U.S. Companies Eye Investment Opportunities in the Philippines

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Due to its potential for growth and development, U.S. businesses are looking to increase commercial and economic ties with the Philippines. Last week, U.S. Secretary of Commerce Penny Pritzker visited the Philippines to meet with President Aquino and other officials.

“We see that there’s a plethora of sectors where U.S. businesses could be more active here in the Philippines,” Ms. Pritzker told The Wall Street Journal, listing infrastructure, telecoms and healthcare as areas in which American businesses could thrive.

The rapid take-off of the Philippine economy has garnered the interest of U.S. investors and politicians alike. Joining Ms. Pritzker were top executives from energy and mining companies Chevron and Rio Tinto, insurer ACE Ltd. and risk management consultant Marsh & Mclennan.

“The Asia-Pacific region will be an engine of global growth over the next decade, which will have profound impact on how and where the world does business. American firms want to be part of this solution, as countries across the region look to support a growing middle class, develop world class infrastructure, unleash sustainable energy and invest in their futures,” Pritzker said during the joint meeting of the American Chamber of Commerce (AmCham), the Makati Business Club and the Management Association of the Philippines in Makati City on Wednesday, June 4th.

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The Philippines’ gross domestic product, valued at US$250 billion in 2012, is expected to surpass US$1 trillion by 2030. Such growth represents a huge opportunity for U.S. companies to sell goods and services and increase bilateral trade, currently worth US$24 billion, according to Ms. Pritzker. By comparison, trade with Thailand – which is suffering from massive political and economic uncertainty – reached US$38 billion in 2013.

According to Secretary Pritzker, studies report that by 2022, the Asia-Pacific region will be home to 54 percent of the world’s middle class and will be importing more than US$10 trillion worth of goods and services. She also said that by 2020, more than US$1 trillion in infrastructure investments is needed in ASEAN to meet the demands of a growing population.

“Our firms are here for the long-term and want to help reach your goals,” said the Secretary

Given the Philippines’ chronic power shortages, electricity generators and distributors may stand to benefit the most. AES Corporation president and chief executive officer Andres Gluski said the energy firm is looking to open a regional office and expand its operations in the Philippines. AES has already invested US$1 billion in the country and plans to spend another US$1.2 billion doubling the capacity of an existing power plant in Zambales province. “We’re very impressed by the strong economic growth in the Philippines,” the CEO stated.

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“What you’re hearing is that American business is optimistic about the future of the Philippines for the long haul, given the progress that’s been made in terms of reforms, of fiscal responsibility,” said Ms. Pritzker.

And that matters for companies looking to build power plants or erect telecom infrastructure, investments that take time to develop, she added.

The Philippines have moved up 30 places on the World Bank’s 2014 ease of doing business report, but many believe recent reforms have not gone far enough. The nation ranks 108th out of 189 countries, still fairly low by most standards.

Rapid economic growth is also no guarantee for the success of foreign investments. Japanese and Korean companies are already well-established in the country, and local conglomerates still control large sectors of the economy. These could be sources of intense competition for businesses looking to expand to the Philippines.

Despite these challenges, the Philippines is positioned to benefit greatly from ASEAN economic integration in 2015 and will continue to attract strong interest from American and domestic investors alike.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email philippines@dezshira.com or visit www.dezshira.com.

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