Examples Of Foreign Investment In The Philippines: Have you ever thought about investing in the Philippines as a foreign investor but don’t know what investment options are available? Fear not, as today we will be going through examples of foreign investment in the Philippines, and we will also be diving into the advantages and disadvantages of foreign investment in the Philippines.
Example Of Foreign Investment In The Philippines
The Philippines is a foreign-friendly country regarding investment opportunities. However, there are specific laws and regulations around different types of investment. Below, we will be going through examples of foreign investment in the Philippines and what you need to know before investing.
Investment Into Real Estate
Investing in real estate in the Philippines as a foreigner can be an excellent idea if you can find the right location and buy at the right price. Unfortunately, in the Philippines, foreign investors cannot own land, which means the only investment option is condominiums. However, there are options and technicalities around this.
If you wish to invest in land or real estate that requires you to own the land, many foreign investors use two common options. The first option is to place the real estate in the name of a Filipino. The second option is opening a business and putting the property under the business name.
Naturally, there are many advantages and disadvantages to these methods. This is why it’s often recommended to speak to an expert before investing in any investments in the Philippines.
However, suppose you are looking to invest in condominiums. In that case, you will have plenty of options as the real estate market is currently booming in the Philippines. One of the most important factors when investing in real estate in the Philippines is choosing a location that is accessible and in demand for your target market.
We’ve previously spoken about the costs and the pros and cons of real estate in the Philippines and answered the question of is a condominium a good investment in the Philippines, which I’ve attached for future reading.
Invest Via The Philippines Stock Exchange
The Philippine Stock Exchange is a topic this often talked about, and one common question is can foreigners invest in the Philippine Stock Exchange? Foreigners can invest in the Philippine Stock Exchange, and this can be done through a local Filipino bank or a stock market brokerage.
Most mainstream banks in the Philippines have several financial products tied together with the Philippine Stock Exchange, which is an indirect investment into the PSE. Nevertheless, the most common way is for foreigners to invest in the Philippines Stock Exchange is through a stock market brokerage.
Col financial is one of the largest and most trustworthy platforms foreigners use to invest in the Philippine Stock Exchange. One advantage of using this brokerage is that they offer an online platform to buy and sell shares wherever you are in the world.
The foreign investment act of the Philippines states that foreigners cannot own more than 40% of a business. However, most public businesses listed on the Philippine Stock Exchange do not come close to this amount. Therefore there is a great list of companies to choose from.
Investment Into A Small Business
Another unique example of foreign investment in the Philippines is investing in a small business. You may have heard of the terms Angel investing, seed funding, and crowdfunding, as they have been very popular types of investing over the years.
Previously we have spoken about Angel investing in the Philippines and covered the process of how to invest in a small business as an investor. But to summarise, most Filipino entrepreneurs use platforms to find investors. These platforms act as a bridge between the investor and the entrepreneur.
However, in recent years, the Philippines has seen a growth in crowdfunding platforms. There are crowdfunding platforms for business opportunities, real estate opportunities, and personal crowdfunding platforms.
Investing In A Filipino Farm
In the Philippines, the farming and agricultural industry has had several developments. One of these developments is the opportunity for investors to invest in local farmers. One of the most well-known companies that offer this service is called Cropital.
Cropital bridges the gap between local Filipino farmers and investors. Not only can you receive a fair return on investment, but you can also do some good for local farmers across the Philippines. The waiting time for the average investment return is between 4 – 6 months. However, due to the ongoing pandemic, some investors have yet to see a return on their investment.
Some farmers turn to other crowdfunding platforms such as the Angel investment network. It is also possible to find farming opportunities on social media, but naturally, this possesses advantages and disadvantages. Unfortunately, scams are common in the investment world, so it’s always recommended to consider your options carefully.
Lastly, when we think about farming investments in the Philippines, we tend to think about plants and seeds. However, with this example of foreign investment in the Philippines, there are plenty of opportunities to invest in livestock such as chickens and pigs. Several investment pitches written by farmers suggest that investment return can be as high as 400% with livestock investing.
Invest Into Your Own Business In The Philippines
Even though the investment law states that foreigners cannot own more than 40% of a business in the Philippines, there are technicalities around this, making this a great example of foreign investment in the Philippines.
If your business earns the majority of its income from overseas (such as an outsourcing call center), you can own a lot more than 40%. If, on the other hand, you are serving a domestic market, you will need to ensure that your business capital is over $200,000; otherwise, you will not be able to own more than 40% of the business.
Business Law in the Philippines can get very technical, and there are several legal loopholes for foreign business owners. Technically the minimum capital you will need to open a corporation in the Philippines is 5000 Pesos. But depending on the type of business, where your business is earning its income and ownership levels, the startup capital can be higher.
Invest Into A Health Insurance Plan
Many insurance plans in the Philippines offer investment with their insurance products. These are often called investment-linked insurance funds and are tied to the Philippine Stock Exchange. One of the largest and most trustworthy companies in this field is Sun Life.
Similar to all types of investment, there are several advantages and disadvantages, but luckily there are online calculators and advisors available that will help you with any queries you have.
After reading the small print of several of these investment plans, it is clear that foreigners can indeed invest; however, some additional information is needed, including completing application forms and identification.
Advantages And Disadvantages Of Foreign Investment In The Philippines
After looking through the examples of foreign investment in the Philippines, you may have one question: What are the advantages and disadvantages of foreign ownership in the Philippines? But it has to be said there are some unique opportunities when investing in the Philippines as a foreign investor so let’s look at these in more detail.
Benefits Of Foreign Investment In The Philippines
One big benefit of foreign investment in the Philippines is that it offers your portfolio an opportunity to diversify. However, after looking through the examples of foreign investment in the Philippines is clear to see that there are several smaller investment opportunities in each main category.
For example, suppose you are looking to invest in the Philippines Stock Exchange as a foreign investor. In that case, you can invest directly into stocks, mutual funds, and several other investment products, which gives your portfolio some unique diversification.
Investing In Emerging Markets
Southeast Asia, in general, has some fantastic emerging markets at the time of writing and the Philippines is one of those countries that offers foreign investors some unique opportunities. Unfortunately, due to the recent pandemic, the stock market of the Philippines has seen a decline, but there, this offers some fantastic opportunities for investors.
In the Philippines, there are also several emerging markets across several industries. As mentioned, the pandemic has taken its toll on the Philippines, but several industries (such as the outsourcing industry) are continuously growing from strength to strength.
Lower Taxation Rates
Currently, the capital gains tax rate for the Philippines stands at 15%. Of course, this will depend on your circumstances, but this tax rate may be lower than your home country, making the Philippines a great option for investors.
Additionally, if you are investing in real estate in the Philippines as a foreign investor, the property tax rate is set at 6%.
Disadvantages Of Foreign Investment In The Philippines
Even though there are several emerging markets in the Philippines, the reality is that the market is uncertain. Of course, this can be true with any market in the world, but some investors would argue that other markets have more solid foundations, and thus, the Philippines poses more risk in the long term.
As we have discovered earlier, when we looked through the examples of foreign investment in the Philippines, foreigners are limited in business. This is understandable as the regulations have been placed to protect local Filipino citizens. However, as a foreign investor, you may see plenty of opportunities, but you may find the execution of these opportunities challenging.
Investing Can Be Difficult If Aboard
We recently spoke about investing in the Philippines from abroad and covered the subject in detail. To summarise, it is possible to invest in the Philippines from abroad; however, it can be a lot more challenging. Additional application forms and identification is often needed as a foreign investor, and this can be very challenging when an investor is aboard.
Should You Invest In The Philippines As A Foreign Investor
As a whole, the Philippines has some exciting opportunities for foreign investors. The advantages of investing in the Philippines as a foreigner far outweigh the disadvantages of investing in the Philippines. Nevertheless, it’s always best to be cautious as an investor.
As we discovered earlier, there are some advantages and disadvantages to investing in the Philippines as a foreigner. If we look at these in more detail, we will find several pros and cons of investing in specific investments. For example, real estate investing is a fantastic idea, but some areas are oversaturated, and investors may find other cities more suitable.
Additionally, whether you should or shouldn’t invest in the Philippines comes down to your financial position and financial goals. As the old saying goes, you should never invest any money you are not prepared to lose. The Philippines markets are continuously changing, and it is possible to profit a great deal just as it is to lose a fortune.
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