Franchises pitched as solution to low FDI

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Although the Philippines continues to lag behind its regional neighbors in attracting foreign direct investment (FDI), it is experiencing explosive growth in foreign franchises and is poised to become the franchise hub of Asia, the Chairman Emeritus of the Philippine Franchise Association (PFA) said.

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At the Franchise Asia Philippines 2014 International Conference held at the SMX Convention Center Manila yesterday, PFA Chairman Emeritus Samie Lim said reforms and other policy changes need to be made to prepare the Philippines for the Asean integration next year, but that the growth of franchises in the country presents opportunities both for foreign investors and Philippine brands looking to expand their markets in the region.

According to Lim, participation in this year’s Franchise Asia expo increased 400 percent from last year, with brands from Malaysia, Singapore, Korea, Japan, Taiwan, Hong Kong, the UK and the US all in attendance.

“Indeed, our vision of making the Philippines the franchise hub of Asia is now becoming a reality. In fact, according to a study by EGS, an international consultancy and survey firm, the Philippines is ranked highest in Asean in terms of being most attractive for franchise investments,” Lim said.

“The Philippines is an underperformer when it comes to attracting foreign direct investment (FDI),” Lim said, noting that in 2012, the Philippines with improved credit ratings only captured $2.7 billion in FDI, while below investment grade Indonesia and Vietnam collected $19.5 billion and $8.13 billion, respectively.

Despite this, Lim explained, “We have always asserted that the Philippines can be an excellent regional headquarters for international franchises because of our large, young population with a median age of 23; our cosmopolitan people who love to shop and dine; our English-speaking, well-educated and service-oriented labor force; and our strategic location.”

Lim also pointed out that the country is entering a double ‘sweet spot’ in terms of working age population and rise of income, stressing these will make the Philippines an investor’s goldmine in the coming years.

The PFA is currently focusing on promoting Philippine franchises to international markets using by connecting partners through international franchise shows sponsored by the World Franchise Council (WFC) and the Asia-Pacific Franchise Confederation (APFC).

Lim urged the Philippine franchising sector to focus on being globally competitive, and building intrinsic brand value, reminding participants that compliance with global standards is a key part of the Asean integration.

“It is evident, therefore, that this will be a period of learning and unlearning for the Philippine franchising sector. It is also a time for changing of mindsets and to become more pro-active in seeking opportunities. Asean integration is a perfect time for Philippine franchises to go overseas,” Lim said.

Highlighting growth that is already taking place, Lim said, “We are seeing a growing number of Philippine companies partnering with Indonesian, Singaporean, Thai and other Asean companies to further foster regional trade. I hope to see more of these partnerships being forged across the region – partnerships that will grow not only in Asean but beyond.”

“With these partnerships, we hope to see our exports of products and services grown from 4% to 25%. And as a testament to our commitment to this goal, PFA has formed an ASEAN integration committee to develop programs that will help unleash our full potential in ASEAN trade,” he added.

Lim admitted that the Philippines’ Asean counterparts have the edge in terms of government support. “Franchising is an important instrument in enlarging the middle class. Furthermore, our Asean neighbors recognized early that franchising is a recommended entry strategy for SMEs to go international, and powerful tool in creating businesses and jobs,” he said.

Meanwhile, Department of Trade and Industry (DTI) Secretary Gregory Domingo said that the government will continue to focus on the ease doing business, development of infrastructure, and reforms in the customs bureau to provide a more competitive environment.

Domingo said that the franchising sector form an important part of the Philippine economy.

“The number of workers grew from a quarter of a million in 2000 to over a million in 2011, and in the same period number of franchises [grew]from 600 to 1200, with annual turnover growing at 20-25 percent from $3 billion to $7 billion. The national brands have performed well, as they make up two-thirds of the total franchise industry, [which is]proof of the entrepreneurial spirit,” Domingo said.

“We at the DTI, for our part will continue our efforts to provide services to help you thrive in an increasingly global competitive market. In particular, we will take a look at how we can support Philippine companies in international franchise shows, and international brands who are seeking access to Asean market through the Center for International Trade Expositions and Missions (CITEM).

The Philippines is your perfect entry point. Now is the best time to invest in the Philippines, time to be part of the growth story,” Domingo said.

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