The White Paper on Business and Investment in the Philippines for Taiwan Investors Organizing unit: Taiwan Association INC. Philippines (TAP) Asia Taiwanese Chambers of Commerce World Taiwanese Chambers of Commerce Commissioned unit: Chung-Hua Institution for Economic Research 17 December 2018 The White Paper on Business and Investment in the Philippines for Taiwan Investors Project director: Chang-cheng Ye Researchers: Yu-wen Lu, Zhe-ren Wang, Jia-jin Guo Contents Contents ........................................................... i Table ............................................................. vi Chart ............................................................ vii Acknowledgments ................................................ viii Abstract .......................................................... ix Part 1 Summary ..................................................... 1 A. Origin ................................................................................................................... 1 B. Taiwan-Philippines bilateral economic and trade relationships ..................... 4 C. Overall Business Environment in the Philippines ............................................ 6 1.Rapid economic development in the Philippines shows bright prospects for growth .......................................................................................................... 6 2.The Philippines actively participates in global economic .............................. 8 3. The Philippines has become one of the main overseas investment countries for Taiwanese enterprises ........................................................ 10 4. The business environment in the Philippines continues to improve ......... 11 Part 2 Issues of concern to Taiwan enterprises and their suggestions for improvement ...................................................... 19 A. History and overview of Taiwanese investment in the Philippines ............... 19 1. History of Taiwanese investment in the Philippines ................................... 19 2. Overview of Taiwanese investment in the Philippines ................................ 22 (1) Overall investment overview .................................................................... 22 (2) The current landscape//structure//presence of Taiwanese enterprises in the Philippines ........................................................................................ 27 3. Substantial contributions of Taiwanese investment in major industries in the Philippines ........................................................................................... 28 4. Investment prospects for Taiwanese enterprises in the Philippines .......... 36 B. Common Issues and suggestions ...................................................................... 38 1. Legal and administrative issues (Related ministries: various ministries in the Philippines, Board of Investment （BOI）of the Department of Trade and Industry) .................................................................................... 38 (1) Laws and Regulations ................................................................................. 38 Raising the level of systemization and digitization of the regulatory system i and administrative governance, increasing transparency of the interpretation of laws and regulation .................................................................. 38 (2) Implementation procedure ...................................................................................... 41 Simplifying administrative procedure to increase the efficiency of administrative operations .................................................................................... 41 2. Labor issues (related ministry: Department of Labor and Employment in the Philippines) ............................................................................................... 42 (1) Work permit ............................................................................................................ 42 3. Human resources (related ministries: Department of Labor and Employment, Ministry of Education in the Philippines) ............................ 45 (1) Skilled labor ........................................................................................................... 45 4. Trade issues (related ministries in Philippines: Department of Finance, Department of Trade and Industry, Department of Foreign Affairs) ....... 46 (1) Tariffs and Customs ................................................................................................ 46 Promoting Taiwan-Philippines cooperation on trade and lowering bilateral tariff barriers ....................................................................................................... 46 Enhancing transparency, promoting convenient and speedy customs clearance, reducing administration and transaction costs for import/export ....................... 48 (2) Industry supply chain ............................................................................................. 50 Enhancing Taiwan-Philippines industry links to assist with further integration of Philippine industry with the global supply chain. .......................................... 50 5. Investment issues (related ministries in Philippines: National Economic and Development Authority (NEDA), Department of Trade and Industry (DTI), Securities and Exchange Commission (SEC) ................................... 51 (1) Loosening restrictions on investment by foreign enterprises ................................. 52 Loosening restrictions on investment by foreign enterprises in Philippine industry to attract more long-term foreign investment ....................................... 52 (2) Threshold for foreign enterprises’ operation in the retail industry ......................... 55 Lowering the threshold for foreign enterprise operation in the retail industry to enable Taiwanese enterprises the participate in business opportunities in the Philippines .......................................................................................................... 55 6. Tax issues (related ministries in Philippines: Department of Finance, Department of Foreign Affairs) ..................................................................... 57 ii (1) Enterprise income tax ..................................................................................... 57 Harmonizing tax rate with ASEAN to close the tax gap and thus reduce the burden on enterprises .................................................................................. 57 (2) Bilateral tax agreements ................................................................................. 58 Promptly enacting the Taiwan-Philippines Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion to protect the right of Taiwan enterprises to reasonable taxation .............................................. 58 7. Infrastructure issues (related ministries in Philippines: Department of Energy (DOE), Department of Transportation and Communications of the Philippines (DOTC), Department of Information and Communications Technology (DICT) ........................................................ 59 (1) Electricity fees ................................................................................................ 59 Promoting reasonable and feasible energy and energy saving policy and enhancing electricity infrastructure construction to stabilize electricity supply quality and reduce electricity supply costs ..................................... 59 (2) Infrastructure facilities ................................................................................... 62 Comprehensive transportation and communications infrastructure ................ 62 (3) Mobile communication network coverage and quality .................................. 64 Improving mobile communication network coverage and quality .................. 64 C. Industrial issues and suggestions ..................................................................... 66 1. Financial Sector (related ministries in Philippines: The Central Bank of the Philippines (Bangko Sentral ng Pilipinas (BSP,) Department of Finance, Department of Agriculture) ........................................................................ 66 (1) Banking Industry ............................................................................................ 66 Enhancing project credit loans and constructing a credit information system, enabling banks to help the agricultural industry and MSMEs obtain necessary funding ....................................................................................... 66 2. Medical equipment industry (related ministries in Philippines: Department of Health) ..................................................................................................... 68 (1) Document review period excessively long ..................................................... 68 Shortening review time for licenses/certificates .............................................. 68 Part 3 Advancing the development of Taiwan-Philippines business cooperation 71 A. Cooperation in human resources and training ......................................... 72 iii 1. Cooperation on vocational education and professional training .............................. 74 2. Continuing to compile improved talent databases and conducting exchanges ........ 76 B. Cooperating to develop Small and Medium Enterprises .................................. 77 1. Continuing to