Representative Joey Salceda of the 2nd District of Albay; Secretary of Budget and Management Amenah Pangandaman; National Treasurer, Ms. Rosalia de Leon; Philippine Chamber of Commerce President, Mr. George Barcelon; management and staff of UBS Securities Philippines Inc.; colleagues in government; distinguished guests; ladies and gentlemen—good afternoon.
I’m glad to have this opportunity to address the participants of the UBS Philippines Macro Tour 2023.
The Philippines is on a path toward economic recovery and growth following the COVID-19 pandemic. As President Ferdinand Marcos Jr. has said on several occasions, the Philippines is now open for business. That message is well received by investors like those we met during our Presidential visits to several countries over the past few months.
Our country’s strong macroeconomic fundamentals and well-crafted structural reforms will serve us well as we confront the challenges of the current tightening of global financial markets and the prevailing inflationary pressures.
Inward investments into the Philippines are showing a positive sign. As of February 9th, DTI’s Board of Investments (BOI) has already approved investments totaling PHP 414 billion, which is over 40% of our PHP 1 trillion target for 2023. This outstanding performance has prompted us to increase BOI’s investment approval target by 50% to PHP 1.5 trillion this year. Indeed, we see the Philippines as moving toward a robust economic expansion.
What makes investing in the Philippines attractive? Allow me to give you five reasons.
Number 1: The Philippines has a large population of 110 million, with a growing middle class, and such a population indicates a sizeable domestic market. Noteworthy as well is the Philippine median age of 24.5 years – quite young relative to the global median age of 30.3 years and very young compared to Japan’s 48.4, Korea’s 43.4, Taiwan’s 42.5, Thailand’s 39.3, China’s 38.4, and Vietnam’s 32.0. Indeed, the Philippines has the advantage of a vast supply of young, talented, and trainable workforce relative to its neighboring countries.
A priority industrial cluster for the Philippines consists of the Modern Basic Needs of a Resilient Economy. This priority sector responds to Filipino consumers’ food and other basic needs. To ensure food availability for 110 million Filipinos, we are improving farm productivity through land consolidation and mechanization and investing more in food processing, agri-technology, and aquaculture.
The President has taken on the agriculture secretary portfolio, which shows the Philippine government’s paramount concern for food and nutrition security.
The task of the Department of Trade and Industry or DDTI in agriculture starts at the farmgate. DTI works to streamline the supply chain and minimize logistics costs and trade margins before food products reach consumers. For instance, we push for more investments in cold storage and refrigerated transport facilities along the supply chain across the archipelago. The goal is to provide farmers with alternatives to the immediate sale of their harvests to traders at a bargain.
Through DTI’s Cooperative Development Authority, we are organizing small farm-holders into cooperatives and enabling them to scale up agricultural production with modern equipment and tech-driven farming methods. Already in the pipeline are several training sessions on cooperative leadership and management.
Aside from cooperatives, the government is also open to the participation of private companies in agriculture, including corporate farming, operation of post-harvest facilities, and other processes in the agriculture and food value chain.
Another of DTI’s priority sectors is the Industrial, Manufacturing, and Transport cluster, such as the electric vehicle (EV) industry.
The 2022 law on EV development demands a mandatory 5% EV share in corporate and government fleets, including, among others, public transport vehicles from tricycles to jeepneys to buses. The consequent increase in the use of batteries in the Philippines further motivates stakeholders to complete the EV value chain in our country: from the mining and processing of our abundant green mineral ore reserves to battery manufacturing and EV production.
In this regard, the Philippines welcomes foreign investments that bring EV technologies. For example, EV battery manufacturing can use the country’s nickel, copper, and cobalt reserves. Among the interested investors in this area is a major processor of mineral ores from Switzerland. As climate change has compelled the global shift to green products such as EVs, our country is also looking to enter the global EV value chain.
Multinational corporations have also expressed their intent to start, expand, or re-start operations for the growing Philippine market. Among these investors are Unilever, with its plan to invest PHP 4.8 billion for consumer goods production for the domestic market; a sizeable industrial-estate developer in the United Arab Emirates (UAE), which plans to develop a 10,000-hectare industrial estate; and Toyota, which is committing to establishing an automotive line based on the Tamaraw, a former Asian utility vehicle model.
The third priority is the Technology, Media, and Telecommunication cluster, benefiting from the growing IT skills available in the Philippines. We welcome investments in the sub-sectors of IT-BPM services, telecommunications and digital technologies, data centers, and hyperscalers.
We have met with several IT-BPM operators in the country. They intend to expand their back-office operations in the Philippines with English-speaking Filipino talent with a neutral accent. They are increasing the number of seats and job openings in this sector and are moving up the value chain.
The fourth priority cluster is Health and Life Sciences. The pandemic has highlighted the need for local investments in pharmaceutical products, medical devices, and health management systems.
As you can see, all our four priority clusters—the Industrial, Manufacturing, and Transport (IMT) cluster; Technology, Media, and Telecommunication (TMT) cluster; Health and Life Science (HLS) cluster; and the Modern Basic Needs and Resilient Economy cluster—stand to benefit from a huge potential Philippine market and workforce.
Number 2: Our country’s strategic location makes it an ideal place to set up a regional hub for various businesses. The Philippines is within four hours of major cities in the region, and our air and sea trade routes address the logistical requirements, especially of exporters.
We are building on our strengths in the Industrial, Manufacturing, and Transport cluster. Apart from the automotive sector discussed earlier, we are also keen on investments in electronics, semiconductors, and aerospace.
Electronics and semiconductors have been our top export. We want to go up the value chain in this sector from the present assembly and testing to manufacturing. We plan to expand to wafer fabrication and integrated circuit design for a more sophisticated involvement in the digital world.
P&G has recognized the strategic location of the Philippines, as it recently launched its new PHP 684 million manufacturing line for Pampers baby diapers for export to Japan and South Korea.
Aerospace is another sector where the Philippines has a clear advantage. Our country hosts the world’s number one aircraft interiors company, Collins Aerospace. We also host the world’s leading aircraft maintenance, repair, and overhaul company, Lufthansa Technik. Luftek expanded its operation last year with the opening of its Hangar 1A. I learned that Luftek Philippines would provide the additional capacity
for the base maintenance services of the popular Airbus 380, the world’s largest passenger aircraft.
Establishing the Philippines as Asia’s aviation MRO (maintenance, repair, and overhaul) hub will surely improve the country’s logistical capability.
Number 3 reason why the Philippines is an attractive investment destination: The Philippine government continues to create an enabling environment for foreign investors, providing various fiscal and other incentives, including ease of doing business.
Our Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) offers foreign investors more attractive and rationalized incentives. We have also amended our Public Service Act, Foreign Investment Act, and Retail Trade Liberalization Act to ease restrictions on foreign ownership of certain businesses in the country.
In our drive to further expand the country’s market reach, we have adopted a more proactive and deliberate approach toward free trade agreements in our bilateral, regional, and multilateral engagements.
Recently, the Senate of the Philippines concurred on the ratification of the Regional Comprehensive Economic Partnership Agreement (RCEP). When the agreement takes effect in about three months, Philippine exporters gain a market of 15 countries representing nearly 30% of the world’s population, economy, and trade. A study by the International Trade Center estimates that with RCEP, the Philippines has the potential to expand its exports by another USD27.8 billion.
RCEP gains outweigh the losses. Among others, we need to take advantage of the enhanced trade facilitation provisions that make cross-border trade simpler and faster. For example, Philippine manufacturers of processed food and garments can use RCEP to expand to ASEAN, China, Japan, South Korea, Australia, and New Zealand due to zero or lower import tariffs.
To update you on other trade agreements, we have concluded our negotiations and are now in the final stages of our FTA with South Korea. We are also looking into entering a potential preferential trade agreement with India and launching negotiations for a comprehensive economic partnership agreement with the United Arab Emirates (UAE). Similarly, the Philippines has expressed interest in acceding to the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership. Moreover, we are an active partner in the US-led Indo-Pacific Economic Framework (IPEF).
We had several talks with the EU bloc about continuing our GSP+ status with them. We are also renewing talks with the United States for our GSP. We have also pushed for a bilateral Free Trade Agreement (FTA) with the US and the EU.
To further promote ease of doing business, President Ferdinand R. Marcos Jr. has issued Executive Order No. 18, which facilitates the establishment of green lanes for strategic and highly desirable projects or investments. This order covers national government agencies (NGAs), local government units (LGUs), government-owned or-controlled corporations (GOCCs), and other government agencies involved in the processing of necessary licenses and permits. The green lanes will fast-track applications for permits and other certifications. In addition, the Board of Investment is establishing a one-stop action center, which will serve as a single point of entry for high-priority investments.
Number 4: Following the President’s directives, we are building better and more infrastructure. Given our country’s archipelagic feature, our national development plan highlights digital and physical connectivity as crucial.
We connect our ecozones, trade centers, and manufacturing and logistics hubs. Such connectivity should serve the needs of businesses located in the Philippines. By connecting urban centers and rural areas, we also enable more balanced growth among regions. Building infrastructure enables us to address transport and logistics constraints,
energy supply shortages and costs, and connectivity issues that stifle economic activities.
For example, it is full speed ahead for the 147-kilometer commuter rail that will connect our technology industrial sites in CALABARZON south of Manila to Clark Airport north of Manila.
As the President said, public-private partnerships can potentially drive infrastructure expansion and innovation. Thus, these collaborations also pave the way for our aviation, rail, road, and maritime transport plans. We seek investments to level up our transport infrastructure to global standards.
PPPs complement our Official Development Assistance (ODA) public works and highways projects. These projects range from expressways and road networks to inter-island bridges to disaster preparedness and mitigation projects.
Our Department of Energy has recently allowed up to 100% foreign equity ownership in solar, wind, and tidal energy projects. Such liberalization has expedited the decisions of some foreign companies to invest in the Philippine renewable energy sector.
One of the PPP projects for renewable energy that has materialized is the one between Tokyo Gas Co. Ltd. and First Gen Corporation. The liquefied natural gas (LNG) terminal project they will establish in Batangas is expected to help boost the country’s energy requirement.
Regarding digital connection, Elon Musk’s Starlink internet service is now available in the Philippines. This service will boost connectivity in remote places of our archipelago.
Number 5: The Philippines is putting a premium on digital transformation, and we aim to engage investors in developing our digital economy.
Our Digital Cities Program aims to set up IT-business process management locators in 31 cities nationwide by 2025.
As part of our good governance objectives, we in government are also moving toward digitally transforming our work. The goals are more robust data for improved decision-making, greater efficiency in service delivery, and more transparency in government transactions.
Digital transformation is also vital in our strategy to upgrade, upskill, and upsize the backbone of the Philippine economy—the micro, small, and medium enterprises (MSMEs). With digital mindsets and technologies, MSMEs can reduce costs, reach bigger markets, and earn more.
Our government agencies are also working together to launch an e-commerce platform enabling businesses to put up virtual or online storefronts and get paid digitally.
Industrialization Strategy
Our economic growth in the past and for a long time has been mainly consumption-driven. Now, our goal is to achieve an industry-led economy. We aim for industrialization to bring long-term investments, generate stable, high-quality, and better-paying jobs, and achieve shared prosperity. For us to accomplish this mission, we have—as you have seen—established the pathways toward Philippine industrialization.
At this point, I would like to reiterate my invitation for you to trade and invest in any of our four priority clusters and at any point in their respective value chains. We seek investments in modern and dynamic industries driven by science, technology, and innovation (STI). The Philippines leverages Industry 4.0 technologies and our existing industrial strengths and competencies. We see the four clusters I have introduced briefly as sources of growth.
I end as I began. The Philippines is open for business. I hope these developments in our trade and industry, infrastructure, and good governance are promising enough for your companies and investments.
Together, let us make mutually beneficial investments happen in the Philippines.
Thank you and mabuhay!*
Date of release: 13 March 2023