Fostering Competitiveness of the Philippines to attract Foreign Direct Investments from the US
-
Upload
roby-camagong -
Category
Economy & Finance
-
view
850 -
download
1
description
Transcript of Fostering Competitiveness of the Philippines to attract Foreign Direct Investments from the US
Team 9 Consultants Inc.Topnotch Global Talent
!Fostering Competitiveness of the Philippines to attract Foreign Direct
Investments from the US for Sustained Economic Growth
!Presented to: ! Amando Tetangco Jr. 10th Governor of the Central Bank of the Philippines ! Gregory Domingo Secretary of Trade and Industry !!Report by: Team 9 Consultants Inc. Balindal Suttatanachod, Branden Maes, Katrina Kalso, Roby Camagong, Wolfgang Feger
�1
Team 9 Consultants Inc.Topnotch Global Talent
!Table of Contents
!!!!!!!!!!!!!!!!!!!!!!!!
Executive Summary 3 1.0 Introduction 4 2.0 Competitiveness and Growth 5 3.0 Trends of Foreign Direct Investments in Southeast Asia 6 4.0 Hurdles for the Philippine Government 10 5.0 Public Policy and Government Action Recommendations 12 6.0 Conclusion 14 Appendix 15 Endnote Citations 22
�2
Team 9 Consultants Inc.Topnotch Global Talent
!!Executive Summary !This business report provides fact-based insights and analysis to help the Philippine government (Department of Trade and Industry and Philippine Central Bank) make the right decisions and trade-offs in making their economy more competitive to attract foreign direct investments from the US. The financial crisis has hampered both the developed and developing countries in a way that it has forced a shift in momentum from the West and put the pressure on emerging markets. US companies adapted to rigid changes in the economy by pursuing businesses elsewhere to build a stronger global presence. Despite the effects of the worldwide economic slowdown, which is still being felt around the world, the Philippines seems to remain largely unaffected. The latest positive changes in the social, political and economic sphere have helped the Philippines achieve its first investment grade rating from the three prominent international credit rating agencies. !Fostering economic growth and competitiveness is a big challenge for emerging markets in terms of policy making, government intervention, and regulations. Moreover, competitive economies can easily attract foreign direct investments to sustain their growth. Further investigations revealed that the trend for foreign direct investment has continuously increased from the 1990s up to this day. FDI has played a major role in driving economic growth, especially in Southeast Asia. In this report, we reviewed three countries which have seen the highest growth rate from 2008 to 2013; Philippines, Indonesia, and Malaysia. Our research reviewed the competitiveness and growth potential of certain sectors in the aforementioned economies. Research and analysis has shown us that economies with high competitiveness attract more FDI, which is good for the economic health of developing nations. Based on the cases of Indonesia and Malaysia, FDI has improved the employment, productivity, output and income with Philippines lagging behind. !Based on this report, we believe that the Philippines, given its current momentum and position in the global economy, can be more competitive by pushing for proper public policy changes, structural actions, and smooth execution. Our suggestions can help make the Philippines become one of the top choices for foreign direct investments from the U.S., improving the entire economy at large.!!!!!
�3
Team 9 Consultants Inc.Topnotch Global Talent
!1.0 Introduction !Five years after the global financial meltdown, economies and businesses share a common
goal of increasing their competitiveness and growth. The financial crisis has hampered both
the developed and developing countries in a way that it has forced a shift in momentum from
the West and put the pressure on emerging markets. U.S. companies adapted to the
demanding changes in the economy by pursuing business elsewhere to build a stronger global
presence. This phenomenon can be seen in the steep decline of inflows for developed
countries, as compared to the emerging markets of Asia . Empirical studies also show that 1
multinational corporations continue to invest in other developing countries even after the
financial crisis . 2
!The economic slowdown that is still being felt around the world seems to have not affected the
Philippines. The archipelago of 7,107 islands has been one of the fastest growing economies in
Asia. The country continued to perform well in the second quarter of 2013 with a 7.5%
growth . This is the economic revival led by President Benigno “Noynoy” Aquino III., through 3
cheap credit, aggressive government spending, increased investments in fixed capital, and high
consumer expenditure (Please see Exhibit 1 for the Average Lending Rates Trend). The latest
positive changes in the social, political and economic spheres have helped the Philippines
achieve its first investment grade rating from the three prominent international credit rating
agencies.
!Fostering economic growth and competitiveness is a big challenge to emerging markets in
terms of policy making, government intervention, and regulations. The trend for foreign direct
investment has been continuously increased from 1990s up to this day.
!After the privatization boom in the 1990s, there was a prevalent trend in foreign direct
investments in sectors of different countries that have labour-intensive, flexible labour market
and still have minimum wage. Even the U.S. economy benefited from both inflows and outflows
of foreign direct investments, complemented by stable economic fundamentals, strong growth
and low inflation. (Please see Exhibit 2 for the Foreign Direct Investment in the United States 4
�4
Team 9 Consultants Inc.Topnotch Global Talent
!and U.S. Direct Investment Abroad, Annual Flows). FDI has played a major role in driving
economic growth of the countries especially in Southeast Asia. In this paper, we reviewed the
three countries which have the highest growth rate from 2008 to 2013; Philippines, Indonesia,
and Malaysia. These countries have relatively friendly economic policies that have attracted
foreign investors. The inflow of FDI stimulate these Southeast Asian economies by increasing
exportation and employment ratings, as well as improving local labor skills.
!This business report provides fact-based insights and analysis to help the Philippine
government make the right decisions and trade-offs in order to make their economy more
competitive and poised for growth for attracting foreign direct investments from the US. We
analyzed the competitiveness of the selected countries in relation to its ability to attract foreign
direct investments and its subsequent growth afterwards.
!!2.0 Competitiveness and Growth !McKinsey defines competitiveness of a sector as the capacity to sustain growth through either
increasing productivity or expanding employment. Sector growth is equal to the total 5
contribution of that specific sector in the total GDP of the country. In our analysis, we focused
on the potential growth of certain sectors in the Philippines by understanding the measures and
factors that have been critical for building the competitive edge in each industry. Moreover, we
also selected pillars of competitiveness from the Global Competitiveness Index to further
analyze the role of enhancing the economic competitiveness of a country in attracting foreign
direct investments . We analyzed the competitiveness of the selected countries in relation to its 6
ability to attract foreign direct investments and its subsequent growth afterwards.
!In terms of competitiveness, countries in Southeast Asia, especially Philippines, Malaysia, and
Indonesia have performed outstandingly in recent years. Global competitive index shows that
Malaysia ranked 24th, Indonesia ranked 38th, and Philippines ranked 59th out of 148 countries in
!!
�5
Team 9 Consultants Inc.Topnotch Global Talent
!2013-2014 (Please see Exhibit 3 for Global Competitiveness Index and Exhibit 4 for GDP of
the three countries).
!3.0 Trends of Foreign Direct Investments in Southeast Asia !As a result of the robust growth of investments and cross-border M&A transactions in the
Southeast Asia region, we focused on what drives growth and competitiveness in different
sectors of the Philippine economy as compared to Malaysia and Indonesia and how foreign
direct investments is affected. 7
!Convenience of doing business
Of the selected countries, Malaysia has the most business-friendly environment in all aspects
especially in getting credit, in which it ranked first place among 189 countries around the world
(Please see Exhibit 5 for Philippine’s ranking in Doing Business). For Philippines and Indonesia,
performance in the categories of starting a business, enforcing contracts and resolving
insolvency still remains relatively weak mainly due to restrictive government regulations. Foreign
companies and government tend to avoid investing in countries with excessive bureaucracy,
strict labor laws and corruption.
!Labor and Employment
The competitiveness of a country is also measured by the quality of its working population and
unemployment rates. Philippines has a relatively high unemployment rate of 7%, compared with
Malaysia’s 6.1% and Indonesia’s 3% . Reviewing wages per hour also gives investors insight 8
into the labor costs that are associated with doing business in a certain country. Comparing
wage average per hour in manufacturing activities in 2012, Indonesia has low labor cost at
$0.8, while Philippines is at US$0.9. (Please see Exhibit 6 for the charted Unemployment Rate)
!Education
Higher education and high skilled labour are important factors when it comes to FDI activity.
According to Caves theory on FDI, education and high skilled labour are qualitative factors that
�6
Team 9 Consultants Inc.Topnotch Global Talent
!can motivate FDI inflows in a country . Companies will choose to invest in these intangible 9
assets as it is a source for competitive advantage. In connection with FDI inflows in the
Philippines, the English language skills of the labour force are a competitive advantage as well.
Also, the literacy rate has been relatively high in the Philippines (96.7%) as compared to other
Asian countries such as Malaysia (93.5%) and Indonesia (93.1%) . 10
!Infrastructure
Developed infrastructure mainly in transportation sectors such as airports, railways, and
highways can increase the incentive for investors to invest more by benefiting from low
transportation costs and logistical advantages. Malaysia ranked 29th in the world due to its
substantial government spending on infrastructure. Malaysia has outperformed Indonesia and
Philippines which ranked 61st and 96th, respectively. (Please see Exhibit 7 for the
Infrastructure Ranking of Philippines, Indonesia and Malaysia)
!Tax and Ownership Structure
Government regulations and the tax environment are very influential elements when considering
initial FDI and the ongoing effects of doing business in foreign countries. The Philippines is
operating on a relatively higher-tax structure compared to Malaysia, Indonesia and other East
Asian countries. From the business impact of policies on FDI, Malaysia performed the best
ranking 14th in the Global Competitiveness Index compared to Indonesia which ranked 61st
and Philippines ranked 86th. In order to attract FDI, the Malaysian government has removed
excessive restrictions in investment regulations through the New Economic Model (NEM)
established Prime Minister Najib Razak . 11
!Technology Readiness and Innovation
Technology readiness and the ability of a country to innovate are very important for industries
since they operate in a globalized economy, connected through technology especially the
internet and mobile broadband. Market liberalization and deregulated government policies
made Malaysia the most technology ready and innovative country among its peers. Foreign
!!
�7
Team 9 Consultants Inc.Topnotch Global Talent
!investors from the U.S. look at the ability of the country to cope with the fast-changing
technological industry to sustain growth for their businesses . 12
!Growing domestic demand and private consumption
Increasing domestic demand is a possible opportunity for growth for foreign companies. It
gives them an insight on how consumers behave. In this regard, Philippines has the highest
percentage of GDP at current market prices. This makes the country a very attractive market is
an opportunity for MNCs and foreign government to exploit.
!Non-economic factors
Natural Disasters
Since 1980, natural disasters in the Philippines have caused an average economic impact of
$239 million per year, affecting around 3.7 million people and killing 1,063 people. Between 13
2005 and 2013, the Philippines suffered its largest economic impact from storms, which cost
an estimated $29 million per event. On November 2013, Haiyan became the most intense
typhoon in recorded history that hit the archipelago. Fortunately, Haiyan will not significantly 14
derail the trajectory of the growing economy according to most analysts. With the high 15
occurrence of typhoons in the Philippines, this most recent disaster has shown the large risk for
foreign firms investing in a country where an already poor infrastructure could be further
damaged by natural disasters. In comparison, natural disasters in Malaysia cause an average
economic impact of $60 million per year affecting around 21,000 people and killing 40
people. Since 2005 and 2013, Malaysia has suffered its largest economic impact from 16
flooding, causing an estimated of $34 million per event. Next, natural disasters in Indonesia
cause an average economic impact of $761 million per year affecting around 698,000 people
and killing 6,209 people. Indonesia suffers the largest economic impact from natural 17
disasters, more than three times that of the second highest economically impacted country, the
Philippines. When considering which country to engage in foreign direct investment (with all
other factors aside), Indonesia is the largest country affected economically from natural
disasters, while the Philippines is the largest country to be affected in terms of death and
!
�8
Team 9 Consultants Inc.Topnotch Global Talent
!people affect per natural disaster. The impact of these natural disasters on the infrastructure of
these countries have the potential to drastically affect business activities and the development
of large impoverished populations. (Please see Exhibit 8 for the breakdown of economic
impact and costs by natural disasters)
!Corruption
Corruption in the public and private sector remains interrelated as businesses must work
closely with government agencies to ensure legality of practices with its foreign partner. The
Philippines, Malaysia, and Indonesia provide varying degrees of corruption which could have
harmful affects on business operating activities in terms of dealing with government and the
costs associated with corruption. According to Transparency International, the Philippines ranks
105th for least corrupt countries for public sector corruption. This is a high risk for foreign 18
direct investment engagements in the Philippines for the business. However, lost business due
to bribery is about 19% versus 30% in the United States. This remains below the current level 19
in our target investor which could be seen as positive. Next, Malaysia ranks 54th for least corrupt
countries for public sector corruption. This shows a lesser potential risk for foreign direct 20
investment engagements compared to the Philippines. Lost business due to bribery is seen by
businesses to be around 50%. This is a drastic increase from the United States home market 21
and further assessment of risk associated must be considered when doing business in this
country and business activities closely monitored. Last but not the least, Indonesia ranks 118th
for least corrupt countries for public sector corruption. This is a very high risk for foreign direct 22
investment engagements as compared to the Philippines and Malaysia and business practices
in this country will need to be closely monitored. In the Private sector, businesses in Indonesia
view 47% of their business lost to bribery. Bribery in Indonesia business deals, near the levels 23
of Malaysia, could be another impactful risk of doing business in this country and can be seen
as an opportunity for the Philippines to attract U.S. FDIs away from its peers.
!!!!!
�9
Team 9 Consultants Inc.Topnotch Global Talent
!4.0 Hurdles for the Philippine Government The research and analysis above showed that the economies with high competitiveness attract
more FDI which is indeed good for the economic health of developing nations. Based on the
cases of Indonesia and Malaysia, FDI has improved employment, productivity, output, and
income. The merits and costs of globalization has affected the flows of foreign direct
investments. The trends are mostly controlled by multinational companies in the emerging
markets. This section covers a number of areas that the Philippine government can improve to
better attract FDI from the United States.
!Ease of Doing Business
The Philippines suffers in the ease of doing business criterion. The high levels of corruption,
strict labor laws, and bureaucracy in business approvals prevent the country from attracting
investors. (Please see Exhibit 5 for Philippine’s ranking in Doing Business). The pervasive
corruption in the Philippines significantly compromises the business confidence for MNCs from
the U.S.
!Education, Labor Market and Population Skill Set
When it comes to government expenditure on education (3% of GDP), the Philippines lacks far
behind Indonesia (15.2% of GDP). (Please see Exhibit 9 for the relationship of Philippine
Government Spending and Student Population) This is due to the country’s deficit, which has
made it difficult for the government to invest more money in education. According to the World
Economic Forum’s Global Competitiveness Report 2013, the Philippines ranked 67th out of 148
countries in higher education and training. The Philippines must also deal with a severe 24
shortage of skilled workers within the manufacturing, healthcare, and information technology
industries. This is mainly due to major labour export of Filipino engineers and health
professionals who are leaving the country to seek better work opportunities abroad. With the 25
upcoming growth in the working population, the Philippine government faces a challenge on
equipping the population with the right skill sets.
!!!
�10
Team 9 Consultants Inc.Topnotch Global Talent
!Infrastructure and Business Environment
One of the most problematic factors for doing business in the Philippines is the inadequate
supply of infrastructure. Insufficient investment in infrastructure has hindered hinders the
Philippine’s competitiveness and growth potential. The resulting poor infrastructure has become
a major setback for the country’s economic development. Transportation systems suffer from
substandard quality. The most prominent ones are telecommunications, land and electricity.
Quality of infrastructure shows the readiness of a country to exploit opportunities in sectors like
information and communication technology. The challenge for the Philippine government is to
maintain the lending rate to sustain the growth of certain sectors that drive the competitive
edge of the country.
!Tax Environment
The tax system in the Philippines is less attractive for MNCs to invest in because of high tax
rates. According to Doing Business 2013, the overall tax rate as a percentage of total profits for
business operating in the archipelago is 46.6%. This is definitely a red flag for MNCs as they 26
try to keep the cost of doing business from taxes to a minimum. (Please see Exhibit 10 for
Summary of Tax Information for Philippines, Malaysia and Indonesia)
Innovation and Technology
ICT penetration in the Philippines has increased rapidly with over US$ 3.6Bn. The current 27
start-up trend in the U.S. signals a stronger demand for offices and businesses in the
developing countries. This again leads to the challenge for the Philippines is to maintain the 28
low-lending rate to sustain the growth of the sector.
!Non-economic factor
A comparison of natural disasters in the Philippines, Malaysia, and Indonesia shows the
potential economic and human risks associated with foreign direct investment in each country.
Natural disasters in Asia account for nearly 66% of the global total with the Philippines the
second highest asian country affected and Indonesia the third. Emerging economies in Asia 29
see disproportionate affects from natural disasters as basic services such as power, water, and
�11
Team 9 Consultants Inc.Topnotch Global Talent
!telecommunications as well as critical business activities supply chains and day to day
business operations are disrupted. (Please see Exhibit 11 for Estimated Damage Costs in the 30
Philippines relative to other countries)
!5.0 Public Policy and Government Action Recommendations By improving the competitiveness and growth of the Philippines, policy makers must take a
tailored approach on their responses and execution to successfully attract FDIs from the United
States.
Higher Investment in Education and Proper Implementation of K-12 curriculum. An
educated workforce solves the root cause of the labor market problem. The Philippine
government should invest more in its quality of labor through education. Talented workforce
attracts MNCs to choose Philippines as a place for doing business. Moreover, skilled
workforce support labor-intensive industries like business services, manufacturing,
healthcare and information technology. These are the industries that the Philippines can
improve on with proper employment. With the increasing working population in the
Philippines, we find it essential to increase the expenditures in education to equip the
population with the proper skill sets needed. Furthermore, the presence of MNCs will
increase the quality of employment opportunities in the Philippines. This will incentivize young
educated professionals to stay in the country, thus being part of the growing human capital
quantitatively and qualitatively instead of going abroad . 31
Proper Execution of Imposed Prudent Measures and Risk Management by the
Central Bank. With the Philippines being one of the fastest growing economies in Asia, the
country has seen rapid growth in sectors like real estate, technology, and the
communications sector. The levied lending rates of the Central Bank and the Commercial
Bank have fueled the growth. Moreover, the Central Bank has taken proper actions in
making sure that the demand will not be overestimated and the supply managed e.g.
implementation of BASEL III Capital requirements. The government should conduct a 32
thorough review and audit of the commercial banks and major real estate, construction, and
technology companies. A healthy financial system with reliable capital measures is a big
attraction for foreign companies and governments.
�12
Team 9 Consultants Inc.Topnotch Global Talent
!Restructure Tax Rates. Cost-savings is the most attractive criteria for U.S. MNCs in
deciding where to invest. MNCs put more weight (70%) on costs than any other criteria in
terms of coming up with the decision to invest in a developing country or not. The 33
Philippine tax rate is significantly higher than its Southeast Asian counterparts. By eliminating
this hurdle, the Philippines will have the capability to attract MNCs to invest in the
archipelago. Between 1995 and 2008, Ireland has developed a program to incentivize MNCs
through restructuring their tax and financial systems which has improved the economic
health of the country dramatically. The Philippine government can learn from Ireland’s action
and should play a vital role in facilitating collaboration by limiting sector policies and lowering
the tax rate.
Push for Transparency and Accountability. The Aquino Administration has definitely
restored confidence in the Philippine government confirming the aphorism of “good
governance is good economics.” In order to sustain growth and achieve competitiveness in
attracting FDI, we recommend that the Philippine government take on more structural
changes that push for transparency and accountability to prevent corruption. A
corresponding increase in confidence will make the country more competitive for future FDI
inflows.
Continue Additional Spending on Infrastructure and Research and Development.
The government should keep up with the pace of the fast-growing information and
communications technology sector both locally and globally. It can be done by increasing the
budget for public roads, buildings and telecommunications infrastructure, especially in rural
areas, to facilitate the growth of competitive sectors. Moreover, we believe that the
competitiveness of sectors matters more than the sector mix per se. In turn, this will help the
Philippine government to direct its efforts in propelling the competitiveness of certain sectors.
McKinsey also found in their research that countries that outperform their peers do not have
a more favorable sector mix but stronger individual sectors. We support the government’s 34
move to implement a stronger transport infrastructure program with the P137.7B budget
next fiscal year. We encourage them to continue allocating more budget in transportation
infrastructure until the next presidential elections (2016).
�13
Team 9 Consultants Inc.Topnotch Global Talent
!Tilt the Playing Field through Incentives. The government should create favorable
conditions for foreign productions. The government should revise its policy in protecting
investors and enforcing contracts to be competitive against its peers. (Please see Exhibit 12
for the Ranking of the Philippines in Doing Business) It can be done through a provision of
financial incentives for foreign operations of MNCs.
!6.0 Conclusion !A country that is more competitive can attract foreign investors to create more growth
opportunities. Our research and analysis further the theory of Blomstorm (1994) that the
competitiveness of local sectors attract foreign direct investments . In this particular case, we 35
believe that the Philippines, given its current momentum and position in the global economy,
can be more competitive by pushing for proper public policy changes, structural actions and
smooth execution. These suggested trade-offs can make the Philippines the top choice for
foreign direct investments from the U.S. that will improve the entire economy at large.
!!!!!!!!!!!
�14
Team 9 Consultants Inc.Topnotch Global Talent
!!Appendix !
Exhibit 1 !!Average Lending Rates in the Philippines
!source: http://brycggroup.com/category/bgperspectives/!
Exhibit 2
Foreign Direct Investment in the United States and U.S. Direct Investment Abroad, Annual Inflows, 1990-2011 (in billions of dollars) !!!!!!!!!!!!!!!!!!!!
�15
Team 9 Consultants Inc.Topnotch Global Talent
!Exhibit 3 !
Global Competitiveness Index !
source: http://www3.weforum.org/docsWEF_GlobalCompetitivenessReport_2013-14.pdf!!Exhibit 4 !
Gross Domestic Product (Indonesia, Malaysia and Philippines)
!source: http://www3.weforum.org/docsWEF_GlobalCompetitivenessReport_2013-14.pdf !!
Exhibit 5 !Breakdown of Economic Impact and Costs by Natural Disasters
Source: EuroMonitor. (2013, June 17). Emerging Focus: Natural Disasters Disproportionately Affect Emerging Market Economies.!!!!!
Global Competitiveness Index
Rank (Out of 148) Score (1-7)
Philippines 59 4.3
Malaysia 24 5
Indonesia 38 4.5
Country Economic Impact (per highest impact disaster)
People Killed (per common disaster)
People Affected (per common disaster)
The Philippines $29 million 123 477,641
Malaysia $34 million 6 17,614
Indonesia $11.3 million 2,360 111,101
�16
Countries Populations (in M)
GDP (US Bn) GDP Per Capita (US)
GDP (PPP) as share (% of the world total
Inflation
Philippines 94.9 250.3 2,614 0.51 4.3
Malaysia 28.9 303.5 10,304 0.60 1.7
Indonesia 242.3 878.2 3,592 1.46 3.1
Team 9 Consultants Inc.Topnotch Global Talent
!!Exhibit 6 ! !
Unemployment Rate !!!!!!!!!!!!!!!!!source: http://www3.weforum.org/docsWEF_GlobalCompetitivenessReport_2013-14.pdf !!!!
Exhibit 7 !Infrastructure Ranking of Philippines, Indonesia and Malaysia
!!source: http://www3.weforum.org/docsWEF_GlobalCompetitivenessReport_2013-14.pdf !!!!!!!!
Infrastructure Rank (out of 148) Score(1-7)
Philippines 96 3.4
Malaysia 29 5.2
Indonesia 61 4.2
�17
Team 9 Consultants Inc.Topnotch Global Talent
!!!!!Exhibit 8 !
Philippine’s ranking in Doing Business
Source : http://www.doingbusiness.org/data/exploreeconomies/malaysia/ http://www.doingbusiness.org/data/exploreeconomies/philippines/ http://www.doingbusiness.org/data/exploreeconomies/indonesia/ !!!!!!!!!!!!!!!
Topic Philippines Indonesia MalaysiaStar%ng a business 175 170 16Dealing with construc%on permits 88 99 43Ge@ng electricity 121 33 21Registering property 101 121 35
Ge@ng Credit 86 86 1Protec%ng Investors 52 128 4
Paying taxes 137 131 36Trading Across Borders 54 42 5Enforcing Contracts 147 114 30Resolving insolvency 144 100 42
�18
Team 9 Consultants Inc.Topnotch Global Talent
!!!!!!Exhibit 9 ! !
Relationship of Government Spending and Student Population !
!source:www.comparativist.org/ceshk-2013-does-the-philippines-really-need-k-12/ !!!!!!!!!!!!!!!!!!!
�19
Team 9 Consultants Inc.Topnotch Global Talent
!!!!!Exhibit 10 !
Summary of Tax Information for Philippines, Malaysia and Indonesia
source:http://portal.euromonitor.com/Portal/Pages/Analysis/AnalysisPage.aspx !!!!!!!!!!!!
Phillipines Indonesia Malaysia
High Tax rates Doing Business Report:“Paying taxes” – No 143 out of 185 !Cumberstone tax system. !!!!!Corporate income tax 30% in 2013, unchanged since 2010 Regional operating headquarters can enjoy a lower tax rate of 10% The value added tax rate is set at 12% in 2013 Tax rates of company profits in 2012 was 46.6%
Fairy competitative tax rates Doing Business Report:“Paying taxes” – No 131 out of 185 !Complicated tax system, although reforms including expansion of tax offices network have been carried out since 2010 to ease payment process. !!Corporate income tax stood at 25% in 2012, unchanged since 2010. Tax rates of company profits in 2012 was 34.5%. VAT rate 10% !Corruption: In 2011 10 to 12 mill companies did not pay their taxes.
Relatively low tax rates Doing Business Report: “Paying taxes” – No 15 out of 185 !Has implemented major tax reforms including the introduction of a single-tier system in 2008, which has made the tax system more simple and business-friendly. !Corporate income tax was 25% in 2012, unchanged since 2009. SMEs are subject to more favourable tax rates at 20% for the first 500,000 RMB of taxable income and 25% for the rest. Tax rate of total company profits in 2013 24.5%. Tax evasion has lead to Inland Revenue Boars(IBR) planning to strengthening the collection of tax revenue by launching investigations.
�20
Team 9 Consultants Inc.Topnotch Global Talent
!!Exhibit 11 !
Estimated Damage Costs in the Philippines relative to other countries
!Source: EuroMonitor. (2013, June 17). Emerging Focus: Natural Disasters Disproportionately Affect
Emerging Market Economies.!!Exhibit 12 !
Ranking of the Philippines in Doing Business
Source: Doing Business, http://www.doingbusiness.org/rankings
Country Ease of Doing Business
Getting Credit Protecting Investors
Enforcing Contracts
United States 4 2 3 9
The Philippines 108 14 19 17
Malaysia 6 1 3 5
Indonesia 120 14 8 19
�21
Team 9 Consultants Inc.Topnotch Global Talent
Endnote Citations
�22
� Kekic, L. (n.d.). Global Economic Crisis ad FDI Inflows to Emerging Markets. In Global Economic Crisis ad FDI Inflows to 1
Emerging Markets. Retrieved December 1, 2013, from http://www.vcc.columbia.edu/pubs/documents/KekicPerspective-Final.pdf
� Contessi, S., & Li, L. (n.d.). Foreign Direct Investments in the United States During the Financial Crisis. In Research St. Louis. 2
Retrieved December 1, 2013, from http://research.stlouisfed.org/publications/es/12/ES_2012-06-01.pdf
� Trading Economics - Philippines' GDP. (n.d.). In Trading Economics. Retrieved December 1, 2013, from 3
www.tradingeconomics.com/philippines/gdp-growth-annual
� Congressional Research Service Congressional Research Team. (n.d.). Congressional Research Services. In Congressional 4
Research. Retrieved December 1, 2013, from www.fas.org/sgp/crs/misc/RS21118.pdf
� McKinsey & Company McKinsey Global Institute. (n.d.). How to Compete and Grow. In Economic Studies. Retrieved 5
December 1, 2013, from www.mckinsey.com/insights/economic_studies/how_to_compete_and_grow
� WEF - Global Competitiveness Index 2013-2014. (n.d.). In World Economic Forum. Retrieved December 1, 2013, from 6
www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf
� Merger Market. (n.d.). Southeast Asia M&A Trend Report. In Merger Market. Retrieved December 1, 2013, from http://7
www.mergermarket.com/pdf/SouthEastAsiaTrendReportQ1-Q32013.pdf
� Global Competitiveness Index 2013-2014. (n.d.). In World Economic Forum. Retrieved December 1, 2013, from 8
www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf
� Alenka S. Giese, William J. Kahley and Roger F. Riefler. Foreign Direct Investment: Motivating factors and economic impact. 9
Journal of Regional Analysis and Policy, 1990, vol. 20, issue 1
� http://portal.euromonitor.com/Portal/Pages/Analysis/AnalysisPage.aspx10
� U.S. Department of State. (n.d.). Investment Climate. In Malaysia. Retrieved December 2, 2013, from http://www.state.gov/11
e/eb/rls/othr/ics/2012/191191.htm
� World Economic Forum. (n.d.). Global Competitiveness 2012-2013. In WEF. Retrieved December 2, 2013, from http://nmi.is/12
media/92463/wef_globalcompetitivenessreport_2012-13.pd
� Philippines Disaster Statistics (2010). In PreventionWeb. Retrieved November 27, 2013, from http://www.preventionweb.net/13
english/countries/statistics/?cid=135
� Typhoon Haiyan death toll jumps to 5,235 in Philippines (n.d.). In CNN. Retrieved November 28, 2013, from http://14
edition.cnn.com/2013/11/22/world/asia/philippines-typhoon-haiyan-deaths/
� Thomson Reuters. http://in.reuters.com/article/2013/11/28/philippines-economy-gdp-idINDEE9AR02420131128?15
type=economicNews
� Malaysia Disaster Statistics (2010). In PreventionWeb. Retrieved November 27, 2013, from http://www.preventionweb.net/16
english/countries/statistics/?cid=105
� Indonesia Disaster Statistics (2010). In PreventionWeb. Retrieved November 27, 2013, from http://www.preventionweb.net/17
english/countries/statistics/?cid=80
� 2012 Corruption Perceptions Index (2012). In Transparency International. Retrieved November 27, 2013, from http://18
cpi.transparency.org/cpi2012/results/
� Putting Corruption out of Business (2012.). In Transparency International. Retrieved November 27, 2013, from http://19
www.transparency.org/research/bps2011
� 2012 Corruption Perceptions Index (2012). In Transparency International. Retrieved November 27, 2013, from http://20
cpi.transparency.org/cpi2012/results/
� Putting Corruption out of Business (2012.). In Transparency International. Retrieved November 27, 2013, from http://21
www.transparency.org/research/bps2011
� 2012 Corruption Perceptions Index (2012). In Transparency International. Retrieved November 27, 2013, from http://22
cpi.transparency.org/cpi2012/results/
� Putting Corruption out of Business (2012.). In Transparency International. Retrieved November 27, 2013, from http://23
www.transparency.org/research/bps2011
� Global Competitiveness Index 2013-2014. (n.d.). In World Economic Forum. Retrieved December 1, 2013, from 24
www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf
� Euromonitor. http://portal.euromonitor.com/Portal/Pages/Analysis/AnalysisPage.aspx25
� Doing Business. http://www.doingbusiness.org/data/exploreeconomies/philippines/26
� Yapyuco, A. (n.d.). Philippines and IT Market Summary. In Philippines and IT Market Summary. Retrieved December 2, 2013, 27
from http://www.slideshare.net/zinnov/philippines-country-and-it-market-report-summary?fb_action_ids=10153573409745230&fb_action_types=slideshare%3Adownload&fb_source=other_multiline&action_object_map=%5B3
� Yapyuco, A. (n.d.). Philippines and IT Market Summary. In Philippines and IT Market Summary. Retrieved December 2, 2013, 28
from http://www.slideshare.net/zinnov/philippines-country-and-it-market-report-summary?fb_action_ids=10153573409745230&fb_action_types=slideshare%3Adownload&fb_source=other_multiline&action_object_map=%5B3
� EuroMonitor. (2013, June 17). Emerging Focus: Natural Disasters Disproportionately Affect Emerging Market Economies. In 29
EuroMonitor: Passport. Retrieved November 29, 2013
� EuroMonitor. (2013, June 17). Emerging Focus: Natural Disasters Disproportionately Affect Emerging Market Economies. In 30
EuroMonitor: Passport. Retrieved November 29, 2013
� http://portal.euromonitor.com/Portal/Pages/Analysis/AnalysisPage.aspx31
� Basel III. http://www.bis.org/bcbs/basel3.htm32
� McKinsey Global Institute. (n.d.). Philippines Offshoring. In Mckinsey & Company. Retrieved December 2, 2013, from http://33
www.mckinsey.com/insights/asia-pacific/the_philippines_offshoring_opportunity
� McKinsey & Company. www.mckinsey.com/insights/economic_studies/how_to_compete_and_grow34
� Denisia, V. (n.d.). Foreign Direct Investment Theories. In Academy of Academic Studies. Retrieved December 2, 2013, from 35
http://ejist.ro/files/pdf/357.pdf
Team 9 Consultants Inc.Topnotch Global Talent
�23