Recent years have been characterized by significant strides and progress in the Philippines’ economic and business environment. The government has focused its efforts in speeding up infrastructure developments and implementation, creating a sustainable and lucrative investment climate and making the general business environment more attractive to international players.
The Heritage organization, in partnership with the Wall Street Journal, publishes an Index of Freedom, which rates the level of economic freedom to trade and partake in business activities, governmental transparency and reliability. It comments that the Philippines has improved its score by ten points in the most recent 2015 ranking. The Philippines has commenced an upward trend of greater economic freedom in the past 5 years, and is gradually entering the “moderately free” category.
Structural weakness and overall economic competitiveness are being worked on diligently and a greater focus has been placed on regulatory efficiency, regional competition and liberalization of the banking sector.
The Philippines has demonstrated a strong sense of sustainability and economic vigor, after overcoming the devastation of the typhoon two years ago. Despite such a set-back, the average economic growth rate has been over 5 percent in the past 5 years.
The Philippine economy has been transitioning from being based upon agriculture to a manufacturing and service focused industrializing nation. It is forecasted that it will become the largest economy in Southeast Asia, the 5th largest economy in all of Asia, and the 16th largest economy of the world in the coming decades.
In 2014, Japan was the largest export market for the Philippines, followed by the USA who purchased 14 percent of all Philippine exports. The European Union represents 11 percent of the Philippine export market and has favourably granted duty-free entry in the past year to an additional array of Philippine goods.
This duty free agreement grants inclusion into the European Union’s Generalized System of Preferences Plus (GSP+). It allows the Philippines to export over 6,000 different products duty-free to the EU, including fish, textiles, processed fruit, coconut oil, and footwear. This not only encourages exports to Europe, but also attracts attention and investment to the Philippines and their export market.
In 2012, the restriction on foreign ownership was partially lifted. It remains unpermitted to own property as a foreigner, to participate in certain mass media activities, and to operate and manage public utilities, amongst other equity activities. Foreign companies can own up to a maximum of 40 percent equity of public utilities and the operation there of.
Stable and resilient private consumption, along with increased investments and exports, are facilitating a recovery of government expenditure and pushing a strong economic growth.
The remittances from abroad have increased gradually over the past years, making the Philippines the fourth largest recipients of remittances after Mexico, China and India. These remittances on average are greater than the Philippines foreign direct investments and offset the country’s trade deficits.
These periodic remittances are crucial to the sustainability of private households and the economy as a whole, since they enable recipient households to meet basic needs including education, microenterprises, housing and health expenses. Remittances will continue to play a key role in the economic outlook of the Philippines.
Inflation has ceased after occasional quarterly peaks, and is expected to be maintained at a moderate rate.
The priority, and primary challenge, is to speed-up infrastructure developments and implementation, and to continue creating an interesting, sustainable and lucrative investment climate for foreign and local parties. This should provide more and higher skilled jobs to reduce poverty levels.
In the past, the Philippines has been suspect and guilty of cases of corruption; yet with the new government and progressive efforts to be more transparent and to be a more significant player on the international market, the Philippines have introduced stricter preventative and vigilant measures and increased its rating in “Transparency International” by ten points from 2010 to 2014.
Nonetheless, the Index of Freedom comments, that corruption continues to be a concern plaguing the Philippines’ economic developments and internal infrastructural progress. It is said that the inefficient judiciary power is susceptible to political influences and interference, and that it is unable to provide sufficient protection for property rights or transparency in law enforcement.
The Philippines greatest areas of opportunity include:
- It’s service industry (specialized in IT business processes) and outsourcing
- Being the fastest growing economy in Asia
- That it seeks public-private partnerships to boost infrastructure and skill-building
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