DEVELOPING THE INFRASTRUCTURE FOR GLOBAL COMPETITION

The Philippines has a well-developed communication, transportation, business and economic infrastructure that make it an ideal center for operations for global business. It is highly accessible to the world by air, water and cyberspace.

Its location in the region is truly central. It is the only country that is less than four hours away from the major capitals of the region. This has made it the address of choice for the Asia-Pacific hubs of both UPS and FedEx, the two biggest names in air express delivery.

An Invigorated Aviation Industry

Most major airlines have daily or multi-weekly flights in and out of Manila to Asian capitals, and to key cities in the United States, Europe, and the Middle East. The country has 8 international airports, and over 200 airports that connect destinations across the islands.

Recent developments in the inter-island shipping and domestic aviation industries have witnessed the entry of more players. This creates a competitive marketplace, which spark the improvement of facilities and services.

Fast-Tracking Port Development

Fair competition, as well as transparency, bolsters the efforts to privatize and modernize Philippine ports. This augurs well for an archipelago with a coastline measuring over 36,289 kilometers (longer than that of the United States), and with many natural harbors. In key economic areas, some of these harbors have already been developed into modern ports and container terminals that play host to national and international trade. The ports dock both passenger and cargo ships. Passenger traffic is steady between the country’s major island groups.

The country’s container terminals are well equipped to handle cargo traffic at the highest levels of efficiency. The Manila International Container Terminal is constantly cited as one of Asia’s top five in terms of efficiency.

The Philippines’ accessibility by air and sea makes it a prime location for export-oriented businesses, which are highly dependent on effective and on-time import and export schedules.

Building for Limitless Growth

The three main islands of Luzon, Visayas and Mindanao, are made accessible by a network of roads, waterways, and airports. Once remote areas are now centers for business, industry and residential development. Progress in these areas has been bolstered by infrastructure support for transportation (roads, airport, seaports, terminals), power, water (dams, water supply) community (public markets, commercial centers) and tourism-related structures.

The building of critical infrastructure has been made possible by economic reforms emphasizing regional growth; and by the landmark Build-Operate-Transfer or BOT legislation that allows private investors to build and operate infrastructure, then turn it over to the Philippine government after a set period of time.

Connected to the World 24-7

The world today communicates with impressive speed and in a variety of ways, with real-time, precision connectivity.  Despite more modest communication infrastructure capabilities, the Philippines nevertheless assures investors of efficiently communicating their business message to the rest of the world, through world-class transmission facilities.

The country's communication infrastructure is well-developed and expanding, a high quality, low cost bandwidth domestic network, with six available platforms: fixed line, cellular, cable TV, over the air TV and radio, and the VSAT system. Year 2003 figures approximate usage at 4.0 million telephone main lines and 18.0 million mobile cellular phones. The Philippines has earned the informal title of “Wireless Champion" because its cellular phone users outpace the rest of the world in accessing the Short Messaging System (SMS) service, or simply, “texting," where plain text data is sent from cellular phone to cellular phone.

This is made possible with fiber optic cable as primary backbone network with satellite as backup. Nine international carriers, six cellular operators, and five nationwide and seventy long distance and local carriers make up a highly competitive telecom sector.

International connectivity has spurred flourishing Internet usage. First quarter of  2004 figures cite 4 million Internet users. The ease by which Filipinos speak and comprehend English has made them avid consumers of Internet technology and mass media. With a constantly developing communication infrastructure, they are updated and well versed on world events, market trends and international business.

The business process outsourcing (BPO) and information technology-enabled services (ITES) sectors fall under the government's Investment Priorities Plan, a list of promoted areas of investments issued annually by the Board of Investments (BOI) under the Department of Trade and Industry (DTI). As such, investors in the local information and communications technology (ICT) industry enjoy fiscal incentives such as income-tax holidays, exemption from taxes and duties on spare parts, additional deductions from taxable income, and exemption from wharfage dues and export taxes, duties, imposts, and fees. The government's investment policies likewise provide non-fiscal incentives to ICT investors, which include employment of foreign nationals in supervisory, technical, or advisory positions; simplified customs procedures; and duty-free importation of consigned equipment.

The Philippine Economic Zone Authority (PEZA, www.peza.gov.ph) is a government corporation set up to oversee the promotion of world-class economic zones (ecozones) and the establishment of ready-to-occupy locations for foreign investments. The agency has put in place additional incentives for ecozone locators and IT investors, developers, and operators.

For ecozone developers and operators, the following incentives are available:

• Income-tax holiday
• Incentives under the Build-Operate-Transfer Law (BOT Law), including government support for accessing official development assistance and other sources of financing
• Vital off-site infrastructure facilities
• Option to pay a special 5% gross income tax, in lieu of all national and local taxes
• Permanent resident status for foreign investors and immediate family members
• Employment of foreign nationals
• Assistance in the promotion of economic zones to local and foreign locator enterprises

For ecozone and IT locators, the following incentives are offered:

• Income-tax holiday or a four-year exemption from corporate income tax, extendable up to eight years, with the option to pay a special 5% tax on gross income in lieu of all national and local taxes after the tax holiday
• Exemption from duties and taxes on imported capital equipment, spare parts, supplies, raw materials
• Domestic sales allowance equivalent to 30% of total sales
• Exemption from wharfage dues and export taxes, imposts, and fees
• Permanent resident status for foreign investors and immediate family members
• Employment of foreign nationals
• Simplified import and export procedures
• Other incentives under Executive Order 226 (Omnibus Investment Code of 1987), as may be determined by the PEZA Board

(Source: "PEZA Incentives")

The Board of Investments, an attached agency of the Department of Trade and Industry (DTI), is the lead government agency tasked with promoting investments in the Philippines. The BOI assists local and foreign investors in appropriate and profitable areas of economic activities and offers a separate range of incentives to ICT investors, which include the following:

• Income-tax holiday
• Exemption from taxes and duties on imported spare parts
• Exemption from wharfage dues and export taxes, duties, imposts, and fees
• Tax credits
• Additional deductions from taxable income

(Source: "BOI Incentives")