The Report: Philippines 2019
The Philippines’ cooling inflation, improved ease of doing business and increased openness to foreign participation are set to encourage more foreign direct investment. A wealth of infrastructure investment under President Rodrigo Duterte’s flagship Build Build Build programme should ease congestion, reduce regional inequality and further boost the flourishing tourism industry.
Country Profile
Spanning more than 300,000 sq km, the Republic of the Philippines reaches from Taiwan in the north to Indonesia in the south. The Philippines is the fourth-largest country in South-east Asia in territorial size and is home to some 175 ethnolinguistic groups across over 7000 islands. In terms of population, it has the 13th-largest population in the world and the seventh largest in Asia. According to the UN, the population reached 107.4m in the first quarter of 2019. Income inequality and uneven growth are problems that need addressing if the country is to escape the middle-income trap, with poverty incidence among Filipinos in the first quarter of 2018 estimated at 21%. This chapter also contains interviews with President Rodrigo Roa Duterte; and Teodoro L Locsin, Secretary, Department of Foreign Affairs.
Explore chapterEconomy
With strong economic growth, an expanding population and an increasingly sophisticated internal market, the Philippines is one of Asia Pacific’s brightest investment opportunities. Concerted efforts to reform taxes, improve the ease of doing business and shore up capital markets are under way, while inflation is back under control and a major programme of infrastructure development is accelerating. Meanwhile, structural reforms are continuing and significant shifts are being undertaken in key areas such as fuel subsidies and rice imports. Additionally, more sectors of the economy are being opened up to foreign participation as the country moves towards greater integration with its international partners. All these moves are helping the Philippines move up the value chain, diversify its economy and attract greater foreign direct investment. This chapter also contains interviews with Carlos G Dominguez, Secretary of Finance; and Kevin Tan, CEO, Alliance Global Group.
Explore chapterRegions
With some 175 ethnolinguistic groups spread across the vast archipelago of the Philippines, uniting remote regions and distinct communities under a national identity has been a challenging task for the central government. Political power gradually became concentrated in the present capital Manila under Spanish and US colonial regimes, and the notion of a strong central government was embraced by many of the initial post-colonial administrations. However, the enactment of the Local Government Code of 1991 transferred more power to local government units. In order to promote development, resolve lingering tensions and attract investment in the regions, the administration of President Rodrigo Duterte is trying to gain support for constitutional reform to establish a federalist system of government that hands more autonomy to the regions. This chapter also contains an interview with Vince Dizon, President and CEO, Bases Conversion and Development Authority.
Explore chapterTrade & Investment
The Philippines is a key bridge between the Americas and Asia, making it a natural conduit for global trade flows. The country also has some of the strongest economic growth rates in the Asia-Pacific region, with growth at 6% or more for 16 out of the 20 quarters between 2014 and March 2019. The nation will continue to have considerable demand for imports as major public infrastructure projects are rolled out and industries expand and move towards higher value-added products. Demand for intermediate goods, as well as building materials and finished products, is therefore high. At the same time, insufficient upstream output of oil, gas and coal means that energy imports are also growing as the economy expands. This chapter also contains interviews with Charito Plaza, Director-General, Philippine Economic Zone Authority; and Allard Nooy, CEO, InfraCo Asia.
Explore chapterBanking
With strong capitalisation and credit growth on the back of robust GDP figures and falling inflation, the Philippine banking sector now faces a year in which consolidation of gains and expansion into new demographics are on the agenda. The country continues to be well served by a variety of lenders, with universal and commercial banks supplemented by a wide array of thrift banks, rural and cooperative banks, and other microfinance institutions. Innovations in financial technology (fintech) are bringing banking to many more Filipinos via technological devices, while acting as a disruptor to traditional banking methods. There is increasing focus placed on smaller lenders as they gradually embrace fintech in a bid to extend their reach to unbanked and underbanked populations. This chapter also contains interviews with Benjamin E Diokno, Governor, Bangko Sentral ng Pilipinas; Nestor Tan, President and CEO, BDO Unibank; and Cezar Consing, President, Bank of the Philippine Islands.
Explore chapterCapital Markets
One of the oldest stock exchanges in Asia, the Philippine Stock Exchange (PSE) is delivering robust returns. In the decade leading up to 2018 there were more years of gains than losses, with the 2009-14 period showing six consecutive years of expansion. Reinforcing the underlying trend, during the first few months of 2019 the PSE index began a slow and steady climb, up from 7466.02 points at the end of 2018 to 7859.78 points near the end of August 2019. The period ahead should see more listings on the Philippine Dealing and Exchange as the public infrastructure drive gathers pace, giving investors a comparatively less volatile means of investment in the Philippines’ capital markets. This chapter also contains interviews with Ramon S Monzon, President and CEO, Philippine Stock Exchange; and Lynette Ortiz, CEO, Standard Chartered Bank Philippines.
Explore chapterInsurance
This is an important period of transition for the Philippine insurance sector, as stakeholders attempt to meet a range of new regulatory requirements designed to expand the industry’s depth and reach. There has been strong growth in profitability and gross written premium in recent years, generated by a wide range of insurance types and entities. Indeed, one of the main characteristics of the Philippine market is that it includes not only conventional life and non-life insurance, but also composite companies, pre-need outfits, mutual benefit associations, health maintenance organisations, and micro- and macro-insurers. All segments are likely to benefit from continued efforts to strengthen the market by the sector regulator, the Insurance Commission. Moves towards establishing a more comprehensive disaster and emergency fund are also expected to improve market standing and spread risk in the years ahead. This chapter also contains an interview with Rahul Hora, CEO, AXA Philippines.
Explore chapterEnergy
The Philippines’ rapid development has outpaced the capacity of the energy sector to meet surging demand. In response, long-term policies have been implemented to promote upstream investment, diversify energy sources and drive down the cost of electricity. Notable projects include the construction of the country’s first liquefied natural gas import terminal and regasification facility, as well as the Visayas-Mindanao Interconnection Project, which should improve the reliability and efficiency of energy supply. Moreover, while disputes with China over sovereignty in the South China Sea – also known as the West Philippine Sea – have hindered upstream development, recent agreements on exploration and development activities in these areas could offset declining reserves at the Malampaya gas field, the Philippines’ primary domestic source of gas. This chapter also contains interviews with Erramon Aboitiz, CEO and President, Aboitiz Equity Ventures and Aboitiz Power Corporation; and Dennis A Uy, president and CEO, Phoenix Petroleum.
Explore chapterIndustry & Retail
Industrial expansion has played a leading role in the Philippines’ economic progress, with industry’s value added doubling between the 1980s and early 2000s. From a manufacturing standpoint, a number of inherent advantages make the country an enticing production base and consumer market, including its strategic location, large population, and burgeoning middle class. However, congested transport networks and the relatively high cost of power have restricted progress. Favourable macroeconomic conditions – lower inflation and increased purchasing power – have bolstered consumer confidence in the Philippines. Likewise, enhanced business strategies and new product lines have played a key role in expanding the retail sector in recent years, as has the continued development of e-commerce and smartphone penetration. This chapter also contains interviews with Satoru Suzuki, President, Toyota Motor Philippines; Gerard Brimo, Chairman and CEO, Nickel Asia Corporation, and Chairman, Chamber of Mines; and John Murphy, CFO and Former President for Asia Pacific, Coca-Cola Company.
Explore chapterTourism
Tourism in the Philippines has seen considerable growth in recent years, with over 7000 islands and an abundance of rich cultural traditions making the archipelago a regionally competitive destination. The closure of popular destination Boracay for six months in 2018 shone a light on other destinations and allowed the sector to diversify its offerings to cater to a wider array of tourists, as well as boost the country’s reputation for being sustainable and environmentally aware. The government’s goal of attracting 12m tourists per year by 2022 will be aided by the emergence of new coastal and island destinations, combined with the growth of medical tourism, cruise tourism, and the meetings, incentives, conferences and exhibitions segment. This chapter also contains interviews with Alan Peter Cayetano, Chairman, Philippines South-east Asian Games Organising Committee; and Pocholo D Paragas, COO, Tourism Infrastructure and Enterprise Zone Authority.
Explore chapterTransport & Infrastructure
On the back of the government’s Build, Build, Build initiative, various infrastructure projects have been implemented across the country to ease the flow of goods and people, as well as make the country an attractive place to live and work. Dubbed “Dutertenomics”, President Rodrigo Duterte’s prioritisation of infrastructure is intended to usher in a golden age of development for the Philippines. Indeed, infrastructure was a cornerstone of the election campaign that brought him into office in 2016. The administration is holding true to its promise, and in a bid to foster economic growth and alleviate congestion, the state is making major strides towards an efficient transport ecosystem. This chapter also contains interviews with Arthur P Tugade, Secretary of the Department of Transportation; and Eddie Monreal, General Manager, Manila International Airport Authority.
Explore chapterConstruction & Real Estate
The Philippines’ construction industry is entering a period of strong growth, supported by government spending led by President Rodrigo Duterte’s signature Build, Build, Build (BBB) infrastructure programme. BBB is leading to ancillary construction and development around airports and seaports, especially residential and retail projects, providing the momentum stakeholders need to confidently plan for the future. The Philippines’ real estate sector has enjoyed robust growth in recent years, fuelled by remittances, rapid economic expansion and a comprehensive public infrastructure programme that has opened up new opportunities beyond Metro Manila and the affluent business districts of the capital. Actions set to further strengthen activity in the sector include reforms to the tax system and the establishment of a new regulator. This chapter also contains interviews with Jose Leviste Jr, Chairman, Atlantic, Gulf & Pacific; and Robbie Antonio, Founder, Revolution Precrafted Properties.
Explore chapterBPO & Creative Industries
Ranking consistently among the top global providers of business process outsourcing (BPO), the Philippines is working to widen and deepen its portfolio of third-party digital services. Foreign companies delegating operations to providers in the Philippines generate roughly one-10th of the country’s GDP, indicating the degree to which BPO is fundamental to the stability of the economy. The industry is the primary avenue of employment and training for the middle class; the second-largest source of foreign currency earnings after remittances; and the driving force behind a network of ancillary transport and retail businesses. Thus, the BPO industry often acts as a bellwether for the country’s overall economic health. This chapter also contains interviews with Lito Tayag, Country Managing Director, Accenture Philippines; and Chair of the Board of Trustees, IT and Business Process Association of the Philippines; and Paolo Mercado, Founder and President, Creative Economy Council of the Philippines.
Explore chapterICT
The Philippines’ ICT industry is embarking on an exciting period as a number of reforms and initiatives take effect and Congress debates legislation for further market liberalisation. Weak competition and the archipelago’s sprawling geography have contributed to the ICT industry’s difficulties in keeping pace with other countries in the region in terms of the scale and quality of its services. At the forefront of developments in the industry is the entrance of a third telecoms provider. While this is threatening the existing duopoly, it is expected to increase innovation, speed and coverage. Telecoms infrastructure improvements, combined with a number of legal and regulatory changes designed to drive competition and improve the provision of ICT services, are also opening the door to lucrative opportunities for domestic and overseas players. This chapter also contains an interview with Andrés Ortola, Country General Manager, Microsoft Philippines.
Explore chapterAgriculture
While the country is well positioned to tap into new export markets, volatile weather conditions, land reform issues and a legacy of neglect continue to hinder agricultural output, preventing the Philippine agriculture sector from reaching its true potential. In addition to these constraints, the Philippines lags behind regional competitors in mechanisation adoption rates, crop research and access to finance. While the sector has suffered from low total factor productivity – a measure of land, labour, capital and material resources used in production, compared to total agricultural output – the country has natural attributes that make it well placed to achieve greater agricultural diversification and productivity. This chapter also contains an interview with Henry Lim Bon Liong, Chairman and CEO, SL Agritech.
Explore chapterHealth
The health sector in the Philippines is undergoing a period of development and reform. The long-awaited move to universal health care (UHC) is now within sight, with the government focused on improving the delivery of public health care and encouraging investment in the sector. While the health system is currently tackling multiple burdens and is limited by human resource constraints, the enactment of the UHC Bill will bring increased funding to the sector and provide greater coverage to the Filipino people. Through increased engagement with the growing private sector, progress is being made towards a more integrated and robust health system that is ready to take on these challenges. This chapter also contains an interview with Francisco Duque III, Secretary, Department of Health.
Explore chapterEducation & Research
Educational attainment in the Philippines was falling at the beginning of the 21st century, marked by declining enrolment and literacy rates, as well as persistent underfunding. In response, successive governments have worked to overhaul the education system and increase expenditure, taking measures to keep more children in school, raise the quality of tertiary education, enhance the education system’s global competitiveness, and improve employability through linkages between academic institutions and industry. All this is proving crucial to keep pace in a world adapting to the Fourth Industrial Revolution, where technological competitiveness and the hunt for qualified human capital is placing education at the centre of many countries’ reform plans. This chapter also contains an interview with Fortunato de la Peña, Secretary, Department of Science and Technology.
Explore chapterTax
This chapter examines the tax system of the Philippines, focusing primarily on those stemming from AmBisyon Natin 2040. This includes: The Tax Reform for Acceleration and Inclusion bill; The Tax Reform for Attracting Better and High-Quality Opportunities bill; the Green Jobs Act; The Tax Amnesties Act; and The Tax Amnesty of Delinquencies. This chapter also outlines which processes can now be completed electronically on the Bureau of Internal Revenue’s digital services platform, as well as which operations are streamlined under the Ease of Doing Business Act. This chapter also contains an interview with Protacio T Tacandong, COO, Reyes Tacandong & Co.
Explore chapterLegal Framework
This chapter examines the legal system of the Philippines, including recent reforms that have been passed into law and their impact on the business community. The chapter covers amendments to: The New Central Bank Act; The Philippine Deposit Insurance Act; The Anti-Money Laundering Act. In addition, it provides an overview of the newly implemented Act Strengthening Compliance with Occupational Safety and Health Standards and Providing Penalties for Violations Thereof; Telecommuting Act; and the 105-Day Expanded Maternity Leave Law; and The Revised Corporation Code. This chapter also contains an interview with Alejandro Alfonso E Navarro, Managing Partner, Villaraza & Angangco Law.
Explore chapterThe Guide
This chapter contains selected listings of some of the country’s top hotels across a range of its regions, as well as contact details for a range of different embassies, ministries, prominent organisations and other important bodies. In addition, it contains a guide of helpful tips for both leisure travellers and business visitors operating in a professional environment. The chapter also offers other useful suggestions for those travelling to the Philippines. This chapter also contains local insight from Ebb Hinchliffe, Executive Director, American Chamber of Commerce of the Philippines.
Explore chapterTable of Contents
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President Rodrigo Roa Duterte
Carlos Dominguez, Secretary of Finance: Interview
Benjamin E Diokno, Governor, Bangko Sentral ng Pilipinas (BSP)
Ramon M Lopez, Secretary of Trade and Industry
Christopher Po, Executive Chairman, Century Pacific Food
Marc Carrel-Billiard, Global Senior Managing Director and Technology Innovation Lead, Accenture Labs
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