Filipino Business Competitiveness in Comparison to Asian Countries

February2013 JapanExternalTradeOrganization(JETRO) Manila

CONTENTS
1. Profit Center
1.1 Estimated Operating Profit in 2012 1.2 Estimated Operating Profit in 2012 (More than 50% of Business is from Export Account)

2. Good Management
2.1 Difficulty in Recruiting General Staff 2.2 Number of Strikes/Lockouts 2.3 Trouble of Time-consuming Customs Procedures 2.4 Trouble of Time-consuming Administrative Procedures

3. Reasonable Salary
3.1 Salary Base up Rate (2012-2013) 3.2 Annual Salary for Manufacturing Staff 3.3 Annual Salary for Manufacturing Engineer 3.4 Annual Salary for Manufacturing Manager 3.5 Annual Salary for Non-Manufacturing Staff 3.6 Annual Salary for Non-Manufacturing Manager

4. Incentives
Reason for Embarkation to each City

5. Business Challenges in the Philippines

5.1 Business Challenges in Asia 5.2 Business Development Plan in Next 1-2 Years

1.ProfitCenter

1.1EstimatedOperatingProfitin2012
India
41.2 20.3 38.5 40.0 19.1 19.5 10.5 11.7 14.9 23.7

Myanmar
45.0 15.0

China
57.2

Vietnam
60.2 20.3 17.0 13.9 13.2

Profit BreakEven Loss

Thailand
72.5

Indonesia
74.4

Philippines
71.9

Note:Surveywas conductedon OctNov.,2012

0%

20%

40%

60%

80%

100%

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

1.2EstimatedOperatingProfitin2012 (Morethan50%ofBusinessisfromExportAccount)
India
55.3

15.8

28.9 25.3 20.1 23.0 7.0 10.3

China
54.6 20.1 21.5 13.5 23.3 17.2

Vietnam
58.3

Profit BreakEven Loss

Thailand
63.5

Indonesia
69.8

Philippines 0% 20%

72.4

40%

60%

80%

100%

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

2.GoodManagement

2.1DifficultyinRecruitingGeneralStaff

China Thailand Myanmar Vietnam Indonesia Philippines 0 10 20 30

35.5 34.4 20.0 13.8

Unit:%
6.8 4.3

40

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

2.2NumberofStrikes/Lockouts
(Unit:Number

Philippines

Thailand Vietnam India

Source)PhilippinesNationalConciliationandMediationBoard ThailandDepartmentofLabourProtectionandWelfare VietnamMinistryofLabor,WarInvalids&SocialAffairs IndiaMinistryofLabour&Employment,LabourBureau

2.3.TroubleofTimeconsuming CustomsProcedures
Myanmar Vietnam Indonesia China Philippines Thailand 0.0 10.0 20.0 30.0 40.0 50.0
55.6 53.9 48.5 43.5

27.3 24.0

60.0

Unit:%

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

2.4TroubleofTimeconsuming AdministrativeProcedures
Myanmar Vietnam Indonesia Philippines Thailand 0 20 40 60 80
85.0 61.5 43.8 34.5 20.6
Unit:%

100

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

3.ReasonableSalary

3.1SalaryBaseupRate(20122013) AgainstPreviousYear
Vietnam(215) Indonesia(139) India(231) China(707) Thailand(618) Malaysia(176) Philippines(97) 0 5 10 15
17.5 17.0 11.8 9.4 6.5 5.3 5.2

Note: Figuresin() indicatesthenumber ofcompanieswho respondedinthis survey

Unit:%

20

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

3.2AnnualSalaryfor ManufacturingStaff
China(396) Thailand(317) Malaysia(138) Philippines(50) India(75) Indonesia(82) Vietnam(133) 0 2000 4000 6000
6,734 6,704

5,942 4,581 4,577 4,551 2,602

US$
Note:AnnualSalary meansthetotalamount receivedperemployee (basesalary,allowance, socialsecurity,overtime, bonus,etc).

8000

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

3.3AnnualSalaryfor ManufacturingEngineer
Malaysia(128) Thailand(305) China(363) India(76) Indonesia(73) Philippines(49) Vietnam(118) 0 5000 10000 14,451 12,520 11,321 10,839 8,629 7,636 5,441 15000 20000
US$

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

3.4AnnualSalaryfor ManufacturingManager
Malaysia(128) Thailand(309) India(88) China(372) Indonesia(77) Philippines(47) Vietnam(113) 0 5000 10000 15000 20000 25000
30,083 27,204 22,091 19,761 18,147 17,498 12,245

US$

30000

35000

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

3.5AnnualSalaryfor NonManufacturingStaff
Thailand(211) China(243) Malaysia(60) India(116) Philippines(37) Indonesia(53) Vietnam(64) 0 5000 10000
13,464 13,278 13,255 9,536 7,888 7,492 6,755

US$

15000

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

3.6AnnualSalaryfor NonManufacturingManager
Malaysia(59) China(214) Thailand(191) India(107) Indonesia(43) Philippine(36) Vietnam(53) 0 5000
31,217 29,165 28,448 24,796 22,621 20,169 16,422

US$

10000 15000 20000 25000 30000 35000

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO

4.Incentives

ReasonforEmbarkationtoeachCity
Jakarta
Incentives FreeTradePolicy WellmaintainedTraffic Infrastructure MarketVolume Requestfrom Assembler CheapLaborCost
1990's 2000's 1990's 2000's 1990's 2000's 1990's 2000's 1990's 2000's 1900's 2000's

Manila
26.9% 26.1% 3.0% 2.9% 12.7% 4.3% 16.8% 27.5% 2.5% 1.4% 5.1% 7.2%

Bangkok
21.4% 8.1% 3.6% 5.4% 5.4% 2.7% 26.8% 21.6% 8.9% 5.4% 1.8% 5.4%

Hanoi
21.1% 14.5% 0.0% 3.6% 7.9% 5.5% 15.8% 18.2% 15.8% 10.9% 5.3% 1.8%

3.1% 2.8% 0.0% 2.8% 25.0% 22.2% 9.4% 11.1% 9.4% 5.6% 0.0% 0.0%

Source:SurveyofERIA,2007 15

5.BusinessChallengesinthe Philippines

Myanmar Powershortage 100.00 orblackout Timeconsuming administrative 85.00 procedures

India Wage increase

Difficultyinlocal procurementof rawmaterials & parts

Vietnam 71.10 Wage Increase 81.50

Indonesia Wage increase 82.20

Thailand Wage increase 77.90

China Wage increase 84.40

Malaysia Wage 70.70 increase

Philippines
Difficultyinlocal procurementofraw 67.70 materialsandparts

66.40

Difficultyinlocal procurementof 74.50 rawmaterials andparts

Competitor's Competitor's marketshares 59.00 marketshares 57.20 aregrowing aregrowing

Lackof employee performance/ 55.50 employee awarenessfor localization

Nomore Lackofemployee roomfor performance/ 55.80 employeeawareness 59.50 cost forlocalization cutting

Wage increase

80.00

Powershortage orblackout

Lackofemployee Lackofemployee Timeconsuming Competitor's Qualityof performance/empl performance/em administrative 61.50 oyeeawareness 55.70 ployeeawareness 55.00 marketshares 53.40 50.40 employees procedures are growing forlocalization forlocalization

Shortagesof land/offices,rising 75.00 landprices/rent Qualityof employees

Lackofemployee Competitor's performance/empl marketshares 63.50 oyeeawareness 60.50 aregrowing forlocalization

Difficultyin recruiting executivestaff

53.40

Difficultyin Nomore recruiting 50.30 roomforcost 50.90 executivestaff cutting Qualityof employees 50.40

Underdeveloped Underdeveloped Majorclients Timeconsuming legalsystemsand legalsystemsand 70.00 60.90 58.70 53.40 requesting for 50.10 unclearlegal unclearlegal taxprocedures lowerprices systemoperation systemoperation

Lackofemployee Timeconsuming Difficultyin Timeconsuming performance/ 65.00 administrative 55.90 56.30 recruitingmiddle 51.10 employeeawareness taxprocedures managementstaff procedures forlocalization Difficultyin Complicated Difficultyinlocal Qualityof procurementofraw customsclearance 55.60 recruiting 54.70 50.00 employees materialsandparts procedures executivestaff Inadequatelogistics 60.00 infrastructures Underdeveloped legalsystemand unclearlegalsystem operation

Timeconsuming Complicated customs 52.50 customsclearance 53.90 procedures procedures

Qualityof employees

52.20

Difficultyin qualitycontrol

51.50

5.1BusinessChallengesinAsia
(RatedbyJapaneseExpatriatesineachcountry)
Itemsdescribedhereinareconsideredmajorandserious issues/challengesbythemanagersoftheJapanesefirmsineach country. Onlytheitemswith50%orhighersurveyresponsewereincluded. Specificanswersarebeingshownforsimilarquestionswiththe responserateof50%orhigher. ThesurveywasconductedfromOctober9toNovember15,2012.

Competitor's Increasein marketsharesare 57.90 51.60 procurementcosts growing

Lackofemployee Complicated performance/empl customsclearance 55.60 oyee awarenessfor 50.00 procedures localization

Difficultyin recruitingmiddle managementstaff Difficultyin 55.00 recruiting executivestaff Timeconsumingtax procedures

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) Dec. 2012/JETRO

Restrictionson 50.00 foreignremittance

5.2BusinessDevelopmentPlanin Next12Years
India
83.6
15.1 1.3 Expansion

Indonesia
77.3 21.0 32.1 33.4 42.0 50.0
1.7 0.4

Vietnam
65.9

Remaining Downsizing Relocatingto otherCountryor Withdrawal

1.6 0.4

Thailand
64.2
1.9

China
52.3

1.8 4.0

Philippines
48.2
1.8

0%

20%

40%

60%

80%

100%

(Source): Survey of Japanese-Affiliated Companies in Asia and Oceania (FY 2012 Survey) ,Dec. 2012/JETRO