Let me greet Her Excellency German Ambassador Anke Reiffenstuel, members of the diplomatic corps, officers and members of the German-Philippine Chamber of Commerce and Industry, distinguished guests, ladies, and gentlemen—good afternoon.

Thank you for inviting me to be the keynote speaker in this formal event.

This engagement is timely as three weeks ago, I had a brief but substantial bilateral meeting with German Minister for Economic Affairs and Climate Action Robert Habeck, at the sidelines of the APK event in Singapore. Our meeting was significant as there has not been a Ministerial meeting between the Philippines and Germany since 2016, as was also pointed out by the Ambassador. Next month, I am scheduled for a short business trip to Germany to meet with business chamber in Nürnberg and visit to Siemens Industry 4.0 factory in Amberg.

I would like to take this opportunity to share with you some of the key points I raised in my  bilateral meeting with Minister Habeck in Singapore. First, Trade and Industry Secretary, I was interested in the support, in behalf of the country of the EUR300 billion EU Global Gateway Fund. This available financing will allow EU companies, like the ones represented here, including Germany’s private sector to participate in the various ongoing infrastructure developments here in the Philippines. The new administration in the Philippines has revived the public-private partnership (PPP) modality for developing  infrastructure projects in various fields including water storage and management, renewables, waste management, logistics and transportation, and disaster mitigation.

Germany has the proven track record in the above-mentioned areas. PPPs offer a wide array of economic and social benefits. They improve access to public services, we all know this. They are also incubators for private sector innovation. The optimal use of private sector skills, specialization, and technology form part of the innovative knowledge bank that is transferred to the country’s public infrastructure development framework. This is what I keep on saying when I was in ADB—promoting public-private partnerships. Government spending is also significantly less under PPP arrangements. PPPs free up public sector financing for other key socio-economic areas, such as human capital development and employment generation as well as skills training—all while infrastructure development funding remains viable.

Second point I took up with Minister Habeck is that I opened a potential engagement between the two countries in the sunrise industry of electric vehicles (EVs). The German government and the German private sector can tap the Philippines’ significant green metal reserves of nickel and copper. Doing so would ensure the supply of these critical resources in support of Germany’s full-electrification objectives for your automobile industry by 2030. In exchange, the Philippines will benefit from Germany’s significant experience and expertise in nickel and copper downstream processing.

The third point I took up is where I drew the attention of the German government and private sector to IT-BPO (IT-enabled business process outsourcing) resources. In the Philippines, there have been a number of BPOs that assist Germany to achieve its digitization objectives.

As you may know, the Philippines is a key participant in the global IT-BPO industry and has been servicing the IT-BPO requirements of major Fortune 500 companies in the U.S. and around the world. A number of German industry leaders are currently operating their own shared services centers (SSCs) in the Philippines including Bosch, Deutsche Bank, Daimler, Fresenius, Lufthansa, Boehringer, and Merck. These SSCs are manned by Filipino professionals. I will elaborate on the investment opportunities of this sector later.

Finally, in Singapore, we renewed our offer to cooperate with the German business in holding the Asia-Pacific Conference of German Business (or APK) in the Philippines by 2026. I hope you will consider this seriously, both sides.

From the recent past to the near future, as I mentioned earlier, I intend to visit Germany and Siemens, and meet with businesses over there.

Siemens—if some of you may not yet know—is our partner in the establishment of our own Industry 4.0 Pilot Factory. Launched just last September with the Center for Artificial Intelligence (AI) Research, this pilot factory forms part of the Philippines’ goal to become an AI Center of Excellence in Southeast Asia.

 The pilot factory is intended to serve as a hub of cutting-edge solutions. It is a space where small businesses, researchers, and universities can learn robotics, automation, and smart factory operation. It can also be a co-working space and prototyping sandbox. Siemens has established a similar facility in Singapore, which I had the opportunity to visit last September when we had the Presidential Visit to that country.

 Today’s event also comes at a period when Germany has been an important trade partner of the Philippines for many years. In 2021, Germany ranked as 12th major trading partner, 7th export market, and 13th import source.

Philippine exports to Germany grew by 23.6% from USD2.4 billion in 2020 to USD2.9 billion in 2021. Still small in the context of the bigger picture in ASEAN. This uptick is mainly due to the growth in the exportation of digital monolithic integrated circuits, semiconductor devices, storage units, and video projectors from the Philippines to Germany.

Philippine imports from Germany also expanded, by 4.1% from USD2 billion in 2020 to over USD2 billion in 2021. This can be attributed principally to the growth in the importation of materials, accessories and supplies for the manufacture of dice; medications; vaccines; and materials for the manufacture of semiconductor devices.

These trade data show the trajectory of our two countries’ economic relationship. I take this opportunity to underscore the Philippine government’s intention to offer our country as a manufacturing investment destination and an IT-BPO partner to German companies, especially those already doing business in the Philippines. We seek the potential expansion of German firms already in the Philippines.

Why invest in the Philippines? As I repeatedly impart to potential investors, our government has made significant strides in creating an enabling environment for foreign businesses in support of our country’s recovery and growth. Recent reforms have made the Philippines more attractive to foreign investors. Amendments to the Foreign Investments Act, the Public Service Act, and the Retail Trade Liberalization Act are among the important policy changes that have liberalized foreign investment ownership restrictions in the Philippines. Now it’s possible to own up to 100% of companies in these areas. Foreign Direct Investment will increase job creation, enhance competition and enable innovation, as well as lower prices and improve the quality of goods and services available to Filipinos. That’s why we continue to invite foreign investments in the Philippines.

Another important policy reform for investors is the Corporate Recovery and Tax Incentives for Enterprises Act, or CREATE. For those of you already operating in the Philippines, you’re familiar with this but I’d like to highlight that the CREATE act reduces corporate income tax and provides tier-specific incentives to investors. Under the CREATE act, the Philippine President, this is something new, is empowered to provide tailor-designed incentives to highly desirable foreign investments.

More recently, our Department of Energy has issued an amendment to the Renewable Energy Act implementing rules and regulations. This amendment now allows up to 100 % foreign equity ownership in the solar, wind, and tidal energy projects.

All these would enable the Philippines to catch up with the developments in the region, mainly in the investment area, including the Regional Comprehensive Economic Partnership (RCEP). I would like to inform the group that which our President has already endorsed RCEP to the Senate and we expect the Senate to give its concurrence ratification soon.

At this point, let me share with you a general overview of our government’s key economic strategies post-pandemic that may serve as your guide in investing in the Philippines. We are formally adopting the principle that science, technology, and innovation (STI) is the integrating component in transforming the Philippines into an advanced, inclusive, resilient, and sustainable economy. The industrialization strategy focuses on the reconfiguration of three industry clusters plus another one that’s focused just on the country. Let me discuss these one by one.

The first cluster—Industrial, Manufacturing, and Transport or IMT—includes aerospace; electric vehicles; advanced electronics chips and products; semiconductors; and advanced manufacturing technologies, among others.

In terms of aerospace, the Philippines already hosts the number one aircraft interiors company in the world—Collins Aerospace; and the world’s leading aircraft maintenance, repair, and overhaul, a German Company, Lufthansa Technik.

We expect more developments in this area. For instance, just two weeks ago, I attended Lufthansa’s expanded operation in the recent opening of Hangar 1A at the Macroasia Special Economic Zone in Villamor Airbase.

In the automotive global value chain, we expect a shift—as compelled by climate change—from combustion engines to electric vehicles (EVs). As automotive companies shift to all-EV manufacturing, DTI is keen to help promote EVs in the Philippines.

We have the Electric Vehicle Industry Development Act (EVIDA). EVIDA provides for the Electric Vehicle Incentive Strategy, which can offer targeted incentives to EV model and parts manufacturers in the Philippines.

I’d like to also inform the body that just recently, as recent as last week, we have reached a decision to allow the duty-free importation of EVs. The logic of this is so that there will be critical mass of EVs in the country that will encourage investors in the charging stations. We have not included the hybrids because as you know, hybrid vehicles are now among the luxury cars. They already have some incentives under the CREATE law.  

DTI, with the assistance of UNIDO, will also implement a USD3.8 million project, deploying EV and charging infrastructure to key cities from 2022 to 2027. The project will further provide technical assistance to national and local governments as they enhance their EV environment.

The semiconductor industry—which remains one of the largest export industries in the Philippines—has produced semiconductor devices manufactured from materials on consignment basis. The industry can gain more from increasing skills in R&D, which can improve business for firms in Outsourced Semiconductor Assembly and Test.

One more point under IMT. Mineral processing is crucial given our resources of green metals such as nickel, copper, and cobalt that can be used for downstream industries such as EV battery manufacturing, wiring harness production, hyperscaler data centers, and renewable energy projects. These could serve as key inputs for production and manufacture of technology products. The Philippines can be a vital partner for these critical minerals not only as exporter of raw ores, which is what is happening now, but as processor and producer of semi-finished and finished products. We have a model to copy, Indonesia has done it and is reaping the benefits from the further processing of nickel ores. We have Philippine companies which are producers of nickel ores now in discussion with foreign partners to start the processing of nickel ores in the Philippines.

The second cluster—Technology, Media, and Telecommunications or TMT—includes IT-BPM; hyperscale data centers; the digital economy; and products using AI, robotics, 5G, and Internet of Things.

In the BPO sector, the next decade will witness the BPO segment as a cross-cutting contributor to the competitiveness and efficiency of the global value chains it supports. From cost saving, it will shift to value addition. With 82% of the BPOs and shared services centers in the Philippines serving global markets, this becomes a positive area for leverage. We hope that by taking advantage of these developments, we can be more active in the TMT global value chain.

With the pandemic, interest in data centers has also increased around the world. Our country’s strong BPO track record, future of work programs, and hyperscale roadmap are drawing the attention of hyperscalers that seek to expand geographically. We are prioritizing data centers and hyperscalers in our investment promotion campaign, “Make It Happen in the Philippines.” And we consider the sector as the next engine of growth for the country.

Last July, for example, we also launched the PLDT Jupiter Cable System. This subsea cable system will serve as an added data superhighway for the digital industry, and further attract hyperscalers into the country. This subsea cable connects the Philippines to Japan and the US. Also, Starlink is already here in the Philippines and is going to launch its low level orbit gateway for Wi-Fi and internet facilities.

The third cluster—Health and Life Science or HLS—plays a strategic role with the COVID-19 pandemic at the root of the current global economic distress and as the turning point for recovery.

The cluster includes pharmaceuticals; biotechnology; medical devices; and digital health products and services.

Our goal is to make the Philippines self-sufficient in pharmaceuticals, as well as relevant and related areas such as healthcare services and therapeutic systems.

Over the next decade, multinational companies will aim to manufacture medicines faster and cheaper. The sector will also witness smaller, more agile pharmaceutical companies taking a more critical role in bringing medicines, including generics, to the market. As pharmaceuticals, medical devices, and healthcare services become more integrated, this facilitates the emergence of an HLS cluster in the Philippines.

We are in discussion with a number of companies proposing to set-up vaccines and other pharmaceuticals manufacturing in the Philippines.

Finally, the fourth cluster: modern basic needs of a resilient economy—this is more focused on the domestic market because as you know, the domestic market in the Philippines is very large and has a growing middle class.This cluster refers to modern basic needs such as food, shelter, infrastructure, education, along with activities that foster economic resilience. Given the need to pursue food security and modernize our agricultural and fishing sector along with other goals such as quality education, clean water and sanitation, and affordable and clean energy; these activities offer opportunities for new investments to support the country’s economic recovery and long-term sustainable and inclusive growth. There is market here to be explored, in fact, there is a competition in Philippine market for imports as well as competition in the export markets. I would like to invite foreign partners to improve the quality of products manufactured in the Philippines so we can compete because our local market is flooded with consumer goods and in the global market.

I’d like to point out again the two important innovation facilities that DTI is establishing soon. I would like to talk about the Industry 4.0 Pilot Factory and I refer to the Center for Artificial Intelligence Research (CAIR) is a two innovation facilities that we are spearheading. This is geared mainly to the MSMEs or the smaller businesses but it is also available to large businesses whom we are bringing in as partners.

Aside from providing a learning and co-working space, these facilities can serve as a way to develop new and better designed products and services.

In the industrial strategy I just have discussed, we envision a prosperous, inclusive, and sustainable economy for the Philippines. We are building dynamic industry ecosystems as foundation for generating quality jobs, creating new products and services, improving environmental sustainability, and ensuring shared prosperity for all.

In closing, I would like to renew our offer to host the 2026 APK in the Philippines. By then, I hope to see more German trade and investments in the Philippines, which we can further strengthen through the APK platform—not just for the country but for the ASEAN region as well.

Thank you and again, good day to all.

Date of release: 29 November 2022