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The Philippines: Market Profile

Picture: Philippine facesheet
Picture: Philippine facesheet

1. Overview

The Philippines has one of the most dynamic economies in the East Asia and the Pacific region. With increasing urbanisation, a growing middle income class, and a large and young population, the Philippines' economic dynamism is rooted in strong consumer demand supported by improving real incomes and robust remittances. Business activities are buoyant with notable performance in the services sector (including business process outsourcing), real estate, and finance and insurance industries.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

June 2016
Rodrigo Duterte was elected president and announced a hard-line crackdown on drugs. He also suggested that he might pivot from the United States to China.

May 2017
Martial law imposed on the island of Mindanao after fighting erupts between security forces and Islamic State-linked militants.

May 2018
Barangay elections were held on May 14, 2018.

May 2019
The 2019 Philippine general election will be held on May 13, 2019. The winners will take office on June 30, 2019, midway through President Rodrigo Duterte's six-year term. The election will see 12 seats in the House of Representatives and all seats in the senate, be contested. Elections will also see to all seats at the provincial, city and municipal level.

Sources: BBC Country Profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: Philippines real GDP and inflation
Graph: Philippines real GDP and inflation
Graph: Philippines GDP by sector (2017)
Graph: Philippines GDP by sector (2017)
Graph: Philippines unemployment rate
Graph: Philippines unemployment rate
Graph: Philippines current account balance
Graph: Philippines current account balance

e = estimate, f = forecast
Sources: IMF, World Bank
Date last reviewed: February 11, 2019

4. External Trade

4.1 Merchandise Trade

Graph: Philippines merchandise trade
Graph: Philippines merchandise trade

Source: WTO
Date last reviewed: May 2, 2019

Graph: Philippines major export commodities (2018)
Graph: Philippines major export commodities (2018)
Graph: Philippines major export markets (2018)
Graph: Philippines major export markets (2018)
Graph: Philippines major import commodities (2018)
Graph: Philippines major import commodities (2018)
Graph: Philippines major import markets (2018)
Graph: Philippines major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: May 2, 2019

4.2 Trade in Services

Graph: Philippines trade in services
Graph: Philippines trade in services

Source: WTO
Date last reviewed: May 2, 2019

5. Trade Policies

  • The Philippines has been a member of WTO since January 1, 1995.

  • The Department of Trade and Industry remains responsible for the implementation and coordination of trade and investment policies as well as for promoting and facilitating trade and investment.

  • The Philippines grants most favoured nation (MFN) treatment to all WTO members. The Philippines' simple average MFN tariff was 7.1% in 2016 and 6% of its applied tariffs is 20% or higher. All agricultural tariffs and about 60% of non-agricultural tariff lines are bound under the Philippines' WTO commitments. The simple average bound tariff in the Philippines is 23.5%.

  • Imported manufactured goods competing with locally produced goods face higher tariffs than those without local competition. The Philippine government cites domestic and global economic developments to justify the modification of applied rates of duty for certain products to protect local producers in the agriculture and manufacturing sectors.

  • The Philippines eliminated tariffs on approximately 99% of all goods from the Association of South East Asian Nations (ASEAN) trading partners as a commitment under the ASEAN Free Trade Area (AFTA) agreement. The Philippines has been a member of ASEAN since 1967.

  • Food products and agricultural inputs are exempt from value-added tax (VAT) which is typically 12%. Excise taxes are levied on alcoholic beverages, tobacco products, automobiles, petroleum products, minerals, perfumes and jewellery.

  • A vast range of goods are subject to licences or permits when imported. For certain products, multiple permits or licences are required and informal payments have been reported by the business community.

  • About 80% of standards are aligned to international norms. There are 72 mandatory technical regulations covering a wide range of goods. The Philippines Accreditation Bureau has accredited 243 conformity assessment bodies. The Philippines has reformed its food safety regime based on a 'farm-to-fork' approach to enhance food safety. A new Food Safety Act was promulgated in 2013 and its implementing legislation entered into force in 2015. However, the Philippines' sanitary and phytosanitary measure (SPS)-related import requirements for food, which appear to be complex, remain largely unchanged. During the period of 2013 to 2015, the Philippines submitted 46 technical barriers to trade (TBT) notifications and over 200 SPS notifications. Members have not raised any specific trade concerns regarding its SPS and TBT measures.

  • Philippine marking and labelling requirements are specified in the Consumer Act of the Philippines (Republic Act No. 7394) and Philippine National Standards (PNS). The Department of Trade and Industry's Bureau of Philippine Standards (BPS) is the national standards body that develops and implements the PNS. All consumer products sold domestically, whether manufactured locally or imported, must contain the following information on their labels: correct and registered trade name or brand name, registered trademark, registered business name and address of the manufacturer, importer, or re-packer of the consumer product in the Philippines, general make or active ingredients, net quality of contents, in terms of weight and country of manufacture (if imported).

  • The BPS implements a product certification mark scheme to verify conformity of products to PNS and other international standards. This includes critical products such as electrical equipment and electronics, as well as consumer, chemical and construction and building materials. Products manufactured locally must bear a Philippine Standard mark, while imported products must bear Import Commodity Clearance certification marks duly issued by the BPS.

Sources: WTO – Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

The government is actively seeking new free trade agreements (FTA) with key trade partners, such as the European Union (EU), and remains committed to reducing current tariff lines for certain products in order to boost competitiveness and ease the trading process for businesses.

6.2 Multinational Trade Agreements


  1. The Philippines is a member of WTO (effective date: 1995).

  2. ASEAN Free Trade Area (AFTA): Came into effect in January 1993. AFTA reduces tariff and non-tariff barriers between 10 member states – Brunei, Indonesia, Malaysia, Philippines, Singapore, Vietnam, Laos, Myanmar, Indonesia and Cambodia.

  3. ASEAN-Australia-New Zealand FTA (AANZFTA): Signed on February 27, 2009, AANZFTA is ASEAN's first FTA with two developed countries simultaneously, and the first ASEAN FTA done in a single undertaking. AANZFTA represents ASEAN's most ambitious FTA to date, covering 18 chapters, including new areas that ASEAN had previously never negotiated on, such as competition policy and intellectual property. The AANZFTA also includes an AANZFTA Economic Cooperation Support Programme, which will provide technical assistance and capacity building to the parties of the agreement with the aim of supporting the implementation of it as well as to support the overall regional economic integration process. The agreement entered into force for all parties in 2012 and work is currently underway to resolve and implement the built-in agenda as stipulated under the agreement. The agreement aims to eliminate tariffs on 99% of exports to key ASEAN markets by 2020.

  4. ASEAN-China: The ASEAN-China FTA covers goods and services. The FTA for goods came into force on January 1, 2005, and the FTA for services came into force on July 1, 2007. The agreement aims to eliminate tariffs, encourage investment and address the barriers that impede the flow of goods and services. The ASEAN-China Free Trade Area came into force on January 1, 2010, and was upgraded in 2014. In 2017 ASEAN was the recipient of 12.3% of China's exports and the source of 12.8% of imports. Total merchandise trade between ASEAN and China grew by 215% between 2005 and 2016 (latest data available).

  5. ASEAN-South Korea: The ASEAN-South Korea FTA (AKFTA) came into force in June 2007 and May 2009 for goods and services respectively. The investment agreement entered into force in June 2009. AKFTA aims to create more liberal, facilitative market access and investment regimes between South Korea and ASEAN. A business council was set up in December 2014 to enhance economic cooperation between parties and boost total trade to USD200 billion by 2020. ASEAN was the recipient of 11.2% of South Korea's exports in 2017 and the source for 16.6% of imports. Total trade between ASEAN and South Korea grew by 68% between 2007 and 2017.

  6. ASEAN-Japan FTA: Japan provides a huge market for a wide range of goods, with tariff-free trade. This benefits a number of important sectors, including manufacturing, agriculture, mining and chemicals production.

  7. ASEAN-India FTA: The ASEAN-India Trade in Goods Agreement (TIG) was signed at the seventh ASEAN Economic Ministers (AEM)-India Consultations on August 13, 2009. The Agreement entered into force on January 1, 2010 for India and some ASEAN member states. The ASEAN-India Trade in Services and Investment Agreements were signed in November 2014. The Philippines benefits from trade preference in terms of tariff exemption or reduction under the AIFTA, which is a trade bloc agreement between India and ASEAN. This will help member states in terms of trade growth and diversification given the size and performance of the Indian economy and other ASEAN member states.

  8. ASEAN-Hong Kong FTA (AHKFTA): Hong Kong and ASEAN commenced negotiations of an FTA and an Investment Agreement in July 2014. After 10 rounds of negotiations, Hong Kong and ASEAN announced the conclusion of the negotiations in September 2017 and forged the agreements on November 12, 2017. The agreements are comprehensive in scope, encompassing trade in goods, trade in services, investment, economic and technical co-operation, dispute settlement mechanism and other related areas. The agreements will bring legal certainty, better market access and fair and equitable treatment in trade and investment, thus creating new business opportunities and further enhancing trade and investment flows between Hong Kong and ASEAN. The agreements will also extend Hong Kong's FTA and Investment Agreement network to cover all major economies in South East Asia. The agreement came into force on January 1, 2019, but will take time for all members of ASEAN to comply as implementation is subject to completion of the necessary procedures. Hong Kong is a key export market and the reduction of tariffs will ease the trading process; Hong Kong's potential as a key export market increases the importance of AHKFTA.

  9. Philippines-European Free Trade Association FTA: The FTA covers trade in goods, services, investment, competition, the protection of intellectual property rights, government procurement and trade and sustainable development with EFTA states (Iceland, Liechtenstein, Norway and Switzerland). All customs duties on industrial products are abolished, and the Philippines will gradually lower or abolish duties on the vast majority of such products.

Under Negotiation

  1. Regional Comprehensive Economic Partnership (RCEP): There are ongoing negotiations about the RCEP, which is a regional economic agreement being negotiated between the ASEAN governments and their FTA partners: Australia, China, India, Japan, New Zealand and South Korea. The RCEP is envisioned to be a modern, comprehensive, high-quality and mutually beneficial economic partnership agreement that aims to advance economic cooperation, and broaden and deepen integration in the region. The RCEP will lower tariffs and other barriers to the trade of goods among the 16 countries that are in the agreement, or have existing trade deals with ASEAN. The agreement is expected to be finalised in November 2019.

  2. Philippines-EU FTA: Negotiations are underway to further increase trade flows between the EU and the Philippines under an FTA. The issues of high tariffs for EU automotive exports remain high on the agenda.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Philippines FDI stock
Graph: Philippines FDI stock
Graph: Philippines FDI flow
Graph: Philippines FDI flow

Source: UNCTAD
Date last reviewed: May 2, 2019

7.2 Foreign Direct Investment Policy

  1. The Philippines Board of Investment (BOI) remains responsible for implementation and coordination of investment policies.

  2. Foreign enterprises are treated equally under law with their domestic counterparts.

  3. Corporations wishing to invest in the Philippines must register with the Securities and Exchange Commission, while individually-owned enterprises must register with the Bureau of Trade Regulation and Consumer Protection in the Department of Trade and Industry. Investors must also register with the relevant agency in order to qualify for incentives.

  4. An enterprise registered with the BOI – pursuant to the 1987 Omnibus Investments Code – is entitled to a range of incentives, provided they meet the requirements listed. Projects that may be eligible for incentives under the BOI include investments in manufacturing of goods not yet produced in the Philippines, manufacturing that uses new methods or designs, agriculture, forestry, mining, services, nonconventional fuels, enterprises exporting at least 70% of output, and projects in less developed areas. The same incentives are also available to businesses that set up operations in one of the numerous special economic zones which operate outside of the Philippines customs area and offer substantial fiscal and non-fiscal advantages to businesses.

  5. The government has a mandated 'negative list' of sectors (the Foreign Investment Negative List ) in which foreign participation is capped at a certain level. The list consists of two parts. Part A lists sectors in which foreign ownership is restricted (such as mass media and private security) and Part B lists sectors in which foreign ownership is limited (such as educational institutions and advertising) for reasons such as national security and public health. The government publishes regular updates to the negative list where restrictions have gradually been reduced on a number of sectors. For example, as of 2014, the government has allowed 100% foreign equity in local subsidiaries of banks. Furthermore, a law signed in 2014 allows foreign banks to enter the Philippine market, where they can establish branches, but cannot open more than six branch offices each.

  6. Foreigners are banned from fully owning land, although foreign investors can lease a contiguous parcel of up to 1,000 hectares for 50 years, renewable one time for an additional 25 years.

  7. Philippine law allows expropriation of private property for public use or in the interest of national welfare or defence and offers fair market value compensation. In the case of expropriation, foreign investors have the right to receive compensation in the currency in which the investment was originally made and to remit it at the equivalent exchange rate.

Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Philippines Economic Zones Authority (PEZA) – 300 zones managed privately and by the government, mainly in the manufacturing, IT, tourism, medical tourism, logistics/warehousing, and agro-industrial sectors- Companies established under PEZA receive the same incentives as listed below as well as a 5% tax rate on gross income following the expiration of the income tax holiday.

- Businesses under PEZA-designated zones operate outside of the customs area and enjoy reduced trade bureaucracy and costs.
Philippines BOI Incentives- Income tax holidays of four-to-six years

- Customs duty exemption on capital goods, raw materials and intermediate inputs

- Exemption from export duties and taxes

- Simplified customs procedures

- Foreign nationals may be employed in supervisory, technical or advisory positions for up to five years

- Guaranteed repatriation of earnings

Sources: US Department of Commerce, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: 12%
  • Corporate Income Tax: 30%

Sources: Philippines Bureau of Internal Revenue, Fitch Solutions

8.1 Important Updates to Taxation Information

The Tax Reform for Acceleration and Inclusion (TRAIN) law amends several provisions of the National Internal Revenue Code of 1997 on individual income taxation, passive income taxation for corporations, estate tax, donor’s tax, VAT, excise tax and  stamp tax, among others. The TRAIN law took effect on January 1, 2018.

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax30%
Capital Gains Tax- Gains obtained via sales are taxed under corporate income tax rates
- 6% on disposal of real property
- 15% on capital gains from shares not traded on the local stock exchange
VAT12% on sale of goods and services
Social security contributionsMaximum contribution of PHP1,178.7 per month per employee
Local Government TaxesUp to 3% depending on location
Real Property Tax1% in a province or 2% if located in a city
Branch Remittance Tax15% on sale price
Withholding Tax- 30% on dividends paid to foreign non-resident corporations
- 20% on interest from peso-denominated deposits
- 20% on royalties made to a domestic or resident foreign corporation

Sources: National Sources, Philippines Bureau of Internal Revenue, Fitch Solutions
Date last reviewed: May 2, 2019

9. Foreign Worker Requirements

9.1 Alien Employment Permit (AEP)

The Alien Employment Permit (AEP) authorises an individual to work in the country and is valid for either one year or for the length of time stipulated in the employee's contract (but no longer than three years). The AEP is only valid for the respective position and applicable company and a new AEP is required when an employee takes on a new position or joins a different company. The application may be made by either the employee or the employer. The AEP is issued by the Department of Labour and Employment.

9.2 9(G) Visa

The AEP is required before obtaining the 9(G) Visa. The 9(G) Visa, or the pre-arranged employment visa, allows for the employment of individuals with skills or qualifications which are not available within the Philippines. The Bureau of Immigration issues this visa and candidates must have secured a job with a company based in the country. A holder of a 9(G) Visa may only work for the employer specified by the visa. If the individual changes employers, the 9(G) Visa automatically downgrades to a tourist visa, requiring the individual to reapply for the 9(G) Visa. The visa is valid for an initial period of one, two, or three years, and can be extended up to three years at a time (depending on the duration of the employment contract) and may be renewed multiple times.

9.3 9(D) Visa

The 9(D) Visa (also known as the Treaty Trader Visa) only applies to nationals from Japan, Germany and the United States. To qualify, foreign nationals must prove that they or their employers are engaged in substantial trade, involving investment of at least USD120,000 between the Philippines and their country of origin, they intend to leave the Philippines upon the completion or termination of their work contract, they hold the same nationality as their employer or company's major shareholder, and they hold a position of a supervisor or executive in the company. The visa is valid for up to two years.

9.4 Provisionary Work Permit

The Provisional Work Permit (PWP) may be obtained while the 9(G) or 9(D) visas is being issued. The AEP is needed for a PWP. The permit is valid for six months.

Sources: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Baa2 (Stable)20/07/2018
Standard & Poor'sBBB+ (Positive)30/04/2019
Fitch RatingsBBB (Stable)19/12/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness41/6350/63N/A

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk Index RankN/A31/20231/202
Short-Term Economic Risk Score73.873.868.8
Long-Term Economic Risk Score73.373.372.2
Political Risk Index RankN/A92/20291/202
Short-Term Political Risk Score63.163.163.1
Long-Term Political Risk Score73.373.364.2
Operational Risk Index Rank106/201124/201120/201
Operational Risk Score44.844.8

Source: Fitch Solutions
Date last reviewed: May 2, 2019

10.4 Fitch Solutions Risk Summary

Ongoing political and economic reforms and increasing foreign investor interest will help to speed up investment growth in the Philippines. This will enable the country to sustain its strong growth trajectory over the coming years.

The Philippines has a large labour market and strong trade connectivity. Meanwhile, there are a number of key risks in certain areas, such as transport networks and labour costs, which may pose a challenging environment.

Source: Fitch Solutions
Date last reviewed: April 30, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Philippines short term political risk index
Graph: Philippines short term political risk index
Graph: Philippines long term political risk index
Graph: Philippines long term political risk index
Graph: Philippines short term economic risk index
Graph: Philippines short term economic risk index
Graph: Philippines long term economic risk index
Graph: Philippines long term economic risk index

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: May 2, 2019

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Philippines Score45.457.150.742.531.3
East and Southeast Asia Average55.255.956.753.854.4
East and Southeast Asia Position (out of 18)138131216
Asia Average48.549.748.246.050.1
Asia Position (out of 35)20
Global Average49.750.349.849.049.8
Global Position (out of 201)1205999119160

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Philippines vs global and regional averages
Graph: Philippines vs global and regional averages
Operational Risk
Labour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Hong Kong81.972.3
South Korea72.565.9
Mainland China58.153.8
North Korea30.945.8
Regional Averages55.255.956.753.854.4
Emerging Markets Averages4648.146.544.744.8
Global Markets Averages49.750.349.8

100 = Lowest risk, 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: May 2, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Philippines

Graph: Major export commodities to Philippines (2018)
Graph: Major export commodities to Philippines (2018)
Graph: Major import commodities from Philippines (2018)
Graph: Major import commodities from Philippines (2018)

Note: Graph shows the main Hong Kong exports to/imports from Philippines (by consignment)
Date last reviewed: May 2, 2019

Graph: Merchandise exports to Philippines
Graph: Merchandise exports to Philippines
Graph: Merchandise imports from Philippines
Graph: Merchandise imports from Philippines

Note: Graph shows Hong Kong exports to/imports from Philippines (by consignment)
Exchange rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: May 2, 2019

Growth rate (%)
Number of Philippine residents visiting Hong Kong894,48913.1
Number of Philippine nationals residing in Hong Kong119,7571.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs - Population Division

Growth rate (%)
Number of Asia Pacific residents visiting Hong Kong54,482,5383.5
Number of East Asians and South Asians residing in Hong Kong2,784,8701.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division, Fitch Solutions
Date last reviewed: May 2, 2019

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of Philippine companies in Hong Kong39N/A
- Regional headquartersN/A
- Regional offices
- Local offices

Source: Hong Kong Census and Statistics Department

11.3 Treaties and Agreements between Hong Kong and Philippines

  • The Philippines has a Bilateral Investment Treaty with China that entered into force on September 8, 1995.
  • The Philippines has a Double Taxation Agreement with China that has been applicable since January 1, 2002.

Sources: Fitch Solutions, UNCTAD

11.4 Chamber of Commerce or Related Organisations

Hongkong Chamber of Commerce of the Philippines Inc
Email: hongkongccpi@gmail.com
Tel: (63) 2 242 9176
Website: www.hkccpi.com
Please click to view more information.

Source: Federation of Hong Kong Business Associations Worldwide

Philippine Consulate General Hong Kong, China
Address: 14/F, United Centre Building, 95 Queensway, Admiralty, Hong Kong
Email: hongkong.pcg@dfa.gov.ph
Tel: (852) 2823 8501 / 9155 4023
Fax: (852) 2866 9885 / 2866 8559

11.5 Visa Requirements for Hong Kong Residents

Hong Kong SAR passport holders have been granted visa-free or visa-on-arrival for the Philippines. This visa-free arrangement is valid for 14 days from entering into the country.

Source: Philippine Consulate General Hong Kong, China

Content provided by Picture: Fitch Solutions – BMI Research