Already seeing good deals abound in the Philippines, CVC Capital Partners bought a 15% stake in local bank RCBC last year. In February, CVC bought Spi, a business process outsourcing (BPO) unit, from Philippines’ Long Distance Telecommunication Company. The sale should be completed in March.
Japanese corporates have started to look for business opportunities in the Philippines as well. Following the nuclear accident at Fukushima and the floods in Thailand, Japanese manufacturing companies need to diversify regional operations. Rising labour costs and territorial disputes with China have also forced Japanese manufacturers to look to the Philippines even though power is more expensive.
“The Philippines has a young, vibrant, English-speaking population and tax incentives in place for foreign business, which is attractive,” says Antonio Paner, treasurer and head of financial markets group at the Bank of the Philippine Islands. “Places like Vietnam can be cheaper overall, but some investors are turned off because inflation is uncontrolled and real estate prices are getting higher. The Philippines becomes a much more feasible option even though we are a bit more expensive.”
One of the most prominent investments comes from Sumitomo, one of the biggest Japanese construction companies, which owns a 30% stake in the First Philippine Industrial Park, located 50 kilometres south of Manila. The industrial estate is a thriving hub for global manufacturing, targeting solar energy, steel and plastic manufacturing companies. Honda, Canon and Nestlé have already set up shop there.
And even though Sumitomo has parks in Thailand, Vietnam and Indonesia, the Japanese investor has made ambitious plans to expand the overall size of the park in the Philippines by a third, highlighting its appeal. Indeed, the extension will attract a new round of foreign investment, boosting the country’s export capability. As it stands, the park already accounts for 3% of total exports from the Philippines.
The central bank announced in March that net foreign direct investment inflows to the Philippines were more than $2 billion in 2012, up nearly 10% on 2011. Japan was the second-largest contributor to Philippines FDI, accounting for 27.3% of investment in the third quarter of 2012. Japan is also the Philippines’ largest trading partner.
