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Philippine Economy

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Competitiveness of Philippines in global map
From WEF “Global Competitiveness report 2012-13”, key performance indices of Philippines in a global scale is analyzed below:

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0.5% of world-wide GDP share implies Philippines is really an insignificant player in world economy in terms of economic output, and 95 millions population, about 1.5% of ~7 billion world population, means current productivity level is only one third of world average. This is a typical characteristic of developing Asian countries, i.e., high population but low economic production output. However, even if only comparing with average of developing Asian countries, including China, India, Indonesia, Malaysia, Pakistan, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Vietnam, the growth of Philippines’ GDP per capita is still significantly lagging behind in the past 20 years, and the gap is continuously widen since 2006. [pic]

Philippines is at the stage of transitioning from factor driven economy to efficiency driven economy. What is promising for Philippines is that the global ranking of competitiveness among 144 countries is improving for the last three year, 85 – 75 – 65, and indices “Macroeconomic environment”, “Market size” are even among the top 40. The indices show “Labor market efficiency”, “Infrastructure”, “Health and primary education”, “Institution” and “Innovation” are area lagging behind.
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From the survey data of “The most problematic factors for doing business” in Philippines show government corruption, bureaucracy and policy instability are the most problematic issues businessmen are facing, other than inadequate infrastructure such as road, stable supply of electricity etc.

I. Trade and Foreign Direct Investment in the Philippines
Historically, the Philippines have been an important centre for commerce for centuries for its important location in south east Asia. Since 1980s, the Philippines have opened their economy to foreign markets, and established a network of free trade agreements with several countries. Some Philippines' Import and Export Indicators and Statistics are list below:
- Total value of exports: US$50.72 billion
- Primary exports - commodities: semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, fruits
- Primary exports partners: US (17.6 percent of total exports), Japan (16.2 percent), Netherlands (9.8 percent), Hong Kong (8.6 percent), China (7.7 percent), Germany (6.5 percent), Singapore (6.2 percent), South Korea (4.8 percent)
- Total value of imports: US$59.9 billion
- Primary imports - commodities: electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, plastic
- Primary imports partners: Japan (12.5 percent of total imports), US (12 percent), China (8.8 percent), Singapore (8.7 percent), South Korea (7.9 percent), Taiwan (7.1 percent), Thailand (5.7 percent)

The United States is one of the Philippines top trading partners. In 2010, according to US Department of Commerce data, trade between the Philippines and US amounts to US$15.4 billion. US is also the Philippines largest foreign investor, with foreign direct investment close to US$6 billion at the end of 2009.

As of 21st century, the country is member in several international trade organizations including the APEC, ASEAN and WTO, under the new Aquino administration, the government plans to open up the country to more foreign investment in industries such as business processing operations, mining and tourism. However, this move may be hindered by restrictions such a prohibition of foreign ownership of land and public utilities. Also foreign investment was also impact by the financial crisis in 2008-2009 period, historical foreign investment data, breakdown by industry and country are listed below:
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Net inflows of foreign direct investments (FDI) to the Philippines for the first two months of 2012 were $850 million, three times higher than the $335 million during the same period in 2011, showing a strong recovery of the foreign investment in Philippines.

II. Basic Education System
The former basic education system of the Philippines is composed of: 6 years of elementary education starting at the age of 6 or 7, and 4 years of high school education starting at the age of 12 or 13. In this system, high school education is not compulsory. A formal public education system structure is show below:
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Participation rate for elementary school in 2009 is 89.43%, go up to 89.89% in 2010. As for secondary school, 2009 is 59.86%, go up to 61.26% in 2010. For Kindergarten, 1.65 million children enrolled in 2010, participation rate of 75.72%, grow to 2.04 million, participation rate of 91.67%, in 2011.

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These numbers are not impressive even compared to Asian developing countries. As the country need to improve overall productivity, higher quality human resource is a must pre-requisite, more resource allocation to education is in top priority list of Philippines government. Since June 4, 2012, Department of Education started to implement the new K-12 basic educational system, which includes the new curricula for all schools including one year of kindergarten(for 5 years old), 6 years of primary education, 4 years of junior high school and 2 years of senior high school. In this system, basic education is now compulsory.

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Program implementation in public schools is being done in phases starting SY 2012–2013. Grade 1 entrants in SY 2012–2013 are the first batch to fully undergo the program, and current 1st year Junior High School students (or Grade 7) are the first to undergo the enhanced secondary education program. First cohort of K to 12 grade 6 and Grade 12 will graduate in 2018.

[pic] III. Population and Workforce
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Population - 103,775,002 (July 2011 est.)
Age group - 0-14 years: 34.6% (male 17,999,279/female 17,285,040) 15-64 years: 61.1% (male 31,103,967/female 31,097,203) 65 years and over: 4.3% (male 1,876,805/female2,471,644) (2011 est.)
Population growth rate - 1.873% (2011 est.)
Birth rate - 24.98 births/1,000 population (2011 est.)
Death rate - 4.98 deaths/1,000 population (July 2011 est.)
Urbanization - urban population: 49% of total population (2010)
Major cities – population - MANILA (capital) 11.449 million

Relatively young population, due to high birth rate, is one of the key force that push Philippines economic growth. This means sufficient young labor force supply to industries and also a big consumer market demand for young people.

It is estimated that between 9.5 million to 12.5 million Filipinos work or reside abroad, these Overseas Filipino Workers, or OFWs, constitute 11% of the total population. In 2012, the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, expects official remittances from OFWs coursed through banks and agents to grow 5% over 2011 to US$21 billion, but official remittances are only a fraction of all remittances. Remittances by unofficial, including illegal, channels are estimated by to be 30 to 40% higher than the official BSP figure. OFW remittances represent 13.5% of the country's GDP, the largest in proportion to the domestic economy.

Philippines is considered having a highly skilled labor force, proficiency in English, and a constant stream of college-educated graduates entering the workforce. This attracts many foreign companies to set up operation here. Take one of the fastest growing industries in the country, Call center, as example, Call centers began in the Philippines as plain providers of email response and managing services, these have industrial capabilities for almost all types of customer relations, ranging from travel services, technical support, education, customer care, financial services, and online business-to-customer support, online business-to-business support. Due to its less expensive operational and labor costs, highly skilled labor force, the Philippines is overtaking India as the largest call center hub in the world.

Reference
1. World Economic Forum. 2012. Global Competitiveness Report_2012-2013. [ONLINE] Available at: http://www.weforum.org/reports. [Accessed 25 November 12].
2. Economy Watch. 2012. Philippines Trade, Exports and Imports. [ONLINE] Available at: http://www.economywatch.com/world_economy/philippines/export-import.html. [Accessed 25 November 12].
3. Department of Trade and Industry, Philippines. 2012. Total Approved Foreign Direct Investments 1996-2009. [ONLINE] Available at: http://www.dti.gov.ph/dti/index.php?p=3. [Accessed 25 November 12].
4. Slideshare. 2012. The State of Basic education. [ONLINE] Available at: http://www.slideshare.net/arangkadaph/state-of-education-in-the-philippines-2012. [Accessed 26 November 12].
5. Department of Education, Philippines. 2012. The K to 12 Basic Education Program. [ONLINE] Available at: http://www.deped.gov.ph/default.asp. [Accessed 26 November 12].
6. World Bank, Human Development Department, 2010. “Philippines Skills Report, Skills for Labor Market in the Philippines”, Report No. 50096-PH, March 2010.
7. Youtube video: Population in the Philippines, 2012. [Accessed 26 November 12]. Available at: http://www.youtube.com/watch?v=YatkDHzahWw&feature=relmfu. Filipinos Working abroad, 2012. [Accessed 26 November 12]. Available at: http://www.youtube.com/watch?v=At1OVpefZus&feature=relmfu. World Call Center Capital, 2012. [Accessed 26 November 12]. Available at: http://www.youtube.com/watch?feature=endscreen&v=kFBgauGCOEQ&NR=1,

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