Republican Reference - Area (sq.km) 300,000 - Population 101,833,938 - Capital Manila - Currency P peso (PHP) - President Benigno Aquino III

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Key Economic Data 
 
  2012 2009 2008 Ranking(2012)
GDP
Millions of US $ 250,265 160,476 166,909 39
         
GNI per capita
 US $ 2,470 1,790 1,890 152
Ranking is given out of 213 nations - (data from the World Bank)


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Background:
The Philippines, a country of some 80 million people, is strategically located at the heart of Southeast Asia. Situated between Taiwan, China and Hong Kong in the North, Singapore, Malaysia and Thailand in the West, the Pacific Ocean in the east and Borneo in the South, this archipelagic nation is composed of 7,107 islands.
The Philippine Archipelago is one of the largest island groups in the world and is divided into three major areas that correspond broadly to the ethnicity of the human population. These three groups are Luzon in the north with a total area of 104,687.80 sq. km.; the Visayas in the central region, 57,201.92 sq. km.; and Mindanao in the south, occupying a further 94,630.10 sq. km.
This island chain stretches more than 1500 km from north to south and more than 1000 km from west to east. Less than 400 of the islands are permanently inhabited.
The majority of the people are of Indo-Malay descent although in many cases mixed with Chinese and Spanish ancestry. Many Filipinos take Spanish and derived Spanish family names. In most cases their name relates to the estate to which their ancestors were indentured. 
Around 40% of the population lives in urban areas of which 13% of the total population lives in Metro Manila alone. Manila accounts for over a third of the country's GDP.
91.5 percent of the population are of Christian Malay descent, almost 5 percent are Muslim Malay and live predominantly in the south, close to 1 percent are ethnic Chinese, and a further 3 percent are otherwise categorized and are mainly from upland tribal groups. 
In recent years there has been a rapid shift from an agricultural based economy to a service economy - much of which however is within government services. There are moves afoot at the political level to reduce and rationalize the myriad levels of government activity but equally there are entrenched political interests opposed to any fundamental change. It is hard to see such reform emerging under the present constitutional system unless there is a massive shift to federalism and an empowerment of resources to finance local decision-making and to make it accountable.
The service sector now accounts for some 43% of GDP while agriculture - which remains the largest employer in rural areas - has been reduced to some 19%. Manufacturing now accounts for a further 24% and is the most important sector in terms of foreign exchange earned through exports. Inwards remittances from overseas workers also play a big part in ensuring adequate international reserves.

Philippines History
The earliest human inhabitants of the islands that subsequently became known as the Philippines are believed to be the Negritos (also known as the Aeta) who arrived some 30,000 years ago having crossed via a land bridge from the Asian mainland. They clashed with other immigrant waves from Borneo and Sumatra, who also made their way across then-existing land bridges. Subsequently, people of Malay stock came from the south in successive waves, the earliest by land bridges and later in boats called balangays. The Malays dominated the lowlands where they settled in scattered communities of kinship, which became known as barangays and which were ruled by local chieftains known as datus.
Permanent Spanish occupation followed in 1565 and the country was then named "Filipinas" after then King Philip II of Spain. By 1571 the entire country aside from the Islamic Sulu archipelago was under Spanish control - often exerted via Mexico and without the knowledge of the administration in Madrid. At first the interest of the Spanish was more strategic than commercial and they viewed their control of the Philippines as no more than a stepping-stone to the rich Spice Islands of Indonesia.
Following Admiral Dewey's defeat of the Spanish fleet in Manila Bay, the United States occupied the Philippines. Spain ceded the islands to the United States under the terms of the Treaty of Paris (December 10, 1898), which ended the war. The United States continued as the colonial master of the Philippines during most of the first half of the 20th Century.
As a result of the Japanese occupation during World War II, the guerrilla warfare that followed, and the battles leading to liberation, the country suffered great damage and a complete organizational breakdown. Despite the shaken state of the country, the United States and the Philippines decided to move forward with plans for independence. On July 4, 1946, the Philippine Islands became the independent Republic of the Philippines, in accordance with the terms of the Tydings-McDuffie Act. In 1962, the official Independence Day was changed from July 4 to June 12, which commemorates the date of independence from Spain as originally declared by General Aguinaldo back in 1898.
After the Second Word War, the Philippines enjoyed one of the most prosperous economies in Asia. It was proud of a per capita GDP that was second only to Japan within the Asian region.
Yet the economic miracle that swept through Asia during the 1960s and 70s, for the most part, swept past the Philippines leaving it untouched. The reasons for the failure of the Philippines to grasp the opportunity to transform economically are complex. At risk of oversimplification, it could be argued that whereas elsewhere in Asia, political emancipation followed economic emancipation, the Philippines was already a "democracy" albeit one that had more in common with the political society of eighteenth century Europe than a modern post war democratic state. The political elite controlled the country and shared power and the spoils of power (and largely still do so). In these circumstances, fundamental economic reform never really had a chance.
In 1972, President Ferdinand E. Marcos (1965-86) declared martial law, citing growing lawlessness and open rebellion by the communist rebels as justification. Marcos governed from 1973 until mid-1981 in accordance with the transitory provisions of a new constitution that replaced the commonwealth constitution of 1935. He suppressed democratic institutions and restricted civil liberties during the martial law period, ruling largely by decree and popular referenda. The government began a process of political normalization during 1978-81, culminating in the reelection of President Marcos to a 6-year term that would have ended in 1987. The Marcos' government's respect for human rights remained low despite the end of martial law on January 17, 1981. His government retained its wide arrest and detention powers. Corruption and favoritism contributed to a serious decline in economic growth and development. 
The assassination of opposition leader Benigno (Ninoy) Aquino upon his return to the Philippines in 1983, after a long period of exile, coalesced popular dissatisfaction with Marcos and set in motion a succession of events that culminated in a snap presidential election in February 1986. The opposition united under Aquino's widow, Corazon Aquino, and Salvador Laurel, head of the United Nationalist Democratic Organization (UNIDO). The election was marred by widespread electoral fraud on the part of Marcos and his supporters and an uprising followed. Marcos was forced to flee the Philippines in the face of a peaceful civilian-military uprising now known as EDSA 1 that ousted him and installed Corazon Aquino as president on February 25, 1986. 
It was under the presidency of Fidel Ramos, the first Protestant to hold the office, who was elected as the 12th President of the Philippines in 1992 that the economy began to transform. During the early years of the last decade, the Philippines belatedly started to realize its potential and was spoken of by many as being Asia's next "tiger" economy.
While Ramos put the country on a path of economic growth, the results were uneven and many - indeed most - remained untouched by the success of government policies aimed at encouraging manufacturing investment. Ramos' vice-president was a former local film star and college dropout, one Joseph Estrada. Estrada had actually stood as part of the opposition ticket in the 1992 race but under the Philippines constitution, the President and Vice President are separately elected and not part of a joint ticket. Under Ramos, Estrada had served as Chairman of the PACC anti-crime commission.
Joseph Estrada won the 1998 election and took office on June 30 of that year. Following his election, President Estrada formed the LAMP party out of a tri-partite alliance that had helped him get elected. Some members of former President Ramos's Lakas Party defected to LAMP. President Estrada publicly declared that the battles against poverty and corruption would be his highest priority. Unfortunately, things did not turn out as optimists had hoped and during the Estrada period the country again went into decline. 

Present Political Environment
President Macapagal-Arroyo, the transitional president who came to power in January 2001 after former President Estrada "vacated" Malacañang Palace, is coming to the close of her three-year transitional term. Elections will take place for a new President, as well as for other branches of government in May 2004. 
The administration of her predecessor, President "Erap" Estrada was marked as a period in which the foreign business community was to all intents and purpose shut out from the consultative process. Famed for his mistresses and his nocturnal drinking habits, the Philippines was governed by a cabal of Estrada cronies known as the "midnight cabinet" - his drinking buddies. It was a period in which statesmanship and statecraft were consigned to the slagheap. 
This is the legacy that the hard-working, US-educated economist inherited. 
Her first State of the Nation address delivered in July 2001 outlined her vision for her administration with goals set in a ten-year time frame. Obviously during the three-year transition rule, she could do no more than lay the foundations. She called on all segments of society to put aside political bickering and unite behind the national agenda.
Her vision (some call it her "wish-list") called for massive new investment to pump prime the economy, to create new jobs and to eliminate poverty within ten years: Reduced to a one-liner her vision was for "jobs, education, home ownership as well as food on every table."
Unfortunately, her call to unity has not been heeded and, among the political core of society, she has remained a controversial figure throughout her presidency. Faced with such disunity, on December 30 2002 while vacationing in Baguio City she announced with much surprise to all that she would not seek re-election in 2004 and that she would pass the mantle to others to complete her vision. However, this announcement did not stop the politicking and the harassment she has received from known supporters of Estrada who have used their money and influence to destabilize the administration. 
Undoubtedly, her tenure in Malacañang has been the antithesis of her predecessor. She is known by all to be a hard-working president who, indeed, has sought to push through her reform program at every opportunity. She is intelligent, articulate and can handle herself with ease on the world stage. In many respects she represents the presidential ideal. However, she sits atop a political minefield in which she is often thwarted by vested interests who resist change at every turn and she works within a constitution which - framed in the aftermath of the martial law period - places unusual constraints on presidential powers.
It is a truism to repeat that in the course of an average lifetime, the Philippines has gone from a position as one of the most affluent of Asian countries to being one of the poorest. For that, the larger part of the blame can be placed on the Marcos years and the martial law period that not only saw the looting of the national treasury but also brought back corruption and nepotism as part of the way of life that exists until today. But there are other factors too. In part it is a legacy of the post-Marcos (1987) Constitution, which both reduced presidential powers and abandoned a two-party political system in favour of a multi-party one. It can also be blamed on the Filipino attribute to "forgive and forget." An attribute that is admirable in many ways yet which in the murky world of politics, is a liability and a millstone around the neck of any genuine reformists.

The Outlook
The Philippines is one of Asia's oldest democracies and the Filipino people have a long tradition of being outspoken and politically active. This free-wheeling democratic tradition can sometimes appear quite distinctive from the ordered political process in many other Asian countries, yet it is an essential part of the vibrancy of the Philippines to allow the free exchange and flow of ideas.
It is certainly true that the recent history of the Philippines has been marked by several periods of turbulence. Much of this turbulence can be directly traced to the Marcos period and the politicization of the military forces that occurred during that time. The present (1987) Constitution enshrines the principle that these forces - both the military and the police - are subject to the control and direction of a civilian commander in chief. This is the President of the Philippines.
Unfortunately a small group of former and present military personnel have not accepted this principle and continue to cause local disturbances. The verdict remains out on the root cause of the coup attempt of July 27 2003, however it came at a time during which the administration of President Arroyo was starting to bite into the vested interests that had controlled much of the wealth and political power for a long period of time. Many of these people were aligned with the Marcos family and with former President Joseph Estrada who, himself, is on trial for plunder - a charge which carries the death penalty. Yet to the amazement of many foreigners, he is allowed a benign form of detention in a hospital "cell" from which he continues to entertain his friends, give interviews to journalists and conduct broadcasts (and even visit his mother at her home in Metro Manila). His treatment has been contrasted with that of two former Korean presidents, Chun Doo-hwan and Rho Tae-woo who appeared in court in Seoul in prison garb and in chains for lesser crimes.
In fact the government of President Gloria Macapagal-Arroyo has enjoyed wide support from a cross section of local society including the business community, the national police and the armed forces. Increasingly, government officials are being subjected to lifestyle checks to ensure that their assets are in keeping with their positions. Significant progress has been made in the recovery of ill-gotten assets and their redistribution to the most needy sections of society. Progress has also been made in the battle against corruption and government inefficiency during her term.
Recent decisions relating to the redistribution of the funds from the taxes levied on the poorest farmers during the Marcos era as well as the recovery of part of the assets plundered from the country by Marcos could make a significant impact on poverty reduction in the Philippines if they are actually distributed as intended. At this stage however, while the first battle has been won, the war is far from over and the result remains indeterminate. 
The present administration has made a major effort to cut the "red tape" by simplifying government procedures and setting time limits on government transactions. In many agencies the number of steps required to obtain government permits has already been reduced significantly. However the results so far are patchy and standards of service in many government agencies remain far from ideal. "Fixers" are still required in most dealings with government. Certainly, there is fear that with a less vigilant administration there will be a roll-back of any improvement.
Importantly, the Department of Labor and the National Labor Relations Commission remains antagonistic towards foreigners and foreign companies and is cited by many companies as a deterrent to investing in the Philippines. 
Among the changes introduced by the Arroyo administration is the government purchase system. Government procurement has been simplified and the procurement process made more transparent. A new procurement law, Republic Act 9184 came into force in January 2003 although the enforcement rules are still being drafted. Much of the procurement process has been placed online with buyers able to compare prices offered by vendors.
The government has also set in place various feedback mechanisms making use of internet and cellphone technologies to encourage the public to report corrupt or errant government officials. The government is committed to the investigation and prosecution of government officials found to be involved in corrupt activities.
Despite the progress made on many fronts, it has yet to make any real impact on most foreign-owned operations in the Philippines. There remains a wide gulf between government rhetoric, which emphasizes the level playing field, and local practice, which is to protect local interests.
The export-manufacturing sector is heavily reliant on both the United States and the Japanese markets and indeed, during a period of shrinking foreign direct investment, those two countries remain the most significant foreign investors into the Philippines.
Yet both these economies have been sluggish. As a result, Philippines manufactured exports - much of which comes from the electronics sector - are not growing as intended. Exports currently make up around 40% of GDP with electronics accounting for two-thirds of this total. Earlier the government had forecast an export growth for 2003 of around 5% but based on the performance so far, is unlikely to meet this target. The prediction now is for a 3% growth target.

Philippines 2005 in review
While final results have not yet been announced, it appears that the economy in 2005 performed better than many had expected given the level of political turbulence. At most, political uncertainty may have shaved half a percentage point off GDP growth; certainly the economy did not go into a tailspin. Investors and the business community appear to have shrugged off the most recent political shenanigans much as they have done over recent years.
The main constraints to a better performance came not from domestic concerns but rather from changes in the global environment. Higher oil prices impacted at many levels. Domestically, as an economy that largely depends on imported oil for much of its energy needs, the price escalation that occurred last year made its impact felt directly in terms of higher energy and transport costs. Indirectly the impact was felt by slowing global consumer demand that in turn impacted on export performance. Earlier the government as well as the Chamber of Exporters had been predicting an eight percent export growth. Sadly, we will be lucky if a 3 percent growth is achieved once the final numbers are known. 
Largely and because of the oil shock, last year the Philippines experienced a high annual inflation rate of between 7 and 8 percent. This discouraged both consumer as well as business spending and indeed pushed up the cost of doing business in the country irrespective of any action government might have taken. Yet, despite the advice of many within the community, government did act to push through significant new revenue measures that included higher taxation. The business community has so far accepted the need for higher taxes with equanimity.

Respectable, but unexciting, growth
While the official growth figures are yet to be released (on January 30), the Philippines' gross domestic product (GDP) probably grew by around 4.7 percent year-on-year in 2005. This was a slower pace than the 6.0 percent registered in 2004, but then, 2004 was the best year for the global economy in 25 years and all things considered, the outcome should be quite pleasing to government. Official data showed that in the three quarters ending September 2005, GDP growth averaged 4.6 percent. There are indications that growth picked up slightly in the fourth quarter.
Gross national product (GNP) most likely grew by 5.5 percent in 2005, with official figures showing an average GNP growth of 5.4 percent in the first nine months of last year. GNP grew faster than GDP, because of the huge surge in remittance income that was up by more than 20 percent on the previous year. In fact, this higher remittance income may have been a reflection of the fact that, increasingly, professionals were leaving the Philippines for employment overseas. This trend will likely continue for a while yet as the economy fails to supply the jobs necessary for a rapidly growing population.

High Dollar Inflows
Remittances from Filipinos working abroad and coursed through normal banking channels are estimated to have reached US$10.7 billion last year. Those coursed outside of the banking channels are estimated to account for between 20 to 30 percent of the total. This suggests that the total OFW remittances could have hit more than US$13 billion last year. This fact alone goes a long way to explaining the buoyancy of consumer spending, one of the major growth drivers at the present time.
According to the Bangko Sentral ng Pilipinas (Central Bank), net foreign portfolio investments amounted to US$2.1 billion in 2005, or more than four times the US$486.8 million recorded in 2004. Inflows (US$5.5 billion), of which 70 percent were invested in Manila stocks, exceeded outflows (US$3.4 billion) last year. Philippine equities were up 21.6 percent in dollar terms, making it one of the best emerging markets in East Asia.
Net foreign direct investments (FDIs) also surged by 64 percent to US$863 million in the first ten months of 2005 from only US$525 million a year ago. While this was a pleasing result when benchmarked against recent inflows, it still means that the Philippines is lagging behind the rest of Asia.

Tourism and BPO revenues up
It is estimated that some US$2.5 billion in tourism revenues were generated from the influx of 2.6 million foreign tourists last year, up from only US$2 billion and 2.3 million tourists in 2004. The growth of revenue from tourism is expected to accelerate in the coming year.
Exports of information technology-enabled services, particularly business process outsourcing (BPO) and call/contact centres, doubled to US$2 billion in 2005 from US$1 billion a year earlier. Total merchandise exports, however, grew by just 2.7 percent to US$37.39 billion in the 11 months ending November 2005, way below the government's growth target of 8 to 10 percent.

People saved in 2005
If there is so much money flowing into the country all of a sudden, many people are left wondering why the rate of growth of personal spending is slowing. Worse yet, investments and construction, even contracted last year. Well, it appears that Filipinos actually saved in 2005. In fact the available data shows that financial services grew 13.2 percent year-on-year in the nine months ending September 2005. The National Economic and Development Agency (NEDA) assumes that with more people putting their money into the banks, as reflected by the double-digit growth in financial services, they are not spending at the same rate as in the past. This partly explains the slowdown in personal consumption expenditure (PCE) growth to 4.8 percent in the first three quarters of 2005, from an average of 5 to 6 percent in the previous years.
While motor vehicle sales rose 10.3 percent to 97,063 units in 2005, sales of major home appliances fell by nearly 20 percent. Electronic items imported from China and used vehicles from Japan and Korea have been flooding the local market. Government data shows that the total number of registered vehicles in the country went up by 6.4 percent year-on-year to 4.310 million units as of September 2005. A total of 579,330 new vehicles were registered for the first time in the nine-month period.
The slowdown in PCE growth can also be attributed in part to the poor performance of the agriculture and fishery sectors, which employs a fifth of the population. This sector grew by just 2.0 percent in 2005, because of a prolonged dry spell and a string of typhoons last year. The industry sector grew at a faster rate of 4.6 percent in the first three quarters of 2005 mainly because of the 5.4 percent increase in manufacturing output, while services grew by 6.1 percent on the back of a strong performance of the BPO sector.

Peso also gains ground in 2005
Despite the political uncertainties, the improving economic fundamentals pushed the value of the peso up by 6 percent in 2005, making it the fifth best performing currency in the world last year, and the best in Asia. Of course, the weakening of the US currency also played a part in this. Gross international reserves (GIR) also rose to US$18.414 billion as of December 2005. This was 13.5 percent higher than the figure recorded in December 2004.

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Update No: 109 - (26/10/13)

This country must be doing something right

President Aquino is having a dream run! While the rest of Asia appears to be in the economic doldrums, dragged down by its overdependence of exporting to the major economic drivers of the USA and Europe (as well as China of course), all of whom are facing major problems; the Philippines is starting to look good. Three credit rating agencies have now raised the Philippines out of the junk category and both the Asian Development Bank and the World Bank have given their own stamp of approval.

"Slow and steady" seems to be a winner and should give President Aquino the impetus needed to continue his process of economic reform against the naysayers. Let us hope that the ambitious action plan he announced early in his presidency to improve infrastructure, impose fiscal discipline on government and increase foreign investment into the country, will finally bring the dividends to the people of this country who need it most.

Despite all the ongoing problems the Philippines is facing, not least of which is the vexatious issue of corruption in high places and the misappropriation of funds meant to alleviate the suffering of the poor in the country, the Philippines - or more particularly President Aquino and his administration - must be doing something right.

In a year marked by a lacklustre performance by the major world economies and the knock-on effect this had had in export-oriented Asia, some quiet congratulations directed to the Philippines may be in order. Both the Asian Development Bank as well as the World Bank have come out in recent weeks with their revised forecasts and in each report the Philippines stands out as the country doing better than the others.

The first report to be published was the revised forecast contained in the Asian Development Bank's (ADB's) Asian Development Outlook. The scenario was reasonably gloomy with projected growth for Southeast Asia as a whole being revised downwards for this year from 5.7 per cent to 4.7 per cent. Standing alone was the Philippines as the only country likely to grow at a better-than-expected pace. Taking note that in the first half of the year, the Philippines economy grew at a healthy 7.6 per cent (the fastest in Southeast Asia), the bank revised upwards its forecast for the country for the year, from six per cent to seven per cent.

It seems that while much of the region has been lulled into a false sense of economic security by a seemingly endless inflow of capital seeking higher returns than can be obtained in mature markets across the globe; the Philippines under President Aquino has instead set about massive reforms. that include reducing the country's budget deficit, higher spending on infrastructure and, of course, tackling the endemic problem of corruption and malversion.

Not surprisingly, the World Bank report, which followed a week later, said much the same thing.

Casting a slightly wider net and taking in the 10 ASEAN economies as well as China, Korea, India and Bangladesh, the Bank pumped for 7.1 per cent growth for 2013 and 7.2 per cent for next year. Nevertheless, these revised figures were also down on earlier projections of 7.8 per cent and 7.6 per cent contained in its earlier review. The higher numbers quoted in this report are largely due to the inclusion of China which is expected to grow its economy by 7.5 per cent this year.

Considering that 'Developing East Asia' is growing at a slower pace than earlier predicted, the World Bank also noted that the Philippines was bucking the trend. In its latest East Asia and Pacific Economic Update released on October 6, the Bank now forecast that the Philippines would grow by seven per cent this year and 6.7 per cent in 2014. Again this was an upward revision from the report's previous forecast in May of 6.2 per cent and 6.4 per cent, respectively.

Bolstered by the business processing outsourcing industry, as well as a resurgence in manufacturing, gross international reserves have more than doubled on the Aquino watch from just $38 billion in 2008 to $84 billion at the end of 2012 and are projected to reach $90 billion by end 2013. Total remittances in the January-August period amounted to $14.5 billion - up by almost 6 per cent from the $13.7 billion received in the same period last year.

Remittances from overseas Filipino workers are also standing up well. Total remittances in the January-August period amounted to US$14.5 billion up by almost 6 per cent from the $13.7 billion received in the same period last year.

Public expenditure has been reined in and the budget has returned to surplus.

Three of the global credit rating agencies, Moody's Investor Services, Fitch Ratings and Standard & Poor have each upgraded the Philippines to 'investment grade' in recent weeks, representing yet another vote of confidence in the direction this country is heading.

Before there are too many backslaps handed out, as always there is a caveat. The Philippines is making real progress and the extent of that progress needs to be recognised, but as we have pointed out before in these essays, the good growth figures are not translating into meaningful inroads into poverty alleviation. The oft-repeated mantra 'a rising tide lifts all boats' does not appear to hold for the Philippines.

The incidence of poverty remains stubbornly high standing nationwide at 22.3 per cent of all families. Visitors to Manila might be surprised to learn that in the nation's capital the rate is only 3.8 per cent whereas in other provinces and regions it goes much higher - especially in the Visayas and Mindanao. In the ARMM for example the poverty incidence is 46.9 per cent, and that is only an average. These are of course the official figures and the actual numbers could be far worse but what is most of concern is the fact that the numbers have proven to be stubbornly resilient and in some provinces they are actually worsening still.

The unemployment rate remains above seven per cent and underemployment is above 20 per cent. Many of the jobs that are available are in the informal sector of the economy where workers endure long hours without basic social protection and a regular income.

Aside from the high birth rates experienced in this predominantly Catholic country, the poor state of the agriculture and fisheries sector is a major problem. As a contributor to GDP, agriculture has shrunk to a mere 11 per cent of economic output, yet it still employs one third of the labour force. Farmers and fisherfolk are among the lowest paid workers in the country with an average daily wage of P156.8 ($3.62) and P178.43 in 2011 ($4.13) , respectively. Worse yet, the official data only counts those aged 15 years and above, and so child labour - believed to be rampant in this sector as it is in small-scale mining, goes unrecorded.

Clearly there remains much to be done and the clock is ticking. President Aquino is now well into the second half of his presdiential term.

While foreign direct investment (FDI-the type that goes into bricks and mortar rather than speculating on the Manila bourse) into the Philippines is increasing, it remains abysmally low. With developing Asia now responsible for some 40 per cent of global output, and with wages increasing rapidly in both China and India, investors are keeping close watch on opportunities elsewhere in Asia and with the ASEAN integrated market due to come into being in 2015, this can only serve to increase the attractiveness of the region. According to UNCTAD, despite global uncertainties, FDI into the 10-member ASEAN group increased overall by two per cent last year; however, the percentage by which FDI in the Philippines grew from 2011 to 2012 is a massive 185 per cent. But again, figures bandied around in isolation can be deceiving. While FDI jumped from $981 million in 2011 to $2.8 billion in 2012 this was by far the smallest amount recorded among the five largest ASEAN economies. Singapore received $56.7 billion in FDI during 2012 more than Indonesia, Malaysia, the Philippines, Thailand, and Vietnam combined. Indonesia and Malaysia were the 2nd and 3rd largest recipients of FDI in ASEAN in 2012, respectively.

To put the Philippines data in even starker perspective, Vietnam received almost $10.5 billion in 2012.

Further economic liberalisation and greater investment into infrastructure are often touted as the remedy that would really propel the Philippines into a new age of dynamism. Yet both appear to be stymied for different reasons.

Despite the obvious benefits of opening up the economy, many Filipinos particularly business people, as well as politicians, remain ambivalent about opening up the economy to international competition. It will come of course and soon, although nobody should underestimate the ability of Filipinos to erect non-tariff barriers to protect what they see is rightfully theirs. The mining industry is a case in point; despite the passage of a law almost a decade ago opening up the mining industry to large scale (and world class) mining investment, many projects have simply failed to get off the ground, because of the complex labyrinth of permits required at each level of government: national, provincial and local. The same holds true of retailing, where foreign retail chains that wish to enter the country need to have a local partner in order to operate. The list goes on.

Early in his presidency Aquino announced that big-ticket Public Private Partnerships (PPP) were a viable solution to addressing the growing need for better infrastructure but so far not one project has seen the light of day. The government claims that it is a complex process and one that it wants to get right; and that compared to other countries, the Philippines is moving speedily. Projects on the table include extensions to the Manila light rail system, a new international airport for Cebu and a new expressway linking the industrial areas of Cavite and Laguna with both Manila and the port of Batangas City.

 

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