By Bernie Cahiles-Magkilat
A large majority of Swedish businessmen are optimistic in their outlook in the Philippine economy with keen interest in infrastructure and the services areas, believing that opportunities are definitely worth pursuing for the long term despite challenges in the ease of doing business in the country.
The “Philippines – Open for Business” report released today by Business Sweden with 13 respondents out 20 Swedish firms in the country surveyed in December 2018-January 2019 showed that 92 percent of these companies plan for long-term business expansion in the country. A majority 85 percent of these firms reported profitable operations in 2018. The 20 Swedish firms in the country employ a total of 30,000 Filipinos both direct and indirect. They reported combined revenue of P30 billion (SEK 5 billion) and exports growing at 30 percent or almost SEK 2 billion in 2018.
The survey also showed that 70 percent of respondents forecast solid growth with expectations of 10 percent increase in sales annually within the next three years.
However, the survey also noted of cautious optimism among Swedish firms on concerns of bureaucratic red tape and regulatory changes posing as potential source of risks. Dealing with government permits top the challenges, topped as the number one challenge representing 69 percent of respondents. This was followed by gap in infrastructure.
Business Sweden Country Manager Ulf Wennblom downplayed these impediments to business stressing, “opportunities outweigh barriers by far.”
Wennblom also added that these companies “were able to manage even if it takes a longer time” to process their permits. Wennblom also noted that the issue of ease of doing business is not unique to the Philippines but it is also a problem with the rest of ASEAN countries, except Singapore.
On infrastructure gap, Wennblom cited the progress in government’s Build Build Build program as a big opportunity to improve the country’s infrastructure.
Airport infrastructure for the supply of equipment and machineries and services for the innovative technology solutions topped among the sectors that Swedish firms are sectors they are most interested to participate in.
The report also forecast a more robust investment in the retail sector in the next two years.
Swedish Ambassador Harald Fries said the expected opening of IKEA by end of next year for its biggest global store located in the MOA area will boost the retail sector. Aside from the initial 500 workers the company is currently hiring, the ambassador cited other indirect jobs to be created in terms of logistics, supply and inputs, support services, among others.
The ambassador also noted that fashion store H & M is also expanding its current 34 stores in the country given the Swedish brand’s popularity among Filipinos.
Swedish firms are also looking at participating in the manufacturing for its need for increased automation.
“Philippines is not a leader today in manufacturing, but it can be with significant leap forward in the level of automation,” he said adding that Swedish firms are very much interested to provide these solutions especially in AI, big data and analytics.
The survey also cited the Philippines for its international orientation that is unique among its ASEAN peers, and its leaning towards global trade with its openness for free trade. Swedish firms also noted that Philippines is leaning towards quality products over price points.
Other top success factors include competitive pricing, high product quality, being able to offer innovative technologies, and the young English-speaking workforce.
“Doing business in the Philippines is not easy, but if done right, it makes a lot of business sense, both from a bottomline perspective as well as a way of increasing your presence in the region. If your target is to ‘double in Asia Pacific,’ then the Philippines is an important piece of the puzzle to increase sales,” the report concluded.
On the average, Wennblom said, 2-3 firms are entering the country every year as he expressed confidence this trend to continue even more.
Ambassador Fries recalled that when he was first posted here in early 1990s, some big Swedish brands had already invested here but, they have grown massively over the years.
The Swedish embassy closed its offices in Manila in 2008 with consular services being served by its Malaysian office. It only formally reopened in September 2017.