Jul 21, 2014

Philippines - Lim: Franchising sector to drive FDI growth

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LIM, speaking on the Philippines’s positioning in an integrated Association of Southeast Asian Nations (Asean) in end-2015, expressed reservation on the country’s preparedness due to its profile in attracting FDI; but championed the franchising sector’s prospects come the Asean integration.

Lim cited the Philippines being a “bottom-dweller” in terms of FDI tally in 2013, despite exhibiting the highest growth compared to Asean nations.

The PFA chairman emeritus also noted that despite successive credit-rating upgrades in the past year, the Philippines fared poorer than fellow Asean countries that are below investment grade. The Philippines gained $2.7 billion in investments in 2013 compared to Vietnam’s $8.13 billion and Indonesia’s $19.5 billion during the same year.

Nontariff barriers also serve as a deterrent to foreign investment, Lim added, such as layered bureaucratic processes and underdeveloped infrastructure. The public-private effort to improve the ease of doing business, Lim said, while gaining headway, is not enough to make the Philippines “an investment Mecca.”

Despite these disadvantages, the franchising sector is going against the norm, said the franchising icon.

“The study of the Edwards Global Services, an international consultancy and service agency, showed the Philippines is ranked the highest in Asean in terms of being the most attractive for franchise investments,” Lim said.

The ranking, he said, is due to several factors such as the young and expanding population, Filipinos’ penchant for shopping and dining, and the well-educated and English-speaking labor force.

The country is also poised to enter a “sweet spot” in terms of working-age population and rising income, which, Lim added, may make the Philippines an investor’s gold mine in the years to come.

Such strengths are slowly making the Philippines’s goal of becoming the franchising hub of Asia a reality, he said.

However, despite the optimism, the PFA chairman emeritus stressed that ramping up competitiveness must be a priority among small and medium enterprises (SMEs), or they will lose market share with the Asean becoming a single market.

Lim also called for continued government support to buttress the SME’s competitiveness, saying other Asean governments have gotten a head start in recognizing the promise of the franchising sector.

“Admittedly, our Asean counterparts have the edge in terms of government support. Our Asean neighbors recognized early that franchising is a recommended entry strategy for SMEs to go international,” Lim said.

Franchising can also help manufacturers go global, if the government would move to help make producers of low-value export products to being original-equipment manufacturer (OEM) subcontractors, and ultimately high-value products of a branded franchise.

Promoting these branded franchises for exports is essentially exporting a whole store that sells hundreds of products sourced from farms and SMEs.

The Asean integration will mean more opportunities for Philippine businesses, Lim said, and franchising will further expand the said businesses domestically and regionally.

Lim said the PFA is eyeing the exports of products and services of the franchising sector to grow by 25 percent, and has established an Asean integration committee to achieve the goal.

Trade Secretary Gregory L. Domingo pledged continued government support to the franchising industry, saying “we, at the DTI, will continue our efforts to provide services to help the franchising industry thrive in an increasingly global competitive market. In particular we, at the DTI, will take a look at how we can support Philippine companies in international franchise shows.”

Domingo affirmed the contribution of the franchising industry to the economy, with the number of workers ballooning from a quarter of a million in 2000 to over a million in 2011.

In the same period, Domingo said, the number of brands grew from 600 to 1,300, while outlets increased from 30,000 to about 125, 000. Local brands make up about 66 percent of the total franchising industry.

“For the franchising sector, you form an important segment of the economy and we encourage you to fully embrace the Asean Economic Community and global competition. Markets are opening up, especially around Asean the region, and take advantage of those opportunities by adopting international best practices,” Domingo said.

Catherine Pillas

Business & Investment Opportunities 

Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. 

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