PROFIT CENTER: Japanese businesses prefer PH
A survey done by the Japan External Trade Organization (JETRO) Manila, showed that Japanese businessmen prefer doing business in the Philippines and has found the country, good profit center.
JETRO, a semi-governmental agency that promotes business between the Philippines and Japan, conducted the survey on Japanese-affiliated companies in Asia and Oceania from October to November 2012.
It compared business competitiveness of the Philippines against other Asian economies such as China, Myanmar, Indonesia, Thailand, Vietnam, Malaysia, and India. Comparison was made in terms of profitability, good management, and reasonable salary. It also showed why the Philippines is appreciated by Japanese businessmen.
The result shows that this year, the Philippines has again topped its competitors. The country has emerged as a profit center for Japanese companies after gaining the top spot for being the most profitable.
The Philippines and Indonesia has outdone their competitors in all industries with a total of 71.9 percent and 74.4 percent profitability, respectively. This result came about specifically because of the very promising performance of the Philippines in export-oriented business with a 72.4 percent profit as opposed to fifth-placed China’s 54.6 percent profit and India at the last with 55.3 percent revenue.
In terms of good management, the Philippines has also performed well.
The survey shows that the country has the least difficulty when it comes to recruiting general staff, having only a 4.3 percent rating, followed by Indonesia with 6.8 percent and Vietnam at third with 13.8 percent. China tops this category with a 35.5 percent rating, primarily because of the stricter working environment in China compared with the Philippines and other countries.
Another aspect where the Philippines fared well was the number of strikes and/or lockouts. The Philippines, compared with Vietnam and India, had the least number of strikes and/or lockouts from 2008 to 2011, with only two stoppages in 2011 as reported by the National Conciliation and Mediation Board. In comparison, Vietnam had 857 strikes, according to its Ministry of Labor, War Invalids & Social Affairs. A total of 389 for the same year was recorded in India, according to its Ministry of Labour & Employment, Labor Bureau.
The appreciation the Philippines gets from foreign investors and business ventures also came from the not so time-consuming customs and administrative procedures.
The survey shows that most Japanese companies found Thailand to be the least troublesome in time-consuming customs and administrative procedures with 24 percent and 20.6 percent ratings, respectively, while the Philippines came in second with 27.3 percent and 34.5 percent ratings, respectively. However, Myanmar with 55.6 percent and 85 percent ratings, respectively, found customs and administrative procedures most time-consuming.
PEZA, on the other hand, has played a vital role in providing assistance and smooth procedure in doing business resulting to the good ratings by the Japanese respondent companies in the Philippines.
The survey results highlighted once again the competitiveness of the Philippines in access to reasonable salary, attracting more foreign investors as it also means low financial costs. The country came out top in terms of salary base up rate as against the previous year’s 5.2 percent rating.
Malaysia came in close with 5.3 percent, while Vietnam ranked low with a 17.5 percent, and Indonesia with 17 percent, India with 11.8 percent, China with 9.4 percent, and Thailand with 6.5 percent.
In terms of annual salary, which is the total amount each employee received in a year, which includes the base salary, allowances, overtime incentives, bonuses, social security, and etc., the Philippines remained in the second lowest group. The Philippines placed in the middle with a $4,581 annual salary for manufacturing staff while China came with the highest labor cost at $6,734 and Vietnam the cheapest at only $2,602 annual salary.
The Philippines and Vietnam both had a cheaper labor cost in annual salary payout for manufacturing engineer with $7,636 and $5,441, respectively, as well as for the manufacturing manager with $17,498 and Vietnam giving $12,245.
Malaysia came in with the highest labor cost both for the manufacturing engineer and manager with $14,451 and $30,083 annual salaries. For non-manufacturing manager, Philippines and Vietnam remained with the cheap labor cost at $20,169 and $16,422, respectively.
Moreover, for non-manufacturing staff annual salary, the Philippines’s labor cost was 17.3 percent cheaper than India’s, the main reason why BPO companies shifted from India to the Philippines in 2011.
Furthermore, among the eight countries that were the subject of comparison in the survey, Japanese businesses in the Philippines came out to have the least challenges. It was shown that Japanese companies find difficulty in local procurement of raw materials and parts the most challenging with 67.7 percent. Furthermore, the survey result also depicted Filipino career perception of going abroad to work rather than stay as a lack of employee awareness of localization is also a challenge for these Japanese investors. On one hand, this still is a good performance for the Philippines as Japanese businesses in other countries had to deal with a lot more challenges such as wage increase and time-consuming administrative procedures.
On the business development plan, however, the Philippines landed last with a 48.2 percent rating for expansion plan, while India, Indonesia, and Vietnam emerged as the target domestic markets with 83.6 percent, 77.3 percent and 65.9 percent, respectively.
JETRO Manila received a total of nine investment missions, 168 persons and 1,572 visitors doing business in the Philippines, a 31 percent increase for 2012. Businessmen in Japan opted to look for a new business site abroad mainly because of the hardships that those companies encounter due to the strong yen, no flexibility on labor recruitment, high rate of corporate tax, severe condition of carbon dioxide emission, delay of Economic Partnership Agreement (EPA) negotiations and shortage of electricity due to the halting of Japan’s nuclear plants. Likewise, Japanese companies in Asia avoid the concentration of production base, or the so called “China +1”.
Needless to say, the good economic fundamentals that the Philippines enjoys have put a weight on how these Japanese companies see the country as an investment destination. As a commitment, JETRO will continue to promote investment missions and open the door for more investment opportunities all year around.
Malaya Business News Online
Published on Wednesday, 13 February 2013
A survey done by the Japan External Trade Organization (JETRO) Manila, showed that Japanese businessmen prefer doing business in the Philippines and has found the country, good profit center.
JETRO, a semi-governmental agency that promotes business between the Philippines and Japan, conducted the survey on Japanese-affiliated companies in Asia and Oceania from October to November 2012.
It compared business competitiveness of the Philippines against other Asian economies such as China, Myanmar, Indonesia, Thailand, Vietnam, Malaysia, and India. Comparison was made in terms of profitability, good management, and reasonable salary. It also showed why the Philippines is appreciated by Japanese businessmen.
The result shows that this year, the Philippines has again topped its competitors. The country has emerged as a profit center for Japanese companies after gaining the top spot for being the most profitable.
The Philippines and Indonesia has outdone their competitors in all industries with a total of 71.9 percent and 74.4 percent profitability, respectively. This result came about specifically because of the very promising performance of the Philippines in export-oriented business with a 72.4 percent profit as opposed to fifth-placed China’s 54.6 percent profit and India at the last with 55.3 percent revenue.
In terms of good management, the Philippines has also performed well.
The survey shows that the country has the least difficulty when it comes to recruiting general staff, having only a 4.3 percent rating, followed by Indonesia with 6.8 percent and Vietnam at third with 13.8 percent. China tops this category with a 35.5 percent rating, primarily because of the stricter working environment in China compared with the Philippines and other countries.
Another aspect where the Philippines fared well was the number of strikes and/or lockouts. The Philippines, compared with Vietnam and India, had the least number of strikes and/or lockouts from 2008 to 2011, with only two stoppages in 2011 as reported by the National Conciliation and Mediation Board. In comparison, Vietnam had 857 strikes, according to its Ministry of Labor, War Invalids & Social Affairs. A total of 389 for the same year was recorded in India, according to its Ministry of Labour & Employment, Labor Bureau.
The appreciation the Philippines gets from foreign investors and business ventures also came from the not so time-consuming customs and administrative procedures.
The survey shows that most Japanese companies found Thailand to be the least troublesome in time-consuming customs and administrative procedures with 24 percent and 20.6 percent ratings, respectively, while the Philippines came in second with 27.3 percent and 34.5 percent ratings, respectively. However, Myanmar with 55.6 percent and 85 percent ratings, respectively, found customs and administrative procedures most time-consuming.
PEZA, on the other hand, has played a vital role in providing assistance and smooth procedure in doing business resulting to the good ratings by the Japanese respondent companies in the Philippines.
The survey results highlighted once again the competitiveness of the Philippines in access to reasonable salary, attracting more foreign investors as it also means low financial costs. The country came out top in terms of salary base up rate as against the previous year’s 5.2 percent rating.
Malaysia came in close with 5.3 percent, while Vietnam ranked low with a 17.5 percent, and Indonesia with 17 percent, India with 11.8 percent, China with 9.4 percent, and Thailand with 6.5 percent.
In terms of annual salary, which is the total amount each employee received in a year, which includes the base salary, allowances, overtime incentives, bonuses, social security, and etc., the Philippines remained in the second lowest group. The Philippines placed in the middle with a $4,581 annual salary for manufacturing staff while China came with the highest labor cost at $6,734 and Vietnam the cheapest at only $2,602 annual salary.
The Philippines and Vietnam both had a cheaper labor cost in annual salary payout for manufacturing engineer with $7,636 and $5,441, respectively, as well as for the manufacturing manager with $17,498 and Vietnam giving $12,245.
Malaysia came in with the highest labor cost both for the manufacturing engineer and manager with $14,451 and $30,083 annual salaries. For non-manufacturing manager, Philippines and Vietnam remained with the cheap labor cost at $20,169 and $16,422, respectively.
Moreover, for non-manufacturing staff annual salary, the Philippines’s labor cost was 17.3 percent cheaper than India’s, the main reason why BPO companies shifted from India to the Philippines in 2011.
Furthermore, among the eight countries that were the subject of comparison in the survey, Japanese businesses in the Philippines came out to have the least challenges. It was shown that Japanese companies find difficulty in local procurement of raw materials and parts the most challenging with 67.7 percent. Furthermore, the survey result also depicted Filipino career perception of going abroad to work rather than stay as a lack of employee awareness of localization is also a challenge for these Japanese investors. On one hand, this still is a good performance for the Philippines as Japanese businesses in other countries had to deal with a lot more challenges such as wage increase and time-consuming administrative procedures.
On the business development plan, however, the Philippines landed last with a 48.2 percent rating for expansion plan, while India, Indonesia, and Vietnam emerged as the target domestic markets with 83.6 percent, 77.3 percent and 65.9 percent, respectively.
JETRO Manila received a total of nine investment missions, 168 persons and 1,572 visitors doing business in the Philippines, a 31 percent increase for 2012. Businessmen in Japan opted to look for a new business site abroad mainly because of the hardships that those companies encounter due to the strong yen, no flexibility on labor recruitment, high rate of corporate tax, severe condition of carbon dioxide emission, delay of Economic Partnership Agreement (EPA) negotiations and shortage of electricity due to the halting of Japan’s nuclear plants. Likewise, Japanese companies in Asia avoid the concentration of production base, or the so called “China +1”.
Needless to say, the good economic fundamentals that the Philippines enjoys have put a weight on how these Japanese companies see the country as an investment destination. As a commitment, JETRO will continue to promote investment missions and open the door for more investment opportunities all year around.
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