28 October 2020, AU/NZ and PH via Facebook Live
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Good morning to everyone!
We hope everyone is keeping themselves safe and healthy during the COVID-19 pandemic.
Thank you for attending this event. Today, we are launching our new marketing brand campaign to promote the Philippines as an attractive and reliable destination for trade and investments.
POST COVID-19 RESPONSE
Prior to the pandemic, the Philippines boasted very strong economic fundamentals. We were growing at an average of 6.6% over the period 2016 to 2019, so much so that we were the 3rd fastest growing economy in Asia. In 2019, our per capita GDP was at US$3,500. We were projecting to breach the US$4,000-mark and become an upper middle-income country by 2020, if COVID-19 did not happen.
Our astute monetary policy enabled us to have low and stable inflation rates averaging at 3% from 2016 to 2019. Last year, we also had a strong fiscal position, whereby we achieved highest revenues and lowest debt as shares of GDP. We also had the lowest unemployment and underemployment rates last year. We even received the highest ever credit ratings in the range of BBB+ to A-.
Our strong growth was supported by the resurgence in our manufacturing sector, which nearly accounts for 20% of the Philippine economy. The average value-added grew by almost 34% for the five-year period of 2010-2014 to 2015-2019. Meanwhile, total merchandise exports were on an uptrend.
Despite the setbacks and challenges brought about by the pandemic, the Philippines still remains a conducive place to do business. We are also considered one of the top emerging economies and countries for investments. Reputed business magazine The Economist ranked the country as the 6th emerging economy with high financial strength. CEOWorld Magazine placed the Philippines among the top ten countries to invest in post-COVID era. Further, both the World Bank and International Monetary Fund predicted a V-shaped economic recovery for the country, with forecasts of 6.2% to 6.8% respectively by 2021.
As such, we are working on rebuilding the economy’s robust growth—but this time higher than pre-COVID levels. Allow me to present to you our new industrial strategy and international marketing campaign to bolster the expected turnaround of our economy from the effects of the pandemic.
REBUILD PH
The way forward for us is to build back better, and to stay the course to have a better future for our country. Our goal is for Filipinos to have a modern, dynamic, and responsible Philippines.
This is what our new industrial strategy is all about: the REBUILD PH or “REvitalizing BUsinesses, Investments, Livelihoods and Domestic Demand.” This strategy is aimed at jumpstarting and reinvigorating the economy by revitalizing consumption and enhancing production capacity. The two broad strategies of REBUILD are: (1) revitalize demand, and (2) empower local industries to capture the demand in the agriculture, industry, and services sectors.
On the demand side, it starts with government support via economic stimulus to keep jobs. This is important to attract more production activities and create a better business environment for investments. On the supply side, we should enhance production capacities in the agriculture, industry, and services sector to help build our export competitiveness and manage imports.
This creates a virtuous cycle of sustained and growing economic activity with strong domestic linkages.
THE PH ADVANTAGE
At this juncture, let me reiterate why Australian and New Zealand businesses should invest in the Philippines. I’ve already mentioned earlier that our economy was one of the fastest growing before the pandemic. It’s also poised to exhibit a sharp V-shaped recovery afterwards.
Further, the Philippines offers a domestic market of 110M people and access to an ASEAN market that has more than 600M people. Our country also has access to key markets through our Free Trade Agreements (FTAs) with other countries and regions, as well as the US Generalized System of Preferences (GSP) and the EU Generalized Scheme of Preferences Plus (GSP+).
Our labor force stands at 49M and we produce 750,000 annual graduates with wage rates among the most stable in the region. Further, the increase of manufacturing cost in the Philippines is more stable compared to neighbouring ASEAN countries such as Vietnam, Thailand, and Malaysia. The country also has a robust electronics and semiconductor industry with strong support industries.
With these in mind, the Philippines offers itself as a strategic partner in services with its large, young, educated, and tech-savvy population. This is a resource that will be critical in responding to the challenges and opportunities of the digital and inter-connected new economy. As Australian and New Zealand companies pursue expansion strategies, they can partner with the Philippines, given our excellent track record in supporting global operations of companies from all over the world. The strong customer service orientation of our workforce also makes our country an ideal location for services getting in touch with its customers globally.
I’d also like to point out that the Philippines has risen in the Global Innovation Index (GII) 2020 to 50th out of 131 countries from 54th in 2019. This is the first time that the Philippines has reached the top 50. Moreover, the GII recognizes the country as an innovation achiever for the second year in a row. From 2014, we were just in the 100s and now we are in 50th rank. I think our next target of 43rd rank is achievable and we are committed to achieve this goal.
As a manufacturing hub, the Philippines has one of the lowest wage levels for manufacturing workers and engineers. The annual wage increase of the Philippines is steady at 4.6% while Vietnam is at 7.0%. These are projected to be at the same level in 2020.
Equally important, employers who exhibit commitment to their workers will reap the benefit of a low turn-over rate in the Philippines, which has one of the lowest in the region. Companies will also enjoy industrial peace in our country, as strikes average less than ten in a year.
I would also like to highlight that during the pandemic period, the Philippines did not impose import/ export restrictions. In fact, the importation of health equipment and supplies deemed critical or needed to address the COVID-19 public health emergency was given exemption from duties, taxes, and fees under Republic Act No. 11469 or the “Bayanihan to Heal as One Act.” Import requirements—as well as application and registration processes for needed medical supplies and equipment, as well as protective gear deemed as COVID-19-critical commodities—were also streamlined.
OPPORTUNITIES IN PH MANUFACTUTING & SERVICES
Let me now walk you through some of the sectoral opportunities in our priority investment areas.
Electronics
The Philippine electronics industry hosts about 500 global semiconductors and electronics companies. The industry is characteristically export-oriented, accounting for 61% of total Philippine exports in 2019 at US$43B.
Of the total electronics exports, 73% are semiconductor while the remaining 27% are manufactured Electronic products. The Philippines is thus already an indispensable part of the electronics global value chain and is a centre of excellence for electronic manufacturing services. We are particularly strong in test, packaging, and assembly of semi-conductors. However, we will be establishing a dedicated center to support integrated circuit (IC) design. What’s more, we are ready to become the home of competitive IC design companies serving customers worldwide, thanks to our growing pool of IC design engineers.
Investment opportunities are available in electronics manufacturing, chip design, and original product design and development works for cutting-edge products and technologies in healthcare, automotive, and aerospace. This also includes autonomous vehicle batteries and SMART wearables.
Automotive
With regard to the Philippine automotive industry, we are already integrated with major global value chains. Companies like Fujitsu, Continental and Yazaki already know we help make it happen in the Philippines.
In 2019, we exported US$4.1B in auto parts. Because we have a fairly extensive auto supply chain comprising of over 380 parts manufacturers—coupled with the strength of our die and mould, electronics, and IT-BPM sectors—we can respond quickly to changes in this fast-moving market.
More importantly, we are ready to meet the rising export demand for automotive assembly and parts manufacturing within the Asia-Pacific and beyond. Our skilled, experienced, and established parts manufacturers are poised to partner with ambitious investors in assembly. While major multinational automotive companies are already capitalising on the opportunities that exist here, we want to do more.
Creating a “future-ready” automotive sector is our goal. Both industry and government are working together to create ideal conditions for investment. From promoting innovation via electric vehicles to improving public transport by modernising our famous fleet of ‘jeepneys’, the Philippines is perfectly placed to shape Asia’s automotive future.
Aerospace
Meanwhile, the aerospace industry in the Philippines is ready for take-off. Our aerospace industry is one of the fastest-growing in the Asia-Pacific region. In 2019, we exported US$780M-worth of value of aerospace parts and components. This is a 7.54% (CAGR) growth from 2015 with our biggest export markets being the US and Europe.
We are perfectly positioned to become the hub for manufacturing and aftermarket services in the Asia-Pacific aerospace industry. But our best-kept secret is that the Philippines is already home to Tier-1 suppliers of the world’s biggest aerospace manufacturers, like Boeing and Airbus.
The PH aerospace manufacturing capabilities include Flight control actuation systems, Interiors, lavatories, galleys, oxygen systems, panel assembly; and Product design engineering.
Moreover, our existing supply chain has the capacity and capability to meet diverse industry requirements.
Our MRO offer is growing, too. In 2019, we imported US$2.791B of aircraft and parts. Major international carriers are choosing to have their fleets serviced in the Philippines and we can cater to this rising demand. Our capabilities include Line Maintenance, Base Maintenance; and Aircraft inspections and structural repairs.
To sum this up, the Philippines is ready to become a state-of-the-art hub for aerospace.
Copper
On the other hand, copper is one of the largest mineral resources in the Philippines. With reserves of around 4B metric tons, our country is one of the world’s largest producers of copper.
Our technical expertise in extraction means that we can produce a wide variety of copper goods to service many other industries. With multiple methods of extraction, the Philippines is well placed to manufacture and export a range of copper-based goods. These include Copper ore, Copper wires and cables, harnesses.
We are also home to a world-class smelting facility with the ability to create numerous copper-based products. The industry has the potential to extract other energy sources such as geothermal gasses.
The resilience and determination of our workforce has contributed to the success of the industry with US$1.9B-worth of copper exports in 2018. We have the potential for expansion and we can make it happen through the establishment of select world-class copper mines, a wire rod casting facility, and the promotion of higher-value copper products.
Locally, we only produce copper cathodes, which is the raw material for rolling/ extrusions to produce cables/ wires, electric motors, and transformers, among others.
Meanwhile, the Leyte Industrial Development Estate (LIDE) has 2 international class ports that can service panamaxes of up to 60,000-70,000 tons). PASAR operates one and is already at 80% capacity.
We also have the Leyte Ecological Industrial Zone (LEIZ) Program. This program proposes to establish integrated copper processing facilities via industry clustering, and will capitalize on the existing capabilities and infrastructure of the Leyte province.
IT-BPM
Of course, the Philippines is well-known for its IT-BPOM sector. With a 15% share of the global market, the Philippine IT-BPM sector is the second largest in the world. We have the edge when it comes to voice-related services, as well as non-voice high-shared service support.
Acquire, Telstra, Macquarie, ANZ GSO are among the companies that trust us with their business. With nearly 20% of the global IT-BPM sector outsourced, we’ve been a cost-competitive destination for major multinationals in the last two decades.
Meanwhile, our IT-BPM Roadmap 2022 is all about acceleration, from strengthening existing capability, leveraging advances in technology, to ensuring a future-ready workforce. Our contact center services are already well-established. However, we have the ambition and the talent pool to move higher up the global services value chain.
English-language skills and a ‘can-do’ culture are the foundation of our IT-BPM industry. Our pool of talented professionals is ready to adapt and take on responsibility in higher-value services like finance, healthcare, and IT support.
But what sets us apart is quality, agility, and creativity. Our finance and accounting, IT, software development, and healthcare services sectors are among the fastest growing in the country. More importantly, our workforce of digital natives is ready to take on more.
I’ve only gone through a few sectors. However, there are endless possibilities and tremendous potential for synergies in the area of manufacturing and services between the Philippines, and Australia and New Zealand.
MAKE IT HAPPEN IN PH CAMPAIGN
As our country navigates a fast-changing world that forecasts an unstable future for many businesses, we face the challenges of the “New Normal” head on. Our new “Make it Happen in the Philippines” international marketing campaign will highlight the Philippines’ strength and adaptability to weather these challenges.
This campaign will be the Philippines’ first sustained and unified multi-sector and multi-market campaign that is primarily designed to generate foreign investment leads. It was developed and tested with international investors in China, as well as the US and the UK. This will also replace the dozens of corporate identities currently being used by our investments promotion agencies. It is now showcased in our recently-developed multilingual digital promotional platform, www.philippines.business.
We are confident that our new “Make it Happen in the Philippines” campaign will promote our country’s “roll-up-your-sleeves” and “make-it-work” mindset. This attitude is what makes the Philippines a unique and attractive investment landscape for strategic sectors in the ASEAN region for foreign investors.
CONCLUSION
To conclude, in light of the economic partnership between the Philippines and Australia and New Zealand, it’s only natural that we become the investment destination for businesses in these countries going global.
Under the leadership of President Duterte, the Philippine government is determined to create inclusive and sustainable economic development that will give all Filipinos a better life. But instead of adjusting to the “New Normal,” we aim to create a “Better Normal” where our people will not only have jobs and livelihoods but also a safe and secure future for their children.
And even as we push the Philippines’ recovery against COVID-19, we are committed to continue our country’s economic growth story. That’s why we call on our Australian and New Zealand friends to take a closer look at how you can partner with the Philippines. You will see how we can ably support your business expansions plans, and provide you with a deeper insight on how to “Make it Happen in the Philippines.”
Thank you and mabuhay tayong lahat!♦
Date of Release: 29 October 2020