The Philippine advantage
The Philippines comprise more than 7000 islands strung out in the South China Sea. The Philippine economy was the fastest growing economy in Southeast Asia during the second quarter of 2007 with a growth rate of 7.5 percent.
Since President Gloria Macapagal-Arroyo was elected in 2004, she has demonstrated an amazing ability to turn the country around with reforms spurring growth, lowering inflation, and creating jobs.
On an international level, the Philippines has improved its standing. It has excellent relations with its neighbors and is attracting more and more direct foreign investment from global corporations. Texas Instruments from the U.S., Tokyo Electric from Japan, and Hanjin of Korea are just a few of the many multinationals investing here.
According to Ambassador Willy Gaa, the Philippines Ambassador to the United States, the Philippines offers a strong English-speaking workforce, low wage levels and ongoing cultural and historic ties with the United States that go back more than 100 years. The Filipino worker offers high productivity and excellent quality coupled with very competitive wage rates.
Elemer Hernandez, Undersecretary of Trade and Industry, promotes the Philippine advantage as having a strategic location with respect to the Asian nations. “The Philippines is strategically located and is very accessible to all major Asian business capitals” according to Hernandez and he goes on to say that “Technology and telecommunications are on par with the rest of the world.”
As Western countries look to outsource anything they can to countries with lower costs, the Philippines finds itself in a starring role as one of the most favored markets for service-center operations for European and American companies.
Exports have been a key driver for growth, and include automotive, semi- conductors, electrical machinery, food, animals and chemicals. Textiles and garments are also a vital part of the manufacturing sector and employ nearly 400,000, making this the largest employer, nearly 11 percent of the overall total. The Philippines have been one of the largest sources of imported garments for North America and Europe, but exports have slowed due to quotas imposed.
The DTI or Department of Trade and Industry, as a key agency of the Philippines government, has a mandate to create a business-friendly environment conducive to growing business and to supporting fair and robust growth, both in trade in goods and services within and outside the Philippines.
Quite simply put by Trade Secretary Peter Favila, the Philippines offer quality manpower resources, strategic business location, a liberalized and business-friendly economy, hospitable lifestyle, and unlimited business opportunities.
There are two factors that are unique to the Philippine economy. One is the large overseas Filipino workforce: Almost 10 million Filipinos live and work overseas sending much needed foreign currency back into the economy. This year alone remittances will average $1 billion a month with a possible $15 billion by year’s end.
The real estate market is also experiencing growth with Metro Manila and Metro Cebu showing the most dramatic price increases. According to Jaime Ayala, President and CEO of Ayala Land, the two most important factors contributing to this surge in investment in property development are the strong growth rates the country is showing coupled with the growing outsourcing industry. The mushrooming business process outsourcing (BPO), including call centers and information technology industries, has become a major contributor to the growth in the real estate sector. Ayala noted that in 2003, the office-space market was a sleepy backwater, but the growth in the outsourcing trend has fueled the demand for new office as well as retail space.
The 10 million overseas Filipino workers also contribute to 40 percent of residential sales. This is an entirely new market that has been created, with ever- increasing remittances coming from abroad.
Super Regions Strategy
The government has embarked on a program to develop what could be termed “super regions” or economic corridors. This program is targeting economic equilibrium throughout the Philippines.
The extensive infrastructure which the United States military left behind in 1992, when the U.S. turned over the two main bases of Subic Bay and Clark Air Force Base, has been successfully recycled as one of these super regions or economic corridors, known as Clark-Subic.
SBMA (Subic Bay Management Authority) has been very successful in transforming the military bases into private enterprise zones for logistics, shipping transportation, and leisure-related activities. In fact the old Clark Air Force Base is now slated to become a major international airport for Manila. Diosdado Macapagal International Airport is now used by cargo transporters and low-cost airlines—Cebu Pacific and Air Asia. Its runway is one of the longest in the world and is one of only three that can accommodate the space shuttle.
The main challenge for Clark is to improve the connectivity with Manila through a rapid train service. This is an important key to Clark’s future success. The project should be partially completed by 2010 and finally realized in 2011.
The economic potential of this region is huge. More than 50,000 jobs have been created in the area since passenger traffic grew tenfold in October 2007, all related to infrastructure projects such as road construction and port expansion in the “economic free- zone corridors.”
President Macapagal-Arroyo is aiming high. By 2020 the goal is to achieve “first world status” through continued growth and a reduction in poverty, with the creation of a robust middle class. By the time she leaves office in 2010, the Philippines will be well on track in achieving those objectives.
