The Philippines - A Profile

Strategic location, skilled and highly trainable human resources, a stable democratic government and vibrant free enterprise economy make the Philippines an attractive investment destination

• Investor considerations
• Geography and climate
• History and Leadership
• The political system and administrative structure
• Government's Thrusts and Programs
• RP-US Military Agreement
• The sociocultural environment
• The economic environment
• Major Economic Indicators
• Hints for the business visitor

Source:
"How to Invest in the Philippines" by PricewaterhouseCoopers Philippines (printed with permission from author)

Investor considerations

The Philippines, with its strategic location, is a gateway to the huge Asian market. Its considerable attractions as an investment destination include:

• A pool of English-speaking people who are highly trainable. Their capabilities and merits as blue-collar workers, technicians, professionals and manager have been confirmed in postings with resident foreign firms and with overseas contractors.
• A large potential market for consumer goods on account of its fast-growing population. Its ASEAN affiliation provides further opportunities for access to the large ASEAN Free Trade Area (AFTA).
• The foreign-investor friendly posture of government. It has manifested its commitment to create conditions that attract foreign investments. The processing of foreign investments is facilitated through a one-stop shop at the Board of Investments. Liberalized policies and regulations on foreign investments continue to be put in place.
• Availability and accessibility of special economic zones and free ports in various parts of the country where locators are granted fiscal and non-fiscal incentives.
• A highly developed legal system.

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Geography and climate

The Philippines is an archipelago of approximately 7,100 islands, located in Southeast Asia. It is surrounded in the north by Japan, Hongkong, Taiwan and South Korea; in the south by Singapore, Malaysia and Indonesia; and in the west by Thailand. To the east is the vast expanse of the Pacific Ocean, which earned for the country the title, "gateway of the west to Asia".

The total land area of the country is approximately 300,000 square kilometers, about the size of Italy or the state of Arizona in the United States. The country has a tropical climate and two seasons: rainy, from June to November, and dry, between December and May. It is rich in natural
resources such as vast arable lands, fishing grounds, forests and extensive mineral reserves.

From north to south, it is divided into the three major island groupings of Luzon, Visayas and Mindanao and for administrative purposes, into 16 regions: 7 in Luzon, 3 in the Visayas and 6 in Mindanao.

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History and Leadership

The Philippines was colonized by Spain for almost 400 years and then by the United States of America for the next 50 years. It proclaimed its independence from Spain on June 12, 1898. As an American ally, it was occupied for 4 years by the Japanese Imperial Army during World War II. It gained its independence from American forces in 1946 and enjoyed 26 years of democratic rule until a dictatorship was established in 1972. The 14-year Martial Law was toppled by a peaceful "people power" march in 1986 and a democratic government was installed, with Ms. Corazon Aquino as president. Peaceful elections held in May 1992 and in May 1998 ushered in the governments of Presidents Fidel V. Ramos and Joseph E. Estrada, respectively. In January 2001, another peaceful "people power" march successfully pressured Mr. Joseph Estrada to step down from office. This was due to the failed impeachment trial on charges of plunder, graft and corruption hurled against him. Consequently, Gloria Macapagal-Arroyo was sworn in as the 14th president of the Republic.

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The political system and administrative structure

Under the 1987 Constitution, the Philippines was declared a democratic republican state whose system of government is the presidential form patterned after the American model. There are 21 departments in the executive branch, more than 200 congressmen and 24 senatorial seats in the legislative branch, and 15 justices in the Supreme Court (judicial branch).

Philippine law is a consolidation of Anglo-American, Roman and Spanish laws and the indigenous customs and traditions of Filipinos. The 1987 Constitution is the fundamental law of the land. Other sources of Philippine law are the Civil Code, Penal Code, National Internal Revenue Code, Labor Code and Code of Commerce. Judicial decisions and pronouncements, letters of instructions, administrative rules and regulations as well as orders issued by the three branches of the government constitute part of the law of the land.

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Government's Thrusts and Programs

For the past several years, the government has been continuously undertaking stabilization efforts. It worked towards the attainment of an impressive economic growth to uplift the economic well-being of the greater mass of its constituents through a modified social market environment and through a policy of self-determination by the regions.

The national government veered away from undue intervention in the market place and its historic centric posturing through the privatization of some government owned and controlled corporations. It promoted an environment conducive to greater private sector participation and responsibility in the economic and social development of the country. Likewise, it devolved government powers to the local units and pursued the dispersal of economic activities to the countryside.

Furthermore, people empowerment was pursued through the continued implementation of policies such as: (1) the Comprehensive Agrarian Reform Program (CARP) which gives farmers ownership over the land they till; (2) the policy to encourage labor-intensive and export-oriented industries; and (3) the take-over by non-government organizations (NGOs) of market intervention activities to protect the interests of the general public.

President Gloria Macapagal-Arroyo has identified fighting poverty as the primary mission of her new government which revolved around four components, as follows:

• economic philosophy of free enterprise appropriate to the 21st century
  
• a modernized agricultural sector founded on social equity
  
• social bias toward the disadvantage to balance economic development plan; and
  
• to raise the moral standard of government and society.

The government's economic philosophy is to create jobs by attracting investments. Macro measures and concerns will be attended to by focusing on long-term structural issues.

The government will also focus on infrastructure development. President Arroyo vowed to harness the private sector via the build-operate-and-transfer law. Her priorities include telecommunication facilities for high speed productivity at low cost, roads to target tourist destination, infrastructure for the modernization of agriculture, mass transport infrastructure for Metro Manila and commuter and transport systems to disperse communities toward Subic, Clark and Calabarzon.

Bottleneck of productivity such as the high cost of power, deterrence to investments and agriculture over the confrontational labor management relations and corruption and red tape at the national and local government levels will be minimized. The reform of the power sector has recently been enacted into law.

With regards to the financial sector, Congress will amend the Bangko Sentral ng Pilipinas' charter and the banking act to improve supervision and to promote financial prudence. An Anti-Money Laundering Bill has recently been enacted into law.

The system of incentives will be simplified and clarified. Investment laws will be interpreted in favor of the investors. The President has also asked Congress to enact laws on capital market reform, such as the Personal Equity Retirement Act and Securitization Act. She is also pushing for the passage of legislations that would clarify and simplify the Investment Company Act and the Securities Regulation Code.

With regards to the fiscal sector, the budget deficit will be controlled by collecting taxes vigorously and spending money prudently. For the longer term, Congress will enact a law providing for a modified gross income tax system.

Fast growing industries where high value jobs are most plentiful will be promoted such as the information and communication technology or ICT. The Philippines is one of the two countries as the likely world centers for software development and data management in this decade. Congress is set to enact laws to address Internet privacy and security to allow for multimedia convergence and create a Department of Telecommunication and Information Technology.

To prepare the youth to be the next generation of knowledge workers, math and science teaching in basic education will be upgraded. Aside from ICT the Philippines has also the competitive edge in tourism with the natural wonders of the country and the natural warmth of the people. The government will provide the necessary infrastructure like roads and transport system to bring tourists to these destinations. In this connection, the liberalization of the airline industry will be pursued.

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RP-US Military Agreement

The Visiting Forces Agreement (VFA) was ratified by the Senate on May 26, 1999. It allows US troops to visit the country and to conduct joint military exercises with their Filipino counterparts. The VFA ratification is expected not only to strengthen the bilateral partnership between the US and the Philippines but also to improve and foster economic and political stability in the region.

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The sociocultural environment

Population

There are approximately 76.5 million Filipinos of Indo-Malay, Chinese and Spanish background. The population grows at an annual rate of 2.36%. About 63% of the population consist of ages between 15 and above. The highest concentration of people is in the National Capital Region or Metro Manila, Region IV - Southern Tagalog, Region III - Central Luzon and Region VI - Western Visayas.

Labor Force

About 41 % of the total population are of working age of which 88.6% are employed. Approximately 500,000 persons enter the labor force every year. Filipino labor is highly trainable and is preferred for its English-speaking ability. A natural inclination attributed to Filipinos is their artistic and creative bent, which is the reason why they have been successful in design and related enterprises.

Language

Most Filipinos are bi-lingual, speaking English and Filipino or a native language like Ilocano or Cebuano. A small percentage of the population speaks Chinese or Spanish.

Religion

The Philippines is the only predominantly Christian country in Asia. About 83% are Roman Catholic, 12% are Protestant or members of other Christian denominations and 5% are Muslims. The latter are mainly concentrated in Mindanao.

Education

The Filipinos value education highly. They look at it as a vehicle for a better future. The government provides free education at the primary and secondary levels. The basic iteracy rate is 93.9%. The Philippines is reported to have one of the highest numbers of Masters in Business Administration (MBA) graduates in the world. There are 130 MBA schools in the country, among which is the Asian Institute of Management (AIM).

Health

The average life expectancy of the Filipino male is 66.6 years while that of the Filipino female is 71.9 years.

The press

There are 387 national and local newspapers, at least 194 TV stations, 1,162 CATV stations and 892 radio stations (355-AM and 537-FM) all over the country, a situation which is reflective of the extent of press freedom in the Philippines.