The
Philippines
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Country traits
The Spanish colony named after a sixteenth century Spanish king was taken over by the United States in the early twentieth century after a protracted rebellion against rule from Madrid. The Spanish and US influences can still be seen today in the country’s language, religion, and government. Out of the 7,000 islands that make up the Philippines, the ever-growing population of the country only occupies eleven of them, leaving the gorgeous beaches to be attracted by a growing tourism industry within the developing country. The mountainous republic is prone to natural disasters, earthquakes, and eruptions, from about twenty active volcanoes that surround the islands. By being surrounded by water, typhoons, monsoons, and other storms take over the country many times a year.
Minimum wage $429 (PHP) Population 98.39 million
Currency Pesos (PHP) Language spoken Filipino and English Ethnic Groups Tagalog, Cebuano, Ilocano, Bisaya/Binisaya, Hiligaynon Ilonggo, Bikol, & Waray President Benigno Aquino Type of government Republic
Religion Catholic Inflation rate 4.5% Capital city Manila Country size 300,000 km2 Exchange rate 1 PHP = $.0224 US dollar Level of education Grade: ages 6-12 Secondary: ages 12-17, Vocational, & Tertiary Poverty Rate 25.2%
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Socio-Economic & political climate
ECONOMY
The foreign currency in the Philippines is 1 Philippine Peso is equal to 0.023 US Dollar. The economy, one of the region’s best performing in the 1990s, slowed down at the turn of the 21st century but has recovered steadily since 2004. The Philippines now ranks as one of the most promising newly industrialized countries, with its export economy moving away from agriculture to electronics, petroleum and other goods. The Philippines has one of the highest birth rates in Asia, and forecasters say the population could double within three decades.
GDP: $289.7 billion (official exchange rate in 2014)
4 Income level: Lower middle income
Exchange rate: 43.87 pesos per us dollar
Inflation rate 4.5% (2014)
Main industries: Electronics assembly, garments, footwear, pharmaceuticals, chemicals, wood products, food processing, petroleum refining, & fishing.
Unemployment rate: 6.6% (2015)
Inflation The inflation rate in Philippines was recorded at 2.40% in March of 2015. Inflation Rate in Philippines averaged 8.84% from 1958 until 2015, reaching an all time high of 62.80% in September of 1984 and a record low of -2.10% in January of 1959. In the Philippines, the most important categories in the consumer price index are: food and non-alcoholic beverages (39 % of total weight); housing, water, electricity, gas and other fuels (22% ) and transport (8%). The index also includes health (3%), education (3%), clothing and footwear (3%), communication (2%) and recreation and culture (2%). (Trading Economics)
Future outlook “The economy has been performing creditably. GDP grew at an average of 5.9% over the last 3 years amid a lingering global economic slowdown and natural disasters. The economy has outperformed most ASEAN countries in the past few years and will be a major player in the ASEAN Economic Community (AEC). This bold forecast seems based on strong fundamentals: a stable macroeconomic framework, continued rise in remittances from Filipino workers overseas, a resurgent manufacturing sector and well-performing service sector, a consistent build-up of foreign exchange reserves, and credit rating upgrades from international credit rating agencies. Yet there are some potential troubles — external and internal — looming on the horizon that could, if not properly managed, spoil this impressive performance and dampen future growth prospects. The economy is becoming more integrated into the global and regional economies, so weaknesses in major trading partners will impact on domestic growth prospects. An important internal factor is the issue of who succeeds the current president, who will end his term of office in the middle of 2016,” according to East Asia Forum.
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Challenges
Between money and corruption, the social unrest that is happening within the Philippines, is just beginning. Within the Philippines one of the major reasons that cause this unrest is the many tropical storms and monsoons, which happen quite often throughout the country. The money that should be put into place for the various drainage systems and infrastructures that are needed to stop the flooding, that occurs after these monsoons, are said to be stolen by the countries politicians. This problem then turns into another factor when the citizens question whether they want to pay their taxes when they know the true meaning of where they are going – directly into the pockets of the politicians.
Product of history
The distinction between the ethnic majority and the ethnic minority is a product of the Philippines colonial past. The groups colonized by Spain, whom were Roman Catholic has transformed as the now ethnic majority. While, those who have continued the practices of their ancestors became labeled as ethnic minorities. The ethnic majorities have more political power because they have embraced the laws and lifestyle of the colonizers.
Filipino diaspora
Filipinos have become ashamed of being Filipino and think that the culture of foreigners is more superior then their own. Eleven million Filipinos living abroad create the largest diaspora network in the world.
Social
Population
Economic problems in the Philippines include high incidence of poverty, the unequal distribution of wealth, the diminishing buying power of the Philippine peso, high cost of commodities, lack of basic services, and the presence of slum communities in urban centers. The elite class that dominates the power structure of the country, developing a lack of economic planning and political foresight, can cause these problems. Intensifying these economic problems is the rapid growth of the population in the country. Health and education could not catch up with the growth of the population. There has been some plans for reconstruction and improvement in play, but the Roman Catholic hierarchy opposes the government’s population management measures, and opposing family planning programs.
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Political
The Philippines was taken over by the US in the early 20th century after a protracted rebellion against rule from Madrid. Self-rule in 1935 was followed by full independence in 1946 under a US-style constitution. The Philippines was marked by rapid economic development and a flourishing democracy until the rule of President Ferdinand Marcos, a close ally of the US, who imposed martial law in the early 1970s. His corrupt and repressive rule led to economic stagnation and growing public discontent, culminating in mass demonstrations in 1986 that cost him the support of the armed forces. President Joseph Estrada was forced out of office in 2001 after months of protests at his corrupt rule. After he was forced out of office, In June of 2010, President Benigno Aquino III was elected into office. Since his election and three years into his term he has helped the Philippines regain its lost confidence. In contrast to some of his predecessors, President Aquino has been a driving force behind controversial, but necessary structural and anti-corruption stance for the county. Aquino has resolved to improve governance and reduce corruption. Since his presidency China and the Philippines agreed to try and strengthen bilateral ties though economic co-operation in search of resolving the maritime dispute in the South China Sea through negotiations and consultations. President Aquino fought to get and succeeded in signing a peace treaty between the Philippines and the chief of Moro Islamic Liberation Front (MILF), Murad Ebrahim; the peace pact aims to settle all disputes by 2016. His initiatives of revival for the country against previous associations of corruption played a huge role in recasting the Philippines’ image as a country in search of renewal. As a result, slowly but surely, more and more individuals are beginning to once again envision the Philippines as a beacon of prosperity and democracy in the region.
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State of textile industry Labor cost: In Pesos: 429.00-466.00 In US Dollar: $9.56-10.38 Trade associations: 1. Garment Manufacturers Associations of the Philippines 2. Confederation of Garment Export Producers of the Philippines 3. Garment Business Association of the Philippines
Advantages
Challenges
Future outlook
The Philippines is a part of the Tiger Club Economies, which also include Indonesia, Malaysia and Thailand. The total external trade in goods within the Philippines reached $114.2 billion, which shows positivity in the economy for total imports and total exports, as it is a 5% increase from the past year. Out of the 64% of total exports, apparel & clothing makeup up only 3% of these total exports. But the Philippines have a strong competitive advantage against some other countries. They have an abundant supply of natural materials, a strong OEM capability, and their widespread availability of skilled manpower across the archipelago. A wide arrange of skilled laborers who are very proficient in skills such as weaving, sewing, and are known to be good in their English literacy, computer work, and comprehension.
With the widespread of piracy, the disinterest to learn original skills among younger generations, & lack of government support the Philippines are facing many challenges in the textile industry. The rising cost of fuel is another problem they face. Prices of gasoline are between $1.14 and $1.37 per liter, and the rates have been fluctuating considerably since the beginning of the year as quotes depend heavily on movements in the international oil market and foreign exchange rate. Lastly the heavy reliance on imported materials to the industry is another challenge the country has to face. Since almost 80% of the sector’s fabric requirements are sourced overseas, outflow and spending is heavily affected by currency instability, shipping costs, and import duties.
The sourcing industry is only growing within the Philippines, which is due to the demand from traditional markets, that is driving the growth of the garments industry. But because the Philippine’s market is connected to the United States market, the exports have been expanding due to the recovery of the US market from the global financial slowdown. This growth is driven by the renewed interest from the US, which accounted for 69% of the exports last year. According to Developing Country Sourcing, with the passing of the Save Our Industries Act, a US bill providing duty-free access to imported garments, it is projected to boost total exports between $2.7 and $3 billion by 2017, & generate 450,000 jobs over the next five years.
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Natural disasters HOLIDAYS January 1: New Year’s Day April 2: Maundy Thursday April 3: Good Friday April 9: The Day of Valor May 1: Labor Day June 12: Independence Day August 30: National Heroes Day November 30: Bonifacio Day December 25: Christmas Day December 30: Rizal Day ENVIRONMENTAL FACTORS The Philippines is prone to many natural disasters, and over the years have encountered many deadly ones. The Philippines is a place vulnerable to natural disasters, from tsunamis, earthquakes, tropical storms, flash floods, typhoons, volcano eruptions, mountainside collapses, floods and landslides, since 1814. Just within the last year, 2014, a heavy monsoon from a tropical storm flooded a city east of Manila, which lead to flooding. A Mayon volcano was close to eruption, and is still on close watch, and the country endured three typhoon’s all within in a year. Annually, approximately 80 typhoons develop above tropical waters, of which 19 enter the Philippine region and 6 to 9 make landfall, according to the Joint Typhoon Warning Center. The Philippines is in fact the country most exposed to tropical storms in the world.
INFRASTRUCTURE According to the World Bank Group the Philippines needs to spend an additional 5% of GDP on health and education to raise labor productivity and competitiveness of Filipino workers. “Going forward, the Philippines can sustain high growth by accelerating structural reforms and increasing investments in infrastructure and in the health and education of the Filipino people,” said Karl Kendrick Chua, World Bank Senior Country Economist for the Philippines. In the last 4 years, the government has doubled spending on social services and has provided more money for developing the country’s infrastructure. Sustaining these efforts will close the remaining gaps brought about by decades of lagging public investment: The country’s spending on roads, bridges, ports, airports, as well as machines and equipment has generally been declining since the 1970s, and is now well below that of its peers. As well as, the Philippines spend 30-50% less in infrastructure, health and education compared to its fast-growing neighbors.
Lead time production Export days: 2 days averaged lead time to export is the median time (the value for 50 percent of shipments) from shipment point to port of loading Import days: 14 days in 2013, The time calculation for a procedure starts from the moment it is initiated and runs until it is completed.
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Trade agreements & laws
Current tpp Countries
The United States and the Philippines have a very good relationship, but have not developed a free trade agreement between the two countries yet, although the two countries have put in place many other documents such as the The Trans-Pacific Partnership (TPP). The Trans-Pacific Partnership the two countries have is of the utmost importance out of all of these agreements. This partnership is “a 21st century trade agreement that will boost U.S. economic growth, support American jobs, and grow Made-in-America exports to some of the most dynamic and fastest growing countries in the world. It is dedicated to expanding economic opportunity for American workers, farmers, ranchers, and businesses.“ The TPP not only seeks to provide new and meaningful market access for American goods and services exports, but also set high-standard rules for trade, and address vital 21st-century issues within the global economy.” The Philippines has other trade agreements with other countries, such as the Japan-Philippines Economic Partnership Agreement, the ASEAN-India Comprehensive Economic Cooperation Agreement, and ASEAN Free Trade Area, which can all benefit potential buyers of the Philippines.
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CULTURE & BUSINESS etiquette
Business Meeting Etiquette: • Appointments are required and should be made 3 to 4 weeks in advance. You should reconfirm a few days prior to the meeting. • Punctuality is expected, & always accept any offer of food or drink, as well as remain for the period of social conversation at the end of the meeting. • Face-to-face meetings are preferred to impersonal methods. • Send informational materials in advance of the meeting so your colleagues may prepare for the discussion. Business Negotiation: • At each stage of the negotiation, try to get agreements in writing to avoid confusion or misinterpretation. • If you raise your voice or lose your temper, you lose face. • Filipinos do business with people more than companies. If you change representatives during negotiations, you may have to start over. And you may never actually meet with the decision maker or it may take several visits to do so. • Do not remove your suit jacket unless the most important Filipino does. Dress Etiquette: • Business attire is conservative. • Men should wear a dark colored, conservative business suit, at least for the initial meeting. • Women should wear a conservative suit, a skirt and blouse, or a dress. • Appearances matter and visitors should dress well.
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Importing from the Philippines
Port of Manila: The Port of Manila is the capital city and chief port for the Philippines. It lies on the mouth of the Pasig River in western Luzon Island and stretches along Manila Bay’s eastern shores. The Port of Manila is about 645 nautical miles southeast of the Port of Hong Kong and about 880 nautical miles east-northeast of Saigon Port. It is the largest and the premier international shipping gateway to the country. It is composed of 3 major facilities namely Manila North Harbor, Manila South Harbor and the Manila International Container Terminal.
Top 5 exports
Total exports brought in $53.36 billion in 2014
Semiconductors & Electronic Products
Coconut Oil
Fruits
Transport Equipment
Garments
TRANSPORTATION Airports: 247 Heliports: 2 Railways: 995 km Roadways: 213, 151 km Waterways: 3,219 km Major Seaports: Batangas, Cagayan de Oro, Cebu, Davao, Liman, Manila Container Port: Manila
2 shipping companies that have Service to the US Cosco Philippines Shipping, Inc. ZIM Integrated Shipping Services Ltd Cost to transport a full 40-ft container To various major ports in the US (at current market rate)
From Manila, Philippines to New York, NYC: $4,025.34 - $ 4,449.06 From Manila, Philippines to Savannah, GA: $3,892.77-$4,302.54 From Manila, Philippines to Los Angeles, CA: $3, 948.43- $4,364.05 From Manila, Philippines to Miami, FL: $3,948.43 - $4,364.05
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Manufacturing in the Philippines
The Philippine apparel manufacturing industry began in the late 1950s as a cottage industry that took over home sewing, dressmaking and tailoring activities. The Philippine Department of Trade and Industry’s (DTI’s) Garments and Textile Industry Development Office (GTIDO) reports that Philippine textile and apparel exports increased annually. Fibre 2 Fashion states that the Philippines earned US $2.095 billion through exports of yarn, fabric and apparel in 2014. Of the total earnings, yarn and fabric exports increased by 34.5% year-on-year to $252.679 million, while clothing exports shot up at 16.6% to $1.843 billion. Apparel exports from Philippines are likely to further increase as the European Union granted its Generalized System of Preferences Plus (GSP+) status to the country beginning this year. The GSP+ brings tariffs down to 0% for around two-thirds of tariff lines, including garments, according to Fibre 2 Fashion.
FUTURE The Philippine Department of Trade and Industry’s (DTI’s) is one of the most important sectors within the Philippines. Although they are facing many challenges within increasing electricity rates, wage increase, and lack of a direct focus, the industry is hopeful. The most recent economic growth, and as the key sector of driving the country’s export growth the textile industry is expected to gain support and continue growing over the next few years.
Suppliers list
13 Denim tops
Sein Together International Philippines, Inc. Clients: Costco, Forever 21, K Mart, and Pacific Sunwear of California Specialties: woven womens and mens knit apparel Contact: aurealim2004@yahoo.com Billerby Corporation Clients: Bazooka Plant, Rhythm USA Inc., Aether Apparel, Oakley Inc. Specialties: denim woven apparel, polyester woven tops Contact: Factory 14c Philexcel Business Clark Freeport Zone Angeles City 2009 Ph Hamlin Industrial Corporation Clients: Lauren By Ralph Lauren A Div Of, Elie Tahari Ltd., Gap Inc., Walmart, Macy’s, Urban Outfitters, Liz Claiborne, Reebok, J. Jill Sourcing LLC Specialties: ladies apparel, knitted, mens and womens shirts, bottoms, & dresses Contact: http://www.hamlin.com.ph
Denim bottoms Somawear Inc. Clients: Old Navy, Distribution Resources, The Gap, Inc. Specialties: denim pants, jeans, woven jeans Contact: 134 Sumulong Hi Way Bo Mayamot Antipolo City Philippines
KNIT Bottoms Seojin Apparel Co. Inc. Clients: BCBG Max Azria Group Inc., Prime Apparel Inc., Gap Inc. Specialties: ladies knit apparel, woven apparel, ladies knit tops, dresses, bottoms Contact: +63 4640 20476 Do1 Gma International Corporation Clients: Meryl Diamond Ltd., Prime Apparel Inc., Kwang Lim America Specialties: ladies knit, spandex knit apparel bottoms, womens knit athletic wear Contact: +63 2680 05291
Intimates Roundtree Merchandising Corporation Clients: Movie Star Inc., Dolce Vita Intimates LLC, Smart Apparel Inc. Specialties: woven underwear, ladies baby dolls, intimate apparel Contact: roundtree@i-manila.com.ph or +63 2 522 3434 Beauty Loom Mfg. Inc. Clients: Dolce Vita Intimates LLC., Tres Joli Accessories Ltd., Handcraft Corporation Specialties: women half-slips, ladies underwear Contact: call +63 2 641 2652
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RISKS & benefits
Severe natural disasters
Highly skilled and available workforce
Unstable developing economy
Lower cost compared to other Southeast Asian countries.
Poor political environment & political corruption High incidence of violent crime, and terrorist threats, and organized crime. Low level of investment, especially in infrastructure Social inequalities and demographic growth affect economic performance
Economic growth and developing stability Government support because the industry has become one of the main revenue generators of the country. Similar cultures with the US Long term opportunities Low employment rate Fully integrate textile and apparel industry Constant growth in exports from the country to emerging Asia. Decreasing inflation rate
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Works cited
http://globaledge.msu.edu/comparator#fields-selection http://globaledge.msu.edu/countries/rankings http://globaledge.msu.edu/countries/philippines/ http://www.bbc.com/news/world-asia-15521300 http://www.doingbusiness.org/data/exploreeconomies/philippines https://www.cia.gov/library/publications/the-world-factbook/geos/rp.html http://newsinfo.inquirer.net/524569/10-deadliest-natural-disasters-in-the-philippines http://www.dw.de/philippines-a-country-prone-to-natural-disasters/a-17217404 http://www.slideshare.net/AlqueenAlmonte/philippine-cultural-system http://www.state.gov/r/pa/ei/bgn/2794.htm http://www.classbase.com/Countries/philippines/Education-System_ http://www.developingcountrysourcing.com/philippines-garments/philippines-sourcing-garments-industry-overview/#.VUBVGM621eU http://www.globalsources.com/NEWS/DCSR-Sourcing-from-the-Philippines-Industries-and-manufacturing-centers.HTM http://www.philippinecompanies.com/search/garment&start=175 https://ustr.gov/trade-agreements/free-trade-agreements https://ustr.gov/tpp https://ustr.gov/countries-regions/southeast-asia-pacific/philippines http://aric.adb.org/fta-country http://www.kwintessential.co.uk/resources/global-etiquette/philippines-country-profile.html http://guide.culturecrossing.net/basics_business_student.php?id=163 https://en.santandertrade.com/international-shipments/philippines/customs-procedures?&actualiser_id_banque=oui&id_banque=18&memoriser_choix=memoriser http://www.worldportsource.com/ports/review/PHL_Port_of_Manila_1947.php https://www.cia.gov/library/publications/resources/the-world-factbook/geos/rp.html http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=170637 http://www.textileworldasia.com/Issues/2013/January-February-March/Country_Profiles/The_Philippines-Textile_And_Apparel_Industry_On_The_Mend http://filipinolinks.com/Business_and_Economy/Garment_and_Textile_Industries/index.html https://www.worldbank.org/en/news/press-release/2014/08/07/philippines-accelerating-investments-in-infrastructure-health-education-to-sustain-growth-that-benefits-the-poor http://0-web.b.ebscohost.com.library.scad.edu/bsi/detail/detail?vid=19&sid=5d254242-8dd4-4e9b-86bf-61b75681f895%40sessionmgr113&hid=124&bdata=JnNpdGU9YnNpLWxpdmU%3d#db=buh&AN=91530076
Ericka mcgriff grace canepa may 2015