Who’s Hit First by Trump’s Tariffs?
With less than a week before the U.S. imposes its “reciprocal tariff” policy globally, we’ve been receiving a surge of inquiries about setting up factories in the Philippines:
“Which industrial zones are available, and is factory rental expensive?”
“What exactly is the process and paperwork for setting up a factory in the Philippines?”
“What are the strengths and weaknesses of investing here?”
“I stopped construction midway on a plant in Cambodia after hearing about the tariffs…”
“I urgently need to lease a factory to handle next year’s U.S. orders!”
This is the most direct stress response to tariffs: suspended orders, rising costs, and customers pressing for backup production options. Suddenly, the Philippines—previously not a frontrunner in manufacturing relocation—is being considered more seriously.
To be clear, the Philippines is not the No. 1 candidate for Southeast Asia’s manufacturing shift. It has a weak industrial base, complex business environment, and supply chain gaps. Yet, under today’s trade conditions, it still offers rational advantages:
Export access: Preferential tariffs from the U.S. and EU mean lower export costs when shipping from the Philippines.
Cost structure: PEZA zones still have available factories; land and labor costs remain lower than many Southeast Asian peers.
Language & management: English is widely spoken, reducing communication and management costs.
This is not sugarcoating the Philippines—just a rational analysis. Now let’s break down the practical process of setting up a factory here.
01｜Company Type & Registration (Timeline: 1–2 months)
Recommended type: Corporation (joint-stock company)
Required documents:
Proposed name, type, capitalization, PEZA-recognized address
Project brief, anti-corruption certificate, credibility report, resumes of responsible officers, parent company profile
Passports & TIN of foreign shareholders; Government ID & TIN of Filipino shareholders (3x signatures each)
Lease contract
Proof of paid-in capital (mandatory for 100% foreign-owned firms)
Capital requirement: At least USD 200,000 is recommended to demonstrate financial capacity and strengthen credit standing.
Process:
Register with SEC, obtain SEC certificate.
Register with BIR, secure tax ID and official registration (~2 weeks).
Apply for PEZA registration (if factory is inside a PEZA ecozone such as Clark/Subic).
Obtain PEZA Certificate of Registration (3–4 weeks).
Open a corporate bank account (BDO, UB, RCBC recommended; 1–2 weeks).
02｜Factory Site Selection & Leasing (Timeline: 2–4 weeks)
Common zones: Lima, Subic, Cavite, Batangas.
Lima-Many ready-to-use plants, strict management, safe, well-equipped
Subic-Near port, high-standard factories, limited supply
Cavite-Plenty of factories, competitive, close to Manila, rich labor pool
Batangas-Port access, average factory conditions, more remote
Leasing process:
Identify zone → Site inspection → Sign LOI → Pay deposit → Formal lease contract (3–5 years, negotiable).
Key notes:
Confirm PEZA accreditation for factories inside ecozones to ensure incentives.
Verify water/electricity capacity and supporting facilities.
Prefer ready-built factories to shorten lead time (new builds require 6–12 months).
03｜Construction Approvals & Permits (Timeline: 2–3 months)
Key permits:
Building Permit – Municipal hall or zone authority
Environmental Compliance Certificate (ECC) – DENR
Fire Safety Certificate – Local fire bureau
Ecozone enterprise registration – PEZA
Required documents: factory layout, production process description, equipment list, scale of operations.
👉 Environmental approvals require an EIA (can outsource to local consultants). Hiring local advisors is highly recommended to avoid delays.
04｜Labor Recruitment & Management (Timeline: 1–2 months)
Recruitment channels: Jobstreet, Indeed, or licensed manpower agencies (fees = 15–30% of first-month salary).
Salary benchmarks:
Workers: USD 350/month
Skilled workers: USD 400–600/month
Managers: USD 600–1,200/month
Compliance notes:
Probationary period capped at 6 months.
Mandatory contributions: SSS (social security), PhilHealth (healthcare), PAG-IBIG (housing fund).
Strict adherence to labor laws is essential to avoid disputes.
Cost Overview (PEZA Factory Setup)
Company registration: USD 4,000–8,000
Factory rent: USD 3–5/m²/month (depending on zone)
Utilities: Water USD 1–2/m³; Power USD 0.18/kWh
Labor cost: USD 350/month/worker
Permits & compliance: USD 2,500–5,000
📌 Example: For a 2,000 m² plant with 50 employees, the 6-month startup cost is approx. USD 50,000–100,000.
Final Takeaways
The Philippines is not a universal solution, but with three key moves, enterprises can stay ahead:
Hire local experts to avoid procedural and compliance risks.
Stage implementation—start small, then expand, to minimize upfront risk.
Plan supply chains early so logistics align with plant and power readiness.
Going abroad is never a reckless adventure—it’s a calculated game of strategy and discipline.
👉 For more inquiries about setting up factories in the Philippines, feel free to contact us anytime.
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