations.
The country’s 12-hour time gap with the
US east coast is ideal for 24-hour work-
sharing of projects for this publicly owned
engineering, procurement, construction
and maintenance services organization,
one of the world’s largest. Their vice pres-
ident says, “We have been worksharing
with the Manila office (Global Execution
Center) for 15 years, and our investment
and commitment are evident in the quality
of the work and increased productivity we
are able to provide our projects.”
Competencies and Skills
Accountancy is the first of the professions
in the Philippines to be included under the
World Trade Organization’s (WTO) policy
of liberalization of services. Philippine
accountants can therefore freely compete
in the global playing field with accoun-
tants from other parts of the world. In the
Philippines, many capable accountants
and auditors can produce corporate finan-
cial statements of internationally compa-
rable standards.5 This is the general view
cited by a World Bank report in December
2001 on the observance of standards and
codes in the Philippines.
Because of its rich supply of skilled
accountants, the Philippines is consid-
ered a center of trained manpower in
accounting work.6 A number of US firms
outsource their accounting work to the
Philippines.
Philippine engineers have successfully
carried out worksharing at the Manila
Global Execution Center of this leading
engineering, construction, maintenance
and diversified services company with
more than 50 offices worldwide. About
70% of the multidiscipline workforce in
Manila are skilled in implementing the
design system and its related modules.
Manila had almost 50 projects involving
worksharing with 13 offices, and com-

ahead. The Philippines’ full adoption of

IFRS makes the country a credible and
efficient player in the worldwide capital
market.
4
Julia Nielson and Daria Taglioni, Service Trade Liberalisation: Identifying Opportunities and Gains (Paris:
OECD, 6 February 2004); available from http://www.oecd.org/TD/TC/WP(2003)/FINAL.
5 World Bank, Report on the Observance of Standards and Codes (ROSC) of the Philippines (New York:
World Bank, 17 December 2001); available from http://www. worldbank.org/ifa/Philippinesrosc12_01.pdf.
6 Nirupam Bajpai, Jeffrey Sachs, Rohit Arora, and Harpreet Khurana, Global Services Sourcing: Issues of
Cost and Quality, working paper, Center on Globalization and Sustainable Development, The Earth Insti-
tute of Columbia University, New York. 2004.

10
 pleted the execution of the largest work-
share project in the company’s history
involving more than 550,000 work-hours.
The company uses this ability to work-
share engineering services as a competi-
tive advantage.
The country’s nurses, doctors, physical
therapists, and dentists are magnets for
foreign tourists in search of affordable
medical services. The Department of
Tourism (DOT) has launched medical
tourism to bring in foreign tourists for
medical services such as dental and cos-
metic surgery. Many people in the US
and Europe already know the caliber of
Filipino nurses, physical therapists, and
doctors who staff their hospitals, and find
it easier to deal with English-speaking
medical practitioners.
The European Chamber of Commerce of
the Philippines (ECCP) sees bright pros-
pects for building up the Philippines as a
destination of choice for health and medi-
cal services outsourcing. ECCP Executive
Vice President Henry J. Schumacher
believes that the some 500,000 Filipino
doctors and nurses working abroad can
be tapped to promote the Philippines as
a health destination. “These are profes-
sionals who have surely made a lot of
patients happy in those countries. They
would be the best ambassadors who can
tell Europeans that there are many profes-
sionals like them back home, where ser-
vices are more affordable than in Europe,”
Schumacher says.7
Executive Caliber
©2006 SGV & Co. All rights reserved.
In its survey of 60 economies, the IMD
World Competitiveness Yearbook 2005
gave the Philippines a rating of #8 in
7 Philippine Department of Trade and Industry, Dataline (Manila: DTI, 25 October 2004); available from
http://www.dti.gov.ph/contentment/7/150/906b.jsp#special1.
11
availability of competent senior managers.
Companies setting up a business in the
country will find an abundance of capable
executives with the required academic
degrees, experience, and know-how.
The following are some of the multina-
tionals in the Philippines being run by
Filipinos: Bank of America NT & SA,
ABN-AMRO Bank, Chase Manhattan
Bank, Dresdner Bank AG, ING Bank,
Macquarie Bank, Procter & Gamble,
Colgate-Palmolive, Texas Instruments,
Philips Group of Companies, Fujitsu,
IBM, Compaq, Sun Microsystems, Fuji
Xerox, Intel Microelectronics, McCann-
Erickson, Pfizer, GlaxoSmithKline,
Reuters, PruLife, Philamlife (AIG),
Sunlife, Monark Equipment Corp., Road to Seventh Avenue - an original animation
American Wire & Cable, Du Pont Far content of NAVEL Productions, has caught the eye of
some Asian studios for co-production. RSA is a story
East, Heinz UFC, Singer, Hershey about musical instruments with the Ifugao nose flute
International, Wyeth, Jardine Davies, and in the stellar role.
Hooven.
Animation Council of the Philippines, Inc.
Creative Forces 3/F Hatchasia Global City
31st St. cor 2nd Ave, e-Square IT Park
For many Filipinos, looking out for the Bonifacio Global City, Taguig
bahay kubo (nipa hut) in the aquarium Metro Manila, Philippines
Tel: (632) 818-5019/818-5020/818-5008
added to the fun of watching the Disney/ Fax: (632) 818-5005
Pixar film Finding Nemo. The bahay E-mail: info@animationcouncil.org
kubo was a tribute to the old homeland by
http://www.animationcouncil.org/index.php
Nelson Bohol, one of the movie’s main
background designers. Another Filipino
artist, Gini Cruz, animated Dory, the blue
fish with short-term memory loss, given Filipinos’ creativity spill over to what-
voice by Ellen DeGeneres. Cruz had ever they do. One area where this talent
also done work for Toy Story 2, A Bug’s comes in handy is software development.
Life, and Monsters, Inc. The two artists Filipinos are adept in system software,
were also involved in the production of middleware, and application packages
The Incredibles. Not too many know that for sectors such as banking, financial,
Filipino animators have helped produce hotel, health, and manufacturing. The
classic TV cartoons like Scooby Doo, Center for International Trade Expositions
The Flintstones, Tom and Jerry, Addams and Missions (CITEM) has reported a
Family, as well as the more recent G.I. continuing expansion of the Philippines’
Joe, DragonBall Z, and Rugrats. share in the global market for offshore IT
outsourcing, estimated to reach US$140
billion in 2008.

Philippine Comparative Advantage
at a Glance
...located strategically in the Asia-Pacific
region, a natural gateway to the East-Asian
economies
…offers a highly educated and literate
workforce with most people having a good
command of English
…ranked in 2000 as the # 1 source of
knowledge workers in the Meta Group's
Global New E-Economy Index
…has opened up its economy by allowing
100% foreign ownership in almost all
sectors of the economy and has established
numerous special economic zones and
industrial estates all over the country
…has redefined government's role through
privatization and allowing private sector
participation in developing infrastructure
and some services which used to be
government's domain through its innovative
Build-Operate-Transfer scheme, a model
now being followed by other countries due
to its success
…has deregulated its banking, energy,
insurance, telecommunications, shipping,
and retail trade sectors, removing most, if
not all, of the monopoly structures in the
Philippines' market economy
…has granted income tax holiday (ITH)/5%
preferential tax rate based on gross income
in lieu of all other taxes to companies
located in economic zones/export zones
…offers a dynamic consumer market used
to an array of product choices created by a
competitive domestic economy
©2006 SGV & Co. All rights reserved.
…offers expatriates a comfortable lifestyle
— internationally known educational
institutions, entertainment and leisure
facilities, a range of housing choices, and
luxury of access to household help
12
Invention is another outlet for Filipino
creativity and innovation. Diosdado
Banatao, the most well-known Filipino-
American entrepreneur in Silicon Valley,
holds several patents and is responsible
for several “firsts” such as developing the
industry’s first Windows graphical user
interface (GUI) accelerator chip, pioneer-
ing the local bus concept for the PC, and
putting the Ethernet controller in a single
chip, among others. His contributions
have helped make PCs smaller, more
powerful, and easier to network.8
Eduardo San Juan built the first Lunar
Rover or moon buggy out of scrap alumi-
num, an old umbrella, bicycle handlebars,
automobile hubcaps, and batteries. The
prototype he built was chosen over other
designs and became the model for the
Lunar Rover used by Apollo XV astro-
nauts in moving around on the moon.
Hospitable Lifestyle
Lifestyle may not be at the forefront
of things expatriates think about when
considering a foreign posting, but this
becomes an important factor once a
family moves. After all, the lifestyle is
what enables foreigners to turn a house
into a home—and the Philippines has
what it takes to do just that.
For expatriates living in the Philippines,
comfort and convenience spell the differ-
ence. The cost of living is very affordable;
the food, shopping, and entertainment are
very easy on one’s pocket. While there are
many dialects, English is widely spoken,
thereby facilitating communication
between foreigners and locals. And while
such basic needs can be met in many other
countries, the Philippines offers all these
with warmth and hospitality.
8
Francis Huang, “From Cagayan Valley to Silicon Valley: An Interview with Dado Banatao,” SGV Review
2, no. 3 (October 2004): 102-113.
Schools
Most public and private schools and uni-
versities in the Philippines use English as
the medium of instruction, so expatriates
need not worry that their children will
have to face a language barrier. A number
of international schools in Manila and
its suburbs offer primary and secondary
levels of education. A few international
schools can also be found in major cities
outside Manila, such as in Cebu and
Davao.
Brent International School
(www.brent.edu.ph)
Brent International School has cam-
puses in Manila and Subic, among other
places in Luzon. It is a co-educational
day school associated with the Episcopal
Church in the Philippines, accepting
students from Nursery to Grade 12. The
population includes a mix of students
from more than 46 countries and like-
wise has an international teaching staff.
Brent International School is accredited
as a college preparatory school by the
Western Association of Schools and
Colleges (WASC) and by the Philippine
Accrediting Association of Schools,
Colleges, and Universities (PAASCU).
It is recognized by the Philippine
Department of Education (DepEd).
The British School Manila
(www.britishschoolmanila.org)
Located in Fort Bonifacio Global City, the
British School Manila currently has over
500 students representing 33 nationalities.
It provides British education following
the English National Curriculum from
Nursery to Year 13. Students are prepared
for various tests such as the National
Curriculum Tests and the International
Baccalaureate. Comparatively, the
 school’s students perform well above
national United Kingdom averages.
Cebu International School
(www.cis.edu.ph)
Cebu International School was first called
the American School of Cebu when it was
established in 1924. The school currently
offers education from the Kindergarten
level to Grade 12.
Eurocampus Manila
(www.eurocampus.org.ph)
Eurocampus includes two schools, each
with a different curriculum: one closely
follows the curriculum of France, while
the other follows the curriculum of
Germany. Both schools employ teachers
and staff from their homelands. Aside
from normal classes, Eurocampus offers
many extra-curricular activities which
allow interaction between the students of
the two schools.
Faith Academy
(www.faith.edu.ph)
Faith Academy is located in Manila, with
a branch campus in Davao. It is an inter-
national Christian School primarily for the
children of expatriate Christian workers in
the Philippines and throughout Asia.
The International School (IS) Manila
(www.ismanila.com)
IS Manila offers an American-based
curriculum from early primary to high
school. It was the first school in the
Philippines to receive accreditation by
the WASC and is accredited until 2007.
IS Manila has also been recognized and
accredited by the DepEd. IS Manila
students represent 59 different nationali-
©2006 SGV & Co. All rights reserved.
ties. 65% of faculty members come from
13 other countries while 35% are host
nationals.
13
Reedley International School
(www.reedleyschool.com)
Reedley International School is a co-
educational school with an international
program combining Singaporean and
American curricula. It offers classes for
Grades 1 to 12 and follows the American
Grading System. The school’s latest
innovation is its Personalized Classroom
Learning Program which benefits students
with specific learning difficulties.
Southville
(www.southville.edu.ph)
Southville International School and
Colleges (SISC) is a nonsectarian school
accredited by the WASC. It offers pre-
school, grade school, and high school
education and has formed linkages with
prestigious schools abroad—such as
the London City College in the United
Kingdom, affiliated with the Schiller
International University in Europe and the
United States—to offer foreign college
diplomas.
The Philippines is also home to the
Asian Institute of Management (AIM),
an institute offering management
programs geared towards develop-
ing professional, entrepreneurial, and
socially responsible leaders and manag-
ers. The institute attracts professionals
from across Asia with its postgraduate
degrees in Business Administration,
Management, Development Management,
and Entrepreneurship, as well as with its
certificate courses. AIM professors have
doctorate and master’s degrees in manage-
ment and related fields from prestigious
universities in Asia, the United States,
and Europe. They are also experienced
managers who have worked in business,
government, and nongovernment organi-
zations. Coming from various countries in
Asia, AIM faculty members provide Asian
solutions to Asian management problems.
European International School
Eurocampus Manila
75 Swaziland St.
Better Living Subdivision
1711 Parañaque City, Philippines
Faith Academy
Manila Campus
Penny Lane off Valley Golf Road
Victoria Valley Subdivision
Cainta, Rizal
Davao Campus
7 Jade St., Marfori Heights
Davao City
International School Manila
University Parkway, Fort Bonifacio
Taguig 1634, Metro Manila
Reedley International School
Pasig Boulevard corner Rosemarie Lane,
1600 Pasig City, Metro Manila
Southville International School
and Colleges
Early Childhood Campus (Elizalde)
136 Elizalde St., BF Homes, Parañaque City
Early Childhood to Grade 3
(Lower School) Campus (Munich)
Munich St. corner Tropical Avenue,
BF Homes International, Las Piñas City
Grade 4 to High School (Lower & Upper School)
Campus (Tropical)
1281 Tropical Avenue corner
Luxembourg St., BF Homes International
Las Piñas City
College Campus (Luxembourg)
Luxembourg St., BF Homes International,
Las Piñas City
Foreign Colleges (Yokohama) Southville Foreign
Colleges (SFC)
Yokohama St. corner Luxembourg St.,
BF Homes International, Las Piñas City
Asian Institute of Management
Eugenio Lopez Foundation Building
Joseph R. McMicking Campus
123 Paseo de Roxas
MCPO Box 2095
1260 Makati City
Tel: (632) 892-4011 to 25
Fax: (632) 892-1724
E-mail: aimnet@aim.edu.ph
http://www.aim.edu.ph

Top Philippine Tourist Spots
Beaches
Boracay (Aklan)
Pagudpud (Ilocos Norte)
Mactan Island (Cebu)
Panglao (Bohol)
Dakak (Zamboanga del Norte)
Honda Bay (Palawan)
El Nido (Palawan)
Pearl Farm (Davao)
Siargao (Surigao del Norte)
Heritage Tours
Tubbataha Reef Marine Park
(Palawan)
Ifugao Rice Terraces (Banawe)
Vigan Heritage Village (Ilocos Sur)
St. Paul Subterranean National Park cal people, Filipinos have rediscovered
(Palawan)
Philippine Baroque Churches (Manila,
Bulacan, Ilocos Norte, Iloilo)
Source: Department of Tourism
©2006 SGV & Co. All rights reserved.
14
AIM was awarded the European Quality
Label in 2003, the first in the Association
of Southeast Asian Nations (ASEAN) to
receive the accreditation, thus becoming a
member of the European Foundation for
Management Development. In 2002, AIM
was selected by the World Bank to be its
strategic partner in Asia with the estab-
lishment of the AIM-World Bank Global
Distance Learning Center. The institute
has also received a number of citations
and is the first graduate school of manage-
ment in the world to be awarded the ISO
14001 Certification for its Environmental
Management System.
Entertainment and Recreation
From day to night, there is something to
occupy tourists and residents alike in the
Philippines.
Those who are after relaxation have
options. Spas have sprouted all over
Manila, giving customers a choice
between relatively inexpensive day spas
and high-end spas that are all about
luxury, ideal for those who wish to
indulge in a few hours of pampering.
Those who have a little more time can
spend a weekend at beaches that are just a
few hours’ drive from Manila. The beau-
tiful beaches in Boracay, Palawan and
other farther parts of Luzon, Visayas, or
Mindanao are perfect for those who need
a few days to rejuvenate.
Adventure-seekers will not be disap-
pointed. The whale sharks in Donsol—a
seaside town in Sorsogon, 540 km south-
east of Manila—are fast becoming a
very popular tourist attraction. Tourists
can swim with the world’s largest fish,
who gather in Donsol every year from
February to May. The experience has been
dubbed the “Best Animal Encounter” in
Asia by Time magazine.9
Over the last few years, surfing has been
making a splash in the Philippines. Locals
and foreigners alike troop to surf spots
such as La Union and Siargao. Other
exciting activities for thrill-seekers are
white water rafting, scuba diving, moun-
tain climbing, even trekking in Taal—
where there is a lake within a volcano
within a lake.
The nightlife will certainly not disap-
point anyone. Long known as a musi-
the many talented performers the local
scene has to offer. New local artists have
reawakened the Philippine music scene in
recent years. Restaurants, bars, and water-
ing holes feature nightly performers who
appeal to varied audiences: acoustic art-
ists who tap into the hearts of romantics,
rock bands who get the adrenaline going,
pop groups who perform danceable tunes.
With covers of favorite foreign songs and
local compositions, these music acts bring
“life” to the Philippine nightlife.
For those who prefer a quiet evening,
there are restaurants offering many dif-
ferent cuisines. Filipinos love to eat, after
all. Coffee-lovers can unwind at the many
local and franchised coffee outlets scat-
tered all over the country’s major cities.
Be it for an afternoon, an evening,
a weekend, or a long vacation, the
Philippines has something in store for
everyone who wants to take a break.
9 Alex Perry, “Best of Asia – Best Animal
Encounter,” Time, 22 November 2004, 42-43.
 Unlimited Business
Opportunities
Agriculture
The agriculture sector remains an im-
portant and integral part of the economy,
contributing about 14% of total gross
domestic product in 2005. It remains the
primary activity in the rural areas and
employs almost 40% of the country’s
workers.
Agriculture grew by 2.2% in 2005 despite
the mild El Nino in the first quarter and
occurrence of typhoons in the third quar-
ter. All subsectors grew in output, led by
fishery with a 6.5% growth rate. Livestock
recovered with 2.0% growth versus last
year’s negative growth. The sector’s gross
value of production, at current prices, was
estimated at PhP815.5 billion.
Indicative plans for 2006 cover programs
for rice, corn, high-value cash crops, live-
stock, and fisheries. Mindanao, considered
the “food basket of the country,” is push-
ing for commodity champions that will
become recognized in the global market.
To this end, development roadmaps for
commodities like banana, coffee, mango,
coconut, rubber, palm oil, seaweeds, and
tilapia have been approved, and various
Mindanao investment forums are sched-
uled in the first part of 2006.
Agriculture Sector in 2005
Sector/Subsector Growth Rates
Overall 2.2%
©2006 SGV & Co. All rights reserved.
Crops 0.5%
Poultry 1.4%
Aquaculture 6.5%
Livestock 2.0%
Source: Bureau of Agricultural Statistics, Department of Agriculture
15
Banking
As of December 31, 2005, there are 41
universal and commercial banks, consist-
ing of 20 private domestic banks, 3 gov-
ernment banks, 4 subsidiaries of foreign
banks, and 14 branches of foreign banks.
One main banking legislation that has
shaped the banking industry in recent
years is the General Banking Law of
2000, which has allowed the Bangko Sen-
tral ng Pilipinas (BSP) to further make the
banking industry more competitive and
highly regulated. Aiming to relax the limi-
tation of foreign ownerships of banks, the
Law authorizes foreign banks to acquire
up to 100% of the voting stock of domes-
tic banks. Because of this, the 14 foreign
banks that have set up their branches in
the Philippines, and the four foreign banks
that have subsidiaries in the country ac-
counted for 17% of the total resources in
the Philippine banking system as of late
2004. The increasing presence of foreign
banks has also heightened competition not
only in the corporate market, but has also
allowed domestic banks to focus on the
commercial middle-market.
To encourage and create stronger and
competitive banking systems, the BSP has
been offering various incentive packages
for merging and consolidating banks. Sev-
eral business combinations have already
taken place, resulting in larger and strong-
Gross value of output (in billions)
PhP815.5
PhP406.8
PhP107.8
PhP146.8
PhP154.2
Fast Facts
Filipino innovations in agriculture and
fisheries
Coconets, coconuts for erosion control -
Coconets was the overall winner of The
World Challenge 2005, a competition
sponsored by BBC World and Newsweek
in association with the Shell Group of
Companies to find entrepreneurs whose
projects are making a difference in
grassroots communities. Coconets were
developed by agricultural engineer Dr.
Justino Arboleda from waste coconut
husks. The coconets prevent landslides by
acting as surrogate tree roots. The product
also won the Global 100 eco-Tech Award in
the 2005 World Exposition in Aichi, Japan.
Waterless transport of live fish - The Buhi
Marine Worldwide Supply Inc. won the prize
for Best International Business at the 2005
International Business Plan competition
held by the University of San Francisco in
March 2005. Bonifacio Comandante Jr.,
a Filipino aquaculture practitioner, has
developed a technology for waterless
transport of live fish, both marine and
freshwater. The technology is covered by an
application for international patent.
Substrates for accelerated coral
restoration - The Philippine team led by
Ronald Roland Cesar Rodriguez won the
Silver Award in the Asia Pacific Region in
the 2005 regional competitions held by
the Holcim Foundation for Sustainable
Construction. Their project provides a
habitat for marine life by assisting in the
regeneration of coral reefs. The project
is low-cost, has a positive environmental
impact, and increases the quantity and
diversity of fish species for nearby fishing
communities. The Philippine entry qualifies
for the global Holcim Award to be given in
2006.

Universal and Commercial Banks
of the Philippines
Private Domestic Banks
Allied Banking Corporation
Asia United Bank Corporation
Banco de Oro Universal Bank
Bank of Commerce
Bank of the Philippine Islands
BDO Private Bank, Inc.
China Banking Corporation
East West Banking Corporation
Equitable PCI Bank
Export & Industry Bank
International Exchange Bank
Metropolitan Bank and Trust Company
Philippine Bank of Communication
Philippine National Bank
Philippine Trust Company
Philippine Veterans Bank
Rizal Commercial Banking Corporation
Security Bank Corporation
Union Bank of the Philippines
United Coconut Planters Bank
Government Banks
Al Amanah Islamic Investment Bank of the players in the banking industry to explore
Philippines
Development Bank of the Philippines
Land Bank of the Philippines
Subsidiaries of Foreign Banks
ABN Amro Bank, Inc.
Chinatrust (Phils.) Commercial Bank Corp.
Maybank Philippines, Inc.
United Overseas Bank Philippines*
Branches of Foreign Banks
ING Bank N.V.-Manila Branch
Standard Chartered Bank
The Hongkong and Shanghai Banking US$27.3 billion or 71% of the total
Corporation, Ltd.
ANZ Banking Group, Ltd.
Bangkok Bank Public Company, Ltd.-
Manila Branch
Bank of America, N.A.
Bank of China-Manila Branch
Bank of Tokyo-Mitsubishi, Ltd.-
Manila Branch
Citibank, N.A. (Phils.)
Deutsche Bank AG
International Commercial Bank of China
JP Morgan Chase Bank
Korea Exchange Bank
Mizuho Corporate Bank, Limited-
Manila Branch (Fuji Bank)
©2006 SGV & Co. All rights reserved.
* On September 16, 2005, the Monetary Board
approved subject to certain conditions the
conversion of United Overseas Bank Philippines
into a thrift bank. As of December 31, 2005, such
conditions have not been fully complied with.
Source: Bangko Sentral ng Pilipinas
16
ly capitalized banks. Also revitalizing the
banking industry is the Special Purpose
Vehicle Act of 2002, which allowed
banks to dispose of nonperforming assets
(NPAs) and maintain financial viability.
Disposition of NPAs improved while the
law was in effect. The law expired on
April 12, 2005, but House Bill 2311 seeks
to extend the deadline by two years. If the
law is extended, it is expected that more
banks will liquefy their assets and avail of
the tax incentives, among others.
Reeling off the Arroyo Administration’s
10-point agenda, the BSP has provided
opportunities to micro-finance institu-
tions to help expand small and medium
enterprises. This has auspiciously created
prospects for entrepreneurship and em-
ployment and has encouraged the major
this previously untapped sector.
Electronics
The electronics industry is the driver of
the Philippine economy.
In 2005, the industry accounted for
Philippine exports of merchandise goods.
The industry directly employs more
than 402,000 engineers, technicians, and
operators and provides the transfer of
best global practices on high-technology
manufacturing to Filipino workers.
After three years of continued decline,
investments went up from US$443 mil-
lion in 2004 to US$776 million last year.
These investments were accounted for by
23 new firms which set up their compa-
nies and 72 existing companies which
have expanded their operations in the
Philippines. To date, there are 883 elec-
tronics firms operating in the Philippines,
10 Philippine Department of Energy, Philippine Energy Plan 2005 Update (Manila: Philippine DOE,
29 March 2006); available from http://www.doe.gov.ph/PEP/PEP_2005_2014.pdf.
of which 72% are foreign-owned and 28%
are Filipino-owned.
The Semiconductor and Electronics
Industries in the Philippines Inc. (SEIPI),
the leading and the largest organization of
foreign and Filipino electronics manu-
facturers in the Philippines, is working
closely with the government to sustain
and further the growth of the industry.
SEIPI projects a growth rate of 10% for
2006 and aims to achieve the target of
US$50 billion in exports in 2010.
Energy and Utilities
Energy production in the Philippines is
concentrated in the electricity sector,
which is facing tremendous opportunities
with the passage of the Electric Power
Industry Reform Act (Republic Act [RA]
No. 9136 or EPIRA) on June 8, 2001.
Its passage paves the way for the re-
structuring of the power industry and the
privatization of the generating assets of
the National Power Corporation and the
transmission assets of the National Trans-
mission Corporation (TransCo).10 The law
seeks to dismantle the industry’s monopo-
listic structure and establish a competitive
environment that will ensure the provision
of quality, reliable, and affordable power
to all consumers.
Another requirement of EPIRA is the
operationalization of the Wholesale Elec-
tricity Spot Market (WESM). WESM is
the electricity trading mechanism among
generators, suppliers, and wholesale
consumers. It will enable industries and
consumer groups to benefit from the open
access scheme in the competitive genera-
tion market, and to choose their suppliers
at the least possible cost. WESM will
be initially operated by the Philippine
Electricity Market Corporation (PEMC),
 which was created in 2003, and will be
implemented in phases, beginning with
Luzon and Visayas in 2006.11
The power generation sector is expected
to register an average annual growth rate
of 7.7% in total electricity generation
within the 10-year planning period. Total
installed capacity in 2004 was 15,548
megawatts (MW), with dependable capac-
ity at 13,792 MW.12 Current contracts
provide about half that amount, with the
remainder expected to be filled once the
market deregulates.13
House Bill No. 4839, an act that further
promotes the development, utiliza-
tion, and commercialization of new and
renewable energy (NRE) sources, was
recently approved in the Philippine House
of Representatives.14 The bill mandates
power firms to source a certain percent-
age of their requirements from renewable
energy. It offers significant incentives for
developers of renewable energy facili-
ties, such as tax and tariff exemptions and
privileges. It is expected to significantly
boost investments not only for micro-hy-
dro power, but also for wind and geother-
mal power.15
Information & Communications
Technology
ICT services offer very exciting business
opportunities for investors.
11 Ibid.
12 Ibid.
13 Energy and Utilities Overview. In SGV E&U Database. Manila: SyCip Gorres Velayo & Co., 2005.
14 “Renewable Energy Bill Approved,” BusinessWorld, 1 March 2006, sec. S1, p. 7.
©2006 SGV & Co. All rights reserved.
The Philippines, ranked second in Asia
by the Meta Group as the destination of
choice for e-services, is poised to become
the next ICT hub in Asia. The country
has the potential to lure more investors
with its strategic location, affordable and
flexible human resource base, expanding
infrastructure, and affinity with Western
culture.
There are about 300 software develop-
ment firms in the Philippines delivering
software solutions to North America,
Europe, Japan, and the Asia Pacific. These
companies offer such services as system
design and analysis; testing and quality
assurance; software maintenance; and
software project management.16
The Technical Education and Skills De-
velopment Authority (TESDA) said in its
latest Labor Market Intelligence Report
(LMIR) that e-service priority sectors are
contact centers, medical transcription, and
computer animation.
The Philippines is fast emerging as the
location of choice in Asia for global
contact centers, which have been bring-
ing in the bulk of the country’s revenues
from outsourced IT and IT-enabled
business services for global markets in
recent years. Contact centers are customer
service operations manned by customer
service representatives that interact with
customers via voice, e-mail, or live chat.
They often provide a mix of inbound and
Fast Facts
EO No. 428 cuts bureaucratic red tape
Executive Order (EO) No. 428 signed by
President Gloria Macapagal-Arroyo in
May 2005 directs departments, bureaus,
agencies, and offices in the Executive
Branch of the government, including govern-
ment-owned and controlled corporations
(GOCCs), to simplify their rules and reduce
reportorial requirements imposed on busi-
ness and industry. For many years, potential
investors have been turned off by bureau-
cratic red tape, which causes delays, raises
costs, and encourages corruption. With EO
No. 428 in place, local and foreign investors
may now find it easier to cut through the
red tape, and ultimately cut the costs of
doing business in the country.
outbound services. Most contact centers
in the country are located in Metro Manila
and Cebu, but there are a few in Clark,
and new ones in Baguio, Davao, and even
Cagayan de Oro.
According to the LIMR, the Philippines
aims to serve 50% of the rapidly growing
contact center demand in the next four to
five years.
The US is the world’s largest market for
medical transcription services, a US$25
billion industry dealing with the electronic
interpretation and encoding of medical
procedures and data. The Philippines is
establishing itself as an offshore medical
transcription services provider of choice,
with about 20 firms in the country cur-
rently offering such services.17
Computer animation, another e-services
priority, is seen as one of the develop-

15 Philippine Department of Energy, New & Renewable Energy (Manila: Philippine DOE, 29 March 2006);
available from http://www.doe.gov.ph/NRE/default.htm. ing fields in ICT. Based on government
16 Global Sourcing in Asia (Hong Kong: Hewitt Quarterly Asia Pacific, 29 March 2006); available from
forecasts, the industry is expected to
http://was4.hewitt.com/ap/resource/rptspubs/hewittquart/HQ_12/articles/globe_source_asia.html.
17 E-Services Philippines, Medical Transcription (Manila: E-Services Philippines, 31 March 2005); double annually over the next couple of
available from http://www.e-servicesphils.com/mt.htm. years.18 Philippine animation studios
18 http://itmatters.com.ph/news/news_02092004a.html
have been doing subcontracted anima-

17

Ten-Point Agenda to "BEAT THE ODDS" in Six Years
Under the Arroyo Administration
What it stands for:
B - Balanced budget
E - Education for all
A - Automated elections
T - Transport and digital infrastructure to connect the country
T - Terminate the Moro Islamic Liberation Front (MILF) and New Peoples Army for financial services such as accounting
(NPA) conflicts
H - Heal the wounds of EDSA
E - Electricity and water for all barangays
O - Opportunities for 10 million jobs
D - Decongest Metro Manila
Ds - Develop Clark and Subic
tion work for nearly two decades for such
huge entertainment companies as Warner
Bros., Hanna-Barberra, and more recently,
Cartoon Network.19 At present there are
around 22 animation service providers in
the Philippines. According to the Anima-
tion Council of the Philippines (ACPI),
Filipino animators are preferred by big
entertainment companies due to their
world-class talent, creativity, and lower
services cost and are recognized for ef-
ficient and quality output. They provide
pre- and post-production services such as
layout, cleanup, digital background pro-
duction, special effects creation, and other
such services.
Recognizing the great technological
strides the country has taken over the past
years, a considerable number of foreign
multinational companies have located
their back-office shared services centers
©2006 SGV & Co. All rights reserved.
ports that there are 53 registered business
process outsourcing (BPO) operators in
the Philippines. Moreover, the 2005 Map-
ping Offshore Markets Update, published
by NeoIT, ranks the Philippines as no. 3
in terms of top global BPO destinations.20
Indeed, the Philippines is fast becom-
ing a regional and global hub for shared
corporate backroom operations, especially
and bookkeeping, account maintenance,
accounts receivable collection, accounts
payable administration, payroll process-
ing, asset management, financial analysis
and auditing, management consulting,
inventory control and purchasing, expense
and revenue reporting, financial reporting,
tax reporting, and other finance-related
services such as financial leasing, credit
card administration, factoring and stock
brokering as well as logistics manage-
ment, cargo ship management, engineer-
ing design and architectural drawings.21
In recognition of the vital role of commu-
nication and information in nation build-
ing, President Arroyo issued EO No. 269
creating the Commission on ICT (CICT)
to oversee ICT matters in the Philippines.
The creation of the commission aims to
promote a central regulatory environ-
ment that will encourage the use of new
technology. The CICT is now the primary
policy planning, regulating, and adminis-
trative entity that will promote, develop,
and regulate integrated and strategic ICT
systems and reliable and cost-efficient
communication facilities and services.
The Business Development Services
group of CICT has drafted blueprints

in the Philippines. Outsourcing Digest re- for flagship projects that are expected

19 Offshore Outsourcing World Staff. 2004. Interview. Tape recording, 20 February.

20 Athena e-services, The Philippines: Your Offshore Outsourcing Destination (Manila: Athena e-services,
29 March 2006); available from http://www.athenaeservices.com/news.php?newsid=7.
21 E-Services Philippines, Business Process Outsourcing (Manila: E-Services Philippines, 29 March 2006);
available from http://www.e-servicesphils.com/bpo.htm.

18
 to propel the growth of the Philippines’
IT-enabled services industry. One of the
projects is the development of the Philip-
pine Cyberservices Corridor, which is
primarily a branding strategy to help sell
the country’s e-services industry in the
global market.22
Infrastructure and Transportation
The Arroyo administration’s Medium-
Term Development Plan for 2004-2010
provides many potential opportunities for
local government units and the private
sector to be the government’s partners in
the development and implementation of
infrastructure.
The administration has a 10-point agenda
providing the guiding framework for
the Department of Public Works and
Highways’ medium-term infrastructure
program, which focuses on the decen-
tralization of development to different
regions by developing a reliable trans-
port network, the decongestion of Metro
Manila, the development of Clark and
Subic Ecozones, the provision of clean
water to all barangays in the country, the
construction of new school buildings and
classrooms, and the creation of at least six
million jobs in six years.23
Among the government’s plans are the
amendment of the Build-Operate-Trans-
fer (BOT) Law to promote wider private
participation; the creation of a Philippine
Infrastructure Corporation (PIC) that
will manage the infrastructure fund by
bidding out and awarding projects to the
most qualified entities; and the prioritiza-
tion of infrastructure projects such as the
Roll-on/Roll-off (RORO) ports and the
highways connecting them, roads and rail
systems that will decongest Metro Manila,
and roads and airports in tourism hubs.
Planned expressways will be opened for
private financing through the BOT or
other related schemes where investment
cost can be recovered by toll fees.24 The
government also plans to increase infra-
structure spending to 4% of GDP over the
next two to three years from current 2.2%
of GDP.25
With the growth of the ICT sector, the
government is also looking into ways of
improving the country’s digital infrastruc-
ture while reducing the cost of connectiv-
ity. One of the government’s thrusts is
to continue to promote investments that
support the provision of physical infra-
structure for high-speed connectivity, high
capacity, and secured network services at
low cost. This will be accelerated through
the participation of and partnership with
the private sector.
To capture long-term investors in infra-
structure, the government also plans to
securitize portions of Clark and Subic,
creating areas where investors can be
comfortable and free from political inter-
ference.
Philippine ports are now ready to accom-
modate bigger inter-island cargo vessels.
In relation to this and in support of the
Strong Republic Nautical Highway Pro-
gram of President Arroyo, the government
has implemented 23 major road projects
in 2005. The idea is to spur economic
growth by interconnecting the country’s
three main islands through the RORO
System. The RORO provides easy trans-
port of commuters, agricultural products,
and services from Mindanao to Visayas
and Luzon and vice versa.26
Based on the highlights of the 2005
DPWH accomplishment report, seven
road improvement works were undertaken
in the Western Nautical Highway, 12 in
the Central Nautical Highway, and four
in the Eastern Nautical Highway sectors.
These nautical highways not only further
reduce transport cost but also enhance
public access to tourism areas throughout
the country and serve as alternate routes
for the flow of agricultural products. Upon
its completion, the Nautical Highway will
reduce travel time by 10 to 12 hours, and
decrease transport cost by 37% to 43%
for passengers and 24% to 34% for cargo.
Reduced travel time will also mean im-
proved delivery of supplies and products
for business.27
The Batangas Port has become an alter-
native to the Port of Manila. Industrial
estates and tenant companies that have
located in Batangas did so with an eye to
the convenience of locating near the port.
A new international seaport was recently
opened at Balayan Bay in Calaca, Batan-
gas, for the exclusive use of locators in
the Batangas Union Industrial Park.

22 Grace Clavecilla, “CICT Drafts Roadmap for E-Services Growth,” ComputerWorld Philippines The Manila International Airport Author-
(August 2004).
©2006 SGV & Co. All rights reserved.

23 Philippine Department of Public Works and Highways. 2005. Presentation presented at Philippine
ity, which now exercises administrative
Infrastructure Conference, at InterContinental Manila. supervision and control over all interna-
24 Ibid. tional airports in the country, is embarking
25“NEDA Pushes Increase in Infrastructure Spending,” BusinessWorld, 9 March 2005.
26 Philippine Department of Public Works and Highways, DPWH Pushes Road Projects to Support Nautical on a two-year, PhP1.25 billion, medium-
Highway (Manila: Philippine DPWH, 29 March 2006); available from http://www.dpwh.gov.ph/News_index. term plan to upgrade the Ninoy Aquino
asp. International Airport’s (NAIA) security
27 Ibid.

19

Fast Facts
Abundant Philippine Reserves
Metallic minerals
Gold, silver, platinum, iron, chromite,
nickel, cobalt, manganese, copper, lead,
zinc, molybdenum, mercury, aluminum
Nonmetallic minerals
Phosphate rock, guano, magnesite, sulfur,
asbestos, barite, clay bentonite, dolomite,
diatomite, feldstar, gypsum, limestone,
marble, perlite, rock aggregates, silica,
sand and gravel, salt, jade, quartz,
rhodomite, tektite, opal, obsidian, diorite,
agate, serpentinite
Source: Mines and Geosciences Bureau, Department
of Environment and Natural Resources
system in preparation for the planned
transfer to NAIA 3, the modern US$640
million facility set to open in 2006. The
security system would be comparable to
those of other international terminals in
Asia, if not in the world.28
Mining
Data from the Mines and Geosciences Bu-
reau (MGB) show that the Philippines has
established reserves of about 14 metallic
and 27 nonmetallic minerals. It ranks sec-
ond in the world in terms of gold depos-
its, third in copper, and fourth in nickel
deposits. Considered a highly mineralized
area, the Philippines is estimated to have
mineral resources in high-potential sites
covering nine million hectares, or about
30% of the country’s total land area. So
far, only 420,000 of the nine million have
mining permits,29 leaving almost 8.6 mil-
lion hectares unexplored.
EO No. 270 directing the Department
of Environment and Natural Resources
(DENR) to take the lead in the prepara-
tion of the Minerals Action Plan, which
provides the strategies and programs, as
well as the rules and regulations for the
exploration, development, and utilization
of the country’s mineral resources. In line
with EO No. 270, the DENR, in coordina-
tion with various agencies and sectors,
has continuously undertaken measures to
further simplify and streamline procedures
for granting mining rights and permits.
Government has also pledged to maintain
fiscal and nonfiscal incentives for the min-
ing sector to attract more foreign capital
and accelerate the development of the
country’s mineral resources. At present,
holders of mineral agreements, financial
and technical assistance agreements, and
exploration permits are entitled to incen-
tives from the BOI under the Omnibus
Investments Code.

Given recent developments, investors are In September 2003, the Department of

eyeing the Philippine mining industry
with renewed interest. On December 1,
2004, the Supreme Court reversed its
January 27, 2004 decision that nullified
the Mining Act of 1995. The Court ruled
there was nothing unconstitutional about
the mining law’s implementing rules and
regulations, and, in effect, reversed the
ban on foreign ownership of large-scale
mining operations.
Trade and Industry (DTI) and the DENR
issued a joint memorandum circular creat-
ing the Mining Investment Assistance
Center, which was tasked to facilitate
mining investments by providing in-
formation on mining rights, investment
procedures, fiscal regimes, and business,
environmental, and social norms, as well
as referrals to other government offices
and advisory services.

New policies and existing incentives
make the mining industry an even more
attractive prospect for investors. On Janu-
ary 16, 2004, President Arroyo issued
©2006 SGV & Co. All rights reserved.
The DENR has canceled 84 inactive
mining permits and contracts covering
100,000 hectares as part of its measures
to weed out speculators and encourage

28 Patricia Ann Perez and Erik Lorenzana, E-bulletin: Good News About the Philippines (Washington DC:
Embassy of the Republic of the Philippines, 29 March 2006); available from http://www.philippineem-
bassy-usa.org/events/ebulletin_21feb06.htm.
29 Angelo Reyes, Philippine Secretary of Interior and Local Government, The Philippines: A New Oppor-
tunity for Africa in Asia (Manila: Philippine Mines and Geosciences Bureau, 29 March 2006); available
from http://www.mgb.gov.ph/SATR_Philippines_A_New_Opportunity_files/frame.htm.

20
 the entry of real investors who have the ing retail market monitoring.33 For the port industry participants in negotiating
financial capacity to venture into the min- natural gas industry, the government plans with natural gas contractors for reasonable
ing industry. New and serious investors to establish a domestic infrastructure fees, terms, and conditions for possible
could take over the canceled agreements network and expand the use of natural gas supply agreements.36
provided they comply with all the require- gas by considering the use of compressed
ments. natural gas (CNG) as district cooling Other government programs include plans
for industrial use and other commercial to enhance energy exploration and devel-
For 2005, the government has succeeded applications. CNG-powered buses will opment through the conduct of the Philip-
in generating interest in 24 new and ex- soon ply the Laguna/Batangas-Manila pine Energy Contracting Round (PECR).
panded flagship mining projects.30 These and vice-versa routes. By 2014, all Metro The PECR in 2005 offered 22 prospect
will require US$8 billion in investments Manila public utility buses are expected to areas for exploration, development and
for the next five to six years.31 A mining run on CNG.34 Refueling stations are cur- production of petroleum, geothermal, and
road show in China alone created US$1.6 rently under construction to pave the way coal.37
billion in investments, and other road for the commercial run of the CNG buses.
shows have been brought to several coun- Under the government’s Natural Gas Among petroleum products, diesel which
tries in Europe, Africa, and Asia.32 With Vehicle Program for Public Transport, the will grow at an annual rate of 4.7% will
various potential onshore and offshore price per diesel liter equivalent for CNG dominate the oil mix. Liquified petroleum
mineral resources, the Philippines may buses is half that of the prevailing price of gas, motor gasoline, and fuel oil follow
become one of the largest mining powers diesel. The promotion and increased use with an average annual growth rate of
in the world. of alternative transport fuels, one of the around 5.0%, 4.5% and 1.8% respectively.
major pillars of the government’s five- Kerosene and jet oil round up the mix
Oil and Gas point energy independence program, will with an average annual growth rate of
thus lessen the country’s dependence on around 1.5% and 3.0% respectively.
The 2005 Philippine Energy Plan lays imported fuel.35
down the government’s plans and pro- The Philippine transport sector depends
grams for the improvement of the oil To attract potential investors to invest heavily on imported oil, but the govern-
and gas industry. For the downstream oil in the processing of natural gas and the ment aims to increase the country’s ener-
industry, the government plans to encour- construction of the necessary infrastruc- gy self-sufficiency level to 60% by 2010.
age private sector participation in industry ture for CNG, the Department of Energy To this end, it has launched the National
activities and at the same time safeguard (DOE) has declared open access to all Bioethanol Program, which encourages
consumer welfare by promoting oil sup- existing and future natural gas resources the use of bioethanol (ethyl alcohol) as an
ply security programs; improving quality in the country. As such, the DOE will sup- alternative fuel to reduce the Philippines’
standards and facilities; and strengthen- dependence on imported oil.38 Ethanol
is seen as one of the most promising
30 Ibid. alternative energy sources. It is produced
31 Ibid. from crops such as corn, wheat, and sugar,
32 Benjamin Philip Romualdez, “Investment Opportunities in the Philippine Mining Sector,”
Industry Bulletin 1, no. 2 (September 2005): 4.
and can be used as a transportation fuel
33 Philippine Department of Energy, Philippine Energy Plan 2005 Update (Manila: Philippine DOE, 29 in three ways: as a blend to gasoline, a
March 2006); available from http://www.doe.gov.ph/PEP/PEP_2005_2014.pdf. component of reformulated gasoline, or a
34 Ibid.
35 Philippine Department of Energy, President Arroyo Welcomes Arrival of CNG Buses for Commercial primary fuel with gasoline as blend. The
Operations (Manila: Philippine DOE, 29 March 2006); available from http://www.doe.gov.ph/press/ DOE has also spearheaded the introduc-
2005-07-01-CNG_Buses.htm.
©2006 SGV & Co. All rights reserved.

tion of coco methyl ester (CME) as an

36 “DOE Declares Open Access to RP Gas Resources,” Philippine Daily Inquirer, 11 July 2005, sec. A, p. 7.
37 Philippine Department of Energy, Philippine Energy Contracting Round 2005 Official Announcement alternative transport fuel. The use of etha-
(Manila: Philippine DOE, 31 August 2005); available from http://www.doe.gov.ph/PECR2005/ nol and CME will not only help alleviate
announcement.htm.
the impact of rising oil prices but may
38 Philippine Fuel Ethanol Alliance, About Us (Manila: Philippine Fuel Ethanol Alliance 29 March 2006);
available from http://www. bioethanol.com.ph/about/about.htm. also benefit sugar and coconut farmers
39 Philippine Department of Energy, Lotilla Hails NDC Involvement in Ethanol Program (Manila: Philippine throughout the country.39
DOE, 29 March 2006); available from http://www.doe.gov.ph/press/2005-04-05-NDC_Ethanol.htm.

21

Fast Facts
Retail Trade Liberalization Act of 2000
allowed foreign investors to sell to the
general public merchandise, commodi-
ties, or goods for consumption, subject
to certain exceptions.
• Allows full foreign ownership of retail
enterprises if paid-up capital is at
least US$2.5 million
• Allows full ownership of existing retail
businesses (subject to investment
requirement of at least US$830,000
per store or branch, Section 3, Rule
V of the Implementing Rules and
Regulations)
Fast Facts
Top Tourists by Country of Origin
1. Korea
2. USA
3. Japan
4. Taiwan
5. China
6. Hong Kong
7. Australia
8. United Kingdom
9. Canada
10. Singapore and Germany (tie)
Source: Department of Tourism
©2006 SGV & Co. All rights reserved.
22
Professional Services
The Philippines is a rich source of skilled
workers and ranks second among offshore
destination countries. Each year, the
country produces about 405,000 college
graduates specializing in diverse fields.
The OECD reports that the Philippines
represents a “large supplier of English-
speaking college-educated accountants,
software writers, architects, telemarketers,
and graphic artists.”
Filipino accountants have recently been
receiving much attention, with a number
of US firms outsourcing their accounting
work to the Philippines. Foreign firms are
likewise outsourcing engineering services;
Filipino engineers, skilled in implement-
ing design systems and related modules,
have successfully carried out worksharing
in Manila offices. The country’s nurses,
doctors, physical therapists, and dentists
continue to attract foreigners in search of
affordable medical services.
Retail Trade
Retail trade sustained its growth although
at a moderated pace in 2005. Retail trade,
which accounts for about three-fourths of
total trade, rose 5.9% in 2005 compared
to 6.9% in the previous year. Meanwhile,
wholesale trade slowed down to 5.5%
in 2005 from 6.3% the year before. The
growth in retail trade came amidst higher
oil prices and the subsequent rise in
inflation. Higher sales revenues resulted
in part from the increased remittances of
overseas Filipinos, particularly the OFWs
(see discussion on OFWs on page 71) and
the expansion of operations of retailers.
Major retailers and fast food chains have
put up new branches and outlets in the
NCR as well as in emerging urban areas
in the regions.
Approved investments in the trade sector
reached PhP 303.8 million in the first
three quarters of 2005. About PhP 84 mil-
lion or 28% of the total approved invest-
ment was foreign direct investments
(FDI). The approved FDI in the trade
sector was a big jump from the PhP 40
million registered in 2004, reflecting an
improvement in the investment climate in
the trade sector.
Stock Market
Despite increasing world oil prices,
domestic political controversies, and
weak economic data, the Philippine Stock
Exchange (PSE) performed well in 2005.
The PSE Composite Index climbed 15.0%
higher to 2,096.04 from 1,822.83 in 2004.
The market was buoyed by foreign funds
that were attracted to companies that were
able to sustain their earnings in the midst
of the oil and political crisis.
Favorable macroeconomic fundamentals
enabled the PSE to continue its strong
performance by starting off 2006 with a
robust 6.23% rise in January to 2,145.39
from 2,019.56 in 2005. Monthly compara-
tive change stood at 2.35%. News of the
budget deficit being lower than target,
high economic growth rates, slower infla-
tion rate, and steady interest rates pro-
vided positive leads to the market.
The PSE ended February 2006 1.61%
higher at 2,178.99 or 33.60 points more
than in January. Investor sentiment gave
more weight to economic fundamentals
than to political turbulence. Also, the
market got its boost from credit rating
upgrades from international credit rating
agencies, and buying into selected stocks.
 Tourism
With its beautiful beaches and rich marine
life, year-round fiestas, shopping bargains,
and hospitable people, the Philippines
makes a very attractive tourist destina-
tion. America, Japan, and Korea are the
Philippines’ major tourist markets, and
the Chinese market has been cited as the
fastest-growing. While other prime tour-
ist destinations in Asia may have bigger
volume of tourists, the Philippines attracts
“quality tourists”—family vacationers
who spend more and stay longer in the
country.
Tourism-related business recorded a 20%
growth in 2005, and tourist arrivals were
estimated to have reached 2.6 million.
Given these figures, the DOT is hoping to
attract at least 3 million tourists by 2006.
Under the 2005 Investment Priorities
Plan (IPP) guidelines, hospital services,
medical and dental services, nursing care,
rehabilitation and recuperation services,
retirement villages, and related services
located in identified medical zones or out-
side Metro Manila when catering mainly
to foreigners and nonresidents are eligible
for registration with the BOI and the Phil-
ippine Economic Zone Authority (PEZA).
Medical tourism facilities and retirement
villages may qualify for pioneer status.
The government is promoting the Philip-
pines as a major destination for medical
tourists.
Regional Growth Areas
To promote regional development, the
©2006 SGV & Co. All rights reserved.
government has identified 11 growth
networks/corridors scattered around the
country that are currently under various
stages of implementation. Four of these
areas are in the investment promotion
stage.
23
Calabarzon
Calabarzon is a large-scale multisectoral
project complex in a region contiguous to
Metro Manila. Calabarzon is composed of
the Southern Luzon provinces of Cavite,
Laguna, Batangas, Rizal, Quezon, and
Aurora. The region has been transformed
from an agro-base rural economy to a
thriving industrial/urban-based economy.
Calabarzon is now the site of at least
65 major private industrial estates and
Ecozones (see pages 33 to 35 of the Chap-
ter How to Operate in the Philippines for
a discussion on Ecozones).
Cagayan de Oro-Iligan Corridor
Lying along the northern coast of Mind-
anao island, the Cagayan-Iligan Corridor
unites the two cities of Cagayan de Oro
in Misamis Oriental, an agro-industrial
center, and Iligan City in Lanao del Norte,
an industrial hub. The corridor abounds
in the supply of hydroelectric power and
is the location of several industrial plants.
It is being promoted as an ideal location
for investments in metals (engineering
and metalworking); construction and
infrastructure; oleochemicals and basic
chemicals; and agriculture/aquaculture
and agro-forestry.
North Quad
The Northwestern Luzon Growth Quad-
rangle or North Quad integrates the
coastal provinces of Ilocos Norte, Ilocos
Sur, La Union, Pangasinan, and the inland
areas of Abra and Southern Benguet at
the northwestern tip of Luzon. Due to its
location, it is considered as an ideal gate-
way for trade with China, Taiwan, Hong
Kong, Korea, Japan, and the ASEAN.
The region is envisioned to be an indus-
trial, financial, and tourist haven. Possible
investment areas include the development
and expansion of existing infrastructure,
agri-industrial estates, and tourism
centers.
SOCSKSARGEN
SOCSKSARGEN is the more popular
name for the areas of South Cotabato,
Sultan Kudarat, Sarangani, and Gen-
eral Santos City. This economic growth
corridor contains abundant agriculture
and natural resources, as well as mod-
ern physical infrastructure including an
international airport. The area also offers
access to nearby ASEAN growth markets.
The Philippine, US, and Japanese govern-
ments have allocated US$200 million for
the development of projects in this area.
Infrastructure and Build-Operate-
Transfer Projects
Economic reforms have allowed the
private sector, particularly foreign
investors, to have wider participation in
almost every aspect of the economy. In
addition to the government’s revitalized
privatization program, the landmark BOT
legislation redefined government’s role
by prescribing the legal and administra-
tive framework for private investment
in infrastructure and other development
projects—areas previously exclusive to
public investments.
RA No. 7718 or the amended BOT Law
enables the private sector to participate in
the financing, construction, operation and
maintenance of infrastructure projects.
The Private Sector Participation Program
is regarded as one of the success stories
in infrastructure privatization not only by
private companies but also by multilateral
agencies and other countries.
 PHILIPPINE ECONOMIC ZONE AUTHORITY
PARTIAL LIST OF APPROVED/PROCLAIMED
SPECIAL ECONOMIC ZONES
December 31, 2005

Ilocos Norte Toyota Sta. Rosa (Laguna) Special Economic Zone II

Fort Ilocandia Tourism Economic Zone YTMI Realty Special Economic Zone
Abra Batangas
Abra Agro-Industrial Center Cocochem Agro-Industrial Park
Benguet First Batangas Industrial Park
Kelly Special Economic Zone First Philippine Industrial Park
Baguio First Philippine Industrial Park (Expansion I)
Baguio City Economic Zone First Philippine Industrial Park (Expansion II)
Pangasinan Light Industry & Science Park III
Pangasinan Industrial Park II Lima Technology Center (Lipa) Ilocos Norte
Zambales Lima Technology Center (Malvar)
Subic Shipyard Special Economic Zone Philtown Technology Park Abra
Tarlac RLC Special Economic Zone
Central Technopark South Coast Ecozone
Luisita Industrial Park Tabangao Special Economic Zone Benguet
Tarlac Provincial Information Technology Park II Camarines Norte
Baguio
Pampanga Global Industrial/Maritime Complex
Angeles Industrial Park Albay Pangasinan
TECO Special Economic Zone Legaspi City Special Economic Zone
Zambales
Bulacan Rapu-Rapu Ecozone Tarlac
Agus Industrial Estate Palawan
Bataan Rio Tuba Export Processing Zone Pampanga
Bulacan
Bataan Economic Zone Aklan Bataan Rizal
Plastic Processing Center SEZ Boracay Eco-Village Resort Tourism
NCR
PNOC Petrochemical Industrial Estate Economic Zone Cavite Camarines Norte
Laguna
Subic Hermosa Cyber City Negros Occidental
Rizal San Carlos Ecozone Batangas
Camarines Sur
Albay
Eastbay Arts, Recreational and Tourism Zone Cebu
Robinsons Big R Supercenter Cainta Junction Cebu Light Industrial Park
National Capital Region Cebu South Reclamation Project
Amkor Technology Special Economic Zone Mactan Economic Zone
Macroasia Ecozone Mactan Ecozone II
Manila Harbour Center MRI Ecozone
Philippine International Air Terminals Co. SEZ New Cebu Township
Victoria Wave Special Economic Zone Polambato-Bogo Economic Zone
Cavite West Cebu Industrial Park Aklan Leyte
Cavite Economic Zone
Cavite Economic Zone (Annexation)
Cavite Eco-Industrial Estate Negros Cebu
Cavite Productivity Economic Zone Palawan Occidental
Daiichi Industrial Park
EMI Special Economic Zone Surigao del
Negros
Fil-Estate Industrial Park Oriental Norte
Filoil Special Economic Zone
Agusan del
First Cavite Industrial Estate Norte
Gateway Business Park Misamis Oriental
Gateway Business Park I Cagayan de Oro
Island Cove Tourism Economic Zone
Agusan del Sur
People’s Technology Complex
Laguna Lanao del Davao del Norte
Norte
Calamba Premiere International Park Leyte
Carmelray Industrial Park Amihan Woodlands Township Zamboanga
Carmelray Industrial Park II Eastern Visayas Regional Growth Center
South Cotabato
Carmelray International Business Park Leyte Industrial Development Estate
Filinvest Technology Park Calamba Leyte Information Communication Technology Park
Greenfield Automative Park Zamboanga
©2006 SGV & Co. All rights reserved.

Laguna International Industrial Park Ayala de Zamboanga Industrial Park

Laguna Technopark I Misamis Oriental
Laguna Technopark II Jasaan Misamis Oriental Ecozone
Laguna Technopark III Lanao del Norte
Laguna Technopark IV CIIF Agro-Industrial Park
Light Industry & Science Park I Davao del Norte
Light Industry & Science Park II Samal Casino Resort
Toyota Sta. Rosa (Laguna) Special Economic Zone First Oriental Business and Industrial Park

24
 What the Philippines Can Offer Your Business

1. Basic rights and guarantees to investors

a. Guarantee against expropriation
b. Guarantee against losses due to:
(1) Nationalization
South Cotabato (2) Damage caused by war
Sarangani Economic Development Zone
SRC Calumpang Economic Development Zone c. Remittance of foreign exchange
Agusan del Norte (1) Earnings, profit, and dividends (on investments)
Nasipit Agusan del Norte Industrial Estate
Tubay Agri-Processing Center
(2) Principal and interest on foreign loans
Agusan del Sur (3) Others
Shannalyne Technological and Environmental Park d. Repatriation of capital
Surigao del Norte
Philnico Industrial Estate
2. Protection schemes and priorities given to investors and aliens
IT PARKS/BUILDINGS a. Employment of aliens
National Capital Region b. Patent protection
6750 Ayala Avenue Building c. Protection against unjust competition
Convergys IT Building
Diliman IT Building (1) Import competition
E-Square IT Park (2) Local competition through imposition of barriers to entry in the industry
Eastwood City CyberPark
EDSA Central IT Center
Eugenio Lopez Jr. Communication Center 3. Exemptions from or reduction of taxes and tariff duties
Exportbank Plaza Building
Gateway Callcenter Office a. Exemption from corporate income taxes
Gateway Office Tower
GT Tower International (1) Tax holiday years and conditions
MSE Center (2) Reduction in income tax rate and preferential tax treatment
Multinational Bancorporation Centre
Northgate Cyber Zone
(3) Applicability to other income
Pacific IT Center b. Exemption from or reduction of taxes on imported capital goods
PBCom Tower c. Exemption from or reduction of taxes on imported raw materials
People Support Center IT Building
Philamlife IT Building d. Exemption from other taxes and fees
PSMT IT Building
RCBC Plaza Information Technology Park
Red Flower Company, Inc. IT Building 4. Deductions from taxable corporate income
Riverbank Center ICT Bldg. 1
Robinsons Cyberpark a. Accelerated depreciation allowance
Robinsons Equitable Tower b. Carryforward of loss
Robinsons Place Novaliches
SM Cyberzone 1 c. Other deductions
SM iCity
Summit One Office Tower
The Enterprise Center 5. Reduction from corporate income taxes
Unionbank Plaza
UP Science and Technology Park (South) a. Tax credit on domestic capital equipment
Laguna b. Other tax credits
Allegis Information Technology Park
Camarines Sur
Camarines Sur Information Technology Park 6. Special incentives
Negros Oriental
Federated IT Park a. To multinational companies
Cebu
Arcenas Estate IT Building b. To exporters
Asia Town Information Technology Park
HDMF-WTCI IT Tower
7. Government assistance to investors
©2006 SGV & Co. All rights reserved.

Innove IT Plaza
JY Square IT Center
KRC IT Building a. Joint venture brokerage
Cagayan de Oro b. Processing of application and other forms of assistance
Pueblo de Oro IT Park

25
 SPECIAL SECTION
Enabling Laws for Investments
Maritime Industry
For an archipelagic country of more than
7,000 islands, setting up and maintaining
a viable transport infrastructure and pro-
viding maritime services are difficult to
achieve. To address the issue, the govern-
ment is propelling the maritime industry
as an effective and efficient logistics sup-
port and services sector through the enact-
ment of RA No. 9295, otherwise known
as the Domestic Shipping Development
Act of 2004 and its complementary law,
RA No. 9301, otherwise known as the
Overseas Shipping Development Act.
RA No. 9295 aims to empower the devel-
opment of Philippine domestic shipping,
shipbuilding, ship repair, and shipbreaking
through investment incentives, deregula-
tion of the rates/operation, enhancement
of safety standards, compulsory insurance
coverage for passengers and cargoes,
reasonable fines and penalties, and other
constructive measures for a strong and
competitive domestic merchant fleet.
 
Under the said Act, a system of invest-
ment incentives which shall be uniformly
applied in domestic shipping, shipbuild-
ing, and ship repair industry includes the
following:
©2006 SGV & Co. All rights reserved.
• Exemption from value-added tax on
the importation and local purchase of
passenger and/or cargo vessels of 150
tons and above, including engine and
spare parts of said vessels, provided
that the vessels to be imported shall
26
comply with the age limit requirement
at the time of acquisition counted from
the date of the vessel’s original com-
missioning
• Exemption from value-added tax on
the importation of life-saving equip-
ment, safety and rescue equipment,
and communication and navigation
safety equipment, steel plates and
other metal plates including marine-
grade aluminum plates, used for trans-
port operations
• Accelerated depreciation for fixed
assets, provided that the domestic
shipping operator notifies the BIR
at the beginning of the depreciation
period.  
 
RA No. 9301 or the Overseas Shipping
Development Act, on the other
hand, which amended RA No. 7471,
the Philippine Overseas Shipping
Development Act, is expected to
“stimulate private sector investment in
Philippine overseas shipping that can
enhance the competitiveness of the
country’s merchant fleets and give them
better access to cargoes worldwide.”
The amendatory law is also expected to
encourage local ship owners and operators
to increase their investments by acquiring
more vessels that will carry exported and
imported products, and thus result in for-
eign exchange savings.
Foreign investment in a Philippine ship-
ping enterprise is allowed up to 40% of
the capital of such enterprise.
 Special Section

Mining Industry
The Philippine Mining Act and Its
Affirmation by the Supreme Court

While the 1987 Constitution provided that

the exploration, development, and utiliza-
tion of natural resources shall be under the
full control and supervision of the State, it
also allowed foreign-owned corporations
to provide technical or financial assistance
for large-scale exploration, development,
and utilization of minerals. Congress then
passed RA No. 7942 or the Philippine
Mining Act of 1995 and, together with
Presidential Decree (PD) No. 1586 or
the Philippine Environmental Impact
Statement (EIS) System, the current
Philippine policy framework for mining
was put in place.

RA No. 7942 is considered as the primary
tool to revitalize the mining industry.
The purpose is clear: to provide the posi-
tive and competitive climate for mining
investments with equal considerations for
both social and environmental responsi-
bilities. Under the Act, the government
was authorized to enter into three major
modes of mining rights: Exploration
Permit (EP), Mineral Agreement (MA),
and Financial or Technical Assistance
Agreements (FTAA).40
©2006 SGV & Co. All rights reserved.
7942 guarantees the mining contractor to
repatriation of investments, remittance of
its earnings, freedom from expropriation,
requisition of investment, and confidenti-
ality of information supplied.
Further, it provides a regulatory structure
that offers the following benefits:
• Contractors in mineral agreements
and financial or technical assistance
agreements shall be entitled to the
• Pollution control devices shall not be
subject to real property and other tax
assessments
• A net operating loss without the ben-
efit of incentives incurred in any of
the first 10 years of operations may
be carried over as a deduction from
taxable income for the next five years
immediately following the year of
such loss
• Income tax accelerated depreciation
• Option to deduct exploration and

applicable fiscal and non-fiscal incen- development expenditures accumu-

Apart from the basic rights and guaran- tives as stated under the Omnibus lated as cost for purposes of arriving
tees provided in the Constitution, RA No. Investments Code at the taxable income

40
An FTAA may be entered into for the exploration, development and utilization of gold, copper, nickel, chro-
mite, lead, zinc, and other minerals, provided, that no FTAAs may be granted with respect to cement raw
materials, marble, granite, sand and gravel, and construction aggregates.

27
 SPECIAL SECTION
Type of Mining Maximum Area for
Right Corporations (has.)
Exploration Onshore, in any one province:
Permit 16,200
Onshore, in the entire
Philippines: 32,400
Offshore, in the entire
Philippines, beyond 500 meters
from the mean low tide: 81,000
Term Qualified Person
2 years; renewable Filipino citizen
for a maximum term
of 6 years In case of corporations,
partnerships, asso-
ciations, cooperatives, at
least 60% of the capital is
owned by Filipino citizens
Foreign-owned corporation

Mineral Onshore, in any one province: 25 years; renewable Filipino citizen

Agreement 8,100
Onshore, in the entire
Philippines: 16,200
Offshore, in the entire
Philippines, beyond 500 meters
from the mean low tide: 40,500
Financial or Onshore: 81,000
Technical
Assistance Offshore: 324,000
Agreement
Combination of Onshore/
Offshore: 405,000
for another term not
exceeding 25 years In case of corporations,
partnerships, asso-
ciations, cooperatives, at
least 60% of the capital is
owned by Filipino citizens
25 years; renewable Filipino citizen
for another term not
exceeding 25 years In case of corporation,
partnership, association or
cooperative, at least 60%
of the capital of which is
owned by Filipino citizens

Foreign-owned corporation

Although initially challenged for being Agriculture and Fisheries

unconstitutional, the Supreme Court has Industry
held that agreements involving either
technical or financial assistance are in In a bid to extend the opportunities of the
fact service contracts where the foreign new economy to the rural countryside, the
contractor provides the capital, techno-
government has made a special effort to
logical and technical know-how, and
cultivate a modern and socially equitable
managerial expertise in the creation and
agriculture and fisheries sector.
operation of the large-scale mining/extrac-
tive enterprise. The government, through
The blueprint for the sector’s advance-
the DENR and Mines and Geosciences
ment is contained in the Agriculture and
Bureau, actively exercises full control
Fisheries Modernization Act (AFMA) of
and supervision over the entire enter-
prise. The Mining Act of 1995 and its 1997. Policy and funding are key issues,
Implementing Rules and Regulations, and the AFMA defines the necessary
which allowed the entry of foreign firms policy environment and pinpoints the
©2006 SGV & Co. All rights reserved.

through FTAAs, were thus declared con-
stitutional insofar as they relate to FTAAs
referred to in Section 2 of Article XII of
the Constitution.
public investment stream necessary to
push the rural economy forward.
The AFMA seeks real policy changes
in the areas of public production and

28
 Special Section

marketing services, training, education,
and industrialization. As for funding, the
AFMA confers an initial PhP20 billion-
budget and PhP17 billion annually for the
next six years. An added boost comes in
the form of trade and fiscal incentives,
particularly the exemption of all agricul-
tural and fishery enterprises from tariffs
and duties in the importation of specific
types of input.
The government has also set out to draw
private sector investments and participa-
tion to maximize the AFMA’s potential.
Already, infrastructure developments are
being shifted from developed mega-cent-
ers like Metro Manila, to the designated
regional growth centers, particularly for
the identified Strategic Agriculture and
Fisheries Development Zones. Roads
and highways leading to and from devel-
oping regions are being constructed,
rehabilitated, or upgraded. Among these
projects are the Pan-Philippine Highway
in several parts of Cagayan Valley and
the Camarines provinces, the Sto. Tomas-
Lipa Expressway, the Pan-Philippine
Highway from Camarines to Sorsogon
and from Agusan del Norte to Compostela
Valley, arterial roads in Negros, North
Cebu, Samar, the Zamboanga peninsula,
and the General Santos-Davao-Bukidnon
corridor, inter-urban expressways such
as the North Luzon Expressway and the
South Expressway, the Southern Tagalog
Arterial Road (STAR) or Batangas
Expressway (Lipa-Batangas City), and the
Subic-Clark-Tarlac Expressway.
Electric Power Industry
With the enactment of the Electric Power
Industry Reform Act (EPIRA) on June 26,
2001, the Philippine electricity industry
has shown it can change. The EPIRA,
which came into force after seven years
of being the subject of much debate in
Congress, set in motion the deregulation
of the power industry and the breakup and
privatization of state-owned enterprises.
The EPIRA required the state-owned util-
ity National Power Corporation (Napocor)
to dismantle its vertically integrated assets
into smaller subsectors such as generation,
transmission, distribution, and supply in
preparation for eventual privatization.  As
of 2004, six power plants had been priva-
tized.
The EPIRA is creating the necessary
conditions for the fulfillment of its three
main objectives of developing indigenous
resources, slashing electricity costs, and
encouraging foreign investment. At the
same time, it is flinging the door open
to new industry players and creating a
wholesale electricity spot market. The
resulting market competition is expected
to deliver quality, reliable, and affordable
electricity to both industrial and house-
hold consumers and ratchet up demand
by around 9% per year through the end of
the decade. Some 10,000 megawatts of
newly installed electric capacity will be
needed, only half of which will be sup-
plied by current contracts. The remainder
will be filled once the market deregulates.
The government is shunting acknowl-
edged geographical difficulties and
targeting full electrification of the archi-
pelago by 2006. Linking the country’s
three major power grids (Luzon, Visayas,
and Mindanao) and setting up separate
local systems around small generating
plants (where it is not economical to link
small islands’ grids into the national grid)
is an elaborate venture. Opportunities for
growth abound in this front.

Opportunities for growth and diversifica-

©2006 SGV & Co. All rights reserved.

tion are expected to be tied in with the

implementation of the AFMA, and it is
hoped that the agriculture sector will
chalk up real and important gains in the
immediate future.

29
 How to Operate in the Philippines
Investment Policy and Laws
General Policy on Investments
Investments are most welcome in the
Philippines. In general, anyone, regard-
less of nationality, is welcome to invest
in the country. For most economic activi-
ties, restriction on foreign investments is
on the extent of ownership allowed for a
particular activity.
Philippine laws and regulations guarantee
the basic rights of all investors and enter-
prises, including the following:
• Freedom from expropriation without
just compensation
• Right to remit profits, capital gains, and
dividends within the guidelines of the
BSP, the country’s monetary authority
• Right to remit the proceeds of the liqui-
dation of investments
• Right to obtain foreign exchange to
meet principal and interest payments
on foreign obligations
There are several important laws gov-
erning investments in the Philippines.
Presently, there are moves to consolidate
all the incentive laws into one law to
rationalize the grant and administration of
fiscal and nonfiscal incentives given by
©2006 SGV & Co. All rights reserved.
various incentive bodies.
The major investment laws are discussed
as follows.
30
Omnibus Investments Code of 1987
(EO No. 226), as amended by RA
No. 7918
Implemented by the BOI, the Omnibus
Investments Code of 1987 provides
a comprehensive set of incentives for
local and foreign enterprises engaged in
activities considered by government as
high priority for national development.
To qualify for BOI incentives, an
enterprise must engage in an area of
activity listed in the current Investment
Priorities Plan (IPP).
If not listed in the IPP, an enterprise is
also entitled to incentives if either of the
following criteria is met:
• At least 50% of production is for
export (for Filipino-owned enterprises)
• At least 70% of production is for
export (for enterprises with more than
40% foreign equity)
Investment Activities under the 2005
IPP
The IPP form, formulated annually by the
BOI and approved by the President, lists
the priority activities for investment.
The 2005 IPP is focused on the sectors
identified in the 2004-2010 Medium-Term
Philippine Development Plan (MTPDP)
of the President. The 2005 IPP sup-
 ports government objectives to promote
globally competitive economic activities,
build up the capabilities of small and me-
dium enterprises (SME), generate jobs,
provide food, deliver basic services, and
spur countryside development.
The 2005 IPP identifies 11 preferred
activities for investment, namely: health-
care and wellness products and services;
various electronics services; production
and/or manufacture of motor vehicle
parts; exploration, development, and/or
utilization of energy sources; shipbuild-
ing and shipping operations; manufacture
of fine jewelry and costume jewelry; pro-
duction of fashion garments as endorsed
by the DTI; and expansion of infrastruc-
ture activities to include business parks,
mass housing, mass transport involving
railway system, among others. The 2005
IPP also retained the following activities:
commercial production and commercial
processing of agricultural and fishery
products; ICT; and tourism.
Other preferred activities include other
export activities not identified above,
industry clusters supporting the preferred
and other preferred activities and manda-
tory inclusions in the IPP under special
laws, and modernization activities.
There is also a special listing of econom-
©2006 SGV & Co. All rights reserved.
ic activities determined for promotion
and eligible for investment incentives
31
by the Autonomous Region of Muslim
Mindanao (ARMM).
Investments in these areas are classified
as either pioneer or nonpioneer activities.
Incentives Available to BOI-Registered
Enterprises
Fiscal incentives
• Income tax holiday. From the start
of commercial operations, newly
registered pioneer projects are exempt
from income taxes for six years,
nonpioneer firms for four years,
expansion or modernization projects
for three years (for incremental
sales revenue/volume), and new or
expansion projects in less developed
areas for six years.
Newly registered pioneer and
nonpioneer enterprises may avail of
a bonus year in each of the following
cases if:
• Indigenous raw materials used are
at least 50% of the total cost of raw
materials for the preceding years
• The ratio of total imported and
domestic capital equipment to
number of workers does not exceed
US$10,000 to one worker
• The net foreign exchange savings
or earnings amount to at least
US$500,000 annually during the first
three years of operation
• Additional deduction of labor
expenses from taxable income
• Tax credit for taxes and duties on raw
materials used in the manufacture,
processing, or production of export
products

The key features of the Foreign
Investments Act (FIA) are the following:
• No restriction on 100% foreign
ownership of export enterprises
• No restriction on foreign ownership of
domestic enterprises unless in areas
included in the Foreign Investments
Negative List (FINL) or when paid-up
capital is less than US$200,000 or its
equivalent
• Waiver of FINL restriction if 60% output
is exported
©2006 SGV & Co. All rights reserved.
32
• Additional deduction of necessary
and major infrastructure expenses
from taxable income
• Exemption from taxes and duties on
imported supplies and spare parts
for consigned or imported equipment
(Until June 6, 2006 per EO No. 313)
• Exemption from wharfage dues and
any export tax, duty, impost, and fee
• Exemption from local business taxes
for four or six years from date of BOI
registration.
Nonfiscal incentives
• Simplification of customs procedures.
Customs procedures are simplified for
the importation of equipment, spare
parts, raw materials, and supplies,
and the export of products of BOI-
registered firms.
• Unrestricted use of consigned
equipment. BOI-registered enterprises’
use of consigned equipment is
unrestricted provided a re-export bond
is posted.
• Access to bonded manufacturing and
warehouse system
• Employment of foreign nationals.
Foreign nationals may be employed
in supervisory, technical, or advisory
positions for five years from a
registered project's registration,
extendible for limited periods to be
determined by the BOI. The positions
of president, general manager, and
treasurer, or their equivalents, of
foreign-owned registered firms may
be retained by foreign nationals for a
longer period.
Qualifications for BOI-Registered
Enterprises
1. If a natural person, he or she must be a
Philippine citizen.
2. If a partnership or any other
association, it must be organized under
Philippine laws and at least 60% of
its capital is owned and controlled by
Philippine citizens.
3. If a corporation, it must be organized
under Philippine laws and at least
60% of the capital stock outstanding
and entitled to vote is owned and held
by Philippine nationals, and at least
60% of the members of the Board
of Directors are Philippine citizens.
If the corporation does not possess
the required degree of ownership by
Philippine nationals, the following
circumstances must be satisfactorily
established:
• It proposes to engage in a pioneer
project which cannot be readily
and adequately filled by Philippine
nationals as determined by BOI, or
the applicant will export at least 70%
of its total production.
• It obligates itself to attain the status
of a Philippine national within 30
years from date of registration, but a
registered enterprise which exports
100% of its total production need not
comply with this requirement.
• The pioneer area it will engage in
is not within the activities reserved
by the Constitution or other laws to
Philippine citizens or corporations
owned and controlled by citizens.
Foreign Investments Act (FIA) of
1991 (or Republic Act No. 7042 as
amended by RA No. 8179)
The Foreign Investments Act (FIA) of
1991 liberalized the entry of foreign
investments into the Philippines. Its
passage marked the end of decades of
protectionism for local business.
Under the FIA, foreign companies are
generally allowed to conduct business
 in the Philippines subject to restrictions
spelled out in the Foreign Investments
Negative List (FINL). The FINL is a
short list of areas of economic activities
where foreign investments are restricted
or limited (see Table 1 on page 34 for the
current FINL). It has two components:
List A contains areas of activities reserved
to Philippine nationals by mandate of the
Constitution and other specific laws.
List B contains the areas of activity and
enterprises where foreign ownership is
limited pursuant to law. Among these
are defense- or law enforcement-related
activities and those with implications
on public health and morals. This list
includes small- and medium-sized
domestic market enterprises with paid-in
equity capital less than the equivalent of
US$200,000 unless they involve advanced
technology as certified by the Department
of Science and Technology or they
employ at least 50 direct employees, in
which case a minimum paid-up capital of
US$100,000 is allowed.
Special Economic Zone Act of 1995
(RA No. 7916, as amended by RA
No. 8748)
This law was passed in 1995 to
encourage economic growth through the
development of special economic zones
called Ecozones. PEZA implements this
law and also grants incentives to qualified
enterprises that locate in the Ecozone.
Ecozones are areas earmarked by
the government for development
into balanced agricultural, industrial,
©2006 SGV & Co. All rights reserved.
commercial, and tourist/recreational
regions (see pages 24-25of the Chapter
Why You Should Invest in the Philippines
for a partial list of approved/proclaimed
Ecozones).
33
The types of Ecozones are as follows:
Industrial Estates (IEs) are tracts of land
developed for the use of industries. They
have basic infrastructure, such as roads,
water and sewage systems, pre-built
factory buildings, and residential housing.
Export Processing Zones (EPZs) are
special IEs whose locator companies are
mainly export-oriented. EPZ incentives
include tax- and duty-free importation
of capital equipment, raw materials, and
spare parts.
Free Trade Zones are areas in nearby
ports of entry, such as seaports and
airports. Imported goods may be
unloaded, repacked, sorted, and
manipulated without being subjected to
import duties. However, if these goods
are moved into a non-free trade zone, they
will be subjected to customs duties.
Tourism Ecozone refers to a tourism
development zone/tourism estate
declared as a special economic zone
suitable for development into an
integrated resort complex with prescribed
carrying capacities of tourist facilities
and activities, such as, but not limited
to, sports and recreation centers,
accomodations, convention and cultural
facilities, food and beverage outlets,
commercial establishments and other
special interest and attraction activities/
establishments, and provided with the
necessary infrastructure.
IT Parks/IT Buildings are special
economic zones for IT projects and
services. An IT Park is an area or an
IT building whole or part of which
has been developed into a complex
capable of providing infrastructures and
other support facilities required by IT
Enterprises including amenities required
by professionals and workers involved in
IT Enterprises.
Each Ecozone is to be developed as an
independent community with minimum
government interference. It shall adminis-
ter its own economic, financial, industrial,
and tourism development without help
from the national government. It shall
also provide adequate facilities to estab-
lish linkages with surrounding communi-
ties and other entities within the country.
Enterprises Qualified to Locate in the
Ecozone
The following describes each type of
Ecozone enterprise.
• Export Enterprise – manufactures,
assembles, or processes products which
are 100% exported, unless a lower
percentage is approved by PEZA.
• Free Trade Zone Enterprise – im-
ports and markets tax- and duty-free
goods within the free trade area in the
Ecozone. Goods brought outside the
free trade area will be subject to cus-
toms and tariff duties.
• Service Enterprise – is engaged in any
one or a combination of the following
activities: customs brokerage, trucking/
forwarding, janitorial, security, insur-
ance and/or banking, consulting, or any
such service approved by PEZA.
• Domestic Market Enterprise – manu-
facturer, assembler, or processor of
goods which continually fails to export
at least 50% of its total output for a
period of three years if majority-owned
by Filipinos and at least 70% if major-
ity-owned by foreign nationals.
• Pioneer Enterprise – falls under any
of the following conditions:
• Manufactures, processes, or produc-
es goods not produced in a commer-
cial scale in the country
 Table 1 Sixth Regular Foreign Investments Negative List
Due to limitations set by the Constitution and other specific laws, the following industries are fully or partly nationalized under the
Sixth Foreign Investments Negative List:
LIST A: Foreign Ownership is Limited by Mandate of the Constitution and Specific Laws
No Foreign Equity
1. Mass media except recording (Art. XVI,
Sec. 11 of the Constitution, Presidential
Memorandum dated May 4, 1994)
2. Practice of all professions
a. Engineering
b. Medicine and allied professions
c. Accountancy
d. Architecture
e. Criminology
f. Chemistry
g. Customs brokerage
h. Environmental planning
i. Forestry
j. Geology
k. Interior design
l. Landscape architecture
m. Law
n. Librarianship
o. Marine desk officers
p. Marine engine officers
q. Master plumbing
r. Sugar technology
s. Social work
t. Teaching
u. Agriculture
v. Fisheries
3. Retail trade enterprises with paid-up capital
of less than US$2,500,000 (Sec. 5 of RA
No. 8762)
4. Cooperatives (Ch. III, Art. 26 of RA No. 6938)
5. Private security agencies (Sec. 4 of RA No.
5487)
6. Small-scale mining (Sec. 3 of RA No. 7076)
7. Utilization of marine resources in archipe-
lagic waters, territorial sea, and exclusive
economic zone as well as small-scale utiliza-
tion of natural resources in rivers, lakes,
bays, and lagoons (Art. XII, Sec. 2 of the
Constitution)
8. Ownership, operation, and management of
cockpits (Sec. 5 of PD No. 449)
9. Manufacture, repair, stockpiling and/or
distribution of nuclear weapons (Art. II, Sec.
8 of the Constitution)
10. Manufacture, repair, stockpiling, and/or
distribution of biological, chemical and
radiological weapons, and anti-person-
©2006 SGV & Co. All rights reserved.
nel mines (various treaties to which the
Philippines is a signatory and conventions
supported by the Philippines)
11. Manufacture of firecrackers and other
pyrotechnic devices (Sec. 5 of RA No. 7183)
34
Up to 20% Foreign Equity
1. Private radio communications network (RA No.
3846)
Up to 25% Foreign Equity
1. Private recruitment, whether for local or over-
seas employment (Art. 27 of PD No. 442)
2. Contracts for the construction and repair of
locally-funded public works (Sec. 1 of Com-
monwealth Act No. 541, Letter of Instruction No.
630) except:
a. Infrastructure/development projects cov-
ered in RA No. 7718
b. Projects which are foreign-funded or-as-
sisted and required to undergo international
competitive bidding (Sec. 2(a) of RA No. 7718)
3. Contracts for the construction of defense-re-
lated structures (Sec. 1 of CA No. 541)
Up to 30% Foreign Equity
1. Advertising (Art. XVI, Sec. 11 of the Constitu-
tion)
Up to 40% Foreign Equity
1. Exploration, development, and utilization of
natural resources (Art. XII, Sec. 2 of the Consti-
tution)
2. Ownership of private lands (Art. XII, Sec. 7 of the
Constitution; Ch. 5, Sec. 22 of CA 141; Sec. 4 of
RA No. 9182)
3. Operation and management of public utilities
(Art. XII, Sec. 11 of the Constitution; Sec. 16 of
CA No. 146)
LIST B: Foreign Ownership is Limited for Reasons of Security, Defense, Risk to Health and
Morals and Protection of Small-and-Medium Scale Enterprises
Up to 40% Foreign Equity
1. Manufacture, repair, storage, and/or distribu-
tion of products and/or ingredients requiring
Philippine National Police (PNP) clearance
2. Manufacture, repair, storage, and/or distribution
of products requiring Department of National
Defense clearance
3. Manufacture and distribution of dangerous
drugs (RA No. 7042 as amended by RA No.
8179)
4. Sauna and steam bathhouse, massage clinics,
and other like activities regulated by law be-
cause of risks posed to public health and morals
(RA No. 7042 as amended by RA No. 8179)
4. Ownership/establishment and administration
of educational institutions (Art. XIV, Sec. 4 of
the Constitution)
5. Culture, production, milling, processing,
trading, except retailing, of rice and corn and
acquiring, by barter, purchase or otherwise,
rice and corn and the by-products thereof
(Sec. 5 of PD No. 194; Sec. 15 of RA No. 8762)
6. Contracts for the supply of materials, goods
and commodities to a government-owned or
controlled corporation, company, agency, or
municipal corporation (Sec. 1 of RA No. 5183)
7. Project proponent and facility operator of a
BOT Project requiring a public utilities fran-
chise (Art. XII, Sec. 11 of the Constitution; Sec.
2(a) of RA No. 7718)
8. Operation of deep sea commercial fishing ves-
sels (Sec. 27 of RA No. 8550)
9. Adjustment companies (Sec. 323 of PD No.
612 as amended by PD No. 1814)
10. Ownership of condominium units where the
common areas in the condominium project are
co-owned by the owners of the separate units
or owned by a corporation (Sec. 5 of RA No.
4726)
Up to 60% Foreign Equity
1. Financing companies regulated by the Securi-
ties and Exchange Commission (SEC) (Sec. 6
of RA No. 5980 as amended by RA No. 8556)
2. Investment houses regulated by the SEC (Sec.
5 of PD No. 129 as amended by RA No. 8366)
5. All forms of gambling, e.g., race track op-
eration (RA No. 7042 as amended by RA No.
8179)
6. Domestic market enterprises with paid-in
equity capital of less than the equivalent of
US$200,000 (RA No. 7042 as amended by RA
No. 8179)
7. Domestic market enterprises which involve
advanced technology or employ at least 50
direct employees with paid-in-equity capital
of less than the equivalent of US$100,000 (RA
No. 7042 as amended by RA No. 8179)
 • Uses a design, formula, scheme,
method, or process which is new and
untried in the Philippines
• Produces nonconventional fuels or
manufactures equipment that utilizes
nonconventional sources of energy
• Develops areas for agri-export
processing development
• Given such a status under the annual
IPP approved by the President.
• Utilities Enterprise – contracted to
provide light and power, water supply
and distribution, communications, and
transportation systems in the Ecozone.
• Facilities Enterprise – contracted
to build and maintain necessary
infrastructure such as warehouses,
buildings, road networks, ports,
sewerage and drainage systems, and
other facilities considered as necessary
by PEZA in the development and
operations of the Ecozone.
• Tourism Enterprise – operates sports
and recreation centers, accomodations,
convention and cultural facilities, and
other special interest and attraction
activities/establishments with foreign
tourists as primary clientele.
• Ecozone Developer/Operator –
develops, operates, and maintains
the Ecozone, all component sectors
(i.e., IEs, EPZs, Free Trade Zones,
and Tourist Ecozones) and all related
infrastructure (roads, light and power
systems, drainage facilities, etc.).
• IT Enterprise – provides or
operates IT services. IT is the
collective term for the various
technologies involved in processing
and transmitting information, which
include computing, multimedia,
telecommunications, microelectronics,
©2006 SGV & Co. All rights reserved.
and their interdependences. Also
called “informatics” or “telematics,”
the term now more often refers to the
convergence of various information-
based, broadcast, and mass-media
communication technologies.
35
Incentives Available to Ecozone
Enterprises
The incentives that are available to
Ecozone enterprises, depending on the
nature of their activities, are:
• Tax- and duty-free importation of
capital equipment, raw materials, spare
parts, supplies, breeding stocks, and
genetic materials
• ITH of four years for nonpioneer
projects or six years for pioneer
projects
• A special tax rate of 5% of modified
gross income in lieu of all national and
local taxes after the ITH
• Tax credit for import substitution
• Exemption from wharfage dues, export
tax, and import fees
• Tax credit on domestic capital
equipment, breeding stocks, and
genetic materials
• Additional deduction for incremental
labor expenses and training expenses
• Unrestricted use of consigned
equipment
• Permanent resident status for foreign
investors and immediate family
• Employment of foreign nationals
• Remittance of earnings without prior
approval from the BSP
• Exemption from local business taxes.
Bases Conversion and Development
Act of 1992 (RA No. 7227)
Passed in 1992, this law created the Bases
Conversion Development Authority,
the Subic Bay Metropolitan Authority
(SBMA), and the Subic Special Economic
and Freeport Zone (SSEFZ) consisting of
the City of Olongapo and the Municipality
of Subic, Province of Zambales, the lands
occupied by the Subic Naval Base and
its contiguous extensions as embraced,
covered, and defined by the 1974 Military
Bases Agreement between the Philippines
and the United States of America, and
within the territorial jurisdiction of the
Municipalities of Morong and Hermosa,
Province of Bataan.
The SSEFZ is a former US military facil-
ity converted into civilian use. The vision
for the 67,000-hectare Subic Bay Freeport
(SBF) is to create a self-sustaining indus-
trial, commercial, financial, and invest-
ment center in addition to its international
seaport, which can anchor 600 ships.
Registered enterprises in the SSEFZ enjoy
various investment incentives including
access to first-class commercial, residen-
tial, and tourist facilities. A registered
SBF enterprise is a business enterprise
organized and existing under Philippine or
foreign laws, registered with the SBMA,
and located within the SBF Zone.
Incentives to entities registered with the
SSEFZ include:
• Tax- and duty-free importation of raw
materials for manufacture and actually
manufactured into finished products,
and on capital goods and equipment
needed for the business operation
within the zone.
• Exemption from national and local
taxes. In lieu thereof, SBF enterprises
pay a tax of 5% of gross income
earned, which refers to gross sales or
revenues derived from any business
activity within the zone, less cost of
production or direct cost of services as
well as other costs specifically deter-
mined in regulations to be material in
the operation of the business.
Aside from the aforementioned enact-
ments, several laws further encourage or
enhance investments in specific sectors.
Some of these laws are discussed in the
succeeding pages.
 An Act Providing for the Terms,
Conditions, and Licensing
Kalookan City
Requirements of RHQs, ROHQs,
and RWs (RA No. 8756)
Valenzuela
RA No. 8756, signed into law on
Navotas
Malabon
Quezon City November 23, 1999, provides, among
Kalookan City others, the rules and guidelines on
(South)
the establishment and maintenance of
City of
multinational companies' Regional or
San Juan
Manila Area Headquarters (RHQs), Regional
Mandaluyong Pasig City
City Operating Headquarters (ROHQs), and
Makati City
Regional Warehouses (RWs).
Taguig
Pasay City
ROHQs are branches established in the
Philippines by multinational companies
Parañaque
that are allowed to derive income by
Las Piñas providing services to their affiliates in the
region.
Muntinlupa
RHQs are branches established in the
Philippines by multinational companies
and whose headquarters do not earn or
Metro Manila covers the 12 cities of Manila, Kalookan,
Las Piñas, Makati, Mandaluyong, Marikina, Muntinlupa, derive income from the Philippines.
Parañaque, Pasay, Pasig, Quezon, and Valenzuela, and the
5 municipalities of Malabon, Navotas, Pateros, San Juan,
and Taguig.
Authorized Activities of RHQs,
ROHQs, and RWs
RHQs act as supervisory, communica-
tions, and coordinating centers for their
subsidiaries, affiliates, and branches in the
region.
ROHQs, on the other hand, are allowed
to perform the following functions:
• General administration and planning
• Business planning and coordination
• Sourcing/procurement of raw materials
and components
• Corporate finance advisory services
• Marketing control and sales promotion
• Training and personnel management
©2006 SGV & Co. All rights reserved.
• Logistics services
• Research and development services,
and product development
• Technical support and maintenance
• Data processing and communication
• Business development.
36
RWs may engage in the following
activities:
• Serving as a supply depot for the
storage, deposit, safekeeping of spare
parts, components, semi-finished
products, and raw materials including
the packing, covering, putting up,
marking, labeling, and cutting or
altering to customer's specification,
mounting and/or packaging into kits or
marketable lots
• Filling up transactions and sales
made by their head offices or parent
companies
• Serving as a storage or warehouse of
goods purchased locally by the home
office for export abroad.
Tax Treatment and Incentives of RHQs
and ROHQs
RA No. 8756 provides favorable tax
treatment and other nonfiscal incentives
for both the RHQs/ROHQs and their non-
Filipino and Filipino employees. Some of
these incentives are listed in Table 2.
Tax Treatment of Foreign and Filipino
Employees of RHQs and ROHQs
Expatriate employees of RHQs and
ROHQs will enjoy the following
incentives:
• Multiple-entry visa
• 15% preferential tax on gross
compensation income
• Tax- and duty-free importation of
personal and household effects
• Travel tax exemption
The 15% preferential tax is also available
to Filipinos employed in an RHQ/ROHQ
who occupy the same positions as the
non-Filipino employees. However,
Filipino employees have the option to be
taxed at either 15% or the normal rates of
0% to 32%, depending on their net taxable
income.
 Licensing of RHQs, ROHQs, and RWs
The RHQ license and the ROHQ
license of nonbanking and nonfinancial
institutions are secured from the SEC,
upon the favorable recommendation of
the BOI. Banks and financial institutions
secure the ROHQ license from the
SEC and the BSP, upon the favorable
recommendation of the BOI. The
primary implementing agency for the
establishment and supervision of RWs
outside the ecozones is the BOI.
Investors' Lease Act (RA No. 7652)
RA No. 7652 allows foreign investors to
lease commercial lands in the Philippines
for a maximum of 75 years (previously 50
years).
Under this law, any foreign investor
infusing capital into the country can lease
private lands, in observance of Philippine
laws and the following:
1. Lease contract shall first be for 50
years, renewable only once for another
25 years.
2. Leased area will be used solely for
investment.
3. Lease contract will conform with the
Comprehensive Agrarian Reform Law
and the Local Government Code.
Export Development Act of 1994
(RA No. 7844)
This law provides incentives to exporters
to encourage investments in the export
sector. Exporters are generally defined
as earning at least 50% of their normal
©2006 SGV & Co. All rights reserved.
operating revenue from the sale of
products or services abroad.
37
Table 2 Some Incentives of RHQs and ROHQs
RHQ ROHQ
Exemption from income tax Subject to preferential income tax rate of
10% on taxable income
Exemption from branch profits remittance tax Subject to applicable BPRT (generally 15%)
(BPRT)
Exemption from VAT; Subject to 10% VAT
sale or lease of goods and property, and
services to the RHQ is subject to 0% VAT
Exemption from all kinds of local taxes, fees, or charges imposed by a local government unit,
except real property tax on land improvements and equipment
Tax- and duty-free importation of equipment and materials for training and conferences
needed and solely used for the RHQ/ROHQ functions, and which are not locally available, sub-
ject to prior BOI approval
Incentives of Exporters
Table 3
Features of the Export Development Registered under EDA
Act (EDA)
• Exemption from PD No. 1853, or
The following are the key features of Advanced Payment of Customs Duties
EDA: • Tax credit for increase in current year's
export revenues, computed as follows:
Increase in Annual Export Revenue
• Institutionalization of the Export
Tax Credit (in %)
Development Council (EDC) to direct
First 5% 2.5
the export offensive Next 5% 5.0
• Privatization of export promotion Next 5% 7.5
functions that can be undertaken by the In excess of 15% 10.0
private sector, including the
• Tax credit for use or import-substitution of
establishment of world-class Philippine nontraditional products
Trade Centers
• Setup of a privately led export financing
institution whose services shall be
devoted to supporting the financing agencies such as the BOI and PEZA. EDA
needs of the export sector incentives are shown on Table 3.
• Granting to exporters of much needed
fiscal incentives, most of them patterned Amended Build-Operate-Transfer
after, but not as extensive as those in Law (RA No. 7718)
newly industrializing economies.
The BOT Law spells out the policy and
Incentives Available to Exporters regulatory framework for the participation
Registered under EDA of private sector entities in the
development of infrastructure projects and
EDA incentives are granted in addition to the provision of services that are normally
existing incentives from other government the responsibility of the government.

Securities and Exchange
Commission
SEC Building
EDSA, Greenhills
©2006 SGV & Co. All rights reserved.
Mandaluyong City, Philippines
Tel: (632) 726-0931 to 39
http://www.sec.gov.ph
38
Registration Procedures with
Government Offices
An investor who will do business in the
Philippines will have to register with a
number of government offices. These
include the SEC, the DTI, the BIR, and
the local government.
Securities and Exchange
Commission
The SEC is the government agency
responsible for registering, licensing,
regulating, and supervising all
corporations and partnerships organized
in the Philippines, including foreign
corporations licensed to engage in
business or to establish branch offices in
the Philippines.
The SEC is mandated to implement the
following Philippine laws:
PD No. 902-A and the Securities
Regulation Code (SRC)
PD No. 902-A dealt with the reorganiza-
tion of the SEC and conferred upon it
the power to hear and decide on cases
involving corporate fraud, intra-corporate
disputes, election cases involving officers
and directors, suspension of payments
proceedings, and rehabilitation proceed-
ings.
With the enactment of the Securities Reg-
ulation Code, however, Sec. 5.2, Chapter
II thereof removed all jurisdiction of the
SEC over all cases enumerated above and
transferred jurisdiction to hear and decide
these cases to the regular courts. With
the realignment of its powers, the SEC
then shifted its focus to the promotion of
capital market development, in accor-
dance with the mandate of the Securities
Regulation Code.
Investment Houses Law (PD No. 129)
PD No. 129, otherwise known as the In-
vestment Houses Law, has been amended
by RA No. 8366 to liberalize the Philip-
pine Investment House industry. Under
RA No. 8366, foreign equity participation
in an Investment Housing company has
been increased to as much as 60% and
foreign nationals are allowed to become
members of the board of directors to the
extent of their participation in the equity
of said enterprise.
Investment Company Act (RA No. 2629)
When the mutual funds industry was ini-
tially introduced in 1957, it attracted both
legitimate and fly-by-night transactions.
After a short four-year boom, the industry
failed due to improper dissemination of
information, nonexistence of government
rules and regulations, and lack of plan-
ning in terms of investments. As a result,
the Investment Company Act was enacted
on June 18, 1969 to protect the public and
impose penalties on unscrupulous fund
managers.
Financing Company Act (RA No. 5980,
as amended by RA No. 8556)
In recognition of the critical role of
medium-and long-term credit for invest-
ments in capital goods and equipment, es-
pecially in the countryside, the Financing
Company Act of 1998 (RA No. 8556) was
enacted to amend RA No. 5980. The new
law regulates and promotes the activities
of financing and leasing companies in
such a way as to place their operations on
a sound, competitive basis as other finan-
cial institutions. Foreign equity owner-
ship is allowed up to 60% of the voting
stock of the corporation as long as the
country of which the prospective investor
is a national accords the same reciprocal
rights to Filipinos in the ownership of
financing companies or their counterpart
entities in such country.
 Corporation Code of the Philippines
(Batas Pambansa Blg. 68)
The Corporation Code or BP Blg. 68 be-
came effective on May 1, 1980. It adopted
various corporate doctrines previously
enunciated by the Supreme Court under
the old Corporation Law and clarified the
obligations of corporate directors and of-
ficers. The Code was enacted to establish
a new concept for business corporations
so that these are not merely entities
established for private gain but effective
partners of the National Government in
spreading the benefits of capitalism for
the social and economic development of
the nation.
Procedures for Forming a Domestic
Corporation or Local Subsidiary
• At least five persons, majority of them
Philippine residents, subscribe to the
proposed articles of incorporation and
file with the SEC documents specifying
the company name and purpose,
principal office, capital distribution, and
so forth.
• The treasurer certifies that at least
25% of the proposed capitalization has
been subscribed and that 25% of the
subscription has been paid up.
• The incorporators meet to elect a
board of directors, numbering at least
five but not more than 15. Majority of
the directors must be residents of the
Philippines.
• The board of directors appoints
management.
©2006 SGV & Co. All rights reserved.
39
Express Registration Bureau of Internal Revenue
To facilitate registering new corporations,
the SEC operates an “express lane,” with The BIR is tasked to administer the
application forms specially prepared collection of internal revenue taxes
for specific types of business. Filing pursuant to the Tax Code.
normally takes one day, provided all
necessary documents and prior clearances All taxpayers are required to secure from
from other agencies are submitted in the the BIR a unique Taxpayer Identification
morning. Number (TIN) which will be indicated on
all tax returns filed with the BIR.
Department of Trade and Industry
Taxpayers will also have to register with
After registration with the SEC, all the BIR Revenue District Office (RDO)
corporations organized under the having jurisdiction over the place of
Corporation Code are encouraged to business of the taxpayer. The book of
register their business name with the DTI. accounts, invoices, and receipts of a
taxpayer will have to be registered with
The DTI-National Capital Region (DTI- the RDO before these are used.
NCR) is one of the primary government
agencies tasked with the promotion as
well as the registration of the trade and
industry sector in Metro Manila area.
Among the services of the DTI-NCR
is the registration of business names as
provided under RA No. 3883. Business
name registration involves the submission
of copies of the corporation's articles
of incorporation, by-laws, and SEC
certificate of registration to the DTI and
the payment of a registration processing
fee. A business name registration is valid
for five years.
Department of Trade and Bureau of Internal Revenue
Industry
385 Industry and Investments
Building BIR National Office Building
Sen. Gil Puyat Avenue, Makati City Agham Road, Diliman
1200 Philippines Quezon City, Philippines
Tel: (632) 895-3611 Tel: (632) 981-7000
http://business.gov.ph http://www.bir.gov.ph
 Registration Procedures
Estimated processing time:
Registration with the Securities and Exchange Commission 3 to 7 days
This is reckoned from the date of
submission and compliance with
requirements.

START


Company representative submits necessary documents to
Company Registration and Monitoring Department (CRMD),
which checks documents for completeness


1
Representative pays SEC cashier a filing fee of ­—
5 of 1%
of authorized capital stock of proposed corporation (Basic
fee) plus legal research fee of 1% basic fee


Documents are forwarded to Financial Analysis & Audit
Division (FAAD) of the CRMD for review of financial and 
accounting aspects


Are documents No Applicant makes necessary changes
in order?  and/or submits additional documents
to the SEC
Yes

Documents are forwarded to the Corporate and
Partnership Registration Division of the CRMD, which
ensures compliance with Philippine laws


Documents are forwarded to the Assistant Director of the
CRMD for approval and to the Director of the CRMD for
final signature on the Certificate of Registration


Approved papers are brought to Releasing Department
for pickup


END
©2006 SGV & Co. All rights reserved.

40
 Registration of Business Name with the Department of Trade and Industry

Estimated processing time:

2 to 3 days
This is reckoned from the date of
submission and compliance with
requirements.

START

Single proprietorships are required to register a business name with the DTI. Registration with the
DTI is optional for partnerships and corporations. However, all three are required to
register their business names with the SEC


Pay registration processing fee


Obtain registration form (registration valid for five years)


Fill out registration form as required

 
For Single Proprietorships For Corporations & Partnerships

A. Applicant must be at least 18 years old

B. Applicant must submit two passport-size
pictures taken not more than one year
preceding the filing of the application


C. Non-Filipinos must submit the following: If the corporation or Submit certified true In case there is an
1. Alien Certificate of Registration if any partnership is fully copy of the Articles of increase of capital,
2. Accomplished DTI Form No 17 under RA owned by an alien or Incorporation (AOI) submit certificate is-
No. 7042 its capital is more than or Partnership or sued by the SEC
3. A written appointment of Filipino Resident 40% owned by aliens, photocopy of bylaws
Agent the SEC certificate and the Registration
4. Authority to verify bank accounts/bank must specify that it is Certificate duly ap-
certificate of deposit in accordance with the proved by the SEC.
5. Proof of inward remittance of foreign Foreign Investment If AOI states “Metro
currency for nonresident alien and bank Act of 1991 Manila” as principal
certificate of deposit for resident alien place of business,
6. Copy of valuation report from BSP if submit a letter duly
investment includes assets other than stamped “Received”
foreign exchange by the SEC, informing
7. Clearance from other involved agencies such the latter of the pres-
as Department of Science and Technology, ent exact business ad-
Philippine National Police, etc. dress of the applicant
8. In case of alien retailer, latest permit to
engage in retail business per RA No. 1180
without the need to submit the requirements  
©2006 SGV & Co. All rights reserved.

under letter C except Alien Certificate of Submit duly accomplished registration form to DTI and Industry Provincial
Registration Office of business location of applicant


END

41
 START
Registration with the
Board of Investments  Estimated processing time:
Applicant files duly accomplished BOI Form
501 with supporting documents
2 to 4 weeks
This is reckoned from the date of
submission and compliance with
 requirements.
Project Evaluation & Registration Department
Board Of (PERD) checks the application for registration
Investments including its qualification for registration &
completeness of the documents PERD issues formal notice
Board of Investments to complete information/
Industry and Investments Building
 No documentary requirements
Are documents complete? 
385 Sen. Gil Puyat Avenue, Existing companies
Yes 
Makati City with penalties go to the
1200 Philippines Applicant pays filing fee at the cashier Supervision & Monitoring
Tel: (632) 890-1332 Department for clearance.
(632) 895-8322  Applications are not
PERD issues letter of acceptance with advice accepted unless penalties
http://www.boi.gov.ph/ to publish the notice of filing in at least one are paid
newspaper of general circulation


PERD prepares technical, financial highlights of the project, market aspect
(for export producers) including the legal aspect. Executive summary out-
lining major highlights of the project is also prepared for presentation. 
 
Plant visit, consultations with the private sector are conducted during this
stage. The Industry Group determines the pioneer status


PERD presents application to Management
 Committee (ManCom) for approval/denial

 Deferred
 ManCom Approval

 Yes
PERD prepares for presentation to the Board executive summary
 including the ManCom highlights and recommendation for the Board’s
final approval

 No PERD prepares disapproval

 Board Approval  letter to be sent to the Firm

 Yes
PERD prepares approval letter containing preregistration
requirements, to be sent to the Firm


Applicant requests waiver of
preregistration requirements
If 30 days have lapsed,
PERD sends follow-up letter.  
No Applicant submits, within 30 days, preregistration PERD prepares memorandum
Applicant may request requirements to the PERD. Request for waiver
extension to file  does not toll running of 30-day period to submit No 
preregistration requirements preregistration requirements  Board approval
 
Yes
©2006 SGV & Co. All rights reserved.

Applicant submits Yes

preregistration requirements  PERDby
prepares certificate of registration for signing
the managing head/presiding officer
within period of extension
granted
Yes 
No  Applicant receives Certificate of Registration

PERD prepares disapproval 
letter addressed to applicant  END

42
 Registration with the Philippine Economic Zone Authority Estimated processing time:
2 to 4 weeks
This is reckoned from the date of
submission and compliance with
requirements.

START Attachments:
• Project Brief
 • ITR and F/S (if existing) for past 3
Proponent prepares/submits years
Application to PEZA-ERD • Biodata of Project Officers

Submission of additional No
requirements per Board  Board Approval

Yes
 
PEZA-ERD evaluates Application.
ERD submits report to the PEZA Board

PEZA Corporate Secretary issues
Board Resolution regarding
Proponent’s Approved Application for
registration
Standard Pre-registration requirements for
submission to PEZA-Legal Department:

• SEC Registration Proponent completes
• Acceptance letter or reservation for the preregistration requirements
location of the proposed project
• Notarized undertaking that proponent will 
not engage in child labor Proponent and PEZA sign
• Payment of registration fee Registration Agreement
• Copy of environmental compliance
certificate (ECC) application received by
the PEZA Environment Safety Group

End of Registration Process


PEZA-ERD issues VAT zero-rating
certificate at request of Enterprise


START OF
COMMERCIAL
OPERATIONS

Philippine Economic
Zone Authority
LEGEND:
ERD - Enterprise Regulation Department
SEC - Securities and Exchange Commission Enterprise Regulation Department
DENR - Department of Environment and Natural Resources 4F Almeda Building
ITR - Income Tax Return San Luis corner Roxas Boulevard,
F/S - Financial Statements Pasay City, Philippines
©2006 SGV & Co. All rights reserved.

Tel: (632) 551-3457

(632) 661-9586
E-mail:
erd@peza.gov.ph
www.peza.gov.ph

43
 Registration with Subic Bay Metropolitan Authority

Estimated processing time:

4 to 8 weeks
This is reckoned from the date of
submission and compliance with
requirements.

Applicant submits Letter of Intent and application

for Subic Bay Freeport registration


SBMA Department (Investment Processing,
Ecology, and others) evaluates application


Evaluation Requirements
• Company profile
• Articles of incorporation and bylaws
• Product brochures
• Annual reports or audited financial
Statements for the previous three years
• SEC registration of sponsoring entity
• Client/supplier list, with contact information
• Credit references (including name and
address of creditor, size and description of
loan facility, past repayment record and
credit rating)


SBMA Department presents application for
registration to SBMA Chairman and Board of
Directors for approval


SBF Enterprise registers with:
• SEC
• SBMA
• BIR

Subic Bay Metropolitan Authority

Building 229, Waterfront Road
Subic Bay Freeport Zone
2222 Philippines
Tel: (63 47) 252-7262
(63 47) 252-4004
E-Mail: webmaster@sbma.com
http://www.sbma.com
©2006 SGV & Co. All rights reserved.

44
 Registration with Clark Development Corporation

To address concerns of investors and

exporters conducting business inside
the zone, the Clark Development
Corporation, in coordination with
various government agencies,
established a One-Stop-Action-Center
(OSAC).
Estimated processing time:
4 to 6 weeks
This is reckoned from the date of
submission and compliance with
requirements.

The OSAC facilitates the prompt evaluation and approval of Clark Development
proposed investment projects for CSEZ within a 30-day period. Corporation
Aside from this, the OSAC also facilitates the immediate
processing of permits, licenses, and other pertinent documents Building 2122
needed by existing locators in their operations by housing agency
desks of government agencies concerned like the Bureau of
Elpidio Quirino St.
Customs, BIR, SSS, DoH, and DOLE. One of its special features Clark Special Economic Zone
is the One-Stop-Export Documentation Center (OSEDC), which Clark Field, Pampanga, Philippines
is an on-line processing center to ensure expeditious processing Tel: (63 45) 599-9000
of export documents. At OSEDC, all agencies concerned are E-Mail: info@clark.com.ph
housed under one roof to facilitate prompt processing of exports.
http://www.clark.com.ph

Registration with Bangko Sentral ng Pilipinas

Foreign loans and foreign

investments may be registered with Estimated processing time:
the BSP. Only loans which have
been duly registered with the BSP
2 to 4 weeks
This is reckoned from the date of
shall be eligible for servicing using submission and compliance with
foreign exchange purchased from requirements.
the banking system. Applications
for registration shall be filed by the
borrower with the BSP within 3 banking days from drawdown Bangko Sentral ng Pilipinas
date for short-term loans, and 15 banking days for medium- and
long-term loans using the prescribed forms. The registration of
a foreign investment with the BSP is required only if the foreign A. Mabini St. cor. P. Ocampo St.
exchange needed to service the repatriation of capital and the 1004 Malate, Manila, Philippines
remittance of dividends, profits, and earnings which accrue Tel: (632) 524-7011
thereon shall be sourced from the banking system. E-Mail: bspmail@bsp.gov.ph
http://www.bsp.gov.ph
©2006 SGV & Co. All rights reserved.

45
 Taxation
The Philippine Constitution mandates that
the rule of taxation shall be uniform, equi-
table, and progressive. In 1997, the Tax
Reform Act of 1997 (RA No. 8424) was
passed to promote sustainable economic
growth by rationalizing the Philippine
internal revenue system, including tax
administration. Various issuances have
amended the Tax Reform Act of 1997,
the most recent of which is RA No. 9337,
which was approved by President Gloria
Macapagal-Arroyo on May 24, 2005 and
implemented on November 1, 2005.
Income Taxation
Corporations
Classification
For income tax purposes, corporations are
classified as domestic or foreign depend-
ing on the place of incorporation or orga-
nization.
A domestic corporation is a corpora-
tion organized under Philippine laws. It
is taxed on the basis of net worldwide
income. A foreign corporation is a corpo-
ration organized under the laws of another
country and is further classified as a resi-
dent or nonresident. It is considered a res-
ident of the Philippines if it is engaged in
trade or business in the Philippines (e.g.,
through a branch). A resident foreign cor-
poration is taxed on net Philippine-source
income, while a nonresident foreign
corporation is taxed on gross Philippine-
source income.
©2006 SGV & Co. All rights reserved.
46
Income Tax Rates for Domestic and
Resident Foreign Corporations
The previous regular corporate income
tax rate of 32% of net taxable income has
been adjusted by RA No. 9337 to 35%.
The new tax rate shall be effective begin-
ning November 1, 2005 until December
31, 2008. It shall, however, be reduced to
30% beginning January 1, 2009.
A 2% minimum corporate income tax
(MCIT) on annual gross income may be
imposed on a corporation beginning on
its fourth year of business operation, if it
has zero or negative taxable income or the
MCIT is greater than its regular corporate
income tax liability.
Royalties, interest, dividends, and other
passive income of domestic and resident
foreign corporations are subject to differ-
ent rates (see Table 4).
Special Income Tax Rates for Certain
Domestic and Resident Foreign
Corporations
Proprietary educational institutions and
nonprofit hospitals are subject to 10%
tax on net taxable income. Foreign cur-
rency deposit units (FCDUs) and offshore
banking units (OBUs) are exempt from
all taxes on income from foreign currency
transactions with nonresidents and other
FCDUs and OBUs in the Philippines.
However, FCDUs and OBUs are subject
to a final tax of 10% on interest income
from foreign currency loans granted to
residents other than FCDUs and OBUs.
International carriers are subject to 2.5%
final tax on gross Philippine billings.
 Tax incentives for enterprises in
Ecozones, the Subic Bay Freeport and
Special Economic Zone, and the Clark
Special and Economic Zone are shown on
page 35.
Branch Profit Remittance Tax
Remittances by branches of foreign cor-
porations in the Philippines (except those
activities registered with PEZA) to its
head office are subject to 15% tax. The
15% tax may be further reduced to 10%
depending on the double taxation treaty
with certain countries (e.g., RP-Japan
Tax Treaty). The tax is based on the total
profits applied or earmarked for remit-
tance without any deduction for the tax
component thereof.
Other Taxes Imposed on Corporations
Table 4 Income Tax Rates on Passive Income of Domestic/Resident
Foreign Corporations
Dividends received from domestic corporations Not subject to tax
Interest on any currency bank deposit and 20% final tax
yield or other monetary benefit from deposit
substitutes and from trust fund and similar
arrangements
1
Interest from foreign currency deposits with 7­—2 % final tax
foreign currency deposit units (FCDUs)
Gains from sale or exchange of shares of stock 5% capital gains tax (CGT) on net
not listed and traded in the local stock exchange gains not exceeding PhP100,000
and 10% on the excess
Gains from sale or exchange of land or buildings 6% CGT on gross selling price or
not actually used in business and treated as fair market value, whichever is
capital asset higher
Royalties 20% final tax

Corporations are also liable for the MCIT,

fringe benefits tax, and improperly accu-
mulated earnings tax.
Minimum corporate income tax
(MCIT). A 2% MCIT on annual gross
income is imposed on corporations with
zero or negative taxable income or whose
regular corporate income tax liability
is less than the MCIT beginning on the
fourth taxable year following the year
they started business operations. Any
excess of the MCIT over the normal tax
shall be carried forward and credited
against the normal tax for the three imme-
diately succeeding taxable years.
However, the Secretary of Finance may
suspend the imposition of the MCIT upon
submission of proof by the applicant-cor-
©2006 SGV & Co. All rights reserved.
authorized representative, that the cor-
poration sustained substantial losses on
account of a prolonged labor dispute,
force majeure, or legitimate business
losses.
Fringe benefits tax. Fringe benefits
granted to supervisory and managerial
employees are subject to a 32% tax on the
grossed up monetary value of the fringe
benefit. Fringe benefits given by OBUs,
regional or area headquarters, regional
operating headquarters of multinational
companies, and petroleum contractors
and subcontractors to qualified non-
Filipino employees and, in certain cases,
to Filipino employees, are taxed at 15%
of the grossed up monetary value of the
fringe benefit.
Improperly accumulated earnings tax.
A 10% tax is imposed on the improperly
accumulated earnings of domestic corpo-
rations, except in the case of publicly held
corporations, banks, and other non-bank
financial intermediaries and insurance
companies. When a corporation allows its
earnings or profits to accumulate beyond
its reasonable needs, it shall be assumed
that the purpose is to avoid tax on stock-
holders, unless proven to the contrary.
Tax on Nonresident Corporations
Generally, nonresident foreign corpora-
tions are taxed at 35% (30% effective
January 1, 2009) of the gross amount of
Philippine source income such as divi-
dends, rents, royalties, compensation, and

poration, verified by the Commissioner’s remuneration for technical services. This

47

Table 5 Preferential Income Tax Rates for Nonresident Corporations
Interest on foreign loans 20% final tax
Cash and property dividends received In general, 35% (30% effective January 1,
from domestic corporations 2009). This is reduced to 15% if the recipient
foreign corporation is a resident of a country
which:
i) Does not impose any tax on dividends
received from foreign sources; or
ii) Allows a credit against the tax due from
the nonresident foreign corporation taxes
deemed to have been paid in the Philippines
equivalent to 20% (15% effective January 1,
2009 )
Income derived from any foreign Exempt
currency transaction with FCDUs and
OBUs
Gains from sale of unlisted shares of 5% CGT on net gains not exceeding PhP100,000
stock in a domestic corporation and 10% on the excess in the Philippines are taxed in the same
Rents and other fees paid to non- 7 12 % final tax on gross rentals or fees manner as citizens and resident aliens but
resident corporate lessors of aircraft,
machinery, and other equipment
Rents or charter fees paid to non-
1
4 2 % final tax on gross rentals or fees
resident corporate owners of vessels
chartered by Philippine nationals Nonresident aliens not engaged in trade
Fees paid to nonresident cinemato- 25% final tax on gross income
graphic film owners or lessors
Note: Lower tax rates may be availed of under applicable tax treaties
tax is withheld at source. Preferential
income tax rates for nonresident corpora-
tions are shown in Table 5.
Individuals
Classification
For income tax purposes, individuals are
classified as:
©2006 SGV & Co. All rights reserved.
Resident citizens. Resident citizens are
taxed on their compensation, business,
and other income derived from sources
within and outside of the Philippines.
48
Nonresident citizens. Nonresident
citizens, including those working and
deriving income from abroad such as
overseas contract workers and seamen
who derive compensation for services
rendered abroad as members of a comple-
ment of vessels engaged exclusively in
international trade, are taxed only on
income derived from sources within the
Philippines.
Resident aliens. Resident aliens are
taxed only on income derived from
sources within the Philippines.
Nonresident aliens engaged in trade or
business in the Philippines. Non-resi-
dent aliens engaged in trade or business
only on Philippine-source income.
Nonresident aliens not engaged in
trade or business in the Philippines.
or business in the Philippines are taxed
on gross amount of Philippine source
income.
Income Tax Rates for Individuals
Citizens, nonresident citizens, resident
aliens, and nonresident aliens engaged in
trade or business in the Philippines are
subject to graduated tax rates on income
from 5% to 32% (see Table 6). Non-
resident aliens not engaged in trade or
business in the Philippines are generally
subject to a flat income tax rate of 25%.
Generally, an individual is taxed on two
main categories of income: income from
employment and income from business or
exercise of a profession. Royalties, inter-
est, dividends, and other passive income
of individuals are subject to different tax
rates (see Table 7).
 Exemptions
Resident citizens and resident aliens are
entitled to personal exemptions as fol-
lows: PhP20,000 for single individuals,
PhP25,000 for heads of families, and
PhP32,000 each for married individuals.
A married individual or head of a family
is allowed an additional exemption of
PhP8,000 for each dependent, not to
exceed four dependents. Married individ-
uals are required to compute their individ-
ual income tax separately. The additional
tax exemption for each dependent shall
be claimed only by the husband unless he
waives the right in favor of his wife.
Nonresident aliens engaged in trade or
business in the Philippines are entitled to
personal exemptions (but not to additional
exemptions) only by way of reciprocity.
Income of any kind exempted by any
treaty binding on the Philippine govern-
ment is likewise exempt. Tax treaties with
the following countries are currently in
force.
Table 6 Rates of Income Tax on Citizens, Resident Aliens,
and Nonresident Aliens Engaged in Trade or Business
Amount Subject to Tax Applicable Rate
Not over PhP10,000 5%
Over PhP10,000 but not over PhP30,000 PhP500 + 10% of the excess over PhP10,000
Over PhP30,000 but not over PhP70,000 PhP2,500 + 15% of the excess over PhP30,000
Over PhP70,000 but not over PhP140,000 PhP8,500 + 20% of the excess over PhP70,000
Over PhP140,000 but not over PhP250,000 PhP22,500 + 25% of the excess over PhP140,000
Over PhP250,000 but not over PhP500,000 PhP50,000 + 30% of the excess over PhP250,000
Over PhP500,000 PhP125,000 + 32% of the excess over PhP500,000
Table 7 Income Tax Rates on Passive Income of Individuals
Interest on any currency bank deposit and 20% final tax for citizens, resident aliens,
yield or other monetary benefit from deposit and nonresident aliens engaged in trade
substitutes and from trust fund and similar or business; 25% final tax for nonresident
arrangements aliens not engaged in trade or business
1
Interest from foreign currency deposits with 7 2 % final tax; exempt for nonresident citi-
FCDUs zens and nonresident aliens
Interest earned from long-term (five-year) In general, tax-exempt; but if preterminated,
peso deposits or investments subject to 5% to 20% final tax depending
on holding period; for nonresident aliens
not engaged in trade or business, subject
to 25% flat rate
Royalties, prizes exceeding PhP10,000, and 10% final tax for citizens, resident aliens,
other winnings (except Philippine Charity and nonresident aliens engaged in trade
Sweepstakes and Lotto winnings) or business; 25% final tax for nonresident
aliens not engaged in trade or business

Countries with Tax Treaties Royalties on books, literary works, and musi- 20% final tax for citizens, resident aliens,
with the Philippines: cal compositions and nonresident aliens engaged in trade
or business; 25% final tax for nonresident
aliens not engaged in trade or business
• Australia • Korea
• Austria • Malaysia Cash and property dividends from domestic 10% for citizens and resident aliens; 20%
• Belgium • The Netherlands corporations for nonresident aliens engaged in trade or
• Brazil • New Zealand business; 25% for nonresident aliens not
• Canada • Norway engaged in trade or business
• China • Pakistan
• Denmark • Romania Gains from sale or exchange of shares of 5% CGT on net gains not exceeding
• Finland • Russia stock either listed or unlisted but not traded PhP100,000 and 10% on the excess
• France • Singapore in the local stock exchange
Germany Spain 6% CGT on gross selling price or fair market
• •
• Hungary • Sweden Gains from sale or exchange of land or value, whichever is higher
• Indonesia • Switzerland buildings not actually used in business and
• India • Thailand treated as capital asset
©2006 SGV & Co. All rights reserved.

Israel
Tax-exempt
• • United Kingdom
Italy United States Gains from sale of principal residence where
• •
• Japan • Vietnam the proceeds are used in acquiring or build-
ing a new principal residence within 18 cal-
endar months from the date of sale

49

Table 8 Payments Subject to Creditable Withholding Tax
Professional fees to lawyers, medical practitioners, and
other individuals engaged in the practice of their profession
Fees to corporate directors
Talent fees to professional entertainers and athletes
Management and technical consultancy fees to domestic
and resident foreign corporations
Professional fees, talent fees, and other services of taxable
juridical persons
Rentals of real property
Rentals of personal property in excess of or reasonably
expected to exceed PhP10,000 per payment
Rentals of poles, satellites, and transmission facilities
Rentals on billboards and similar structures
Fees to certain contractors, e.g., general engineering con-
tractors; general building contractors; advertising agencies;
messengerial, janitorial, or security agencies; and persons
engaged in the sale of computer services
Commissions and fees of customs, insurance, stock, real
estate, immigration and commercial brokers, and fees of
agents of professional entertainers
Gross selling price on the sale of real property by a person
habitually engaged in real estate business
Gross selling price on the sale of real property by a person
not habitually engaged in real estate business
On half the amount of gross payments made by credit card
companies
Commissions of independent and exclusive distributors,
medical/technical and sales representatives, and marketing
agents of multi level marketing companies
Tolling fees paid to refineries
Payments to local/resident suppliers of goods and services
by top 10,000 private corporations
Payments for purchases of mineral and quarry products
©2006 SGV & Co. All rights reserved.
50
Withholding Tax
15% if gross income exceeds PhP720,000; Systems of Withholding Tax
otherwise, 10%
15% if the gross income for the current Creditable withholding tax (CWT).
year exceeds PhP720,000; otherwise, 10%
Certain income payments made by a
15%, if the professional entertainer’s
resident to another resident are subject to
gross income for the current year exceeds
PhP720,000; otherwise, 10% specified withholding tax rates. The tax
15% if the gross income for the current
withheld is creditable against the income
year exceeds PhP720,000; otherwise, 10% tax liability of the recipient. Table 8
15% if the income payment to the partner shows some income payments subject to
for the current year exceeds PhP720,000; CWT.
otherwise, 10%
5% Withholding tax on wages. This is the
5% tax withheld from individuals receiving
purely compensation income. Employers
5% are required to withhold the tax due on
5% salaries and wages paid to their employ-
2% ees. Subject to certain conditions,
employees may no longer be required to
file income tax returns at the end of the
taxable year.
10%
Final withholding tax (FWT). Under
the FWT system, the amount of income
1.5%, 3%, 5% depending on price
tax withheld by the withholding agent is
constituted as a full and final payment of
6%
the income tax due from the payee on the
said income. Tables 4, 5, and 7 list some
1%
income payments subject to FWT.
10%
Value-Added Tax (VAT)
5% General
1% for goods
2% for services Pursuant to RA No. 9337 and upon the
1% recommendation of the Secretary of
Finance, the President raised the VAT rate
to 12% effective February 1, 2006.
Some transactions are exempt from
VAT. The list of exempt transactions has
recently been revised by RA No. 9337.
(See Table 9).
 Table 9 VAT-Exempt Transactions
a. Sale or importation of agricultural and
marine food products in their original
state, livestock and poultry of a kind
generally used as, or yielding or producing
foods for human consumption; and breed-
ing stock and genetic materials therefor
b. Sale or importation of fertilizers; seeds,
seedlings and fingerlings; fish, prawn,
livestock and poultry feeds, including
ingredients, whether locally produced
or imported, used in the manufacture of
finished feeds (except specialty feeds for
race horses, fighting cocks, aquarium fish,
zoo animals, and other animals generally
considered as pets)
c. Importation of personal and household
effects belonging to the residents of the
Philippines returning from abroad and
nonresident citizens coming to resettle
in the Philippines; provided that such
goods are exempt from customs duties
under the Tariff and Customs Code of the
Philippines
d. Importation of professional instru-
ments and implements, wearing apparel,
domestic animals and personal house-
hold effects (except any vehicle, vessel,
aircraft, machinery, other goods for use
in the manufacture, and merchandise of
any kind in commercial quantity) belong-
ing to persons coming to settle in the
Philippines, for their own use and not for
sale, barter or exchange, accompany-
ing such persons, or arriving within 90
days before or after their arrival upon
the production of evidence satisfactory
to the Commissioner, that such persons
are actually coming to settle in the
Philippines and that the change of resi-
dence is bona fide
e. Services subject to percentage tax
f. Services by agricultural contract growers
and milling for others of palay into rice,
©2006 SGV & Co. All rights reserved.
corn into grits and sugar cane into raw
sugar
51
g. Medical, dental, hospital, and veterinary
services except those rendered by pro-
fessionals
h. Educational services rendered by private
educational institutions, duly accredited
by the Department of Education (DepEd),
the Commission on Higher Education
(CHED), the Technical Education and
Skills Development Authority (TESDA),
and those rendered by government edu-
cational institutions
i. Services rendered by individuals pursuant
to an employer-employee relationship
j. Services rendered by regional or
area headquarters established in the
Philippines by multinational corporations
which act as supervisory, communica-
tions, and coordinating centers for their
affiliates, subsidiaries, or branches in the
Asia Pacific Region and do not earn or
derive income from the Philippines
k. Transactions which are exempt under
international agreements to which the
Philippines is a signatory or under special
laws except those under PD No. 529
l. Sales by agricultural cooperatives
duly registered with the Cooperative
Development Authority to their members
as well as sale of their produce, whether
in its original state or processed form, to
non-members; their importation of direct
farm inputs, machineries and equipment,
including spare parts thereof, to be used
directly and exclusively in the production
and/or processing of their produce
m. Gross receipts from lending activities
by credit or multi-purpose cooperatives
duly registered with the Cooperative
Development Authority
n. Sales by non-agricultural, non-electric
and non-credit cooperatives duly regis-
tered with the Cooperative Development
Authority; provided that the share capital
contribution of each member does not
exceed PhP15,000 and regardless of the
aggregate capital and net surplus ratably
distributed among the members
o. Export sales by persons who are not VAT-
registered
p. Sale of real properties not primarily held
for sale to customers or held for lease
in the ordinary course of business, or
real property utilized for low-cost and
socialized housing as defined by RA No.
7279, otherwise known as the Urban
Development and Housing Act of 1992,
and other related laws, residential lot
valued at PhP1,500,000 and below, house
and lot, and other residential dwellings
valued at PhP2,500,000 and below
q. Lease of a residential unit with a monthly
rental not exceeding PhP10,000
r. Sale, importation, printing, or publication
of books and any newspaper, magazine,
review, or bulletin which appears at regu-
lar intervals with fixed prices for subscrip-
tion and sale and which is not devoted
principally to the publication of paid
advertisements
s. Sale, importation, or lease of passenger
or cargo vessels and aircraft, includ-
ing engine, equipment, and spare parts
thereof for domestic or international
transport operations
t. Importation of fuel, goods, and supplies
by persons engaged in international ship-
ping or air transport operations
u. Services of banks, non-bank financial
intermediaries performing quasi-banking
functions, and other non-bank financial
intermediaries
v. Sale or lease of goods or properties
or the performance of services other
than the transactions mentioned in the
preceding paragraphs, the gross annual
sales and/or receipts do not exceed the
amount of PhP1,500,000.

VAT-Exempt vs. VAT Zero-Rated
Transactions
For both VAT-exempt and VAT zero-rated
sales of goods and services, the sellers do
not pass on VAT to their customers. How-
ever, VAT-registered sellers may apply for the
issuance of tax credit certificates or refund
of the input tax (i.e., the VAT passed on to
the sellers by their suppliers) attributable to
the zero-rated sale of goods and services.
This benefit is not available for VAT-exempt
sale of goods and services. Any VAT passed
on to the sellers by their suppliers, attribut-
able to such VAT-exempt sale of goods and
services, forms part of the cost.
©2006 SGV & Co. All rights reserved.
52
On the other hand, several items are no
longer VAT-exempt, most notable of
which are:
a. Sale of non-food agricultural products;
marine and forest products in their
original state by the primary producer
or the owner of the land where the
same are produced
b. Sale of cotton and cotton seeds in their
original state, and copra
c. Sale or importation of coal and natural
gas, in whatever form or state, and
petroleum products (except lubricating
oil, processed gas, grease, wax, and
petrolatum subject to excise tax)
d. Sale or importation of raw materials
to be used by the buyer or importer
himself in the manufacture of petro-
leum products (except lubricating oil,
processed gas, grease, wax, and petro-
latum subject to excise tax)
e. Services rendered by doctors of
medicine duly registered with the
Philippine Regulatory Commission
f. Services rendered by lawyers duly reg-
istered with the Integrated Bar of the
Philippines.
At the same time, RA No. 9337 expands
the list of exemptions to include, among
others:
a. Gross receipts from lending activi-
ties by credit or multi-purpose coop-
eratives duly registered with the
Cooperative Development Authority
b. Sale, importation, or lease of pas-
senger or cargo vessels and aircraft,
including engine, equipment, and
spare parts thereof for domestic or
international transport operations
c. Importation of fuel, goods, and sup-
plies by persons engaged in inter-
national shipping or air transport
operations.
Some transactions, commonly referred to
as zero-rated transactions, are subject to
the zero percent VAT rate. RA No. 9337
also amends the provisions pertaining to
zero-rated transactions (See Table 10).
Excise Tax
Excise taxes are imposed on certain goods
(such as cigarettes, liquor, and motor
vehicles) manufactured or produced in
the Philippines for domestic sale or con-
sumption or for any other disposition.
Excise taxes are also imposed on certain
imported goods, in addition to the VAT
and customs duties.
On August 29, 2003, RA No. 9224 was
enacted. The Act, which rationalized the
excise tax on automobiles, imposed an ad
valorem tax on automobiles based on the
manufacturer’s or importer’s selling price,
net of excise and value-added taxes, in
accordance with the following schedule:
Net Manufacturer’s Rate
Price/Importer’s Selling
Price
Up to PhP600,000 2%
Over PhP600,000 to PhP12,000 + 20%
PhP1.1 million of value in excess of
PhP600 thousand
Over PhP1.1. million to PhP112,000 + 40%
PhP2.1 million of value in excess of
PhP1.1 million
Over PhP2.1 million PhP512,000 + 60%
of value in excess of
PhP2.1 million
 An indexation of sin taxes was likewise
undertaken and with the passage of
Revenue Regulations (RR) No. 22-2003,
new rates of excise tax on new brands of
cigarettes and variants that were intro-
duced in the market after January 1, 1997
were prescribed. On the other hand, RR
No. 23-2003 prescribed new rates of
excise tax on new brands of alcohol prod-
ucts and variants that were introduced in
the market after January 1, 1997.
Percentage Tax
Persons or entities not subject to VAT,
including domestic common carriers of
passengers, international carriers, and
those in the amusement business, are sub-
ject to percentage tax on gross receipts or
gross income (see examples on Table 11).
Stock Transaction Tax
A stock transaction tax (STT) on the sale,
barter, exchange, or other disposition of
shares through the facilities of the PSE is
imposed at the rate of ½ of 1% of gross
selling price.
Initial Public Offering (IPO) Tax
A tax is also imposed on the sale, barter,
exchange, or other disposition through
IPO of shares of stock in closely held cor-
porations in accordance with the propor-
tion of shares of stock sold through IPO.
A closely held corporation is any corpora-
tion of which at least 50% in value of the
outstanding capital stock or at least 50%
of the total combined voting power of all
classes of stock entitled to vote is owned
directly or indirectly by or for not more
©2006 SGV & Co. All rights reserved.
than 20 individuals.
53
Table 10 Zero-Rated Sales
Zero-Rated Sale of Goods
1. Export Sales which are:
a. Sale and actual shipment of goods from the Philippines to a foreign country, irrespec-
tive of any shipping arrangement that may be agreed upon which may influence or
determine the transfer of ownership of the goods so exported, paid for in acceptable
foreign currency or its equivalent in goods or services, and accounted for in accordance
with the rules and regulations of the BSP
b. Sale of raw materials or packaging materials to a nonresident buyer for delivery to a
resident local export-oriented enterprise to be used in manufacturing, processing, pack-
ing, or repacking in the Philippines of the said buyer’s goods and paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the
BSP
c. Sale of raw materials or packaging materials to export-oriented enterprise whose export
sales exceed 70% of total annual production
d. Sale of gold to the BSP
e. Those considered export sales under EO No. 226, otherwise known as the Omnibus
Investments Code of 1987, and other special laws
f. The sale of goods, supplies, equipment, and fuel to persons engaged in international
shipping or international air transport operations
2. Foreign currency-denominated sales which are the sale to a nonresident of goods, except
automobiles and non-essential goods, assembled or manufactured in the Philippines
for delivery to a resident in the Philippines, paid for in acceptable foreign currency, and
accounted for in accordance with the rules and regulations of the BSP
3. Sales to person or entities whose exemption under special laws or international agreements
to which the Philippines is a signatory effectively subjects such sales to zero rate.
Zero-Rated Sale of Services
1. Processing, manufacturing, or repacking goods for other persons doing business outside
the Philippines which goods are subsequently exported, where the services are paid
for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the BSP
2. Services other than those mentioned in the preceding paragraph rendered to a person
engaged in business conducted outside the Philippines or to a nonresident person not
engaged in business who is outside the Philippines when the services are performed, the
consideration for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP
3. Services rendered to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively subjects the
supply of such services to 0% rate
4. Services rendered to persons engaged in international shipping or international air
transport operations, including leases of property for use thereof
5. Services performed by subcontractors and/or contractors in processing, converting, or
manufacturing goods for an enterprise whose export sales exceed 70% of total annual
production
6. Transport of passengers and cargo by air or sea vessels from the Philippines to a foreign
country
7. Sale of power or fuel generated through renewable sources of energy such as, but not
limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging
energy sources using technologies such as fuel cells and hydrogen fuels.

Table 11 Selected Percentage Tax Rates
Type of Business
Life insurance companies doing business in the
Philippines
Water and gas utilities
Radio and/or television broadcasting companies
whose annual gross receipts do not exceed PhP10
million
Domestic common carriers of passengers
Carriers and garage proprietors
Overseas dispatch, message, or conversation
transmitted from the Philippines by telephone,
telegraph, telewriter exchange, wireless, and other
communication equipment services
Banks and non-bank financial intermediaries
Sale of stocks listed and traded in the Stock
Exchange
Other non-VAT-registered businesses
©2006 SGV & Co. All rights reserved.
54
Percentage Tax Rate
5% of the total premiums collected
2% of gross receipts
3% of gross receipts
3% of gross receipts
Various rates, depending on the place of opera-
tion and on vehicles used.
10% on gross receipts
a) on interest, commissions and discount from
lending activities as well as income from
financial leasing – 5% on gross receipts for
instruments with maturities not exceeding
five years and 1% for those with maturities of
over five years
b) on dividends and equity shares and net
income of subsidiaries – 0%
c) on royalties, rentals of real or personal prop-
erty, profits from exchange and all other items
treated as gross income under Section 32 of
the Code – 7%
d) On net trading gains within the taxable year
on foreign currency, debt securities, deriva-
tives, and other similar financial instruments
– 7 %.
1
2 of 1%
3% of gross sales or gross receipts not exceed-
ing PhP1,500,000
The IPO tax shall be at the following
rates, in accordance with the proportion of
shares sold, bartered, or exchanged to the
total outstanding shares of stock after the
listing in the local stock exchange:
Up to 25% 4%
Over 25% but not over 33.33% 2%
Over 33.33% 1%
The IPO tax shall be paid by the issuing
corporation in a primary offering or by
the seller in a secondary offering. The
tax base shall be the gross selling price
or gross value in money of the shares of
stock sold, bartered, exchanged, or other-
wise disposed of.
Documentary Stamp Tax
The documentary stamp tax (DST) is
an excise tax on documents, instru-
ments, loan agreements, and papers and
on acceptances, assignments, sales, and
transfers of the obligation, right, or prop-
erty incident thereto. This tax is imposed
on the maker, signor, issuer, accepter, or
transferor of the document.
In order to boost stock trading and the
equity market, RA No. 9243 or the
Act Rationalizing the Provisions of the
Documentary Stamp Tax was passed on
February 17, 2004. The said act lists
additional transactions exempt from DST,
provides lower DST rates for investments
in shares, and specifies the new DST base
for insurance policies, annuities, and pre-
need plans and a uniform DST rate on
debt instruments.
Table 12 shows some of the documents
requiring payment of DST.
Documents and Papers Exempt from
the DST
1. Policies of insurance or annuities
made or granted by a fraternal or ben-
eficiary society, order, association, or
cooperative
2. Borrowing and lending of securi-
ties executed under the Securities
Borrowing and Lending Program of a
registered exchange
3. Loan agreements or promissory
notes, the aggregate of which does
not exceed PhP250,000 executed by
an individual for his or her purchase
 on installment for his or her personal
or family use, and not for business,
resale, barter, or hire of a house, lot,
motor vehicle, appliance, or furniture
4. Sale, barter, or exchange of shares of
stock listed and traded through the
local stock exchange for a period of
five years from March 20, 2004
5. Assignment or transfer of any mort-
gage, lease, or policy of insurance
or the renewal or continuance of any
agreement, contract, charter, or any
evidence of obligation or indebted-
ness, if there is no change in the
maturity date or remaining period
of coverage from that of the original
instrument
6. Fixed income and other securities
traded in the secondary market or
through an exchange
7. Derivatives, repurchase agreements,
and reverse repurchase agreements
8. Interbranch or interdepartmental
advances within the same legal entity
9. All forebearances arising from sales
or service contracts including credit
card and trade receivables
10. Bank deposit accounts without a fixed
term or maturity
11. All contracts, deeds, documents and
transactions related to the conduct of
business of the BSP
12. Transfer of property pursuant to tax-
free exchange, mergers, or consoli-
dations under Sec. 40(C)(2) of the
National Internal Revenue Code
13. Interbank call loans with maturity of
not more than seven days to cover
deficiency in reserves against deposit
liabilities, including those between or
among banks and quasi banks.
©2006 SGV & Co. All rights reserved.
55
Table 12 Some Documents Requiring Documentary Stamps
Bank Checks
Debt instruments (loans, debentures, deposit
substitutes, bonds, promissory notes, etc.)
Certificates of Stock
Deeds of Sale and Conveyances of Real
Property
Life Insurance Policies
Customs Duty
Goods imported into the Philippines are
generally subject to customs duty (aside
from 10% VAT and excise tax on certain
goods). For customs purposes, the value
of imported goods are based on their
transaction value, i.e., the price paid or
payable for the goods when sold or export
to the Philippines. The applicable duty
rate (most-favored nation [MFN] rate)
will depend on the appropriate classifi-
cation of the goods under the Tariff and
Customs Code of the Philippines (TCCP)
which generally ranges from 0% to 30%.
Preferential rates under the Common
Effective Preferential Tariff of the
ASEAN Free Trade Agreement (AFTA)
are generally lower than the MFN rates.
Certain importations are exempt from the
imposition of custom duty, such as condi-
tionally free importations, items entered
into a customs bonded warehouse, and
importations under special laws.
PhP1.50 for each check regardless of amount
PhP1 for every PhP200 of the issue price
PhP1 for every PhP200 of the par value on original
issue. In case of transfers, the tax is PhP0.75 for
every PhP200 of the par value
PhP15 on every PhP1,000 consideration or Fair
Market Value (FMV), whichever is higher
PhP0.50 on every PhP200 of the amount of premium
collected
Importers and their brokers are required
to keep records of importations within
three years from the date of importation
of the goods. The Bureau of Customs has
the power to conduct post-entry audit on
the importers/brokers books within the
same period to determine compliance with
customs rules and to assess any deficiency
customs duty.
Local Taxes
Under the Local Government Code, local
government units (LGUs) are given the
authority to tax certain activities and
business conducted within their jurisdic-
tion unless otherwise expressly exempt
by law. LGUs are also authorized to
levy an annual ad valorem tax on real
property such as land, building, machin-
ery, and other improvements, as well as
on the sale, donation, barter, or on any
other mode of transfer of real property.
However, the taxing powers of LGUs do
not extend to the levy of income tax, cus-
toms duties, DST, estate tax, and gift tax,
among others.
 Labor Requirements
The laws on labor standards and employ-
ment relations are consolidated in the
Labor Code of the Philippines, which
is supplemented, from time to time, by
legislative issuances. The salient points
of employment conditions and employee
benefits covered by Philippine labor laws
are given below.
Hours of Work
Eight hours per day or 48 hours per week
is the maximum period an employee may
be required to work at his regular rate of
pay. Workers are entitled to a 24-con-
secutive hour rest period after every six
consecutive normal work days. Some
exceptions are managerial employees,
field personnel, those in the personal
services of another, and workers paid by
results.
Work Day
A day is the 24-hour period which begins
from the time the employee regularly
starts to work. Thus, if an employee regu-
larly works from 8:00 a.m. to 4:00 p.m.,
the work day of such employee is from
8:00 a.m. of a given day to 8:00 a.m. of
the following day. Any work in excess
of eight hours within the 24 hour period
is considered overtime work regardless
of whether the work covers two calendar
days.
Overtime Remuneration
Overtime (OT) premium is allotted for
©2006 SGV & Co. All rights reserved.
work exceeding the maximum prescribed
period. Table 13 presents the OT rates per
hour for overtime work rendered on the
specified days.
56
Night Shift Differential Pay
Night shift employees must be paid a dif-
ferential of not less than 10% of the regu-
lar wage for each hour of work performed
between 10:00 p.m. and 6:00 a.m.
Service Incentive Leave Pay
Every employee who has rendered at least
one year of service is entitled to a yearly
service incentive leave of five days with
pay.
Meal and Rest Periods
Every employer is obliged to give his
employees not less than one hour time-
off for regular meals, except in the fol-
lowing cases when a meal period of not
less than 20 minutes a day maybe given,
provided that such shorter meal period is
credited to the employee as compensable
hours worked: (1) where the work is non-
manual in nature and does not involve
strenuous physical exertion; (2) where
the establishment regularly operates not
less than 16 hours a day; (3) in cases of
actual or impending emergencies or where
there is urgent work to be performed on
machinery, equipment, or installations to
avoid serious loss which the employer
would otherwise suffer; or (4) where
the work is necessary to prevent serious
loss of perishable goods. Rest periods
or coffee breaks running from five to 20
minutes shall be considered as compen-
sable working time.
Minimum Wage
The minimum wage rates for agricultural
and non-agricultural workers in every
region are determined by the Regional
Tripartite Wages and Productivity Board.
Effective July 1990, RA No. 6727 ratio-
 nalized the structuring of the minimum
Table 13 Overtime (OT) Rates
wage adjustments in order to address the
regional and intraregional disparities in Category Computation
the cost of living in different regions (see
1. OT work on a regular day Daily rate x 1.25
Table 14 for the minimum wage rates of
2. OT work during rest day or special public holiday
nonagricultural workers).
First 8 hours Daily rate x 1.30
In excess of the first 8 hours Daily rate x 1.69
Salaries and wages must be paid at least 3. OT work on a special public holiday falling on employee's rest day
once every two weeks and must be in First 8 hours Daily rate x 1.50
legal tender and not by means of vouch- In excess of the first 8 hours Daily rate x 1.95
ers, token, or the like. 4. OT work on a regular holiday
First 8 hours Daily rate x 2.00
In excess of the first 8 hours Daily rate x 2.60
Employees’ Compensation Program
5. OT work on a regular holiday falling on employee's rest day
First 8 hours Daily rate x 2.60
Coverage under the Program is com- In excess of the first 8 hours Daily rate x 3.38
pulsory for every employer with one or
more employees and for the National
Government and only its political subdi-
visions and instrumentalities, including
government-owned and controlled corpo- and progressive contribution schedule
Table 14 Minimum Wage Rates by
rations (GOCCs). Private employees are to be determined by PHIC. Table 15
Region (Nonagricultural Jobs)
covered under the Social Security System enumerates some of the personal health As of June 16, 2005
(SSS); government employees are covered services granted to members or their
Regions Daily Minimum Wage
under the Government Service Insurance dependents under RA No. 7875 (effective
National Capital PhP325
System (GSIS). February 14, 1995). Region (NCR)
Cordillera PhP219
For the private sector, monthly contribu- Emergency, Medical, and Dental Autonomous
tions to the Program must be shouldered Services Region (CAR)
Region I PhP121 to PhP212
solely by the employer at the rate of 1%
Region II PhP165 to PhP208
of the employee’s total monthly salary Every employer is required to keep in his Region III PhP182 to PhP228.50
credits, but not exceeding PhP10.00 per establishment the first-aid medicine and Region IVA PhP210 to PhP277
month. All premiums, revenues, and equipment stipulated by the Department Region IVB PhP216
other collections constitute the State of Labor and Employment (DOLE). Region V PhP152 to PhP187
Insurance Fund, from which the compen- Region VI PhP155 to PhP205
If the work is hazardous, the part-time Region VII PhP190 to PhP223
sation and other benefits are paid to the
Region VIII PhP157 to PhP188
employees or their heirs. physician or dentist must be on the
Region IX PhP196 to PhP200
employer’s premises at least two hours a Region X PhP211 to PhP218
National Health Insurance day. If the number of employees requires Region XI PhP222 to PhP224
that a full time physician be in attendance, Region XII PhP213.50
All citizens of the Philippines are covered the physician must remain in the employ- Autonomous PhP180
by the National Health Insurance Program er’s premises for eight hours a day. If the Region in Muslim
Mindanao (ARMM)
(NHIP), which is administered by the work is non-hazardous, the physician and
©2006 SGV & Co. All rights reserved.

Region XIII – PhP200

Philippine Health Insurance Corporation the dentist may be kept on retainer. Surigao del Norte,
(PHIC). All members of NHIP contribute Surigao del Sur,
to the National Health Insurance Fund in Agusan del Norte
& Agusan del Sur
accordance with a reasonable, equitable,
(CARAGA)

57

Table 15 Partial List of National
Health Insurance Program
Benefits
• Room and board
• Service of health care professionals
• Medical examination services
• Prescription drugs and biologicals
Source: RA No. 7875
©2006 SGV & Co. All rights reserved.
58
Woman and Child Labor
A female employee is entitled to mater-
nity benefits. If an employee is an SSS
member and has paid at least three
monthly contributions in the 12-month
period immediately preceding the semes-
ter of her childbirth or miscarriage, she
is entitled to maternity leave with pay for
60 days or 78 days in the case of cesarean
delivery, subject to certain conditions
enumerated in the Social Security Act of
1997, such as:
1. The employee should have notified her
employer of her pregnancy and prob-
able date of childbirth, which notice
shall be transmitted to the SSS.
2. The full payment shall be advanced by
the employer within 30 days from the
filing of the maternity leave applica-
tion.
3. The maternity benefits shall be paid
only for the first four deliveries or
miscarriages.
4. The SSS shall immediately reimburse
the employer the amount of the ben-
efits advanced to the employee.
No child below 15 years of age may be
employed unless directly supervised by
a parent or guardian in activities that are
nonhazardous and do not interfere with
the child’s schooling. Any minor between
15 and 18 years of age may be employed
in nonhazardous undertakings if such
activities comply with regulations issued
by the DOLE.
Under RA No. 7877, all forms of sexual
harassment in the employment, education,
or training environment are unlawful.
Employers shall promulgate appropriate
rules and regulations to implement the
law.
Paternity Leave
Effective August 1996, every married
male employee both in the private and
public sectors shall be entitled to a pater-
nity leave of seven days with full pay for
the first four deliveries of the legitimate
spouse.
Termination of Employment
The State guarantees the rights of all
workers to security of tenure and protects
all workers to arbitrary deprivation of job.
An employer, therefore, may not termi-
nate the services of an employee except
for a just cause or when authorized by
the Labor Code. Just causes for termina-
tion include serious misconduct or willful
disobedience, gross and habitual neglect,
fraud, commission of a crime or offense
by the employee against the person of
his or her employer, and other analogous
causes. If the dismissal is based on any
of these just causes, the employer must
give the employee two written notices
and a hearing or opportunity to be heard if
requested by the employee before termi-
nating the employment.
Further, the employer may also terminate
the employment of any employee due to
the installation of labor saving devices,
redundancy, retrenchment to prevent
losses, or the closing or cessation of
operation of the establishment or under-
taking. In these instances, the employer is
required by law to serve a written notice
to the employee and the DOLE at least
one month prior to the intended date of
termination.
 Failure to comply with the procedural
requirements of notice and hearing will
make the employer liable for damages.
(Agabon vs. NLRC, G.R. No. 158693,
November 17, 2004)
Unions
The right of workers to form labor unions
is recognized and respected by the gov-
ernment. Workers may engage in con-
certed activities for collective bargaining
purposes or for their mutual benefit or
protection.
Financial and Monetary Policies
Philippine monetary policy is enforced
by the BSP created under RA No. 7653.
Prior to May 1993, this authority resided
with the Central Bank of the Philippines.
Foreign exchange regulations have been
relaxed with the issuance of BSP Circular
No. 5, dated September 15, 1993. The
key features of this circular are shown in
Table 16.
Other Business Regulations
Immigration and Employment
Regulations for Foreigners in the
Philippines
The government has liberalized
the visa requirements for certain
categories of foreigners to encourage
foreign participation in the economic
development of the country. Foreign
stockholders, investors, representatives of
investment houses, and land developers
©2006 SGV & Co. All rights reserved.
are among the categories granted this
special incentive.
59
The following visas may be granted
to foreigners who will work or render
service in the Philippines:
Treaty Trader's/Investor's Visa under
Section 9(d) of the Philippine
Immigration Act
This visa is granted to aliens entering
the country to carry on trade between
the Philippines and the foreign state
of which they are nationals, under and
pursuant to the provisions of a treaty of
amity, commerce, and navigation. The
immigration office requires an initial
investment of US$30,000 or annual trade
worth US$120,000. At present, the only
countries with which the Philippines has
entered into a treaty of amity, commerce,
and navigation are the United States of
America, Germany, and Japan.
Prearranged Employee's Visa
under Section 9(g) of the Philippine
Immigration Act
This is a regular work visa given
to foreign nationals to undertake
employment in the Philippines in a
technical, managerial, or confidential
capacity. However, it must be shown that
there are no local Filipinos or residents
who are willing and competent to perform
the labor or service for which the foreign
national is being hired and that the
latter's admission would be beneficial
to the public interest. This type of visa
is subject to the approval of the Board
of Commissioners of the Bureau of
Immigration (BI) meeting en banc.
A requirement in processing this visa
is the submission to the BI of the Alien
Employment Permit (AEP). Normally, the
validity date of this visa is co-terminus
with the validity date of the foreign
Table 16 Key Features of BSP
Circular No. 5
• Foreign exchange may be freely sold
and purchased outside the banking
system
• Foreign exchange receipts, acqui-
sitions, or earnings may be sold for
pesos to unauthorized agent banks
or outside the banking system,
retained, or deposited in foreign
currency accounts, whether in the
Philippines or abroad, or may be used
for any other purpose
Source: Bangko Sentral ng Pilipinas
national's AEP or the expiration of his
or her employment contract, whichever
comes first. The AEP is granted by the
DOLE only after the sponsoring company
complies with the labor market test and
submits an Understudy Training Program.
The latter requires that the foreign
national train at least two Filipinos under
his or her supervision.
Special Nonimmigrant Visa under Sec.
47(a)(2)
This type of visa may be issued to
foreign nationals employed by enterprises
registered with PEZA and the BOI,
as well as those who are temporarily
assigned to work in government projects.
Although all of them enjoy multiple entry
privileges, foreign employees of PEZA-
registered enterprises are also exempt
from fingerprinting and registration
with the BI, paying fees, and securing
clearances. However, foreign nationals
with this visa are still required to secure
an AEP from the DOLE.
 Special Nonimmigrant Visa under EO
Areas where a project impacts No. 226
the environment
This visa is granted to foreign personnel
1. Natural environment — land, water,
atmosphere, terrestrial life, aquatic assigned to BOI-registered regional
life, ecological balance or area headquarters of multinational
companies in the Philippines. They are
2. Socioeconomic conditions — entitled to multiple entry privileges and
demographic, lifestyles, amenities, are exempt from paying immigration fees,
cultural minorities, historical sites, fingerprinting, registration with BI, and
health, economics securing an AEP from DOLE.
Special Nonimmigrant Visa under PD
No. 1034
Examples of negative impacts
1. Water and air pollution This visa is granted to foreign personnel
2. Destruction of historical or of offshore banks duly licensed by the
archaeological sites BSP to operate as an offshore banking
3. Disruption of wildlife habitats unit. They are also entitled to multiple
4. Increase of urban congestion entry privileges and are exempt from
5. Threats to health paying immigration fees, fingerprinting,
6. Undesirable land use patterns registration with BI, and securing an AEP
Source: Implementing Rules and Regulations from DOLE.
for PD No. 1586
Special Subic Work Visa
This visa is granted to foreign nationals
employed as executives by Subic Bay
Freeport Zone enterprises and to other
foreign nationals possessing highly
technical skills.
Other Immigration Policies
Foreign nationals who wish to come to
the Philippines can either enter as a tourist
without visa under EO No. 408, or secure
a temporary visitor's visa under Section
9(a) before any Philippine consular post
abroad. The Section 9(a) visa can either
be for business, pleasure, or health and
normally entitles an alien to an initial stay
©2006 SGV & Co. All rights reserved.
of 59 days, extendible to a year.
60
While in the Philippines, aliens are
allowed by the BI to convert their
immigration status from tourist/temporary
visitor to another visa category without
having to leave the country.
The foreign national must be in the
Philippines when his or her application
for conversion of immigration status
is approved; otherwise, it will be
invalidated. If this happens, there will be a
need to file an application for revalidation.
The spouse and dependent children
may likewise qualify for the same visa
category as that of the principal applicant.
While the expatriate's application for
conversion of immigration status is being
processed by the BI, he or she should
apply for a Provisional Permit to Work.
Philippine Environmental Laws
When an investment involves a proposed
project or undertaking which may affect
the quality of the environment, the project
proponent is subject to the implementing
rules and regulations of PD No. 1586,
otherwise known as the Philippine
Environmental Impact Statement (EIS)
System. PD No. 1586 requires a project
proponent to conduct an Environmental
Impact Assessment (EIA) to ensure that
all possible environmental effects of
the project are addressed, in line with
the country's overall goal of sustainable
development.
The EIA process results in the preparation
of an EIS or an Initial Environmental
Examination (IEE), depending on the
location and nature of the project. The
 final report is submitted to the DENR,
together with other required documents
such as clearances from other government
agencies and endorsements of the project
from local government officials. After
its review, the DENR decides on the
issuance or denial of an Environmental
Compliance Certificate (ECC), without
which the project cannot be implemented
legally (e.g., the proposed project site
cannot be altered in any way).
The ECC typically includes a number
of conditions which the proponent
must follow during the construction
and operational phases of the project.
The ECC identifies all other applicable
environmental laws, regulations, or
guidelines which the proponent must
comply with to ensure the continuous
implementation of the project. If an ECC
is denied, the proponent may submit a
new EIS corresponding to a new site or
change the facilities' design and operation.
Philippine Laws on Intellectual
Property Rights
The Philippines provides foreign investors
with ample protection of their intellectual
property rights (IPR). In contrast to other
countries in the Asia-Pacific region where
IPR protection is either lacking or only
recently provided, the Philippines had in
place the necessary legal infrastructure
for IPR protection even before the
country became independent in 1946.
This infrastructure is basically patterned
after US laws, regulations, and practices.
In 1997, the Philippine government
©2006 SGV & Co. All rights reserved.
61
codified into a single law the different
legal issuances governing IPR protection
in the country. With the creation of the
Intellectual Property Code of 1997 (RA
No. 8293), the Philippines provides
an effective means of encouraging
innovation by local and foreign scientists,
investors, artists, and other gifted citizens
through the protection of their intellectual
property rights and creations. Embodied
in this Act is the establishment of the
Intellectual Property Office.
RA No. 8293 aims to develop domestic
creative activity, facilitate transfer of
technology, attract foreign investments,
and ensure market access for our
products.
Due to the extraterritorial nature of IPR
protection, the Philippines has acceded to
international conventions under the World
International Property Organization.
The Philippines is a signatory to the
following conventions: Berne Convention
for the Protection of Literary and
Artistic Works (Brussels Act of 1948);
Rome Convention for the Protection of
Performers, Producers of Phonograms,
and Broadcasting Organizations; and
Paris Convention for the Protection of
Industrial Property (Lisbon Revision).
Functions of the Intellectual
Property Office
• Examine applications for grant of letters
patent for inventions and register utility
models and industrial designs
• Examine applications for the
registration of marks, geographic
indication, and integrated circuits
• Register technology transfer
arrangements and settle disputes
involving technology transfer payments,
and develop and implement strategies
to promote and facilitate technology
transfer
• Promote the use of patent information
as a tool for technology development
• Publish regularly in its own publication
the patents, marks, utility models,
and industrial designs issued and
approved, and the technology transfer
arrangements registered
• Administratively arbitrate contested
proceedings affecting intellectual
property rights
• Coordinate with other government
agencies and the private sector on the
formulation and implementation of
plans and policies to strengthen the
protection of intellectual property rights
in the country
 Costs of Doing Business
Operating Costs in Metro Manila
As of January 2005

Manpower (Annual Basic Pay)1 Utilities

Occupation As of January 2005 Water – Residential6
Chief Executive Officer I PhP3,986,280 First 10 cu.m. PhP46.88
Head of Finance/Finance Director PhP2,596,110 Per excess cu.m. Starts at PhP5.72
Head of Human Resources & PhP2,184,950 Water – Industrial
Administration/Director of Human First 10 cu.m. PhP230.52
Resources & Administration In excess Starts at PhP23.20
Head of Information Technology PhP2,451,870 Sewage treatment 60% of basic + CERA7 + Foreign
Head of Manufacturing/Director of PhP2,881,010 Currency Differential Adjustment
Manufacturing (FCDA)8
Head of Sales/Sales Director PhP2,371,450 Power Rates per kWh9
National Sales Manager II PhP1,613,440 Residential Around PhP6
Accountant PhP336,060 Commercial/Industrial Around PhP7
Systems Analyst PhP385,310
Production Supervisor PhP401,480
Senior Secretary PhP313,790 Telecommunications
Secretary PhP238,680 Residential10
Office Driver PhP181,690 Installation PhP1,200
Monthly billing PhP780
Office Space2 Business
Based on “Grade A” office developments Installation PhP1,500
Selling Monthly billing PhP1,500
- Makati CBD PhP48,000/m2 Cellular Phone Kits11
- Ortigas CBD PhP30,000/m2 Prepaid (includes handset and SIM card)
Rental Globe PhP3,490-26,090
- Makati CBD PhP375-425/m2 Smart PhP3,290-11,790
- Ortigas CBD PhP220-300/m2 Sun Cellular PhP2,990-35,390
Industry Land and Factory Building Postpaid (subscription has a 24-month contract, includes
handset and first month subscription free)
Monthly lease rate for industrial land US$0.15-1.20/m2
Globe PhP3,300-28,780
Selling rates of industrial lots US$35-70/m2
Smart PhP2,000-42,500
Monthly lease rate for standard factory building
Sun Cellular PhP500-38,000
- Warehouse US$1.74-6.50/m2
Fax Unit12 PhP5,600-14,900
- Bare lot and build-to-suit development US$3.38-5.00/m2
International Calls
- International long dis- US$0.40/minute
tance direct dial (IDD) rate
Accommodations to all countries
Sales
Residential condo unit – 2-bedroom
- Makati PhP47,000/m2
- Ortigas PhP30,000/m2
Monthly Rental
House
- Makati PhP50,000-250,000
- Ortigas PhP40,000-170,000
- Alabang PhP80,000-200,000
Residential condo unit – 2-bedroom3
- Makati PhP325/m2
- Ortigas/San Juan PhP200/m2
©2006 SGV & Co. All rights reserved.

Hotel Costs per Night4

3-star hotel US$35-60
4-star hotel US$60-100
5-star hotel US$100-180
Hotel Car Rental (AVIS)5 US$55-100

62
 Internet Service Fees13
Dial-up rates
Installation fee Free-PhP825
E-mail account Included in subscription
Web account Included in subscription
Monthly fee (depending PhP220-4,950 (VAT-inclusive)
on number of hours)
Cable/broadband rates
Installation fee Free-PhP2,500
E-mail account Included in subscription
Web account Included in subscription
1
Watson Wyatt Worldwide
Subscription 2
Source: Leechiu & Associates, Inc. Research. Rates
Personal account PhP1,500-3,000 (VAT-inclusive) and prices in US$ are as at end-August 2004 (US$1:
Corporate account PhP4,000 (3 computers networked) PhP56.8342).
PhP9,000 (8 computers networked) Prepared by the Consultancy Services Department
PhP80,000 (40 or more computers of Leechiu & Associates Inc. (L&A), a member of
networked) FPDSavills International, for information only.
US$1,200 (dedicated bandwidth Whilst reasonable care has been exercised in prepar-
with unlimited number of ing this, it is subject to change and L&A makes no
computers) representation as to its truth, accuracy, or complete-
ness, and accordingly cannot be held responsible for
any liability whatsoever for any loss whosoever aris-
Mailing Rates ing from or in reliance upon the whole or any part of
International the contents.
Airmail letters (20 g-1 kg) PhP17-805
Additional rate in excess of 1 kg PhP271-400
3
Monthly lease rates are exclusive of association dues
Postcards PhP11 and utility charges.
Printed matter (20 g-1 kg) PhP15-737 4
Prices are exclusive of 10% service charge and 10%
Each additional 500 g or less PhP252-366 VAT.
Domestic (first 20 g-2 kg)
Ordinary mail PhP6-120
5
For a minimum 10-hour charge. Prices are exclusive
Priority mail PhP10-130 of gasoline (per consumption) charge, driver’s meal,
Express PhP20-150 toll fees and parking charges.
Registered mail PhP15-129+PhP5 for return 6
Manila Water
receipt
PO Box rental per month PhP480-1,440
7
CERA: PhP1 surcharge for every cubic meter con-
Postal ID fee PhP75 (for companies) sumed.
PhP245 (for personal use) 8
FCDA: 2.76% of basic.
9
Meralco
Others 10
Philippine Long Distance Telephone Co.
Household help with free board & lodging14
Family driver US$125-140
11
Various cellular phone service centers in Metro
Cook US$125 Manila. Prices of units depend on model, telecom
Maid US$50-200 company’s prepaid phone kits and plans, and special
Fastfoods and restaurants promos.
Set meals in fast-food restaurants US$1-3 12
Various appliance centers in Metro Manila
Executive lunch/buffet in restaurants US$5-10 13
Various Internet service providers in Metro Manila
©2006 SGV & Co. All rights reserved.

Taxicab rates (air-conditioned)

Flagdown for first 500 m PhP30 14
Monthly salaries
Every 250 m thereafter PhP2

63
 Costs of Doing Business
Operating Costs in the Philippines
As of January 2005

Clark1 Subic Cebu2 Davao

1. Manpower Salary per Month
Manufacturing Director PhP23,667 (Entry Level for a PhP20,000-50,000 (Manufac- PhP170,000-180,0003 PhP75,0004
Mfg. Head) turing Head)
Sales Director - PhP50,000-60,000 PhP50,000-70,000 PhP50,000
Sales Manager - PhP20,000-30,000 PhP25,000-30,000 PhP18,000
Accountant PhP10,088 (Entry Level) PhP7,000-7,500 (Entry Level) PhP30,000-38,000 PhP35,000-40,000
Software Developer - PhP10,000-17,000 PhP10,000-18,000 PhP8,000
Field Services Engineer - PhP18,000-30,000 PhP40,000-70,000 -
Production Supervisor PhP8,831 (Entry Level) PhP7,000-7,500 (Entry Level) PhP35,000-40,000 PhP10,000-15,000
Executive Secretary - PhP10,000-15,000 PhP15,000-18,000 -
Secretary - PhP7,000 (Entry Level) PhP8,000-12,000 PhP6,070-8,000
Chauffeur PhP6,154 (Entry Level for PhP6,800 (Entry Level) PhP6,000-7,650 PhP5,070
Messenger-Driver)
2. Office Space 5
Selling N/A N/A PhP45,000/m2 PhP47,000-93,000/m2
Monthly lease rate US$5.50/m2 plus 5% service US$3.50-15/m2 PhP200-375/m2 PhP246-300/m2
charge (ready-to-occupy)
Industrial Land & Factory Building
Monthly lease rate for industrial US$0.30/m2 (land) US$0.12-4/m2 $0.40/P22.406 PhP150-500/m2
land US$1.50-4.00/m2 (structure)
Selling rates for industrial lots N/A N/A PhP20,000/m2 along the PhP700-3,000/m2
highway7
3. Accommodations
Sales
Residential condo unit (2-bed- - N/A PhP4,000,000 (M) per unit8 N/A
room)
Monthly Rental
House PhP16,500/mo. (2BR unit, PhP39,200-65,000 (2BR unit, PhP32,000-58,000 (execu- PhP15,000-60,000
unfurnished) furnished) tive house)9
PhP22,500/mo. (2BR unit, PhP44,800-67,000 (3BR unit,
fully furnished) furnished)
PhP50,400-67,000 (4BR unit,
furnished)
Residential condo unit (2-bed- - PhP30,000-40,000 N/A
room)
Hotel Costs Per Night
3-star PhP2,000-2,900 $35.71-53.5710 PhP1,100-2,90011
4-star US$125 (Standard) PhP3,200-3,800 PhP3,500 -5,000 PhP1,500-45,600
US$200 (Junior Suite)
US$280 (Holiday Villa)
US$25 (Extra Person/Bed)
5-star $178.57-1,660.71
Hotel car rental (per day) Within Ecozone limits : PhP1,200 first 3 hours PhP2,000-2,500
PhP350/hour (car w/ driver) PhP320 succeeding hr.
PhP500/hour (van w/ driver)
4. Utilities
Water – Residential
1
First 10 m3 PhP82.50 Standing Charge21 : PhP363.80 PhP108.51 ( —2 inch meter) PhP32.0013
©2006 SGV & Co. All rights reserved.

(per m3 ) 11-20m3 : PhP8.91
21-30m3 : PhP9.41
Above 31m3 : PhP9.90
0-10m3 =PhP14.80/m3
11-30m3 : PhP16.28/m3
31-60m3 =PhP22.20/m3
61-100 =PhP25.90/m3
over 100m3 =PhP29.59/m3
3
PhP175.97 ( —4 inch meter)12
11-20m3 : PhP11.97
21-30m3 : PhP14.07
Over 30m3 : PhP38.61
11-20m3 : PhP8.40
21-30m3 : PhP10.85
31-40m3 : PhP14.40
41 m3 -up: PhP21

64
 Clark Subic Cebu Davao
Water – Industrial
First 10 m3 PhP165 Standing Charge: PhP363.80 PhP344.60 (1 inch meter) Minimum charge of
0-10 m3 : PhP26.88/m3 PhP2,184.92 (2 inches meter) PhP32
(in excess) 11-20 m3 : PhP17.77 11-30 m3 : PhP29.57/m3 11-20 m3 : PhP11.97 11-20 m3 : PhP8.40
21-30 m3 : PhP18.81 31-60 m3 : PhP33.59/m3 21-30 m3 : PhP14.07 21-30 m3 : PhP10.85
Above 31 m3 : PhP19.86 61-100: PhP36.28/m3 Over 30 m3 : PhP38.61 31-40 m3 : PhP14.40
over 100 m3 : PhP38.97 (comm’l) 41 m3 -up: PhP21
Power Rates per kWh Industrial, Commercial, Residen- Res’l/Comm’l 22: Household14 Residential: PhP3.2428
tial : PhP4.706/kWh 0-20 kWh : PhP137.64 PhP5.20 Commercial: PhP3.4027
succeeding kWh: PhP6.8819 Business PhP5.46 Industrial: PhP3.5783
5. Telecommunications
Telephone Rental
Residential
Installation PhP1,590 (installation charge) PhP500 23 PhP1,20015 waived
PhP50 (telephone unit)
Monthly billing PhP628.65 PhP540 PhP684-700 PhP700 (+10% VAT)
Business
Installation PhP2,335 (installation charge) PhP800 PhP1,500 waived
PhP500 (telephone unit)
Monthly billing PhP1,089.97 PhP950 PhP900-1,000 PhP1,200 (+10% VAT)
6. Internet Service Fees
Installation fee Waived PhP500-waived24 Residential: PhP2,000 Waived17
Business: PhP2,00016
E-mail account As low as PhP4,000/mo. Residential: 1 e-mail: free, Free-PhP825
each additional: PhP90
Business: 5 e-mails: free,
each additional: PhP90
Web account As low as PhP8,000/mo. Residential: 1st 10MB: free, PhP375-39,000
beyond: PhP136
Business: 1st 10MB: free,
beyond: PhP909
Subscription–depending on type PhP220-1,430 Residential PhP1,500-80,000
of plan and hours PhP1,995 (384 kbps)
PhP2,500 (512 kbps)
PhP3,000 (786 (kbps)
Business
PhP4,000 (512 kbps)
PhP8,000 (786 kbps)
PhP14,500 (1MBps)
7. Others
Household help w/ free board and lodging
Family driver PhP6,000 PhP5,000 PhP5,000-7,000 PhP1,500-2,50018
Cook PhP8,000-10,000 PhP3,000 PhP3,500-5,000 PhP1,000-2,500
Maid PhP3,000-5,000 PhP3,000 PhP2,000-5,000 PhP1,000-2,500
Fastfoods and restaurants
Set meals in fast food restau- $1-3 PhP45-120 PhP60-100 PhP45-84
rants
Executive lunch/buffet in $5-10 PhP250-500 PhP550-75019 PhP200-552
restaurants
Taxicab rates (aircon)
Flagdown for first 500m PhP25 Within Central Business PhP2520 PhP25
District: PhP50
Thereafter PhP2 To other destinations : PhP51-300 (Every 300m) PhP2 (Every 300m) PhP2
1 13
Clark Development Corporation Rates are from Davao City Water District, DCIPC
2 14
SGV Cebu Rates per kWh are taken from CIPC
3 15
Monthly rates are taken from various payroll services in the branch Telephone rates are from PLDT
4 16
Manpower rates are from Davao City Investment Promotion Center Internet rates are taken from PLDT
17
(DCIPC) Rates are from various ISPs in Davao, DCIPC
5 18
Rates are from Pryce Business Park and DCIPC Rates are taken from actual household survey by DCIPC
©2006 SGV & Co. All rights reserved.

6 19
Ave monthly rate of land located in MEZ, converted at $1=P56 Rates taken from various hotels in Cebu
7 20
Rate taken from Union Bank of the Philippines Rates taken from Department of Trade and Industry
8 21
Rate taken from Cebu Holdings, Inc. Rates are from Subicwater
9 22
Rates are from Cebu Investment Promotion Center (CIPC) Rates are from Subic Enerzone
10
Rates are from various hotels in Cebu 23
Rates are from Subic Telecom
11
Rates are from various hotels in Davao, DCIPC 24
Rates are from Infocomm Technologies
12
All rates for water residential and industrial are taken from Metro Cebu
Water District

65

The Philippines . . . at a Glance
Land Area: 300,000 km2 (115,830m2 );
archipelago of 7,107 islands
Capital: Manila (land area of 38.3 km2 )
Government: Democratic
Political System: The 1987 Constitution
provides for a presidential system of
government with a bicameral parliament
and three equal branches: the executive,
legislative, and judiciary
Population: 76.5 million (official result of
Census 2000)*
Population Growth Rate: 2.36% (actual
annual growth rate for 2003)
Population Density: 255 persons/sq. km.
(official result of Census 2000)
Life Expectancy: 67.8 years, male; 73.1
years, female (data as of 2005)
Literacy Rate: 92.6%
Languages Spoken: Filipino, English, Chi-
nese, and Spanish
Ethnic Background: Christian Malay, Muslim
Malay, Spanish, American, and Chinese
Major Religion: Predominantly Roman
Catholic (82.9%), Protestant (5.4%),
Islam (4.6%)
Ports of Entry: Manila, La Union, Aparri,
Legaspi, Subic Bay, Tabaco, Cebu, Iloilo,
Cagayan de Oro, Davao, General Santos,
Zamboanga
Climate: Tropical with a normal year-round
temperature of 320C (900F); dry and wet
Time Zone: GMT + 8 hours
Currency Unit: Philippine Peso (US$1 =
©2006 SGV & Co. All rights reserved.
PhP51.31 as of March 9, 2006)
_________________
*85.2 million (projected for 2005)
66
The Philippines
The People
Origin and Culture
Majority of the population are from the
Malay stock. Strong influences of Islamic,
Hindu, and Chinese cultures are also evi-
dent. Long before it was “discovered” in
1521 by the explorer Ferdinand Magellan,
the archipelago—eventually named the
Philippines after King Philip II of Spain—
already had trading relations with the
flourishing civilizations in the region. The
first Spanish settlement in the country was
established on the island of Cebu in the
Visayas in 1565. Spanish rule lasted
for 333 years. American colonial rule
followed and lasted for nearly 50 years.
Many aspects of Philippine culture today
reflect an eclectic cultural heritage.
Education
The literacy rate in the Philippines is
listed at 92.6% by the UNESCO Insti-
tute for Statistics. This rate is one of the
highest in Southeast Asia, higher than
that of Malaysia, Indonesia, Vietnam, and
Singapore.
Education is culturally very important to
the Filipino, and is usually regarded as a
means of moving up the social ladder.
This importance can be seen in the num-
ber of schools and students in the country.
Elementary schools numbered 41,688
in school year 2003-2004 and second-
ary schools, 8,091. Close to 13 million
students were enrolled in the elementary
level and 6.2 million in the secondary
level.
The Philippines is one of the Asian
countries with an edge in number of
universities, colleges, and institutions of
higher learning. As of March 2004, Higher
Education Institutions (HEI), including
satellite campuses, totaled 1,735, of which
1,316 were private and 173 were public.
State colleges and universities numbered
111. Total enrollment in the tertiary level
for school year 2002-2003 was recorded at
2.1 million.
Language and Skills
Filipino is the national language, although
over 80 dialects are spoken in different
parts of the country. English is widely
spoken and is the medium of communica-
tion in business and higher education. The
Spanish and Chinese languages are also
spoken by a small minority.
Filipinos are highly trainable and adept at
producing medium- to high-technology
products. Both skilled and unskilled work-
ers consistently rate well in quality of
work in surveys of executives in the Asian
region. The people are also recognized for
their management capabilities, computer
skills, craftsmanship, and design artistry.
 Religion

Christianity is the predominant religion in

the country, with Roman Catholics
comprising a major portion of the Chris-
tian population. Dominant Protestant
denominations include Baptists, Method-
ists, and Lutherans. Locally established
Christian churches, namely, the Iglesia ni
Kristo and the Philippine Independent
Church, together with Islam and Bud-
dhism, comprise less than 15% of the
population.

Population

Based on official results of the year 2000

national census, the country’s total
population has reached 76.5 million, and
is estimated to reach 85.2 million in 2005.
With a total land area of 300,000 square
kilometers (km2), the country has a popu-
lation density of 255 persons per sq. km. Celebes Sea on the south, and the South facility, has an area of 1,970 square kilo-
Urban population was placed at roughly China Sea on the west and north. meters and a coastline of 192 kilometers.
36.8 million, around 48.1% of the total
population. The Philippines is made up of 7,107 is- The country has two distinct seasons: the
lands and islets, making it one of the larg- dry season, from November to May, and
As of 2003, the size of the labor force was est archipelagos in the world. The islands the wet season, from June to October. The
estimated at 52.3 million, composed of are grouped into three geographic areas: different parts of the country experience
persons age 15 years old and over. Of this Luzon, the biggest island group where the varied weather conditions because of the
number, 60.3% were employed. capital city of Manila is located, Visayas, general airstreams that cross the islands,
and Mindanao. namely, the monsoons and tradewinds.
©2006 SGV & Co. All rights reserved.

The average annual rainfall in the Philip-

The Land
The Philippine archipelago lies off the
southeastern coast of mainland Asia. The
Pacific Ocean bounds it on the east, the
Topography is varied, consisting of
lowlands, high mountain areas, and a
coastline of 18,411 kilometers on which
there are 60 natural harbors. Manila Bay,
considered the country’s premier seaport
pines is about 2,030 millimeters. Temper-
ature ranges from 290 to 340C and humid-
ity varies from 70% to 85%, depending on
the time of year.

67

Fast Facts
Resource Base
The Philippines is one of the 10 most
biologically diverse countries in the world.
Despite a total land area of a mere 298,000
km2, Philippine forests contain over 15,000
plant species.
The Narra is an internationally known
Philippine hardwood used for making fine
furniture.
The Philippines has no wild animals of the size
and strain of those found in mainland Asia
and in Africa but is home to countless rare
species such as the tarsier, mouse deer, and
monkey-eating eagle.
The water buffalo (carabao) is indigenous to
the Philippines.
The Philippines is 88% water, with 36,000 km
of coastline, and is one of the few countries
in the world where 100% of its population live
within 100 km of the shoreline.
488 out of the 500 known coral species
of the world, 6 out of the 8 species of sea
turtles, and at least 23 species of marine
mammals can be found in the country's
waters.
More than 2,000 species of fish including
the economically important yellowfin, skipeye,
and bigeye tuna can be found in Philippine
seas.
The Resource Base
Crops
Philippine land is suitable for grow-
ing various crops including rice, corn,
coconut, sugarcane, tobacco, abaca, and
tropical fruit like banana and pineapple.
Forests
Most Philippine forests are of the tropical
rain-type and contain predominantly
dipterocarp varieties. Almost half of the
total land area of the country is classified
as timberland. Commercial hectarage is
mostly found in the Mindanao area and
Palawan.
Marine Resources
An abundant supply of marine products
can be harvested from the 167 million
hectares of Philippine waters. The coun-
try’s brackish water fishponds make up
a large area of developed fishponds in
Southeast Asia. A good potential for the
expansion of inland fishing remains, as
there are interisland waters and swamps
that may still be developed into fishing
areas.
Minerals
The Philippines has about 13 known
metallic and 29 nonmetallic mineral
resources. Metallic minerals available in
commercial quantity include copper, gold,
nickel, chromite, silver, iron, lead, zinc,
manganese, and mercury. Nonmetallic
mineral reserves of economic significance
include gypsum, salt, sand and gravel,
marble, limestone, clay, feldspar, dolo-
mite, carbide, rock phosphate, guano, and
pyrite.
Currency
The Philippine monetary unit is the peso
(PhP), divided into 100 centavos. Most
international currencies are accepted for
conversion into pesos and, in general, are
allowed to be freely sold and purchased
outside the local banking system.

The numerous coral beds are home to

pearl-oysters. The Philippine pearl is known
worldwide.

The 919-km nautical highway links Luzon,

Visayas, and Mindanao by land and sea routes
using the roll-on, roll-off (RO-RO) system of
terminals and ferryboats and other modes of
land transportation.
©2006 SGV & Co. All rights reserved.

68
 The Philippine Economy in 2005
Chart 1 Growth of Output, %
Economic Growth

The Philippine economy slowed down. 6.2 6.0

5.7
5.6
After accelerating to 6.0% in 2004, its 4.7
5.1
4.3 4.3
highest in the past decade, the economy
posted a moderate 5.1% growth in 2005
(see Chart 1).* Many of the challenges
remain in the horizon and are poised to
dampen growth prospects in 2006.
2002 2003 2004 2005
Agriculture Sources:
GNP GDP National Statistical Coordination Board (NSCB),
National Economic and Development Authority (NEDA)
In 2005, the agriculture sector grew by
2.0% or less than half its 4.9% ban-
ner performance in 2004 (see Chart 2).
Despite the government’s Agriculture and
Fisheries Modernization Act (AFMA)
program, the sector withered from the
Chart 2 Growth of Output by Sector, 2003 to 2005, %
high costs of farm inputs and the extended
dry spell induced by El Niño. Farmers 7.1
have reduced planted areas, particularly 6.0 6.3
5.8
in Visayas and Mindanao. Result: lower 5.1 5.2 5.3
4.7 4.9
agricultural yields except for the coconut
3.7 3.8
and banana. Both crops are among the
country’s leading agricultural exports. 2.0

Services
GDP Agriculture Industry Services
The services sector has become the
primary source of growth and provider 2003 2004 2005
Sources: NSCB, NEDA
of jobs in 2005. It posted a 6.3% growth
in 2005, on top of the 7.1% growth in
2004. Finance, which includes banks and
non-banks, led the services sector with
15.4%. The communications subsector,
particularly mobile communications,
sustained its robust performance with
a 14.8% growth. Other subsectors that
©2006 SGV & Co. All rights reserved.

posted above-average growth rates were

storage and service incidental to transport
(18.7%), domestic retail trade (5.9%),
medical and health (6.5%), and business

* Economic data are as of January 2006

69
 services (6.0%). The business services
Chart 3 Consumer Spending, in PhP billion subsector includes IT-enabled services
such as animation, contact centers, medi-
cal transcription, and business processing
Miscellaneous, 857 outsourcing.

Industry

Trans/commm, 374 Industry growth improved to 5.3%. Manu-

facturing, which accounts for two-thirds
Food, beverage of industry output, improved to 5.6%,
and tobacco, 1815
Utilities, 185 thanks to its four biggest subsectors food
manufacturing, petroleum and coal, elec-
trical machinery, and chemicals. Mining
Household operations, 396
also improved to 9.3% while construction
Household furnishings, 58
Apparel, 86 and electricity, gas, and water slowed
down.

Sources: NSCB, NEDA

Consumer Spending

Consumer spending remained the main

growth driver in 2005. Peso sales im-
proved to 12.8%. Food sales, which
account for about half of the household
Chart 4 CPI and Inflation by Commodity Group, 2002-2005 budget, grew by 12.2% (see Chart 3).
Transport & communications sales
22.0
rose 34.9% while fuel light, and water
20.0 18.0
increased 16.7%. But the double-digit
18.0
16.0
increases were due to higher prices. In
14.0 real terms, consumer spending moder-
11.8
12.0 ated. Spending on food slowed down
Growth, %

10.0
7.6
while purchases of fuel, light and water,
8.0 6.4 and household furnishings declined. The
6.0 4.5
3.5
sales of major and even small household
4.0
appliances fell considerably in 2005. By
2.0
contrast, the purchases of cars increased
0
2002 2003 2004 2005 by 10.2%. Consumer spending slowed
down despite the government’s increase in
Fuel, light & water Food and beverage legislated minimum wages and the record
Services Housing
growth in OFW remittances.
All items Clothing
©2006 SGV & Co. All rights reserved.

Source: NSCB

70
 Inflation

Inflation rose to 7.6% in 2005 on top of

the 6.0% average in 2004 (see Chart 4).
The price increases of basic goods like
food and beverages were lower than
inflation. But the prices of fuel, light, and
water soared 18.0%, while that of services
rose by 11.8%. With the high oil prices in
the world market and the implementation
of EVAT, inflation is expected to further
erode the households’ purchasing power. Chart 5 OFW Remittances, in US$ million
11000
10,689
Labor Force and Unemployment
10500

10000
The country’s labor force reached 37 mil-
lion in October 2005. In the World Com- 9500

petitiveness Yearbook Report 2005, IMD 9000

8,550
ranked the Philippine among the leaders 8500
in terms of availability and growth of
8000
skilled labor. Unfortunately, the domestic 7,578
economy has not generated enough jobs 7500

6,886
for its growing labor force. Unemploy- 7000

ment was estimated in October 2005 at 6500

10.3%. 6000
6,031

5500
Overseas Filipino Workers
5000
2001 2002 2003 2004 2005
Filipinos have increasingly taken ad-
Source: Bangko Sentral ng Pilipinas (BSP)
vantage of job opportunities overseas.
About a million OFWs are deployed in
America, Asia, Australia, Europe, and the
Middle East as professionals, technicians,
production or service workers, labor-
ers, or domestic helpers. The Philippines
is the second largest source of migrant
workers after Mexico. In January-Decem-
ber 2005, OFWs sent US$10.7 billion in
dollar remittances for a 25% growth over
the 2004 level (see Chart 5). The Philip-
©2006 SGV & Co. All rights reserved.

pines has become the largest recipient of

overseas remittances behind India, China,
and Mexico. These remittances fund basic
household needs, micro enterprise activi-
ties, and savings of households.

71
 Exports
Chart 6 Key Export Products, in US$ billion
The DTI reported US$41.2 billion of
Philippine merchandise exports in 2005
Electronics 27.3 (see Chart 6). In 2004, exports totaled
US$39.7 billion. Year-on-year growth was
Machinery 2.6
a negligible 3.9%.
Garments 2.2

0.8
Electronic products continued to be the
Other Industrial
country’s top export, accounting for
Processed Food 0.8 66.3% of total exports. The Philippines
Petroleum pdts 0.7 was given a #1 rating for high-tech ex-
ports in the IMD World Competitiveness
Coconut pdts 0.7
Yearbook 2005.
Others 6.1
Year-on-year growth of the sector,
0 5 10 15 20 25 30 however, was only 2.1%. Demand for
Source: DTI
electronics weakened in 2005 as people
curtailed spending in the aftermath of
surging oil prices.

The country’s other major export prod-

ucts were machineries and transport
equipment, garments, coconut products,
processed foods, other industrial manufac-
Chart 7 Key Export Markets, in US$ billion tures, and petroleum products. Machinery
represented 6.3% of total exports in 2005
Netherlands, 4.0 and increased by 8.0% in comparison with
China, PR, 4.1
2004 figures.
HK, SAR, 3.3

The United States and Japan were the two

Singapore, 2.7 biggest markets for Philippine exports.
Japan, 7.2
The US, with US$7.4 billion in exports,
accounted for 18% while Japan, with
Malaysia, 2.5
exports of US$7.2 billion, accounted for
17.5% (see Chart 7). Exports to the US
increased by 9.6% year-on-year, while
exports to Japan declined by 9.8% for the
Others, 10.1 USA, 7.4 comparable period. Other markets of note
were China, the Netherlands, Hong Kong,
©2006 SGV & Co. All rights reserved.

Source: DTI
Singapore, and Malaysia.

72
 Exporters have diversified to other devel-
oping economies in Western Europe, the Chart 8 Key Import Products, in US$ billion
Middle East, and the Caribbean. Exports
to these regions have grown at double- 12.0
digit rates. Electronics

Other Industrial
Economic arrangements with industrial
Petroleum 11.3
economies and emerging markets will products
6.2
help boost the country’s prospects in trade Machineries/
transport 3.8
and investment.
Chemicals 2.6
Imports 1.8
Processed food
Metal
The total value of imports was flat in manufactures
1.5

2005, with imports totaling US$47.0

Others 7.7
billion, higher by only 1.8% over 2004
figures (see Chart 8). Imports consisted 0.0 2.0 4.0 6.0 8.0 10.0 12.0
primarily of raw materials and inputs Source: DTI
for manufacturing exporters and other
producers. Manufacturers of electronic
products imported about US$12.0 billion
worth of electronic parts and accessories
for the manufacture or assembly of elec-
tronic components and products. Impor-
tations of other industrial manufactures
dropped by 15.6% to US$11.3 billion in Chart 9 Key Import Suppliers, in US$ billion
2005 from US$13.4 billion in 2004.
Taiwan, 3.4
China, PR, 3.0
The major suppliers in 2005 were the US Singapore, 3.7
S. Korea, 2.3
and Japan (see Chart 9). Imports from the
US declined by 4.0% in 2005 to US$8.2 Saudi Arabia, 2.2
billion in comparison with imports in
Japan, 8.0
2004.

Others , 16.0
USA, 8.2
©2006 SGV & Co. All rights reserved.

Source: DTI

73
 approved were the manufacture of petro-
Chart 10 Approved Foreign Direct Investment, in PhP billion chemical products and operation of power
plants. A total of 75,874 jobs are expected
180 to be generated by these approved invest-
160 155.5 ments.

140
Prospects for 2006
120
The 5.1% growth in 2005 fell short of the
100
5.3% target for the year. The slowdown
80 does not augur well for the economy.
59.4
60 Government has implemented reform
46.0 measures to address the chronic deficit,
40 34.0
resulting in improved ratings from Fitch
20 Ratings and Standard & Poor's. Mean-
while, oil prices hovered at US$60 a
0
2002 2003 2004 1st-3rd Q 2005 barrel and demand for electronic exports
Source: NSCB
remains soft. Political tensions continue
to build up. For 2006, government proj-
ects economic growth of 6.3% to 7.4%.
Private economists and donors project
growth of about 5%.
Approved FDI

FDI commitments for the three quarters The Political System

of 2005 contracted by 56% in comparison
with the same period in 2004. In the first
quarter of 2004, approved FDI soared to
PhP118.6 billion mainly because of the
approved application of the Republic of
Nauru for the operation of a power plant
in Bataan. In the first quarter of 2005, ap-
proved FDI totaled only PhP31.5 billion.
Expansions in approved FDI in the second
of third quarters of 2005 brought up the
total approved FDI as of October close to
PhP60 billion (see Chart 10).
Japan was the top source of approved
FDIs with pledges of about PhP23.5 bil-
©2006 SGV & Co. All rights reserved.
The Philippines is the first democracy
in Asia and considers June 12, 1898 its
Independence Day.
The country became a Spanish colony
during the 16th century and remained un-
der Spanish rule for over three centuries
before being ceded to the United States.
In 1935, the Philippines became a self-
governing commonwealth under President
Manuel Quezon. The country fell under
Japanese rule in 1942 before again attain-
ing independence in 1946.
The current Philippine government is

lion. Manufacturing was the top recipient divided into three branches: the execu-
of approved FDIs. Among the projects tive branch, the legislative branch, and

74
 the judicial branch. The executive branch
consists of the President—who is both
the chief of state and head of govern-
ment—and the cabinet. The legislative
branch is a bicameral congress consisting
of the Senate and the House of Repre-
sentatives. The judicial branch is made up
of a system of courts, the highest of which
is the Supreme Court.
Philippine democratic tradition was inter-
rupted during the 21-year rule of Ferdi-
nand Marcos, who declared martial law
in 1972. Under the Marcos regime, trade
remained liberalized but consolidated
and doled out to cronies. The system was
toppled in 1986 by the “People Power”
revolt, a bloodless revolution led by Cora-
zon C. Aquino. People Power inspired
nonviolent movements for democracy in
other countries.
Aquino was installed as President and
authentic democratic rule was restored.
She presided over the peaceful transfer
of power to her successor, Fidel Ramos.
The Ramos administration was marked by
greater stability and economic progress.
The government carried out key eco-
nomic reforms, implementing the BOT
scheme, allowing private sector participa-
tion in previously regulated sectors, and
encouraging private sector participation
in economic and social development. It
also passed the Local Government Code,
empowering local government units to
undertake economic activities in the
countryside.
©2006 SGV & Co. All rights reserved.
75
Joseph Ejercito Estrada succeeded Ramos
in 1998. His administration’s thrust was
to address the plight of the disadvantaged
sectors of society. However, his six-year
term was cut to three years after his
impeachment trial on corruption charges
led to widespread demonstrations—a
second People Power revolt—resulting
in his ouster in January 2001. His Vice
President, Gloria Macapagal-Arroyo, suc-
ceeded him. She was reelected as Presi-
dent in 2004.
The current administration’s Medium
Term Development Plan revolves around
Arroyo’s 10-point national development
agenda. This agenda covers the creation
of six to 10 million jobs, education for
all, balancing the national budget, and the
development of transport and digital infra-
structure to connect the entire country. It
also includes the provision of power and
water supply to all barangays; deconges-
tion of Metro Manila by developing new
centers for government and housing in
Luzon, Visayas, and Mindanao; and the
development of Subic and Clark into the
best international service and logistics
center in Asia. Specific targets include
the increase in growth to 7% or more up
to 2010, the reduction of poverty inci-
dence from 34% to 17%, the increase in
the investment rate from 19% of GDP to
28% in two years, the increase in exports
from US$38 billion to US$50 billion in
two years, the development of two million
hectares of agri-business land, and the de-
velopment of and support for two million
entrepreneurs.
Fast Facts
Politics
The Philippines is the first democracy in Asia.
Independence Day from Spain is June 12,
1898.
In February 1986, the inspiring People Power
phenomenon forced Ferdinand Marcos into
exile after a 21-year rule.
In January 2001, the Supreme Court
declared Joseph Estrada unable to rule in
view of mass resignations from his
government. Chief Justice Hilario Davide
Jr. administered the oath of office to then
Vice President Gloria Macapagal-Arroyo as
Estrada’s constitutional successor.
Economy/Business
In the World Investment Report 2002, the
United Nations Conference on Trade and
Development (UNCTAD) cited the Philippines
as one of the world’s export winners for its
improved export performance from 1985-
2000.
In Industrial Development Report 2002/2003:
Competing through Innovation and Learning,
the United Nations Industrial Development
Organization (UNIDO) cited the Philippines
among the biggest winners in the Industrial
Development Scoreboard.The Philippines,
together with China, moved up the industrial
performance rankings by 20 ranks between
1985 and 1998.
The number of mobile phone subscribers in
the Philippines increased from 6.4 million in
2000 to 32.9 million as of the end of 2004
according ot the latest Information Economy
Report of UNCTAD. With Filipinos making
extensive use of the short message service
(SMS) (otherwise known as text message) of
the country’s telecommunications companies,
the Philippines is considered the world leader
in per capita SMS usage.
 David L. Balangue
Chairman and Managing Partner
Cirilo P. Noel
Vice Chairman and
Deputy Managing Partner
Luis Y. Benitez, Jr.
Vice Chairman for Assurance and
Advisory Business Services
Amelia B. Cabal
Vice Chairman for
Financial Markets
Roman Felipe S. Reyes
Vice Chairman for Industries
SGV & Co. is the Philippines’ largest professional services firm with nine offices across the coun-
try. It employs over 1,800 people. SGV professionals from various disciplines provide integrated
solutions that draw on diverse and deep competencies in assurance, tax, and risk services. Up-
holding the highest standards of quality, the Assurance and Advisory Business Services division
of SGV & Co. has been ISO-certified since 1996.
SGV & Co.’s track record has remained unmatched in the region. It has accumulated invaluable
resources in its nearly 60 years of operation—highly qualified and competent staff, state-of-the-
art facilities, and an enviable international network. The Firm envisions not only to give value-
added services to its clients but, more importantly, to become a partner in their and the region’s
development.

SGV & Co. is a member practice of Ernst & Young Global. Ernst & Young, a global leader in
professional services, understands the business issues that are important to senior executives.
* * *
With extensive business knowledge and hands-on industry experience, the Ernst & Young
Washington SyCip organization can implement a broad array of solutions to help companies capture growth, improve
Founder
financial performance, and manage risk—
anywhere in the world. Its 107,000 people
serve as trusted business advisors in more
than 140 countries, offering auditing,
accounting, tax, and transaction advisory
services across all industries to many of
today’s leading global corporations as well
as emerging growth companies.
©2006 SGV & Co. All rights reserved.

76
 Services
Assurance and Advisory Business
Services
We have invested substantially in innovating
our global, risk-based audit methodology and
technology and knowledge enablers. All our
auditors are equipped with our global audit
process management and documentation
tools. The methodology is supplemented by
comprehensive standards and quality controls
that are applicable to every client engagement.
• External Audit
• Compilation and Review Services
• Accounting Consultations
• International Accounting Standards financial products and arrangements; transfer
Conversions and Advisory
• US Generally Accepted Accounting make us valuable to our clients. We also
Principles (GAAP) Conversion
• Regulatory Compliance
• Extended Audit Services
• Accounting Advisory and Consultation • Tax Compliance Review
Services on Deal Structuring
• Due Diligence Work
Luis Y. Benitez, Jr.
Head
Luis.Y.Benitez@ph.ey.com
Tel : (632) 894-8108/(0917) 894-8108
©2006 SGV & Co. All rights reserved.
77
Tax Services
We offer a full range of tax compliance, tax
advisory, tax planning, and tax outsourcing
services. We also provide advocacy work
before the Bureau of Internal Revenue,
the Bureau of Customs, the Department
of Finance, local governments, and other
agencies such as the Subic Bay Metropolitan
Authority, the Bases Conversion Development
Authority, the Philippine Economic Zone
Authority, the Securities and Exchange
Commission, and the Department of Trade
and Industry. Our tax advice on cross-border
transactions; corporate restructuring on
acquisitions, mergers, and consolidations;
pricing; contract review; and estate planning
prepare US 1040 and Philippine returns for
individuals.
• Tax Planning Engagement
• Tax Due Diligence Review
• Tax Advocacy/Controversy Work
• Litigation Support Services
• Investment Advisory Services
• General Advisory Services
• Transfer Pricing Services
• Customs Services
• Contract Tax Services/Outsourcing
• Income Tax Return Preparation
• Estate/Family Wealth Planning
• Tax Seminars
Cirilo P. Noel
Head
Cirilo.P.Noel@ph.ey.com
Tel: (632) 894-8144/(0917) 894-8144
Risk and Technology Services
We help you manage risk effectively while
executing your business strategies by
reviewing your company’s risk profile, sharing
our insights on the critical issues affecting
your business and industry, and providing
ongoing feedback through internal audits.
• Internal Audit Services
• Enterprise Risk Management
• Employment Solutions
• Treasury Risk Solutions
We offer comprehensive information
technology and security-related services
ranging from IT risk management and
assurance to IT controls and security design
and implementation. We help organizations
in their efforts to ensure that IT investments
support business strategies and provide
maximum security and risk mitigation in the
most cost-effective manner.
• Enterprise Systems Risk Management
• Enterprise Security Management
• IT Infrastructure Risk Management
Medel T. Nera
Head
Medel.T.Nera@ph.ey.com
Tel: (632) 894-8107/(0917) 894-8107
 SGV & Co Partners & Principals SGV & Co Offices
Vincent O. Abella
Emmanuel C. Alcantara
Florante A. Aseron
Ladislao Z. Avila, Jr.
Bennette A. Daplas-Bachoco
Teresita M. Baes
David L. Balangue
Ma. Fides A. Balili
Luis Y. Benitez, Jr.
Warren R. Bituin
Amelia B. Cabal Branches Head of Branches Cebu
Jessie D. Cabaluna
Mary Ann C. Capuchino
Aldrin M. Cerrado
Lucy L. Lim-Chan
Winston A. Chan
Emmanuel V. Clarino
J Carlitos G. Cruz
Romulo S. Danao, Jr.
Sharon Gabionza-Dayoan
Ramon D. Dizon
Josephine H. Estomo
Rossana A. Fajardo
Luis Jose P. Ferrer
Juanito A. Fullecido
Renato J. Galve
Manolito F. Gonzales
Martin C. Guantes
Eduardo B. De Guia
Arnel F. de Jesus
Joselito E. Lopez
Aris C. Malantic
Cynthia A. Manlapig
Melinda Gonzales-Manto
Leonardo J. Matignas, Jr.
Marydith C. Miguel
Manolito Q. Montes
Medel T. Nera
Cirilo P. Noel
Virginia T. Obcena
John C. Ong
Jose A. Osana
Feliza A. Peralta
Noel P. Rabaja
Mildred R. Ramos
Roman Felipe S. Reyes
Washington A. Roqueza
Jaime F. del Rosario
Ruben R. Rubio
Maria Vivian G. Cruz-Ruiz
Vicky B. Lee-Salas
Gemilo J. San Pedro
Fabian K. delos Santos
Veronica A. Santos
Gerard B. Sanvictores
Aileen L. Saringan
Rebecca Go Sarmenta
Jose Joel M. Sebastian
Protacio T. Tacandong
Mark Anthony P. Tamayo
Henry M. Tan
Wilson P. Tan
Joel L. Tan-Torres
Antonette C. Tionko
©2006 SGV & Co. All rights reserved.
Makati - Head Office
6760 Ayala Avenue, Makati City,
1226 Metro Manila, Philippines
PO Box 1408, Makati Central Post Office
0740 Metro Manila, Philippines
Tel: (632) 891-0307
Telex: EE 63743
Answerback: 63743 SGV PN
Fax: (632) 819-0872 / (632) 818-1377
E-mail: SGV_Information@sgv.com.ph
Protacio T. Tacandong Officers-in-charge:
Maria Madeira R. Vestil - Audit
E-mail: Protacio.T.Tacandong@ph.ey.com
Mobile: (0917) 894-8104 E-mail: Maria.Madeira.R.Vestil@ph.ey.com
Mobile: (0917) 894-8297
Bacolod Dalisay V. Bas-Catedrilla - Tax
Jessie D. Cabaluna E-mail: Dalisay.V.Bas-Catedrilla@ph.ey.com
E-mail: Jessie.D.Cabaluna@ph.ey.com Mobile: (0917) 894-8296
Mobile: (0917)894-8106 6/F, Ayala Life FGU Center
Officer-in-charge: Riz Ann Tonette U. Fernandez Mindanao Avenue corner
E-mail: Riz.Ann.Tonette.U.Fernandez@ph.ey.com Biliran Road, Cebu Business Park
Mobile: (0917) 301-2321 Cebu City
302 A Chan Building Tel: (032) 231-7551 to 55
Lacson St Mandalagan Fax: (032) 231-9539
Bacolod City
6100 Negros Occidental Davao
Tel: (034) 441-2861 to 62 Fabian K. delos Santos - Tax
Fax: (034) 441-2863 E-mail: Fabian.K.delos.Santos@ph.ey.com
Mobile: (0920) 961-8324
Baguio Officer-in-charge: Alicia O. Lu
Aileen L. Saringan E-mail: Alicia.Lu@ph.ey.com
E-mail: Aileen.L.Saringan@ph.ey.com Mobile: (0917) 894-8295
Mobile: (0917) 894-8150
8/F, Pryce Tower
Officer-in-charge: Mary Cresencia P. MacBean Pryce Business Park
E-mail: Mary.Cresencia.P.MacBean@ph.ey.com
JP Laurel Avenue
Mobile: (0917) 506-9789 Bajada, Davao City
Suite 3H, West Burnham Place Tel: (082) 227-3070
Kisad Road, 2600 Baguio City Fax: (082) 224-3857
Tel: (074) 443-9858
Fax: (074) 442-6509 General Santos
Fabian K. delos Santos - Tax
Cagayan de Oro E-mail: Fabian.K.delos.Santos@ph.ey.com
Officer-in-charge: Mirasol L. Padayhag Mobile: (0920) 961-8324
E-mail: Mirasol.L.Padayhag@ph.ey.com Officer-in-charge: Cedric M. Caterio
E-mail: Cedric.M.Caterio@ph.ey.com
Mobile: (0917) 712-0637
Mobile: (0917) 891-9915
2/F, Insular Life Building
Don Apolinar Velez St cor 2/F, SAFI Building II
Uldarico Akut St Mansanitas St corner
Cagayan de Oro City Magsaysay Avenue
Tel: (08822) 725-078; 726-555 9500 General Santos City
Tel: (083) 552-7001 to 02
Fax: (088) 856-4415
Fax: (083) 552-5314
Cavite
Juanito A. Fullecido Mactan
Officers-in-charge:
E-mail: Juanito.A.Fullecido@ph.ey.com
Mobile: (0918) 994-8120 Maria Madeira R. Vestil - Audit
Officer-in-charge: Christine I. Marquez E-mail: Maria.Madeira.R.Vestil@ph.ey.com
E-mail: Christine.I.Marquez@ph.ey.com Mobile: (0917) 894-8297
Mobile: (0917) 801-0398 Ma. Cristina C. Larrobis - Tax
E-mail: Ma.Cristina.C.Larrobis@ph.ey.com

Narciso T. Torres, Jr.
Bella B. Valdez
Ma. Victoria A. Villaluz
Romulfo B. Villamayor
Wilfredo U. Villanueva
Rafael C. Vinzon
Betty C. Siy-Yap
Jose Pepito E. Zabat lll
2/F, SGV Building III Mobile: (0917) 478-5773
Gen Trias Drive, Tejero
Rosario, Cavite 2/F, Block A
Tel/Fax: 741-1375; 845-2065 Mactan Marina Mall
Pusok, Lapu-Lapu City
Tel: (032) 340-7945 to 46
www.sgv.com.ph Fax: (032) 340-3507
www.ey.com

78
 Glossary of Frequently Used Abbreviations and Terms

AEP Alien Employment Permit IFRS International Financial Reporting Standards

AFMA Agricultural and Fisheries Modernization Act IMF International Monetary Fund
AFTA ASEAN Free Trade Agreement IPO Initial public offering
ARMM Autonomous Region of Muslim Mindanao IPP Investment Priorities Plan
ASEAN Association of South East Asian Nations IPR Intellectual property rights
BI Bureau of Immigration IT Information technology
BIR Bureau of Internal Revenue ITH Income tax holiday
BOI Board of Investments LGUs Local government units
BOT Build-Operate-Transfer MA Mineral Agreement
BPRT Branch profits remittance tax MCIT Minimum corporate income tax
BSP Bangko Sentral ng Pilipinas MFN Most-favored nation
Calabarzon Multisectoral project complex in Cavite, Laguna, MW Megawatts
Batangas, Rizal, and Quezon provinces in Napocor National Power Corporation
Southern Luzon NEDA National Economic and Development Authority
CDC Clark Development Corporation NHIP National Health Insrurance Progran
CITEM Center for International Trade Expositions and Missions North Quad Northwestern Luzon Growth Quadrangle integrating Ilocos Norte, Ilocos
CME Coco methyl ester Sur, La Union, Pangasinan, Abra, and Southern Benguet
CNG Compressed natural gas NPAs Nonperforming assets
CSEZ Clark Special Economic Zone NPC National Power Corporation
CWT Creditable withholding tax NPLs Nonperforming loans
DepEd Department of Education NSCB National Statistical Coordination Board
DENR Department of Environment and Natural Resources OBUs Offshore banking units
DOE Department of Energy OECD Organization for Economic Co-operation and Development
DOLE Department of Labor and Employment OFWs Overseas Filipino workers
DOT Department of Tourism PD Presidential Decree
DST Documentary stamp tax PECR Philippine Energy Contracting Round
DTI Department of Trade and Industry PEZA Philippine Economic Zone Authority
ECC Environmental Compliance Certificate PHIC Philippine Health Insurance Corporation
ECCP European Chamber of Commerce of the Philippines PICPA Philippine Institute of Certified Public Accountants
EDA Export Development Act of 1994 PSE Philippine Stock Exchange
EDC Export Development Council R&D Research and development
EIA Environmental Impact Assessment RA Republic Act
EIS Environmental Impact System RHQs Regional or Area Headquarters
EO Executive Order ROHQs Regional Operating Headquarters
EP Exploration Permit RORO Roll-0n, Roll-off
EPIRA Electric Power Industry Reform Act RWs Regional Warehouses
EPZ Export processing zone SBF Subic Bay Freeport and Special Economic Zone
FCDU Foreign currency deposit units SBMA Subic Bay Metropolitan Authority
FDI Foreign Direct Investment SEC Securities and Exchange Commission
FIA Foreign Investments Act SEIPI Semiconductor and Electronics Industries in the Philippines, Inc.
FINL Foreign Investments Negative List SME Small and medium enterprises
FTAA Financial or Technical Assistance Agreement SOCSKSARGEN Economic growth corridor in Mindanao consisting of South Cotabato,
FWT Final withholding tax Sultan Kudarat, Sarangani, and General Santos City
GDP Gross domestic product SPV Special-purpose vehicle
GNP Gross national product SRC Securities Regulation Code
GOCC Government-Owned and -Controlled Corporations SSS Social Security System
IAS International Accounting Standards TESDA Technical Education and Skills Development Authority
ICT Information and Communications Technology TIN Taxpayer Identification Number
IE Industrial estate VAT Value-added tax

All rights reserved Photo credits

©2006 SGV & Co. All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or Carla Madarang (cover), Willie de Vera (page 9), NAVEL
transmitted in any form or by any means without the prior permission of the publisher, Productions and The Animation Council of the Philippines,
or be otherwise circulated in any form of binding or cover other than that in which it is Inc. (page 11), Michelle Malasig (page 67), Jing Antonio
published and without a similar condition including this condition being imposed on the (page 68), EY Branding Zone (other photos)
subsequent purchaser.
While the publisher has taken every care with regard to the accuracy of the information Information in this brochure is as of March 2006.
in this brochure, it cannot be held responsible for any errors or omissions therein.

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© 2006 SGV & Co.

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