If a factory manager reveals "I want to go invest in the Philippines!" the likely response of his friends will be "Absolutely not!" The reasons: there are numerous coup attempts, public safety is inadequate, and one is in danger of having to "hit the road" at any time.
But many Chinese investors experienced in the Philippines respond, "You see the local coups of the Philippines on TV in Taiwan, but it's like us seeing the 'bustling chaos' of the Legislative Yuan on Taiwan; there's really nothing to be afraid of!"
Ultimately, does political instability affect the factory? Many entrepreneurs respond, "Relax, the production line keeps running." But the ROC Ministry of Economic Affairs' guide to investment in Southeast Asia gives the Philippines the lowest points in the "political stability" category. Many investors look elsewhere because of this point.
This really leaves one confused. Is the Philippines a suitable place to build a factory? Well, between January and October of last year, the ROC was the biggest foreign investor there. The total for 1988 exceeded US$100 million, and trade between the two countries reached about US$850 million, more than triple the trade between the Philippines and the mainland.
Philippine President Corazon Aquino has stated that last year investment from the ROC constituted 23% of all foreign investment. She pointed out the Philippine investment commission decided in February of this year to give basic guarantees and rights to ROC investors, such as the right to repatriate profits. The Philippine government is studying giving ROC businessmen multiple entry visas, as well as opening "immediate handling" centers in the north, central, and south of Taiwan. At the beginning of March, the Fifth Sino-Philippine Economic Conference was held; participants hoped to give Filipinos a new look at the investment potential from the ROC as well as to promote the passage of a local "Taiwan Relations Act."
From all appearances, then, ROC-Philippine economic relations are close. What is it about the Philippines that attracts investors?
First, it is close. Manila is only an hour and a half from Taipei--that's faster than getting to Taichung! Also, many Filipinos study English, so there are no communication problems with ROC investors. And local overseas Chinese speak Fukienese, another communications link.
The key, however, lies in tax incentives, cheap labor, an ample labor supply, and the preferences (like GSP and quotas the Philippines is unable to fill) given by the U.S. and Europe.
In 1964, the per capita income of the Philippines was higher than that of the ROC Today, there are idle industry, high unemployment, and a large gap between rich and poor. With a debt of US$28 billion, there is acute need for foreign assistance. Thus the Aquino government offers many incentives, with better tax incentives than Thailand, Malaysia, or Indonesia.
Among the various incentives: "Pioneer enterprises" (for example enterprises whose production or design has heretofore not been used in the Philippines) have six years free from income tax from profit-making operations; non-pioneer types get four years. Those exporting more than 70% of production can import their equipment without import tax.
Non-tax incentives include a simplified customs process, interest-free loans, and permission to employ non-Filipino managers and technicians.
Philippine labor is inexpensive and welleducated. In general, in Manila, the lowest daily wage is 64 pesos (about US$3). This is helpful to labor-intensive industries, which constitute the bulk of ROC investment there. However, big companies also go; the USI and CGPC groups have just formally signed an agreement to invest US$300 million in a naphtha cracker in Batan Province, the largest single ROC investment there.
But, besides political worries, there are other problems. Transportation is a problem. Congested and chaotic traffic is a standard sight in Manila. For factories which often have to move things in and out, the traffic can create considerable difficulty.
Also, Philippine labor has a quite strong independent consciousness. Labor union organizations, in trying to get benefits for the workers, often stage strikes. Also, the government stipulates that after a worker has completed six months, management cannot lay him off at will. So some workers work hard for six months; but once the "honeymoon" is over, the mood becomes disagreeable.
Strikes are sometimes contagious; Ben Liaw, president of Kyoto Leather Goods, who set up in the Manila processing zone, describes the situation as once one company strikes, the others learn how and follow, and once it starts there's no stopping it! The Philippines saw 577 strikes in 1986, involving 108,000 workers. But with economic hard times and high unemployment, the situation has visibly improved over the last two years.
Talking about strikes, veterans have a few suggestions: one is to carefully choose the site. For example, building a factory in the processing zone has advantages: special handling of product-related taxes, special rates on water and electricity, avoidance of local tax and license. . . . As for remote areas, one can get an extremely low tax rate, and investment in needed and important public construction is tax deductible.
On the other hand, factories in the processing zone are more easily affected by strikes in other companies. If one builds outside the zone in Metro Manila, the strike threat is reduced, and communications are still convenient, but water, electricity, and transport fees are higher.
Some people also have complaints about the efficiency of Philippine government agencies.
Vis-a-vis these problems, those who have come have ways of coping. For management, "You just have to be a little nicer to workers, then they will repay you." Chuang Chung Hsing, board chairman of Ta Hsing Machinery Casting, who has been in the Philippines many years, awards bonuses when the company makes money. His troops have been with him almost ten years. Leo Cheng of Gold Feather Industries points out that unions are common in the Philippines. Waiting until a labor-management conflict arises and a union is formed is not as good as taking the initiative to form one--one can still find people relatively friendly to management as leaders. Most important is to understand the labor laws and act according to them.
As for administrative efficiency, those good at interpersonal relations have no problems. One approach says that factory managers must learn how to use "coffee money" to win friends. And things will go a little smoother when one gives a little tip to process matters. But how to use this best requires accumulated experience.
Stanley M. Chen, president of Diamond Industries, says that it is important to know the law, and to have the assistance of a lawyer and an accountant. When one stands firm on legal grounds, there is room for other matters. He also recommends, owing to the risks of foreign investment, that entrepreneurs are best to leave their roots on Taiwan, and to do R&D and sales in Taiwan.
There are many agencies to help the ROC investor thinking of going to the Philippines: the Chung Hwa Association and the Taiwan Chamber of Commerce and Industry in the Philippines, as well as the Pacific Economic and Cultural Center (all in Manila) and the Industrial Developement and Investment Center of the ROC Ministry of Economic Affairs. And as for political instability, Hung Chichuan of the Chung Hua Association says that one only need steer clear of trouble zones and areas controlled by the communist New People's Army, and business in Manila is no different than in New York or Tokyo.
In children's stories the "treasure island" is mysterious and covered with jewels. But the modern "treasure island" of the Philippines is not so hard to fathom if you take a look. Only, you can't rely only on brute strength to search for its riches, but must use wisdom and heart.
[Picture Caption]
Manila Bay is a famous sight-seeing spot in the Philippines. At the right is a "little hero of the road"--the Jeepney.
Strikes are front-page news.
Filipino workers at the Carnival Company. Efficiency is high when they start to work.
In fact, if the entrepreneur deals fairly, Filipino workers will be dedicated.
Filipinos are mostly Catholic. The various kinds of religious symbols make a beautiful picture.
A church in Manila's Chinatown: its history is long, believers close knit.
Business is better on the weekends at the city's movie theaters.
The Philippines was formerly a colony of Spain. Many of its buildings ha ve a rich Spanish flavor.
The cheap labor in the Philippines has attracted entrepreneurs in labor-intensive industries to come to establish factories. Baseball gloves are one example.
Before Christmas, every group in the factory invests a lot of time and energy to decorate the factory as part of a competition.
As soon as you see the famous "Filipino-Chinese Friendship Gate," you think of Chinatown.
At an aristocratic wedding, the female guests wear Filipino traditional, formal dresses.
Rizal Park is the most popular recreation area among the people. People bring their kids and elders and flock to the grassy areas for sunbaths whenever its a holiday.
ROC citizens in Singapore hosted a welcoming fete for President Lee. （photo by Chen Min-jeng）
The training of a hard life has enabled Liao Chung-chih to effort-lessly portray every gesture and emotion of the ku-tan.
