You are on page 1of 31

Economic Development in the Philippines

:
High Potential, Big Challenges, Wide Impact
By
John D. Forbes
Senior Adviser, The Arangkada Philippines Project
The American Chamber of Commerce of the Philippines, Inc.

November 19, 2014
Southeast Asia Wednesday Lunch Program
School for Advanced International Studies
Washington, DC

Proposition:
A country with High Potential
that can surmount its Big Challenges
can have Wide Impact

High Potential
 Human resources
 Large population (100 million)
 Demographic dividend - young
(53% 24* years)
 English-speaking (largely) and
friendly
 To grow to world’s 10th most
populous (140 million)

 Natural resources
 Minerals - $1.4 trillion in
mining reserves (copper, gold,
nickel, iron, uranium)
 Marine
 Agriculture

 Location: world’s fastest
growing region
Note: 2014 est., NSO; CIA World Factbook

Strong GDP Growth; Could be Higher
Real GDP Growth Rates, ASEAN-6, 1990-2014f
20%
15%
10%

6.8% 7.2%

6.5%

5%
3.6%
0%
Philippines
Indonesia
Thailand
Malaysia
Vietnam
Singapore

-5%
-10%

Source: World Bank;
Note/s: Forecast by IMF World Economic Outlook as of April 2014

2014f

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

-15%

Rising Remittances Contribute Almost
10% to GDP
Philippine OFW remittance, 1990-H1 2014
24
21
18
15
12
9
6
3
0
-3
-6
-9
-12

10%
2%

Source: BSP

% Share of GDP, RHS
Bn USD, LHS

Growth Rate, RHS

10%10%10%

10%

6%
8%

40%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%

Becoming More Competitive
Year

2013 Ranking

2014 Ranking

Trend

Previous
ASEAN-6
Ranking

2014 ASEAN-6
Ranking

Trend

Date of
Previous Press
Release

(Est.) Date of
Next Release

1. Best Countries for
Business

2013

90 of 145

No update

No Update

5 of 6

No Update

No Update

Dec. 2013

Dec. 2014

2. Fragile States
Index1

2014

59 of 178

52 of 178

Deteriorated

6 of 6

6 of 6

Stable

Jun. 24, 2014

3. Index of Economic
Freedom

2014

97 of 177

89 of 178

Improved

4 of 6

4 of 6

Stable

Jan. 14, 2014

Jan. 10-14,
2015

Heritage
Foundation / Wall
Street Journal
International
Institute of
Management
Development

Survey

Sources

Forbes Magazine

Foreign Policy
Jun. 24, 2015 Magazine / The
Fund for Peace

4. World
Competitiveness
Yearbook

2014

38 of 60

42 of 60

Deteriorated

5 of 5

5 of 6

Deteriorated

22-May-14

May 22-30,
2015

5. International
Property Rights Index

2013

77 of 131

Removed from
list

N/A

4 of 6

N/A

N/A

Sept. 2014

Sept. 2015

Property Rights
Alliance

6. Corruption
Perception Index

2013

94 of 177

No update

No update

3 of 6

No Update

No Update

Dec. 2013

Dec. 2014

7. Human
Development Report

2014

114 of 186
(2012)

117 of 187
(2013)

Stable

4 of 6
(2012)

4 of 6 (2013)

Stable

24-Jul-14

Mar. or July
2015

8. E-Government
Readiness Survey5

2014

88 of 190
(2012)

95 of 193

Deteriorated

4 of 6
(2012)

3 of 6

Improved

Jun. 24, 2014

Mar. or Jun.
2016

Transparency
International
United Nations
Development
Programme
United Nations
Public
Administration
Network

9. Doing Business6

2014

1082 of 189
(2013-2014)

95 of 189
(2014-2015)

Improved

5 of 6

5 of 6

Stable

Oct. 29, 2014

10. Investing Across
Borders7

2010

N/A

N/A

No Update

N/A

N/A

N/A

Jul. 7, 2010

11. Paying Taxes12

2013

131 of 189
(2013-2014)

No update

No Update

4 of 6

No Update

No Update

Nov. 19, 2013

12. Global
Competitiveness
Report

2013

59 of 148

52 of 144

Improved

5 of 6

5 of 6

Stable

13. Global Enabling
Trade Report8

2012

72 of 132
(2012)

64 of 138

Improved

6 of 6

5 of 6

Improved

25-Mar-14

Mar. or May,
2016

World Economic
Forum

14. Travel & Tourism
Competitiveness9

2013

82 of 140

No Update

No Update

4 of 6

No Update

No Update

Mar. 7, 2013

Mar. 2015

World Economic
Forum

15. Environmental
Performance Index10

2012

42 of 132
(2012)

117 of 1783

Deteriorated

3 of 6 (2012)

5 of 6

Deteriorated

Jan. 25, 2014

2

Oct. 23World Bank
30,2015
Before end of
World Bank
2012
Nov. 19World Bank
21,2014

Sept. 3, 2014 Sept. 3-4, 2015

World Economic
Forum

Yale Center for
Jan. 25, 2016 Environmental Law
and Policy

Global Competitiveness Index, Percentile Rankings, ASEAN-6, 20012014
100

2nd

90

20th
31st
34th

80
70

59th

52nd

65th

60
75th

50
85th
87th

40

30

Singapore

Malaysia

20

Thailand

Indonesia

10

Philippines

Vietnam

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sources: World Economic Forum, author's calculations

World Bank Ease of Doing Dusiness Index, Percentile Rankings, ASEAN6, 2006-2015
100
90
80
70
60
50

95th

40

108th

30
20

10

134th

Singapore

Thailand

Malaysia

136th

Vietnam

138th

Indonesia

Philippines

0
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: World Bank
Note: 2013-2014 ranking of 86th is not the published ranking of the Philippines, but is a result of revisions in methodology, hence the country’s
decline in ranking from 86th in 2013-2014 to 95th in 2014-2015

Corruption Perceptions Index, Percentile Rankings, ASEAN-6,
1998-2013
100
90
80
70
60

50
94th

40

105th

30
129th
134th

20
10
0

Singapore

Malaysia

Thailand

Sources: Transparency International and author's calculations

Philippines

Indonesia

Vietnam

Rising Foreign Direct Investment
Net FDI, Bn US$, ASEAN-6, 1990-H1 2014
70

Singapore

Indonesia

50

Malaysia

Vietnam

40

Thailand

Philippines

60

39.8

30

20
10
0

2.6

-10

Source: UNCTAD
Note: 2014 data covers first semester (January to June) for all ASEAN-6 except for Philippines, whose data covers January to August

12.5
6.8
4.5
4.3

BPO Sector Reaches One Million

growth

million
direct employment
by 2016

by the numbers

Source: IBPAP

…and contributes Million

US$

billion

2016 IT-BPM Revenue

by the numbers

Source: IBPAP

Philippines BPO 2013 Performance
FTEs

Philippine IT-BPM industry size
2006–2013; US$ billion

x%

YoY Growth

Revenue
(US$M)

Rev %
inc.
fr ’12

Voice BPO

586,000

10,000

15%

Non-voice
BPO/KPO

169,818

2,915

18%

ITO

71,196

1,767

52%

Health Info
Mgt & Care

65,895

988

114%

Engineering
Services

11,920

216

5%

Animation

9,200

132

0%

Game
Development

3,500

50

0%

917,529

16,067

22%

16.1
13.2
11.0
8.9

6.1
3.4

4.5
31%

34%

7.1

22%

19%

24%

25%

17%

45%

2006 2007 2008 2009 2010 2011 2012 2013

# FTEs
(~‘000)

236

298

371

424

527

640

Global
share1

5%

6%

6%

7%

8%

9.5% 10.4% 11%

777

917

TOTAL FTEs

1Philippines IT-BPM market as percentage of global offshore services market, in revenue terms
Sources: BPAP, ACPI, CCAP, GDAP, HIMOAP, PSIA
Copyright ©2012: BPAP. All rights reserved.

Manufacturing Growing
Manufacturing GVA, Bn PhP, 1990-2013
2400

16%
Value current prices, lhs

1800

12%

Real YoY growth, rhs

1200

8%

600

4%

0

0%

Source: PSA; Old series (1997-back) New series (1998-onwards)

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

-8%
1992

-1200
1991

-4%

1990

-600

Tourism Growth: Foreign
Foreign Tourist Arrivals in ASEAN
(in '000 and % share), 2008-2012
100,000
89M, 100%
90,000
81M, 100%
80,000
70,000

74M, 100%
66M, 100%

66M, 100%
Vietnam
Thailand

60,000

Singapore
Philippines

50,000
40,000
3M, 5%

3M, 5%

3.5M, 5%

4M, 5%

4M, 5%

Myanmar
Malaysia
Lao PDR

30,000

Indonesia
Cambodia

20,000

Brunei Darussalam
10,000
2008

2009

2010

2011

Source: ASEAN Tourist Statistics Database;
Note: The Philippines received 4.6 Mn foreign tourists in 2013 and 3.3 Mn as of August 2014

2012

Tourism Growth: Domestic
PH Air Transport Domestic Passengers,
1996-Q1 2014 (Mn pax)
25.0

30.0%
Passengers (Mn pax)
20.6 20.3

Growth Rate
20.0

18.8

15.0

13.3%
9.6%

20.0%
10.0%
0.0%

10.0

-1.2%
-10.0%

5.0

0.0

Source: Civil Aviation Board

5.1
-20.0%
-30.0%

Big Challenges: Poverty/Inclusive
Growth
Poverty Rate at $1.25 a day (PPP) Benchmark, % of population,
4-year average from 1991 to 2012, ASEAN-6
70%
60%
50%
40%

Philippines

30%

Indonesia
19%
16%

20%

Vietnam
Thailand
Malaysia

10%
2%

0%
1991-1994

1995-1998

1999-2002

2003-2006

2007-2010

2011-2012

Source: World Bank
Notes: ; The plotted data represent the latest data given the indicated time interval; gaps indicate absence of data; no updates yet for 2013
onwards and for Malaysia and Thailand, whose poverty statistics are very low compared to the rest of ASEAN-6

Poverty (National Standard) Declining:
Trickle Down and CCT
Poverty incidence declined to 24.9 percent in the first semester of 2013 from 27.9
percent for the same period in 2012. This translates to about 2.5 million people lifted out
of poverty.

Poverty Incidence (% of population), per PSA criteria
35.0
30.0

28.8

28.6

27.9
24.9

Individuals in
poverty

25.0
Percent

20.0
15.0

14.2

13.4

13.3

Individuals in
extreme
poverty

10.7

10.0

5.0
0.0
2005

2006

2007

2008

2009 2010
Year

2011

2012

2013

2014

Source: PSA-LFS
Note: Poverty incidence, as defined by PSA, refers to portion of the popultion who earn income below the average individual income enough to
cover aggregate spending on basic needs: clothing, food, shelter, etc.; in H1 2013, povety per capita threshold was at PhP9,626 per month

Investment in Human Capital/Social
Infrastructure
2010 (PhP Bn) 2015 (PhP Bn)

% Change

Education

171

319

87%

Health

28

87

211%

CCT

10

64

540%

Source: National Expenditure Program, Department of Budget and Management

WEF Infrastructure Rankings, ASEAN6,, 2013-14
Overall

Airport

Rail

Road

Seaport

Telecomm*

Power

Singapore

5th of 144

1st

N/A

6th

2nd

17th

6th

Malaysia

20th of
144

19th

12th

19th

29th

30th

39th

Indonesia

72nd of
144

64th

41st

72nd

77th

54th

84th

Thailand

76th of
144

37th

74th

50th

54th

34th

58th

Philippines

95th of
144

108th

80th

87th

101st

86th

87th

112nd of
144

87th

52nd

104th

88th

42nd

88th

ASEAN-6

Vietnam

Source: WEF Global Competitiveness Report (GCR) 2014-2015;
Note: N/A is used for economies where there is no regular train service or where the network covers only a negligible portion of the territory; it
may also be noted that early this year, the Singaporean gov’t has announced plans to expand its railway network, possibly impacting the
assessment done by the WEF; *Mobile telephone subscriptions/100 population

Congestion Challenges
 Port of Manila
 NAIA
 Traffic
 Dream Plan
 $60B over 10 yrs.
 road  rail

Investment in Physical Infrastructure
Increase Infrastructure Spending:
Increase infrastructure spending from 2.6% to at least 5% of GDP by 2016
Philippine Public Infrastructure Spending,
Actual vs. Programmed (in Bn PHP and as % of GDP),
2011-2016

800

5.0%
702.88

700
600

4.0%
562.3

500

5.00%

2.6%

2%
1.80%

200

228.5

2.7%

3.00%

Programmed
Spending
(Budget), lhs

442.3
3%

2.00%

% Share of Actual
to GDP, rhs

2.3%
2.0%

306.9
270

Actual Spending,
lhs

4.00%

3.4%

400
300

6.00%

261.8

215.7

175.4

1.00%

156.5

100

Target % Share of
GDP, rhs

0

0.00%
2011

2012

2013

2014

2015

2016

Source: Budget of Expenditures and Sources of Financing and Nat’l Gov’t Disbursement Performance reports, DBM; PDP 2011-2016, NEDA;

Public Private Partnership Projects
 WB ranks Philippines in
top 10
 Program largely dormant
1998-2010
 $100 million in Project
Development Fund
 Eight projects awarded
worth $3 billlion
 13 projects targeted for
bidding by 2016 worth
$12.28 billion

Two Low-Growth High Potential
Sectors
 Agriculture





30% of population
Undercapitalized
CARP-ER-ER
Low productivity
High costs
Bangsamoro

 Mining
 New mining projects
suspended
 EO 71 July 2012
 Seeks uncompetitive
fiscal regime
 Extensive No-Go zones
 Ban ore exports

The Economy Should Be All About Jobs
Unemployment Rates, ASEAN-6, 1990-2014
16%

Philippines
Indonesia
Malaysia
Vietnam
Singapore
Thailand

14%
12%
10%
8%

6.7%
5.94%

6%
4%
2%
2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

0%

2014

2.7%
1.90%
1.84%
0.80%

Sources: ILO, ADB and respective national statistics offices;
Note: no data for Vietnam before 1997; Philippines revised the definition of "unemployed" in April 2005; 2014 data as of June for
Vietnam, July for Philippines, August for Indonesia and Malaysia, and September for Singapore and Thailand

Policy Reforms
GOCC Reform
RH Law
K-12
Universal Healthcare
ACT/Higher Taxes on cigarettes
Foreign Bank Act

More Policy Reforms
Bangsamoro Act
Build-Operate-Transfer Act amendments
Customs Modernization and Tariff Act
Competition Act
Foreign Equity constitutional amendments
Foreign Investment Negative list amendments
Freedom of Information Act
Sandiganbayan Reform

Other Challenges
Bureaucracy/red tape
Business Costs – labor, power, taxes
Corruption persistence and recidivism
Judicial Convictions
Judicial Reform
Security – internal
Trade Policy – TPP, RCEP, EU-FTA
Poor Infrastructure

Wide Impact: a Middle Income
Economy and US partner
 Middle Income Economy
 At 7.5% growth, a GDP of
$1 trillion by 2030
 Population of 130 million
and PCI near $8,000
 2nd or 3rd largest ASEAN
economy
 Global diaspora
 Regional MNCs
 Hub for US BPO and
manufacturing

 Stronger US partner
 Democratic values
 Strong people and
historical links
 Largest English-speaking
Asian country
 US treaty ally

Arangkada Advocacy Documents
 2010 Policy Paper and
Anniversary Assessments

 Policy Briefs

Arangkada Website
 Check our website: www.investphilippines.info/arangkada/
 Subscribe to our clips: www.investphilippines.info/arangkada/newsclips/

THANK YOU!

A Project of AmCham with USAID
and the Joint Foreign Chambers