HOW TO START AN IMPORT EXPORT BUSINESS IN THE PHILIPPINES
What is up everyone? In today’s video, I want to talk about the Philippines specifically the key things that I searched about international trade business in the Philippines. Do you want to start an import-export business in the Philippines? But you don’t know how to do it or do not have enough information about the Philippines. Maybe you don’t have enough time, knowledge, or experience for searching and putting together all pieces of information. Then, you are in the right place because in this video, I have put together useful resources to assist you in exporting to the Philippines, importing from the Philippines, or starting your business in the Philippines for you.
So, if you want to learn then keep on watching. All right friends, let’s talk about the first thing I prepared for you which is an overview of the Philippines’ business environment, and try to understand the peculiarities of the Philippines together in this clip. Many foreigners are confused with starting a business in the Philippines which is a place with many natural disasters and unfavorable business conditions.
Yes, the Philippines is indeed a country with many natural disasters and social instability. However, this country also has many opportunities for international entrepreneurs. Okay guys, let’s look at the data that I have gotten from the world bank and Comtrade data resources. The population is around one hundred eight million.
Gross Domestic Product (GDP) was three hundred sixty-one point forty-nine billion United States Dollars in two thousand twenty. Gross national income per capita purchasing power parity (current international dollar) was nine thousand forty United States Dollars in the same period. Inflation is around two point forty-eight percent. Their currency is the Philippines Peso and the conversion rate is one United States dollar is around fifty-two point forty pesos. The status of ease doing business is two out of five. And also the logistics performance is two out of five too.
The average time required to start a business is thirty-three days. Okay, all these numbers help you understand the country and define the market. Let’s consider the peculiarities of the Philippines. First, the Philippines has a lot of English-speaking people, more than 90 million. It is easier for you to negotiate without having to hire a translator. Moreover, Filipino workers are hard-working and responsible.
Their productivity is superior in Asia, so it is very potential to build a business here as a foreigner (in case you have a good idea of what to produce). Secondly, on natural disasters, localities across the country are very active in setting up disaster reduction departments at regional, provincial, and city levels. As a result, although being slow, disaster risk reduction has been paid more attention.
And Thirdly, the Philippines has a favorable business environment. For exporters, the Philippines market is relatively new with increasing purchasing power. Because it is a developing economy. It wants to attract other businesses and investments, and international entrepreneurs are welcomed, also importers and exporters.
Next, I am going to talk about the Philippines' international business and opportunities in that market. If you are interested, come on let's look at it together. The Philippines is a country rich in natural resources with many minerals such as gold, copper, iron, chromium, manganese, coal, oil, and gas. In two thousand four, the Government estimated the total reserves of minerals in the ground are about eight hundred to one thousand billion United States Dollars.
However, the Philippines currently only exports about five hundred million United States Dollars of minerals a year. The Philippines is mainly an agricultural country. The development level is still low. The population is occupied mainly by agriculture.
Agriculture accounts for eight points eighty-two percent of GDP. The main crops are rice, maize, coconut, sugarcane, banana, pineapple, coffee, tobacco, cotton, jute, beans, and abaca plants for fiber. In the past, the Philippines’ industry was dominated by mining, timber, and food processing. Some emerging industries are electronics and apparel exports.
The Philippines’ export-import destinations are the USA, China, Hong Kong, Germany, Thailand, Singapore, South Korea, Malaysia, Netherlands, and Japan. Oil, coal, construction materials, machinery, food, chemicals, iron, and steel, are the import products. Okay, let’s look at the main export products of the Philippines. Because the Philippines is an agricultural country, then a lot of its export goods are related or originated from agriculture.
Okay, let us look at the list of that products. Products related to coconut (coconut oil, coconut cake) Sugar and related products Fruits, vegetables (such as pineapple, banana, mango) Agricultural products (like fish, shrimp, raw coffee, seaweed, natural rubber, raw tobacco) Products related to wood Metal products (such copper, iron, gold, nickel) Manufacturing industry (electronics, fabrics, and textiles, footwear, suitcases, bags, furniture, medicine, processed food, children’s toys, machine parts, or isometric convenient traffic) Now it is time to look deeply at some of the very strategic and common products for the Philippines. Coconut products The Philippines is the second-largest coconut producer in the world after Malaysia. In addition to the burgeoning coconut oil production process, the Philippines also derives large commercial revenues from the prestigious coconut industry. The Philippines sells more than seventy percent of coconut oil to the export market, of which about eighty percent goes to Europe and the United States.
The Philippines earned one point seven billion united states dollars from exports of coconut in two thousand sixteen. Most of the export revenue is coconut oil, accounting for eighty point five percent of the total export turnover. Banana Banana exports account for about thirty percent of the total agricultural export with a value of six-point thirty-nine billion United States dollars in two thousand nineteen. The Philippines is still the second-largest banana-growing country in the world, after Ecuador. The banana agriculture industry of the Philippines is facing competition from other banana exporting countries. Although Japan and Korea still maintain banana consumption, banana exporting countries in Latin America are scrambling for export market share with the Philippines.
Mango The mangoes originating in the Philippines are famous for being the sweetest in the world. Ideal conditions for mango trees to flower bear fruit due to the dry air caused by the El Nino wind. However, the mango export still has many limitations for the inefficient chain of cold storage management. Exporters do not meet the standards of consumer markets for packaging and handling. Pre-export treatment includes sanitary and phytosanitary measures. Nickel The Philippines is currently the world’s second-largest supplier of nickel ore, after Indonesia.
The new nickel mining regulations will affect twenty-nine out of forty-eight operational mines. The country’s nickel ore production in the first half of two thousand eighteen fell ten percent year-on-year to nine-point forty-three million tons. Up to eleven nickel mines in the Philippines are banned or suspended and need upgrading to meet the new mining standards.
Okay, let's look at the main import products of the Philippines now. We are talking about some of the most common product categories that the Philippines is importing. Rice In two thousand nineteen, the Philippines imported two point nine million tons of rice.
The rice imported into the Philippines has nearly quadrupled in the past three years and accounts for about seven percent of the total rice imports worldwide. Machine products, electrical equipment Currently, the electrical machinery and equipment that Philippine businesses want to import include electrical machinery, equipment, electrical cables, lighting equipment. If you are from a country, which is producing technically high level and quality machinery, then you may have a great export opportunity. So, we come to the end of this clip. Let's see how to export to the Philippines. Are you ready? If you are, I will be waiting for you in the next clip.
See you there. If you have found a product you wish to export to the Philippines, then you need to know how exactly you can get that product to the country and allow it to be released for the local consumers. You need to know the import-export procedures and documentation. In this part, I will point out the most important parts and aspects you shall pay attention to when doing business with local Philippines partners and exporting to the Philippines.
Let’s consider the international sales-purchase contract. It is an indispensable and crucial part of any international business transaction or export activity. The sales-purchase contract confirms the transaction details that the parties have agreed upon and committed to performing. That is why the contract is the basis for the parties to perform their obligations and at the same time requires partners to perform their obligations. The exporter is obliged to transfer ownership to another party called the buyer of a given product.
The buyer is obliged to receive the goods and pay the money. Let's look at the Import requirements in the Philippines. Goods exported into the Philippines by air or by sea must complete an import customs procedure. One - Providing export documentation of the goods to the customs. Two - Inspection and evaluation Three - Payment of taxes Four - Release of goods from customs areas Philippine Customs applies official import declaration and non-trade declaration.
The non-trade declaration applies to commercially imported goods of less than five hundred United States dollars or portable household goods of no commercial value. The official statement applies to the remaining cases. All importers or their agents must submit import declarations to the Philippine Bureau of Customs, after which the data will process through the Automated Customs Operating System. Ok let's look at what are documents needed when exporting goods to the Philippines include: Commercial invoice Bill of lading or air waybill Certificate of origin Packing list Import license for importers Certain special certificates of the quality of the goods shipped by sea and as required by the terms of the importer, bank, and letter of credit. Export-import license In the Philippines, there are still two different procedures for granting import licenses, one for non-quota goods and one for items subject to quotas. Permits for non-quota imports are usually issued immediately.
But the applications must be submitted at least two weeks before the date of goods arrival. Licensing registration fees are classified by product and collected by the licensing office. Okay, let’s consider the taxes in the Philippines.
Import taxes in the Philippines: Products that cannot produce domestically are subject to low import duties, while imports that compete with domestic goods are subject to higher taxes. All tariffs are taxes calculated on the price of goods, which is to calculate transparency and predictability. Other taxes and fees In the Philippines: Most of the imported items are subject to a twelve percent value-added tax like those produced domestically. Items not subject to value-added tax include agricultural and marine food, agricultural raw materials, petroleum products, books, newspapers, and magazines, freight ships, or passenger- ships of five thousand tons. Imported goods are subject to several customs fees, including processing, administration, registration, and laboratory fees. Paying taxes in the Philippines: Import duties are paid together with all taxes and other shipping charges before receiving for consumption.
Tax payments are made via banks and electronically linked to the tax authorities. According to the online Release System, when paying taxes through banks has been notified to the tax authorities, the opposite tax authorities will then unlock the taxes paid and allow the operating the port for the importer or the importer’s representative to receive the goods. Now let’s look at the Regulations on packaging and labeling. Every country has its own rules and regulations related to the imported product’s labeling, marking, and packing.
Here is the most important information regarding the marking of exported goods to the Philippines. All imported or home-made goods need to show the following information: Names of registered goods; Legally register the trademark; Address of manufacturer, importer, or packer of consumer products in the Philippines; The general composition or composition of the product; Net weight, calculated in meters; Country of manufacture, (if imported); The mark must state the repackage under the original license from the manufacturer. The authorities may request the following additional information: Products are flammable or not flammable, Instructions for use, if necessary, Warning on toxins, Electricity (in watts), voltage (in volts), The production methodology is used if needed. Okay, the next part, let’s look at the establishment of business in the Philippines together.
When investing in the Philippines, foreign investors are guaranteed the following benefits. To enjoy tax and other non-tax preferences; Transfer investment capital to partner or move back to your country; Transfer of profits abroad; Foreign currency loan contract; Freely export its products; Not be nationalized, or confiscated; Investment incentive policy of the Philippines; Income tax exemption for six years if investing in encouraging fields: production and processing of goods, raw materials, formulas, designs, methods, technological processes Let's look at the Procedures for establishing a business in the Philippines: Get the certificate of deposit at the bank’s capital in cash of the business. Check that the name of the business you intend to set is the same as the Philippine Securities and Exchange Commission. Registration of transactions with the Foreign Exchange and Securities Commission. Get a tax certificate. Submit an application for certification from the local government of the business headquarters.
Get an operating license from the mayor’s licensing office. The mayor’s office conducts a physical inspection of the business. Buy accounting books. Registration of value-added tax.
Pay the VAT registration fee. Receive authorization to print invoices from the Department of Domestic Revenue. Collect receipts and invoices at the print shop designated by the Department of Domestic Revenue.
Submit receipts and invoices to the Department of Domestic Revenue. Register with the social security system. And lastly, Register with the Philippine Health Insurance Corporation. Ok now let's consider what are the best ways to find buyers in the Philippines. If you have found the potential products you would like to export to the Philippines, then to start exporting, you need to find customers for your business.
You should have a systematic export sales and marketing strategy and plan. All start from the planning, and at first, you should make sure: One, who are the customers, Number Two, what channels to use to reach them, Three, what are the market prices, And Four, what information is important to them. If you are targeting Philippines importers from an overseas country, then you could consider the following channels and tactics to find local importers. Find local import agents and let them find local pot customers. Use trade portals to find purchase requests for your products from the Philippines.
Contact the Philippines chamber of commerce and other trade institutions and ask for the contact details of the targeted companies. Use the internet, contact directly the companies you know are potential customers. Travel to the country, visit potential customers (if possible to travel). Use the options of digital marketing, and channels like Linkedin, Google advertising. Now at this point of this video, before we dive into more parts. I want to put a disclaimer and say that digital marketing planning will be beneficial for your business to collect insights from your customers before leveraging digital marketing.
To get this info, you can discuss with some real customers about your products and services. Make sure what kind of information about your products is important and engaging for the customers. Use experts (Specialists writers, advertising designers, etc.) to conduct advertising campaigns. Coordinate, manage, and ensure that the advertising campaign is carried out as planned, on schedule, and within the expected budget. Always side by side with customers in advertising projects, always consider the feedback from the customers. Anyways in my next clip, I’m going to talk about more things.
Then let's go. Let’s consider how to participate in import-export bidding in the Philippines. For some products, it is possible to find tenders or bids, where you could participate, so I also explain the nature of tenders in international business. Bidding is the process of selecting contractors to sign and perform import-export transaction contracts. The goal of this is to find a contractor (or investor) that satisfies their technical requirements, quality with the lowest cost, thereby bringing many benefits to the buyer. Bidding is a trading method for large-scale transactions that require efficiency and transparency.
Therefore, all professional businesses, if they have enough capacity, can participate in bidding. Bidding and tenders are common for big companies and government institutions. To participate in bidding and achieve the goal of winning purchase contracts in the Philippines, contractors must improve themselves in all aspects, including access to bidding information.
You can search for opportunities to participate in a bid, such as using the invitation to bid application, attending meetings or seminars. Tenders, where you could participate can be found in many ways. It is possible to use the help of a local agent to find tenders. Secondly, you could ask for help from the Philippines chamber of commerce and ask the information about the ongoing tenders in your area.
After all, the Philippines is very different from the rest of Asia. The country has no overwhelmed religious places or a shopping paradise. However, because of its new and unspoiled nature, the Philippines will be an attractive destination to start a business. More and more companies want to invest there and open offices there.
The Philippines' business environment is not too harsh, but there are growing numbers of opportunities. You need to research the market before deciding to import from there or export to this country. I believe that no matter where you do want to start a business, thorough research is essential. And you always open your mind to new perspectives.
So that is the biggest advice that I have for you. I really hope that guys, you enjoyed this video. And, again comment on the keyword "let's get started" in the comment section so I know you got to this point.
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