I thank MAP led by President Benedicta Du-Baladad for initiating this popular series of poems to promote the Philippines as an investment destination. I greet my fellow speakers, guests, ladies and gentlemen—good morning.
The Philippines is on a remarkable journey toward recovery from the COVID-19 pandemic. The GDP growth rate soared to 7.6% in 2022, up from 5.7% in 2021. However, as we enter 2023, we see a slower growth rate amid headwinds, such as the global economic slowdown and the prevailing high inflation. Thankfully, the ADB still forecasts the Philippine economy to grow by 6.0% this year, still on track to the goal of becoming an upper middle-income country.
Central to the government’s efforts in fortifying our economy is the focus on attracting investors, both foreign and local, ensuring that the Philippines becomes a thriving business and industrial hub in the region. Investments are a top priority, as they create jobs and stimulate economic activities nationwide. They are, in fact, the driver of our trade performance. In 2023, the Board of Investments (BOI), which are here, aims to secure PHP1.5 trillion in investments. During the first quarter of 2023, total investment projects approved by the BOI reached close to PHP 500 billion, a staggering 155% surge compared to the same period in 2022. BOI foreign investment approvals also accelerated to PHP 165.4 billion during the same period, marking close to 4,000% increase. Thanks to the recent game-changing reforms, already referred to by President Dict, we anticipate an influx of investments that will invigorate our nation’s economic activities.
A notable policy action is the Senate’s recent ratification of the Regional Comprehensive Economic Partnership (RCEP) Agreement. For the Philippines, the RCEP enhances regional trade and provides more comprehensive market access, among other benefits. We’re talking of investments here that we make sure will make our country attractive as an investment place for those who are going to export their products around us, the Philippines, so that means the ASEAN plus the five other members of RCEP. This agreement grants our exporters access to a market of 2.3 billion people and enables Philippine manufacturers to expand into ASEAN plus One countries with zero or low tariff rates.
For instance, RCEP will prove advantageous for the garments industry in the Philippines, allowing them to source fabric and textiles from 14 other countries, including China, and export their products to a more extensive market. Previously, this was not possible due to restrictive rules of origin under the ASEAN-Japan Comprehensive Economic Partnership and Philippine-Japan Economic Partnership Agreement. RCEP also lowers the tariff from 5% under the ASEAN-Korea Free Trade Agreement, now 0%, under RCEP.
Another beneficiary of RCEP, for example, is the fish canning industry. Canning factories can source raw materials from non-RCEP Parties and produce canned tuna for export to RCEP countries. Currently, some tuna canneries source their raw materials from non- RCEP Parties such as Papua New Guinea and Norway. With RCEP, their exports to Japan will now qualify for preferential tariffs instead of higher import tariffs under the existing bilateral agreement and the ASEAN plus Japan agreement, even if some of the inputs are imported from non-RCEP countries. Many more industries stand to benefit from this agreement. We improve export potential investment first.
We are all familiar with the recent reforms, as already mentioned, the Retail Trade Liberalization Act, Public Service Act, Foreign Investments Act, and another two easing restrictions of foreign ownership of certain businesses. At the same time, the amended Foreign Investments Act also empowers micro, small, and medium enterprises (MSMEs) to find potential foreign partners and investors. Moreover, the CREATE law offers investors more attractive and rationalized incentives that can go as long as 40 years and we’ll also harmonize investments across all investment promotion agencies.
In an effort to enhance the ease of doing business in the country, the President signed Executive Order No. 18 in February this year, establishing Green Lanes for Strategic Investments from the initiative of DTI and BOI. This executive order addresses investors’ standing back with many pain points, they say, to investors getting more traffic. This EO will address those challenges through a comprehensive, whole-of-government approach, easing barriers across multiple regulatory agencies. It introduces a single point of entry for strategic investments—a highly desirable investments valued at 1M USD or more. This will be done in a One-Stop Action Center at BOI. The EO streamlines the processing of permits and licenses for endorsed strategic investments by creating Green Lanes at the national government agencies (NGAs) and local government units (LGUs).
These reforms are set to attract increased investments moving forward. We want investments that will enable the Philippines to leapfrog, that is, to quickly advance to higher-value industrialization by skipping intermediate stages of development which we already raised relative to our neighboring countries. We are particularly interested in investments that promote advancements in science, technology, and innovation (STI) and foster innovative industries. By positioning STI and digital technologies at the forefront of our country’s industrialization, our industries will be better equipped to transform and compete in the domestic and global markets. Innovation and the development of new technologies create new goods and services, stimulate the growth of industries, and expand production capacities. As a result, our enterprises will be able to generate more higher-quality and better-paying job opportunities for our people and get us closer to our dream of shared prosperity for all.
We aim to build a dynamic industry ecosystem with four industrial clusters as primary sources of growth. These clusters are the following:
1. The Industrial, Manufacturing, and Transport (IMT);
2. The Technology, Media, and Telecommunications (TMT);
3. The Health and Life Science (HLS); and
4. The Modern Basic Needs of a Resilient Economy.
These industrial clusters will benefit from the reconfiguration of global value chains brought about by the COVID-19 pandemic, the rapid technological innovations, the growing servicification of manufacturing, and the realignment of geopolitical forces.
These are also industries in which the Philippines has already developed some of the requisite competencies.
Within the Industrial, Manufacturing, and Transport cluster, we are eager to attract investments in aerospace, automotive, semiconductors, and electronics, electronics will be discussed later in this forum. For example, our country is home to Collins Aerospace, the world’s leading aircraft interiors company, and Lufthansa Technik, a top aircraft maintenance, repair, and overhaul provider doing the MRO in various aircrafts in the Philippines. In August last year, we witnessed Lufthansa Technik’s further expansion in its facilities in Metro Manila.
Our country is eager to join the global electric vehicle value chain as the global shift toward green products such as electric vehicles (EVs) gains momentum due to climate change concerns. We welcome foreign investments introducing relevant EV technologies and capitalize on our abundant green metals, such as nickel, copper, and cobalt. The Philippines can be a critical partner for these essential minerals, not as an exporter of raw ores, but mainly as processor and producer of semi-finished and finished products, such as batteries. We’re moving in this direction. In the semiconductor and electronics sectors, we seek foreign investments that promote higher value addition, including skills enhancement in R&D, to improve business prospects for firms in the Outsourced Semiconductor Assembly and Test operation we’d like to go up the value chain up to probably IC design and others.
Within the Technology, Media, and Telecommunications cluster, we aim to engage investors in developing our digital economy, IT-BPM, hyperscale data centers, and products utilizing AI, robotics, 5G, and the Internet of Things. We encourage investors to leverage the majority (82%) of our BPOs and shared services centers that already cater to global markets.
Investors in our creative industries, in new films, new laws have been passed for the creative industries law, the implementation of the law has again been placed on the hands of DTI. The investors in the creative industry is also part of the Technology, Media, and Telecommunications cluster, can anticipate the implementation of this law, Philippine Creative Industries Development Act (PCIDA). The PCIDA recognizes creativity as a cornerstone of our national identity, and, in line with this, we will establish the Creative Venture Fund. This fund will finance creative enterprises and individuals as they expand their pursuits, fostering a vibrant and innovative creative sector. I think this has a lot of potentials to work to achieve that potential.
In the Health and Life Sciences sector, we are committed to fostering a strategic security role and creating opportunities for our country. We invite investments in pharmaceutical products, medical devices, and health management systems. I’m thinking, for example getting Japanese pharmaceutical companies, they’re running out of working-aged people to bring their manufacturing facility here, we’ll provide the raw materials, we’ll do the products here, and export back to Japan. That’s happening in Dubai, what they do is import all the raw materials from what they call ecozones, they import materials from Europe and do the assembly, finished products and manufacturing in Dubai to export back to Europe.
Moreover, the fourth cluster, the Modern Basic Needs and Resilient Economy, to achieve that, we must meet the modern ways of a resilient economy. This cluster addresses the essential needs of Filipino consumers, such as food, goods, and energy. Food is very important. We’re working hard to get a supply chain for food organize, so we won’t again
suffer from the Php 800 kilo of onion recently, when in fact, the farm gate price is less than Php 50 per kilo. Moreover, we recognize the critical importance of food security in achieving sustainable and inclusive economic growth. Consequently, we welcome investments in agribusiness, agriculture technology, food processing and packaging, and aquaculture. We are moving towards industrialized farming and the challenges of how we consolidate the lands. Hopefully, there is a new law that will focus on land reform that will allow the leasing of land to those who will operate the farm on a big scale basis.
The Philippines is also dedicated to transitioning to renewable energy (RE) as outlined in the Philippine Energy Plan for 2020 to 2040. Our National RE Program aims for 50% RE generation by 2040. With recent reforms allowing foreigners to own up to 100% of RE projects in the country, we are working to increase the share of renewables in our national power generation.
We firmly believe that dependable infrastructure is essential for businesses investing in the Philippines. Following the President’s directives, we are committed to building better and more extensive infrastructure in transport and logistics, energy, information and communications technology, and food logistics. Connecting our ecozones, trade centers, and manufacturing and logistics hubs will facilitate vibrant trade and balanced growth among regions. This strategy will address transport and logistics constraints, energy shortages and costs, and connectivity issues hindering economic activities, particularly investments.
For instance, we are making significant progress on the 147-kilometer commuter rail connecting our technology industrial sites in CALABARZON, south of Manila, to Clark Airport, north of Manila. Other noteworthy projects are in other parts of the country in transport infrastructure.
Another attractive aspect of investing in the Philippines is our commitment to develop a skilled workforce. Preparing our workforce for the future is crucial, as we encourage employers to upskill workers while also recognizing the importance of aligning our learning systems with learning institutions. With approximately close to 800,000 thousand Filipino graduates annually, companies should find recruiting our intelligent, young, tech- savvy, and productive workforce promising. Note that our country has a large and young population, which is a significant attraction to many foreign investments. We have the youngest population in our region. The developed countries have an average age of upper 40s and lower 40s and high 30s, while we’re in less than 24 years old median age.
For example, we support the Advanced Manufacturing Workforce Development Alliance launched recently by the United States Agency for International Development (USAID), which I attended. This five-year, PHP622-million partnership with Unilab Foundation aims to train Filipino workers to meet the evolving demands of the manufacturing sector. We also support AmDev’s goal of improving the capacity of our education system to develop human capital in line with Industry 4.0 requirements.
Investors, especially foreign investors, are crucial in accelerating the Philippines’ economic development. We aim for them to recognize the potential of our country and support in making our country grow, in our investment landscape. We encourage them to invest in our priority clusters for industrialization, and we pledge to support them as they capitalize on our reforms. Our continuing message and invitation to investors remain steadfast: make it happen in the Philippines.
Thank you at mabuhay tayong lahat! ♦
Date of release: 19 April 2023
