The Philippines has become an important emerging economy in Southeast Asia and a hot spot for investment by overseas companies. Before investing and immigrating to the Philippines, our entrepreneurs need to have a detailed understanding of the local investment situation in the Philippines.
1. Local Currency
The currency of the Philippines is the peso, which is freely convertible. The Chinese yuan and the peso cannot yet be settled directly.
In recent years, the peso-to-US dollar exchange rate has continued to rise. The average exchange rates in 2005, 2006, and 2007 were 55.09:1, 51.31:1, and 46.15:1, respectively. In 2007, the peso appreciated by nearly 19% against the US dollar, making it the best-performing currency in Asia that year. However, as of December 24, 2008, the peso-to-US dollar exchange rate was 47.52:1, a depreciation of 15.3% from the beginning of the year. In 2012, the Philippine peso appreciated rapidly, rising from 43.92:1 at the beginning of the year to 41.19:1 at the end of the year.
2. Foreign Exchange Management
Starting in 1992, the Philippines carried out reforms to its foreign exchange management system. The main contents were: lifting foreign exchange controls and implementing a floating exchange rate; allowing the free buying and selling of foreign exchange outside the banking system; allowing foreign exchange income and earnings to be sold to authorized agent banks, as well as allowing transactions outside the banking system; and allowing foreign currency to be stored freely within or outside the Philippines and used freely for any purpose.
Foreign companies registered in the Philippines can open foreign exchange accounts in Philippine banks for import and export settlement. Payment methods for all imported goods do not require approval from the Central Bank, and commercial banks may sell foreign exchange for import payments in the following ways: letters of credit, documents against payment, documents against acceptance, trade accounts, and direct remittances. For all export goods, exporters must apply to a commercial bank for an "Export Declaration." Payments for exports can be made in the following ways: permitted methods, other permitted methods, and convertible foreign currency.
Foreigners working in the Philippines may transfer their legal after-tax income in full. Carrying cash in or out of the country requires a declaration; the limit is 10,000 pesos. There is no limit on foreign exchange, but amounts over 10,000 US dollars must be declared to customs.
3. Banking Institutions
The Bangko Sentral ng Pilipinas (Central Bank of the Philippines) is the national monetary management authority responsible for formulating and implementing national foreign exchange management policies. The Philippine banking system is divided into four categories: commercial banks, savings banks, rural banks, and government-specialized banks.
Commercial banks are the core of the Philippine banking system, accounting for approximately 90% of the total assets of the banking industry. Major commercial banks include: Metropolitan Bank and Trust Company (Metrobank), BDO Unibank, Bank of the Philippine Islands (BPI), and Philippine National Bank, etc. As of March 22, 2013, there were 36 commercial banks, 70 savings banks, and 582 rural and cooperative banks in the Philippines. By the end of 2012, the business network of all banks had increased to 9,410 branches, with 12,225 ATMs. In the first half of 2012, the total assets of the Philippine banking industry were 7.41 trillion pesos, an increase of 5.54% over the same period of the previous year. In terms of quantity, the degree of participation of foreign banks in the Philippine market ranks among the top in emerging Asian market countries, and foreign banks have become an important part of the Philippine banking system. Major local foreign banks in the Philippines include: Standard Chartered Bank, HSBC, Citibank, and Bank of America.
