The Philippines is currently accepting applications from companies to participate in its Inclusive Business (IB) program. The program is intended to help reduce poverty across the nation by encouraging businesses to set up their operations in areas that have been identified as economically disadvantaged.
In return for basing their operations in these areas, businesses will be granted a range of financial and other incentives. The program will initially focus on the areas of Mariveles (Bataan), Cavite, Mactan (Cebu), and Baguio.
Unilever says yes
Major international companies are already seeking to take advantage of the new program. Unilever Philippines has already submitted its application to the Philippine Board of Investment (BOI). The company’s participation is part of a wider strategy to expand its operations throughout the country, which will include US$120 million upgrade of its manufacturing infrastructure. The upgrades involves importing new equipment, updating existing technology, and expanding the asset base.
In order to qualify for the IB program, businesses must commit to setting up their operations in areas that have been classified as economically disadvantaged. In return for this, and a commitment to sustainable farming of tamarind, tea, cocoa and vanilla, Unilever will receive benefits such as:
- An income tax holiday lasting four to eight years
- Zero import duties on capital equipment
- Simplified business procedures, such as reduced paperwork
While the IB program is certainly a step in the right direction vis-à-vis the Philippines government’s treatment of foreign-invested companies, there are still a number of economic restrictions hindering foreign investors.
For example, foreign-ownership continues to be restricted by the 60/40 capital rule, which allows the foreign investor and domestic partner to own 40% and 60% of their enterprise respectively.
Additionally, a dividend tax rate of 30% is applied to foreign investors, while local companies are only liable for a rate of 15%. Compounding this problem, countries such as Vietnam have zero dividend taxes for companies.
Because of the residents’ fluent English and high productivity, labor costs in the Philippines are among the highest in Southeast Asia. Myanmar has the lowest labor costs in the region.