Economic overview
The Philippines GDP grew by 4.6% in 2008 and despite the current economic climate, achieved a 1.6% year-on-year growth as of the 2nd quarter of 2009. Whilst external trade continued to suffer from the high Peso and strong oil prices, domestic demand is supported by both investor confidence (bullish stock market), and consumer confidence, as well as significant levels of remittance from the estimated 10 million Overseas Filipino Workers (OFWs). Remittance levels reached USD 17 billion in 2008 and have grown by 3% as of June this year.
In terms of trade, exports make up about 34% of the Philippines’ GDP. Significant exports include electronics and finished electrical machinery, wood craft and furniture products; and agricultural and food products. On the other hand, main imports are electronic components and telecommunications equipment; minerals and fuels; industrial machinery; iron and steel; textile yarns and fabric; and chemicals.
Opportunities exist particularly in the development of infrastructure projects, including power, water, construction, oil and gas and environmental technologies. There are also opportunities in education and training, financial services, healthcare, and consumer goods. Increasingly, overseas companies see the Philippines as a location for call centre and BPO operations. The country maintains its position in third place behind India and China as a location of choice. The Asian Development Bank headquarters is likewise based in Manila, offering UK firms opportunities in supplying goods and consulting services for various sectoral projects in the region.
The UK and the Philippines enjoy good trade relations. The balance of trade remains as it has over the last few years, in favour of the Philippines in a ratio of about 2:1. Top UK exports, and top imports to the UK are shown in the tables below. The UK remains one the leading long-term foreign investors in the Philippines. In 2008, it was the largest net foreign direct investor and the second largest net portfolio investor in the country. British companies have major investments concentrated in power, energy, water, mining and financial services. There are currently about 200 British companies active in the Philippines ranging from big multinationals to small local operations. Major firms operating in country include Anglo-American, Shell, HSBC, BG, Standard Chartered, Pru Life and Unilever. Retail brands Debenhams, M & S, Speedo, Clarks Shoes, Top Shop, Burberry and Lush have local franchises. Atkins, the Financial Times and Lloyds are active in the BPO sector, while Balfour Beatty and Cape PLC have established technical training centres in Manila.
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Opportunities The Philippines is a consumer-oriented society which has a propensity to buy imported goods. There are also privatisations and reforms in the electricity, water and waste management sectors. Infrastructure projects are increasingly being opened up to private finance. Sectors with opportunities include:
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UK top 10 exports to the Philippines: 2008 (in £ millions)
Electrical machinery, apparatus, appliances and parts: 49.29m (-)
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UK top 10 imports from the Philippines: 2008 (in £ millions)
Electrical machinery, apparatus, appliances and parts: 201.51m (-)
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Potential Growth Drivers: Improved VAT collections/Fiscal reforms, Infrastructure development, Power sector privatisation, Mining, Booming sectors e.g. BPO/IT outsourcing, tourism and finance.
Potential Growth Challenges: Tax revenue leakage, slow infrastructure development, opposition to mining investments, slow privatisation.
UK Trade Relations and Investment
The UK has good trade relations with the Philippines. For January - November 2009, UK exports of goods to the Philippines stood at GBP 235m, 10% higher than the same period in 2008, while imports from the Philippines dropped by 38% to GBP 346m over the same period. In terms of its share of world exports to the Philippines, the UK remains in the 15th position. It is also the top net FDI investor in the Philippines, investing US$ 298.17m in 2008, and a total of over US$18bn over the last 10 years.
The World Bank is forecasting an economic growth of 3.5% in 2010. Among the business drivers are the local market of about 92 million people, inflow of overseas remittances (US$17bn in 2009), a Westernised culture, and the country’s central location in Southeast Asia. The Philippines is also one of the largest English-speaking countries in the world.
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• Assistance and knowledge is shared to combat global terrorism
• The good relationship facilitates the maximisation of commercial opportunities for UK companies.
• The relationship allows for the success of 200 active British companies in the Philippines. Ranging from Multinational companies to smaller singularly owned companies.
• Shell and HSBC are among many that operate in the Philippines
• A number of British companies are also involved in successful franchise projects, such as, Debenhams, M&S, Top Shop and Lush.
The UK has been a significant investor in the Philippines and in the last ten years has invested US $17.5billion, this accounts for 6% of total direct investments and 32% of portfolio investments.
• The British council is an active partner in the Philippine reform agenda, working with the Commission on higher education issues, English language teaching and the development of other government departments.
International Trade Relations
The Philippine archipelago although has no land boundaries is surrounded by many countries, Malaysia and Indonesia to south, China and Taiwan to the North, and many other strong trading countries. Therefore the international relations between the Southeast Asian countries are important. The Philippines was a founding member of the ASEAN (Association of South-East Asian Nations) in 1967. Malaysia and the Philippines work closely to ensure the success of negotiations with the Moro Islamic Liberation Front (MILF). There have been some tensions and disagreements between China and the Philippines but are being resolved under ASEAN Codes of Conduct recently signed by all parties.
Assistance
The UK supports the Philippines mainly through a DFID funded grants scheme to aid poverty-reduction projects in several areas, environment, healthcare, agriculture, and enterprise developments.
Human Rights
The Philippine human rights system has seen vital improvements since the Martial Law era, but there are still some reported discrepancies. The Philippines are striving to comply with all core UN human rights treaties and have a functioning democracy, civil society and more open media coverage. However there is a widespread awareness of allegations of torture and judicial killings. There is an underlying current of corruption, widespread poverty, and poor prison conditions. The government is aware of these issues and does co-operate with the independent Philippine Commission on Human Rights.
• The death penalty is still a serious concern within the Philippine legal system and was reintroduced in 1993.
• President Arroyo is vowing to certify a pending bill to abolish capital punishment.
• Positive steps towards the freedom of religion, association and expression are recognised. But journalists investigating crime and corruption have been murdered; around 75 since 1986.
• Violence towards women remains a serious human rights concern, some legislations to criminalise domestic violence has been passed.
• There are over 100 000 street children suffering sexual abuse and prostitution. The British Embassy in Manila is involved in projects to rehabilitate these children and improve the situation.
Political History
The Philippines was a colony and vital trading centre for the Spanish for over 300 years, from 1521 until 1898. In between, it was occupied by the British in 1762 during their war with Spain, but was relinquished back to the latter in 1764 following the Treaty of Paris. The Americans occupied the Philippines in 1898. It was seized by the Japanese during World War II, but was later liberated by the United States. It finally became independent in 1946.
The Philippines is now a democratic republic based on a presidential system of government. The President and Vice President are elected for a six-year term and may serve only one term. The current president, Gloria Macapagal – Arroyo, has placed emphasis on economic growth initiatives, involving infrastructure development, poverty alleviation and good governance.
Parliament consists of a House of Representatives and a Senate, which are composed of elected officials. The next presidential and senatorial elections are in May 2010.
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Timeline
1565 First Spanish settlement was established in the Philippines, after it was discovered by the Europeans in 1521.
1890’s Discontent with the Spanish rule begins.
1896 A nationalist movement develops, and the revolution begins. Dr Jose Rizal, a national hero, is also executed.
1898 US Navy destroys Spanish fleet in Manila Bay. Spain relinquishes occupation to the US in the Treaty of Paris. The nationalist leader, Emilio Aguinaldo, declares independence but the US claims military rule.
1899 Insurgent activity against US forces begins.
(Emilio Aguinaldo is captured 1901 and fighting continues until 1902)
1902 US civil government replaces military rule. The Americans also introduce an elective political system to hopefully grant eventual Filipino independence.
1935 Establishment of the Commonwealth of the Philippines is approved. Manual Quezon is the first president.
1941 Japan attacks the Philippines
1946 Full independence and establishment of the Republic of the Philippines. (For the next twenty years Filipino politics was dominated by two major political parties, but corruption was still a concern)
1965 Ferdinand Marcos elected president.
1972 Martial law declared by Marcos, parliament is suspended, opposition politicians are arrested, and censorship is imposed.
1973 New constitution gives Marcos absolute power.
1977 Opposition leader, Benigno Aquino, is sentenced to death. But it is delayed and in 1980 he travels to US for medical care.
1983 Upon return to the country Aquino is shot dead as he leaves his plane.
1986 Marcos is opposed by Aquino’s widow in presidential elections. There are mass protests as Marcos declares himself the winner. The military withdraw their support for him and Marcos flees the country for Hawaii.
1992 Aquino’s defence minister, Fidel Ramos, wins presidency.
1996 Peace agreement reached with Moro National Liberation Front (MNLF), but Moro Islamic Liberation Front (MILF) carries on its campaign.
1998 Joseph Estrada is elected president
2000 Allegations of corruption, betrayal of public trust, and violation of the constitution are made against Estrada
2001 Impeachment trial is suspended on January 16th, but there are mass protests. The military withdraw their support for Estrada and he stands down. The vice-president, Gloria Arroyo, is sworn in as president.
2001 In March the MILF declares a ceasefire and agrees to talk with the government
2001 In April Estrada is charged and arrested.
2002 Series of bomb blasts blamed on Islamic militants.
2003 In February MILF and government ceasefire breaks down after rebel attacks.
2003 Ceasefire resumed between government and MILF. There is an Army mutiny in Manila, involving 300 soldiers who seize a shopping centre. The incident is resolved with peaceful negotiations.
2004 In June, Gloria Arroyo is announced to have won the May’s presidential elections.
2005 The July 2003 ceasefire is broken as heavy fighting breaks out between Filipino troops and MILF rebels.
2005 Between July and September President Arroyo is put under pressure to resign, as allegations of vote-rigging have arisen. Yet she survives an impeachment attempt by her opposition.
2005 Further fighting this time between Filipino troops and Muslim Abu Sayyaf rebels on the island of Jolo, many deaths are reported.
2006 In June the death penalty is abolished (It was scrapped in 1987 but had since been reinstated).
Current government
President: Gloria Macapagal Arroyo
Foreign Minister: Alberto Romulo
Finance Minister: Margarito Teves
