President Rodrigo Duterte recently had state visits to China and Japan, with the intent of strengthening our economic ties with these two nations. In the case of Japan, in particular, it remains the largest source of foreign direct investments and the largest export market of the Philippines, according to data from the Philippine Statistics Authority.
The Philippine Franchise Association (PFA), together with other organizations from the local business community, had the privilege of sending delegates in these much-awaited state visits, myself included. Although there have been a lot of articles written on Duterte’s more controversial statements, I wanted to leave behind politics and focus on the impact of various policy statements on entrepreneurs and on the franchise industry.
1. Increased infrastructure spending
In the Japanese Economic Forum with over 1,000 Japanese and Filipino businessmen, key cabinet members focused on plans to increase infrastructure spending from an average of about 3 percent of gross domestic product in the previous administration to 5 to 7 percent in the coming years. In light with this increase, Budget Secretary Benjamin E. Diokno sees infrastructure spending reaching Php 7 trillion over the next five years. Duterte even brought up the possibility of partnering with Japan and China for the development of key infrastructure, such as tapping their expertise for large-scale railway projects and other modern public transportation.
Better infrastructure can only mean that for entrepreneurs, this is a perfect time to start planning your expansion outside the urban centers of Metro Manila, Cebu and Davao into other cities and provinces. Franchise brands can continue to tap franchisees in these locations now that their commissaries or logistics infrastructure can more easily access secondary and tertiary cities. In addition, tourism-related businesses from hotels, restaurants and tourism schools can expect improved business as infrastructure allows better access to local tourists.
2. “Separation” from the United States
Duterte also announced a new foreign policy which entails economic and military separation from the Philippines’ long-time ally, the US. Beyond the politically-charged implications of this move, what Duterte simply aims to do is pivot our focus towards Asia and strengthen the economic partnerships between East Asian and Southeast Asian regions.
These strategic partnerships and closer ties with neighboring Asian countries will also bode well for the regional and global expansion of our local businesses. Entrepreneurs can look at getting master franchises of key Japanese and Chinese brands while looking at these markets as potential jump off points to grow your businesses. More importantly, with Duterte visiting other ASEAN neighbors and the Philippines playing host to ASEAN in 2017, Philippine brands can start looking beyond the 100 million consumers in the Philippines to the over 600 million consumers in our ASEAN neighbors.
3. Agenda Zero – drugs and criminality
Agenda Zero, or Duterte’s all-out war on drugs and criminality, was also one of the key points raised during his state visits. Duterte said that the Philippines is “a nation of drug addicts,” with more than four million reported drug addicts all over the country. There have been numerous deaths in light of Duterte’s war on drugs; the Philippine National Police said that the anti-drug campaign has already resulted in more than 3,000 deaths.
But Agenda Zero has also resulted in an unprecedented boom for certain businesses. It has been reported that funeral and memorial services have seen a 300 percent growth in sales due to Duterte’s crackdown on drugs. Drug rehabilitation centers are also seen to boom in light of Agenda Zero, as thousands of former drug users have also chosen to surrender and turn over a new leaf. Franchising can help these businesses expand further using other people’s time, money and organization while keeping the same quality of service.
4. Improved competitiveness through lower tax rates, ease of doing business
Duterte also highlighted the administration’s plan to lower income tax rates from the current 32 to 25 percent; by next year, plans are also underway to lower corporate income tax from 30 percent to 25 percent. This tax reform package is part of an economic plan that can sustain a 7 percent economic growth until 2040, as well as cut down the poverty rate from the current 26 to 17 percent by 2022.
Trade Secretary Ramon Lopez also presented economic policies that can boost business in the country. One of these policies is the game plan for competitiveness, which in turn includes ease of doing business. Not only will the trade department monitor different competitiveness indicators and implement actions to ensure national competitiveness, but it will also remove certain layers of policies complicate the process of setting up businesses.
This will hopefully create an improved environment for would-be franchisees by making it easier to open a new business and franchise new brands.
5. Repatriating OFWs
On an uplifting note, Duterte also announced to the Filipino community in Japan that he envisions that this generation of Filipino families will be the last generation that needs to send their loved ones overseas to find work.
In light with this, investing in a franchise can serve as a viable alternative to overseas employment. For returning OFWs, a franchise can also be a viable fallback or investment for their retirement years. Local franchise entrepreneurs can capitalize on this by working with OFWs to find franchise brands that can help them create long term income for their families.
Sam Christopher Lim is the senior vice president for marketing and strategy at franchise consultancy Francorp Philippines; president of U-Franchise Sales &Management; and chairperson for ASEAN and director for special projects at the Philippine Franchise Association.