THE PHILIPPINES: An Overview to Investing in the Philippines

Workforce

The Filipino workforce is one of the most compelling advantages the Philippines has over any other Asian country. With higher education priority, the literacy rate in the country is 94.6% among the highest. English is taught in all schools, making the Philippines the worlds third largest English-speaking country. Every year, there are some 350,000 graduates enriching the professional pool.

Business location The Philippines is located right in the heart of Asia today the fastest growing region. It is located within four hours flying time from major capitals of the region. Sited at the crossroads of the eastern and western business, it is a critical entry point to over 500 million people in the Association of Southeast Asian Nations (ASEAN) market and a gateway of international shipping and air lanes suited for European and American businesses. First-class Lifestyle Discover the best of sun, sea, sand and style in the tropical setting teeming with the best of western amenities. The Philippines is second home to expatriates who enjoy the company of the warmest people in the region, the countrys openness to varied cultures, and a decidedly global outlook. Expats enjoy accessible and affordable luxuries business centers, housing, schools, hospitals, shopping malls, hotels and restaurants, beach resorts, and recreation centers.

Abundant Resources An archipelago like the Philippines offers diverse natural resources, from land to marine to mineral resources. It is also the biggest copper producer in Southeast Asia and among the top ten producers of gold in the world. It is also home to 2,145 fish species, four times more than those found in the Bahamas. The 7,100 islands boast of beautiful beaches and breathtaking sceneries that offer soothing leisure and relaxation spots for vacationers and tourists.

Low Cost of Doing Business Wages are typically less than a fifth of that in the United States. Local communication, electricity, and housing costs are also 50% lower compared to the US rates. Foreign companies that are now outsourcing programming and business processes to the Philippines estimate 30%-40% business cost savings, 15%-30% call center services and application systems, and 35%-50% software development.

Liberalized and Business-Friendly Economy

An open economy, like the Philippines, allows 100% foreign ownership in almost all sectors and supports a Build-Operate-Transfer (BOT) investment scheme that other Asian countries emulate. Government corporations are being privatized and the banking, insurance, shipping telecommunications, and power industries have been deregulated. Incentive packages include the corporate income tax, reduced to a current 32%, with companies in the Special Economic Zones (ecozones) subject to only 5% overall tax rates. Multinationals looking for regional headquarters are entitled to incentives such as tax exemptions and tax and duty-free importation of specific equipment and materials.

Unlimited Business Opportunities Asian economies integrate within the vast framework of the ASEAN Free Trade Agreement (AFTA), the Philippines is the natural and most strategic location for firms that want access to the large ASEAN market and its vast trade opportunities. The Philippines has enhanced and primed up various areas for investors and offers a dynamic consumer market accustomed to an array of product choices created by a competitive domestic economy.

Developing Infrastructure for Global Growth A well-developed communication, transportation, business, and economic infrastructure links the three major islands Luzon, Visayas, and Mindanao and distinguishes the Philippine economy. Highly accessible by air, water, and cyberspace, liberalization of inter-island shipping and domestic aviation further sparked improved facilities and services. The container terminals are suited to handle cargo traffic at the highest levels of efficiency.

Further, Figure below shows that the country has sixteen (16) sedimentary basins with a combined potential of 4,777 MMBOE (689.8 MTOE) of oil and gas reserves . These are located in the Cagayan Valley Basin in the north down to the Agusan-Davao Basin in the south as well as the productive Northwest Palawan and the Sulu Sea Basin along the western side of the archipelago.

Service Contracts

Considering the huge Investment requirement in the exploration and development of indigenous oil and gas, the DOE continues to encourage the private sectors participation through the Philippine Energy Contracting Round (PECR). At present there are 26 active Petroleum Service Contracts (PSC) in the country as detailed in the Table below.

Philippine Energy Contracting Round (PECR)

The implementation of the PECR continues to draw interest from oil and gas operators. The government in partnership with private companies shows the continued drive and commitment to discover new areas that can yield higher oil and gas production.

Downstream Oil Industry

The Philippines is a net energy importer in spite of low consumption levels relative to

its Southeast Asian neighbors. The country produces small volumes of oil, natural

gas, and coal. Geothermal, hydropower, and other renewable sources constitute a

significant share of electricity generation.

In 2011, total primary energy consumption in the Philippines was roughly 1.3

quadrillion British thermal units (Btu). Oil constituted roughly 41% of total

consumption, coal made up 22%, biomass made up 19%, and the remainder came

from natural gas and various renewable sources.

In 2013, total oil production was 26,000 barrels per day (bbl/d) while the country

consumed 299,000 bbl/d. In May 2014, the government invited tenders for 11 oil and

gas blocks in the Palawan Basin and nearby areas, including one in the South China

Sea, according to Reuters. This exploration bid round could push oil production up to

39,000 bbl/d by 2019.

Two of the blocks being launched for exploration licensing are located close to the

Spratly Islands (of which a portion are claimed by the Philippines), which are areas

under territorial dispute with China. EIA estimates the South China Sea contains

approximately 11 billion barrels of oil and 190 trillion cubic feet of natural gas in

proved and probable reserves.

The Philippines imported roughly 270,000 bbl/d of crude oil and petroleum products

in 2013, with 35% of their crude oil imports coming from Saudi Arabia and Russia.

The Philippines possesses the capacity to refine 290,000 bbl/d. Shell Philippines - a

subsidiary of Shell - and Otto Energy play significant roles in the upstream sector,

while Petron Corporation operates the largest refinery in the country, supplying

nearly 40% of the countrys oil needs. The Philippines exports nearly all the crude oil

it produces.

Dry natural gas production was 99 billion cubic feet (Bcf) in 2012, down every year

since 2008, and all of which was consumed domestically. The Malampaya deep-

water, gas-to-power project is one of the largest foreign energy projects in the

country and is operated by Shell with joint venture partners Chevron and the PNOC

Exploration Corporation, a subsidiary of the state-owned Philippine National Oil

Company. Malampaya provides 30% of the countrys power needs.

The Philippines consumed roughly 20 million short tons of coal in 2013, almost half

of which was produced domestically and the remainder imported. Domestic coal

production is estimated to reach roughly 7.3 million short tons of coal by 2014. Coal

consumption in the Philippines is projected to continue increasing because of a rise

in domestic supply and increased demand from domestic coal-fired power plants,

according to the International Energy Agency.

The Philippines has an existing total capacity of 16.2 gigawatts (GW) and the

government plans to add 11.4 GW of additional capacity by 2030 as part of the

Philippine Energy Plan, according to the countrys Department of Energy. The

Philippines had 3.5 GW of installed hydropower generation capacity and 1.8 GW of

installed geothermal generation capacity in 2012.

Total electricity generation in 2013 was 76 terawatthours (TWh), up 4.5% from 2012,

according to BP Statistical Review of World Energy 2014. Geothermal (11%) and

hydropower (21%) were major contributors to total generation in 2012, while

hydrocarbons, mainly coal and natural gas, accounted for the remainder. Currently there are 3,472 registered gasoline dispensing stations, 182 LPG refilling

plants, 28.30 MB of storage capacity and 16.62 MMB depots (import and export terminals).

Petroleum (Thousand Barrels

per Day) Previous Year

Latest

Year

History Philippines Asia &

Oceania

World Rank

Philippines

Total Oil

Production

(1980-

2013)

25.24 9,086 89,75

9

72 26.25

Crude Oil

Production

(1980-

2013)

19.99 7,739 75,96

0

65 21.00

Consumption

(1980-

2013)

308.44 29,419 89,72

1

40 299.39

Estimated

Petroleum Net

Exports

(1980-

2013)

-283.20 -20,333 -- 190 -273.14

Refinery

Capacity

(1980-

2012)

273 24,875 88,09

7

52 273

Proved

Reserves(Billio

n Barrels)

(1980-

2014)

0.14 45 1,646 61 0.14

Three (3) Oil Majors

Dominated by two (2) major oil refining and marketing companies namely: PETRON and PILIPINAS SHELL

A third oil refiner and marketer, Caltex Philippines converted its 86,500 barrels/day refinery into an import terminal in 2003 and now operates as a plain marketing and distributing company under the name CHEVRON but maintains its Caltex brand

Petron Corporation

Operates the largest refinery nationwide with a capacity of 180,000 barrels-per-day Currently serves 40% of the nationwide demand Located in Limay, Bataan which is about 139 kilometers from Manila or 71.1 kilometers

to Subic Total of 30 terminals nationwide with the bulk located in various parts of Luzon Over 2,200 gas stations nationwide Runs an integrated downstream operation in Malaysia

Pilipinas Shell

Operates the 2nd largest refinery with a capacity 110,000 barrels per day Currently serves almost 30% of the nationwide demand Located in Tabangao, Batangas which is about 107 kilometers from Manila or 234

kilometers to Subic Total of 22 oil depots Over 960 retail stations nationwide Presence include oil and gas exploration activities, operating the Malampaya Deepwater

Gas-to-Power Project on behalf of the Department of Energy and its partners (Chevron Malampaya LLC and the Philippine National Oil Company - Exploration Corporation).

Chevron Philippines

Built the first refinery in San Pascual, Batangas with a capacity of 86,500 barrels/day which was converted to an import terminal in 2003

Total of 2 oil terminals About 750 retail gas stations nationwide Presence include oil and gas exploration activities operating the Malampaya Deepwater

Gas-to-Power Project on behalf of the Department of Energy and its partners (Shell Exploration BV and the Philippine National Oil Company - Exploration Corporation).

Owns substantial interests in Geothermal Power Plants in Luzon

A 33-hectare compound located in Pandacan, district of Manila which houses the storage facilities and distribution terminals of the three (3) oil majors namely Petron, Shell and Chevron

The depot holds a combined capacity of 313 million liters of refined petroleum products The Supreme Court has ordered the closure and transfer by July 2015 Manila Mayor has given Petron and Shell until January 2016 Chevron has ceased operations in the area as of June 2014 Reason for the closure is location in a highly populated area There has been several incidents of fire and explosion Old facility not designed to withstand earthquakes

Other Oil Players

Total Philippines

Operates storage terminal in Mariveles, Bataan with a capacity of 50-million liters Recently opened its storage facility in Harbor Centre, Tondo, Manila with a capacity of 9-

million liters Mandaue City fuel depot

2 million liters for 2 million liters for diesel 80,000 liters tank for ethanol. 1 million liters tank is used for aviation fuel.

TOGRI is putting up a second fuel storage facility located in the town of San Jose, Province of Negros Oriental with a storage capacity of 2 million liters.

Phoenix Petroleum Philippines

Cagayan de Oro -37 million liters. Calaca, Batangas- 82 million liters Davao City, Batangas, Cagayan de Oro, Aklan, Zamboanga, Tagum, and Surigao del

Sur, Phoenix Petroleum now has the largest storage capacity among local independent oil companies

PTT

Subic Bay, Olongapo City, Zambales; Clark Field, Angeles City, Pampanga; and in Lapu-lapu City in Cebu - with a combined ullage of three million barrels

SBMA- storage and handling facility, operated by Philippine Coastal Storage and Pipeline Corp. (PCSPC), can hold 2.4 million barrels of refined petroleum products

Clark Pipeline and Depot Company, Inc. (CPDCI) has a capacity of more than 500,000 barrels designed to store Gasoline, Gas Oil and Jet Fuel.

CPDCI likewise operates the 64-km underground pipeline running from the Subic Bay facility to Clark.

Seaoil Philippines

SEAOIL now operates 10 depots and terminals across the country, representing 160 million liters of oil storage capacity

Jetti

2.2 hectare land area off-shore berthing facility located at Naic, Cavite. combined shell capacity of the storage tanks is 16 million liters for automotive diesel oil

and unleaded gasoline products.

Unioil

Lucanin, Bataan 22 storage tanks with a total capacity of more than 1 million barrels

Oil Supply/Demand Report FY 2012 SUPPLY Inventory

Actual crudes and petroleum products closing inventory for the month of December 2012 was reported at 13,085 thousand barrels (MB) or 44-days supply equivalent; 35 days for crude oil and products in country stocks and 9 days in-transit. This was slightly lower in volume by 0.6 percent from last years December level of 13,169 MB. YTD December 2012 average inventory was recorded at 47 days, 38 days in country stock and 9 days in-transit.

The Minimum Inventory Requirement (MIR) is still being enforced given the continuing risks faced by the downstream oil industry sector such as geopolitical instability and supply delivery problems to areas affected by calamities (e.g. typhoon, flood, earthquake, etc.).

Current MIR for refiners is in-country stocks equivalent to 30 days while an equivalent of 15 days stock is required for the bulk marketers and 7 days for the LPG players.

Sometime in the third quarter of 2012, Metro Manila and nearby provinces experienced tightness in the supply of LPG. This was due to the delayed arrival of import shipments of a major LPG player in Luzon because of bad weather condition. The situation was further aggravated when their import vessels were unable to dock and unload the LPG cargo due to rough sea and high water level in their Bataan port. This resulted to long queue of their customers LPG tank trucks for loading at their depot, mostly independent LPG refillers. The situation normalized a month later with the Department of Energy closely monitoring the situation and coordinating with other LPG importers to ensure continuous LPG supply in the affected areas. Crude Oil Imports

Total crude oil imported in 2012 reached 64,941 MB, a drop of 6.7 percent vis--vis 2011s 69,615 MB.

Of these imports, 51,556 MB or 79.4 percent of the crude mix originated from the Middle East. The bulk of the imported crude oil from the Middle East came from Saudi Arabia: 29,784 MB or equivalent to 45.9 percent of the total crude mix.

On the other hand, a total of 16,754 MB, equivalent to 25.8 percent of the total crude mix, were imported from UAE; 10,253 MB or 15.8 percent came from Russia and 5,018 MB or 7.7 percent was bought from Qatar.

The remaining 4.8 percent (3,131 MB) was imported from the Far East Region such as Malaysia, Brunei, Indonesia and Vietnam and from local production. Petroleum Product Imports

The country imported a total of 54,754 MB finished petroleum products in 2012, an increase of 18.9 percent from 46,065 MB of 2011.

Meanwhile, on a per product basis, diesel oil posted the biggest growth of 35.7 percent as compared withlast years level. Kerosene/avturbo and unleaded gasoline also rose by 20.6 and 10.7 percent, respectively. On the other hand, fuel oil imports and LPG dropped by 18.0 and 0.8 percent, respectively.

The new industry players accounted for majority of the product imports with 54.2 percent of the total imports volume, up by 9.1 percent to 29,678 MB from 2011s 27,193

MB. The oil majors (Petron, Chevron and Shell) accounted for the remaining 45.8 percent which increased by 32.9 percent from 2011s 18,872 MB to 25,076 MB.

The local refiners (Petron and Pilipinas Shell) accounted for 26.0 percent of the total product imports, which included blending stocks, as against 74.0 percent by direct importers.

Product import mix comprised mostly of diesel oil at 45.5 percent, unleaded gasoline at 22.6 percent, LPG at 15.2 percent, kerosene/ avturbo at 11.1 percent, fuel oil at 3.4 percent and other products at 2.2 percent share in the total product mix.

Total gasoline import reached 47.7 percent of gasoline demand while diesel oil import was 53.5 percent of diesel demand. LPG import on the other hand, was 66.9 percent of LPG demand. Total product import was 49.3 percent of the total products demand.

The oil majors import share in the total demand was 22.6 percent while the other players import share was at 26.7 percent. As for the refiners, their import share in the total demand was 12.8 percent, while 36.5 percent was attributed to direct importers. Crude Run and Refinery Production

The countrys current maximum working crude distillation capacity is 275 thousand barrels per stream day (MBSD).

Total crude processed as of YTD December 2012 fell by 10.0 percent from 69,288 MB of YTD December 2011 to 62,391 MB. The reported refinery capacity utilization also declined by 10.3 percent from 69.1 percent in YTD December 2011 to 62.0 percent this year. This was due to the successive shutdown of the two refineries in the country sometime in the 2nd quarter of 2012 for turnaround/maintenance schedule.

Consequently, local petroleum refinery production output also declined by 10.5 percent from 67,375 MB to 60,293 MB. FY 2012 average refining output was at 164.7 MB per day.

Diesel oil continued to dominate the production mix with a share of 37.5 percent, followed by unleaded gasoline with a 19.9 percent share. Next was fuel oil at 19.0 percent share. Meanwhile, kerosene/ avturbo and LPG got 10.1 and 6.8 percent share, respectively

Refinery output of all petroleum products decreased vis--vis last year. Fuel oil,

kerosene/avturbo and diesel oil decreased by 13.1, 11.1 and 10.2 percent, respectively. LPG refinery output also went down 9.2 percent.

DEMAND

Petroleum Product Demand The countrys total demand of finished petroleum products in year 2012 was up by 3.9

percent to 110,991 MB from 106,857 MB of year 2011. This can be translated to an average daily requirement of 303.3 MB compared with last years level of 292.8 MB.

Compared with last year, unleaded gasoline demand posted an increase of 6.0 percent while diesel oil demand rose by 4.5 percent. Kerosene/avtubo demand also grew by 4.0 percent. On the other hand, demand of LPG and fuel oil dropped by 1.5 and 0.4 percent, respectively.

Product demand mix comprised mostly of diesel oil at 42.0 percent, unleaded gasoline at 23.3 percent, fuel oil at 11.3 percent, LPG at 11.2 percent, kerosene/ avturbo at 11.1 percent and other products at 1.1 percent share in the total product mix Petroleum Product Exports

Total petroleum products exported for the period was down by 30.3 percent from 13,470 MB of 2011 to 9,395 MB. This may be attributed to the shutdown of refineries for turnaround schedule as cited previously.

On a per product basis, exports of all petroleum products dropped vis--vis 2011 figures except diesel oil which grew by 43.5 percent. Condensate, the top product exported for the period fell by 12.4 percent. Fuel oil also decreased by 61.9 percent. Exports of naphtha went down by 9.4 percent.

The total export mix comprised of condensate (48.8 percent); naphtha (17.0 percent); fuel oil (14.3 percent); mixed xylene (9.4 percent); toluene (3.5 percent); reformate (1.3 percent); and benzene (1.5 percent), respectively.

The oil refiners accounted for 51.2 percent of the total export mix while the condensate exports of Shell Philippines Exploration B. V. (SPEX) and LPG exports by Liquigaz accounted for the remaining 48.8 percent. Crude Oil Exports

A total of 1,401 MB crude oil from Galoc (Palawan Light) was exported during the year which fell by 42.7 percent vis--vis 2,447 MB of last year due to its low production which resumed only in May 2012 after a 6-month long shutdown.

MARKET SHARE

Total Petroleum Products The major oil companies (Petron Corp., Chevron Phils. and Pilipinas Shell Petroleum

Corp.) got 72.8 percent market share of the total demand while the other industry players which include PTT Philippine Corp. (PTTPC), Total Phils., Seaoil Corp., TWA, Filpride, Phoenix, Liquigaz, Petronas, Prycegas, Micro Dragon, Unioil, Isla LPG Corp., Jetti and Filoil Gas Co., as well as the end users who imported directly part of their requirement captured 27.2 percent of the market

Meanwhile, the local refiners (Petron Corp. and Pilipinas Shell) captured 62.9 percent of

the total market demand while 37.1 percent was credited to direct importers/distributors.

OIL IMPORT BILL

Full year 2012 total oil import bill amounting to $13,861.2 million was up by 7.9 percent from full year 2011s $12,846.2 million despite the decrease in crude import volume. This is due to high import costs of both crudes and finished products during the period as compared to year ago level.

Total oil import cost was made up of 53.6 percent crude oil and 46.4 percent finished products.

Import cost of crude oil, amounting to $7,430.9 million at an average CIF cost of $114.426/bbl, was 2.1 percent lower than $7,590.1 million of year 2011 at an average CIF cost of $109.932/bbl.

Meanwhile, total product import cost increased by 22.3 percent to $6,430.2 million at an average CIF cost of $117.438/bbl vis--vis 2011s $5,256.1 million at an average CIF cost of $114.102/bbl.

With the decreased volume of petroleum products and crude oil exported for the period, the countrys petroleum export earnings fell by 30.3 percent from $1,770.6 million of 2011 to $1,233.9 million this year.

Overall, the countrys 2012 net oil import bill amounting to $12,627.3 million was up by

14.0 percent from 2011 level of $11,075.7 million.

Proposed Locations

1. Tanza, Cavite

36.5kms from Manila 45 mins from Manila (without traffic) Land area 62,400 sqm (undeveloped property) Without jetty

2. Subic Bay Freeport Zone

A. Pure Petroleum Corp.

9 storage tanks within an area of 1 hectare Roughly about 10 cubic meters each storage tank Own jetty 124kms from Manila

B. Subic Bay Motors Corp. (SBMC)

Lot Size: It has a land area of about 32,700 sq.m. (mostly paved or asphalted) while the main production building has a floor area of 7,586 sq.m. Facilities include an administration, production & sales offices, and public bidding area or auction shed.

Address: Bldg. 1457 Argonaut Highway, CUBI Point, Subic Bay Freeport Zone, Philippines 2222

Coordinates: 1447'57"N 12017'44"E

SUBIC PROPOSED LOCATIONS

3. Sariaya, Quezon

World Precision Gas Corporation

Diesel Oil Terminal Facility

Present storage capacity- 30 million liters( 3 tanks at 10million liters each) or 25,000 metric tons

Immediately expandable to 100million liters(ground improvements completed)or 85,000metric tons or 0.64Mil Barrels

Still expandable by another 100million liters or a total of 200Million liters or 170,000 metric tons or 1.28Million Barrels

Receiving Facility-submarine pipeline,buoy mooring, 18 meters draft, capacity of 100,000 metric tons

Fully compliant with intl standards,had passed required tests- radiographic, leak, vacuum

Complemented with barge load out and tank truck loading gantry

Hub of Asia Well Positioned- Vessels coming from the west will pass by the Philippines first. 5 days vessel travel time between Asian Countries. Good for Local & Asian Region Storage.

COMPETITIVE ADVANTAGE

Natural Port Attributes

Capability of Tayabas Bay to Accommodate VLCCs

Located in an Inland Bay

Natural Deep Water Environs

Uncongested Servicing of Inbound and Outbound Ships Land Area Availability Not Thickly Populated Direct Access to Natural Deep Water Berth(18.5 meters) that can handle VLCC

Diese1 Oil Depot Specs

A. FACILITIES

l. Bundwall

2. Oil Water Separator compJete with Mechanical Facility

3. Storm drainage/open canal system

4. 3-Bay Bulk Filling Gantry

B. MECHANICAL WORKS

I. Aboveground Distribution & Supply Lines

- Complete with gate valves, wye strainers, check valves & pressure gauges

6" diameter pump suction lines

4" diameter discharge line goes to Bulk Filling Gantry

Radiographic test of all butt welded lines

Hydrotesting of lines

Anti corrosion wrapping of all underground pipes

2. Fire Hydrant lines for three (3) tanks

C. 'MARINE FACILITIES

1. Receiving Facility - 18" diameter x 1,000 meters submarine pipeline

- Hydro or Air testing of pipelines

2. Barge Load Out Facility

4 point mooring buoy facility

Spiral steel pipe

Submarine pipeline about 600 meters from terminal sea wall

Radiographic & Hydrotest Tests

D. ELECTRICAL WORKS

- Main feeder line for the 220 VAC single phase utility power

- Lights, AlC system

- Grounding System & Lighting System

- Fire Alarm System & Emergency Shutdown

E. INSTRUMENTATION AND FACILITIES EQUIPMENT

1. Oil spill containment, boom etc.

2. Generator, 500 KVA Cummins

3. Fire pump, jockey pump and accessories

4. Loading gantry facility including meters, Dev and loading arms 5. Outloading hoses for barge loading, marine receiving hose, break away

couplings, line valves

6. Flow metering system for marine receiving and barge loading

7. Tank gauging and inventory control system including installation

8. Multiload II (Batch controllers)

9. Densitometer

10. Petroleum valves

F. STORAGE TANK

Tank type

Bottom type

Liquid type

Shell Height

Nominal Diameter

Reference Height (side hatch)

Volume at 0 level

Maximum Filling Height

Maximum Filling Volume

Safe Filling Height

Safe Filling Volume

Vertical cylindrical

Coned down

Petroleum

9.770 - meters

36.745 - meters

10.167 - meters

169,061 -liters

9.790 - meters

10,529,831 -liters

9.290 - meters

10,000,989 - liters

Doing Business in the Philippines

Board of Investments: FISCAL INCENTIVES:

Income tax holiday (ITH) for 6 years for pioneer firms and generally 4-6 years for non-pioneer firms.

If a non-pioneer firm is located in a less developed area, it shall generally be entitled to an ITH of 6 years.

Firms locating within Metro Manila shall not be granted ITH unless they are: Within a government industrial estate; Service-type projects with no manufacturing facilities; Power generating plants; or Exporters with expansion projects.

Tax credit on raw materials, supplies, and semi-manufactured products Duty-free importation of capital equipment, spare parts and accessories until 10 May

2017 Board of Investments

Board of Investments: NON-FISCAL INCENTIVES:

Allows employment of foreign nationals Simplification of customs procedures Importation of consigned equipment; and The privilege to operate a bonded manufacturing/trading warehouse subject to custom

rules and regulations.

Economic & Freeport Zones Incentives

Exempted from all local and national taxes - value-added taxes, franchise taxes, excise and ad valorem taxes)

Special Tax Rate of 5% on Gross Income

Tax and Duty-Free on Importation of Capital Equipment, Spare Parts and Supplies

Foreign nationals may be employed in supervisory, technical or advisory positions within 5 years from a projects registration, extendible for limited periods. The positions of president, general manager, and treasurer or their equivalents, of foreign-owned registered firms may be retained by foreign nationals.

All foreign employees may bring with them their spouses and unmarried children under 21 years of age.

Attractive Investment Incentives

TYPES OF BUSINESS ENTERPRISES

There are several types of business enterprises an investor can choose from in establishing operations in the Philippines.

A. ORGANIZED UNDER PHILIPPINE LAWS 1. SOLE PROPRIETORSHIP

Sole Proprietorship is a business structure owned by an individual who has full control/authority of its own and owns all the assets, personally owes and answers all liabilities or suffers all losses but enjoys all the profits to the exclusion of others.

A Sole Proprietorship must apply for a Business Name and be registered with the Department of Trade and Industry- National Capital Region (DTI-NCR).

In the provinces, application may be filed with the extension offices of the DTI.

2. PARTNERSHIP

Under the Civil Code of the Philippines, a partnership is treated as juridical person, having a separate legal personality from that of its members. Partnerships may either be general partnerships, where the partners have unlimited liability for the debts and obligation of the

partnership, or limited partnerships, where one or more general partners have unlimited liability and the limited partners have liability only up to the amount of their capital contributions. It consists of two (2) or more partners. A partnership with more than three thousand pesos ( 3,000.00) capital must register with Securities and Exchange Commission (SEC).

3. CORPORATION

Corporations are juridical persons established under the Corporation Code and regulated by the Securities and Exchange Commission with a personality separate and distinct from that of its stockholders. The liability of the shareholders of a corporation is limited to the amount of their share capital. It consists of at least five (5) to fifteen (15) incorporators each of whom must hold at least one share and must be registered with the Securities and Exchange Commission (SEC). Minimum paid up capital: five thousand pesos ( 5,000.00).

A corporation can either be stock or non-stock company regardless of nationality. Such company, if 60% Filipino-40% foreign-owned, is considered a Filipino corporation; If more than 40% foreign-owned, it is considered a foreign-owned corporation.

a. Stock Corporation

This is a corporation with capital stock divided into shares and authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held.

b. Non-stock Corporation

It is a corporation organized principally for public purposes such as charitable, educational, cultural or similar purposes and does not issue shares of stock to its members.

B. ORGANIZED UNDER FOREIGN LAWS 1. BRANCH OFFICE

A Branch office is a foreign corporation organized and existing under foreign laws that carries out business activities of the head office and derives income from the host country. It is required to put up a minimum paid in capital of US$200,000.00, which can be reduced to US$100,000.00 if (a) activity involves advanced technology, or (b) company employs at least 50 direct employees. Registration with the SEC is mandatory.

2. REPRESENTATIVE OFFICE

A Representative Office is foreign corporation organized and existing under foreign laws. It does not derive income from the host country and is fully subsidized by its head office. It deals directly with clients of the parent company as it undertakes such activities as information dissemination, acts as a communication center and promote company products, as well as quality control of products for export. It is required to have a minimum inward remittance in the amount of US$30,000.00 to cover its operating expenses and must be registered with SEC.

3. REGIONAL HEADQUARTERS/REGIONAL OPERATING HEADQUARTERS (RHQS/ROHQS)

Under RA 8756, any multinational company may establish an RHQ or ROHQ as long as they are existing under laws other than the Philippines, with branches, affiliates and subsidiaries in the Asia Pacific Region and other foreign markets.

a. Regional Headquarters (RHQS)

An RHQ undertakes activities that shall be limited to acting as supervisory, communication and coordinating center for its subsidiaries, affiliates and branches in the Asia-Pacific region.

It acts as an administrative branch of a multinational company engaged in international trade. It does not derive income from sources within the Philippines and does not participate in any

manner in the management of any subsidiary or branch office it might have in the Philippines. Required inward remmitance of US$50,000.00 annually to cover operating expenses.

b. Regional Operating Headquarers (ROHQS)

An ROHQ performs the following qualifying services to its affiliates, subsidiaries, and branches in the Philippines. o General administration and planning o Business planning and coordination o Sourcing/procurement of raw materials components o Corporate finance advisory services o Marketing Control and sales promotion o Training and personnel management o Logistic services o Research and development services and product development o Technical support and communications o Business development

Derives income in the Philippines Required capital: US$200,000.00 one-time remittance

Securities Exchange Commission

Minimum paid up capital requirement: US$200,000.00 Foreign equity: Oil Depots may be 100% owned and operated.

Local Government Permits, etc.

Barangay Clearance for Business Permit Purposes Municipal / Sanitary Permit Municipal / City Business Permit Building Permits / Civil / Structural Permits Locational Clearance / Business Permit in the localities where the business will be

established

Owning Lands in the Philippines

The ownership of private lands in the Philippines is reserved to Philippine citizens and corporations that are considered Philippine nationals. Foreign nationals and foreign companies may indirectly own private lands in the Philippines by taking a minority interest up to the extent of 40% in corporations that are considered Philippine nationals. As an alternative to owning private lands, may also lease land. Lease taken by a foreign national or a foreign entity can be for a term of 25 years and may be renewed for another 25 years.

For the purpose of establishing industrial estates, factories, assembly or processing plants, agroindustrial enterprises and other similar endeavors, law allows a maximum lease term of 50 years renewable for another 25 years. A lease under the Investors Lease Act is required to be registered with the Philippine Department of Trade and Industry.