Economy

The Philippines is a newly industrialized country in South-East Asia. In 2004, it was ranked as the 24th largest economy by the World Bank according to purchasing power parity. The Philippines is one of the emerging markets in the world.

Economic Background

Important sectors of the Philippine economy include agriculture and industry, particularly food processing, textiles and garments, and electronics and automobile parts. Most industries are concentrated in the urban areas around metropolitan Manila. Mining also has great potential in the Philippines, which possesses significant reserves of chromite, nickel, and copper. Recent natural gas finds off the islands of Palawan add to the country's substantial geothermal, hydro, and coal energy reserves.

The resiliency of the Philippine economy is due to low foreign fund inflows and its agriculture-based economy that allowed it to snap back from Asian Financial Crisis as evidenced by a 3% growth in 1999 and 4% in 2000. By 2004, the Philippine economy catapulted to over 6% growth after the East Asian financial crisis of the late 1990s. President Gloria Macapagal-Arroyo pledged to turn the country into a First World state by 2020. In 2005, the Philippine peso was said to be Asia's best-performing currency. In 2006, the Philippine economy expanded at a rate of 5.4%, higher than of the previous year. The government plans to accelerate the country's GDP growth by 7% in 2007. The government forecasts the economy to grow at 9% by 2009.

Strategies for streamlining the economy include improvements of infrastructure, more efficient tax systems to bolster government revenues, furthering deregulation and privatization of the economy, and increasing trade integration within the region and across the world.

On November 1, 2005, a newly expanded value added tax (E-VAT) law was instituted as a measure to bridle the rising foreign debt and to improve government services such as education, health care, social security and transportation. As of 2006, The Philippines' economic prosperity also depends in large part on how well its two biggest trading partners' economies perform: the US and Japan.

The Philippines is a member of the Asian Development Bank, the World Bank, the International Monetary Fund, the Asia Pacific Economic Cooperation (APEC), the World Trade Organization (WTO), the Colombo Plan, and the G-77, among others.

Economic Problems

Despite the growing economy, the Philippines will have to address several chronic problems in the future. Income inequality remains persistent; about 30 million people lived on less than $2 per day in 2005. China and India have emerged as major economic competitors, siphoning away investors who would otherwise have invested in the Philippines, particularly telecom companies. Regional development is also somewhat uneven, with the main island Luzon and Metro Manila gaining most of the new economic growth at the expense of the other regions.

Budgets

In 2006, the Philippines experienced its lowest budget deficit in 8 years. President Gloria Macapagal Arroyo said that the nation is 'making gains ahead of schedule.' The Philippines' target in 2007 is to have a balanced budget. The 2006 budget deficit was at an all-time low of $1.27 billion.

Migrant Workers

The Philippines is a significant source of migrant workers; as of 2004, the Philippine government has estimated that there are over 8 million Overseas Filipinos while independent estimates by various Philippine civic organisations estimate the number at 11 million. Overseas Filipinos sent home a record $10.7 billion in 2005. The Filipino diaspora is present in 190 nations worldwide. In 2006, Overseas Filipinos remitted $12.8 billion back home and represents an almost 20% increase from the previous year. The government forecast for 2007 that at least $14 billion will be sent to the Philippines by Filipino workers.

Sectors

Agriculture

The Philippines currently hosts the International Rice Research Institute (IRRI), which studies high yielding rice varieties. It has played a key role in the Green Revolution and was able to increase rice yields and rice production during the 1970s .

Automotive

The ABS system used in Mercedes-Benz, BMW and Volvo cars are made in the Philippines. 2005 was the first year that the Philippines exported cars in quantity courtesy of Ford Motor Company. Further investments in this sector are expected to grow in the next following years.

Electronics

Intel has been in the Philippines for 28 years as major producer of Intel's advanced products including the Pentium 4 processor. A Texas Instruments plant in Baguio has been operating in for 20 years and is the largest producer of DSP chips in the world. TI's Baguio plant produces 100% of all the chips used in Nokia cell phones and 80% of all chips used in Ericsson cell phones in the world. Until 2005, Toshiba laptops were produced in Santa Rosa, Laguna. Presently the Philippine plant's focus is in the production of HDD's.

Industry

Industrial production is centred on processing and assembly operations of the following: food, beverages, tobacco, rubber products, textiles, clothing and footwear, pharmaceuticals, paints, plywood and veneer, paper and paper products, small appliances, and electronics. Heavier industries are dominated by the production of cement, glass, industrial chemicals, fertilizers, iron and steel, and refined petroleum products.

The industrial sector is concentrated in the urban areas, especially in the metropolitan Manila region and has only weak linkages to the rural economy. Inadequate infrastructure, transportation and communication have so far inhibited faster industrial growth.

Mining

The country is rich with mineral and thermal energy resources. It produces 1,931 MW of electricity from geothermal sources (27% of total electricity production), second only to the United States and a recent discovery of natural gas reserves in the Malampaya Fields off the island of Palawan is already being used to generate electricity in three gas-powered plants.

Philippine gold, nickel, copper and chromite deposits are among the largest in the world. Other important minerals include silver, coal, gypsum, and sulphur. Significant deposits of clay, limestone, marble, silica, and phosphate exist. About 60% of total mining production are accounted for by non-metallic minerals, which contributed substantially to the industry's steady output growth between 1993 and 1998, with the value of production growing 58%. In 1999, however, mineral production declined 16% to $793 million. Mineral exports have generally slowed since 1996. Led by copper cathodes, Philippine mineral exports amounted to $650 million in 2000, barely up from 1999 levels. Low metal prices, high production costs, lack of investment in infrastructure and a challenge to the new mining law have contributed to the mining industry's overall decline.

The mining industry rebounded in late 2004 when the Supreme Court deemed an important law permitting 100% foreign ownership of Philippine mining companies constitutional.

The Department of Environment and Natural Resources is ill equipped to address the renewed interest in mining. There are several companies that mine under the Small Scale Mining (SSM) that should rightly be classified and taxed under the large scale mining laws. The DENR is taking some time to inform these companies that they are violating the SSM laws by mining more than 50,000 tons of ore per year.

Outsourcing

The majority of the top ten BPO firms of the United States operate in the Philippines. Total jobs in the industry grew to 100,000 and total revenues are placed at $960 million for 2005.

Software

One of the software houses established in the country is Trend Micro, an anti virus software maker with its main product PC-Cillin. The company develops its 'cures' for viruses in Eastwood City, Libis.