Why the Philippines?

Philippines: overview

The Republic of the Philippines derived its moniker “Pearls of the Orient” from its archipelagic setting composing of 7,107 islands dispersed across the Pacific Ocean and the West Philippine Sea. 

The Philippine is certainly one of the easiest Asian countries to visit owing to its cultural closeness to the Occident.

  • A former Spanish colony for more than 300 years, the country has a Catholic tradition with enduring traces of Latin Culture
  • A former American colony for 50 years, one can get around speaking English.

The Chinese influence is very strong in several sectors of activity. There is a Muslim minority particularly in the region of Mindanao. A flexible, well-trained labor force at a stable cost is in abundance.

Having more than 100 million inhabitants in the country and coupled with its rich history, the Philippines today is home to vast cultural and ethnic diversity. Additionally, with a significant number of Filipino population living abroad as Overseas Filipino Workers (OFWs), the country is considered as one of the world's largest diaspora, representing 12 million Filipinos and generating a remittance inflow of USD 25.76 billion in 2015.

The Philippines’ significant economic development in the previous years, averaging a Gross Domestic Product (GDP) growth rate of 6.2% (2010 – 2014) and reaching 6.9% first quarter of 2016, was largely driven by the country’s domestic consumption. The Philippines enters a demographic sweet spot from rising proportion of young consumption-driven workforce, with a median age being 23 years old.

A few important facts

Key industries

Business Process Outsourcing (BPO)

Since 2011, with the country’s low operating costs, the Philippines dominated the BPO sector worldwide, making India rank in the second position. Additionally, the country’s skilled workforce coupled with the population’s high English literacy rate, even further assisted in the development of the BPO in the Philippines. Moreover, the Philippine government prioritizes the sector’s progress through the creation of numerous economic zones as well as the implementation of tax concessions. In 2015, the total BPO sector turnover had reached USD 22 billion, representing roughly 6% of the Philippine GDP with expectations that the industry will continue to grow and could contribute up to 9% before the end of 2016.

 

Agriculture

The agricultural sector shows a continued growth of roughly 2% in 2015. Philippines is an agricultural country with a land area of 30 million hectares, 9.671 million hectare of which considered as agricultural land. Providing job opportunities for 25,8% of the country’s workforce, the agriculture industry is the second largest employer of the Philippines in 2015. The agriculture industry is today one of the main focus of the current administration. To boost the sector, the government increased its budget and efforts in areas such as modern farming practices, mechanization, irrigation and micro-financing, with the long term objective of reducing poverty, achieving food self sufficiency and improving sustainability and competitiveness in the industry.

 

Transport and Infrastructure

Government spending on transport and infrastructure, representing 5% of the GDP, has grown steadily and significantly over the recent years to overcome the challenges the industry is currently facing. Local industrial firms are already seeing the increased demand for the material handling equipment and have stated the rise can be accounted for the developing industrial sector and increasing transport and infrastructure projects of the government. Contractors are seeing high potential in the country’s market due to the increased efforts of the government to reinvigorate the country’s infrastructure industry. A total of 12 Public-Private Partnerships (PPP) projects were awarded in 2015, estimated at USD 2.4 billion. With the current Administration’s transport and infrastructure developmental plans for the rapid, long-term, and inclusive growth of the country, combined with the growing number of both national and PPP infrastructure projects, the country is evidently bridging the gap created by under spending in the past few years.

 

Energy

The electricity rate in the Philippines is relatively high, ranking in the 8th position worldwide. Due to some unfavourable climactic conditions in the country, with several destructive typhoons that enter annually, the electricity supply and distribution can be unstable. The rise of environmental awareness led to the passage of Renewable Energy Act 2008, a government commitment to clean energy. In terms of renewable energy, the Philippines aims for self-efficiency. The country is the second producer of geothermal energy, with 1906.19 MW of installed capacity as of 2015 and still a vast potential of untapped resources. Geothermal is followed by wind (427 MW), biomass (241.27 MW), hydropower (139.49 MW) and solar (144.4 MW). To boost the development of renewable energy in the country, the government is providing numerous financial incentives to renewable energy project developers.

 

Consumer retail

Concurrent with the rise of consumer confidence and increased disposable income the total household consumption expenditure, in 2015 has amounted to PHP 5.3 trillion (USD 117.7 billion), with the growth rate of 6% the same year. As a developing country, the Philippines retail sector’s main growth driver is derived from food consumption. 43% of the total household consumption expenditure in 2015 is from the Food, Beverages and Tobacco industry. Household equipment and routine household maintenance consumption growth percentage was at 10.5% in 2015. Three major local actors dominate the high and medium-scale retail segments: Ayala, SM Group and Robinson’s. These retailers are diversified in nature, for example SM Group does not only venture into retail but is also the leading real estate developer in the country. Robinson’s Retail, the second largest mall operator in the country is owned by JG Summit Holdings. JG Summit Holdings have ventures in food manufacturing, petrochemical, and real estate.

 

Tourism

For a country with a rich biodiversity composing of 7,107 islands and home to several of the most famous beaches world-wide, tourism has become an integral part of the Philippines’ growing economy. In 2012, the Philippine government has rebranded the country’s tag line as “It’s More Fun in the Philippines” and declared the year 2015 as the “Visit the Philippines Year”. Travel and tourism accounted for some 4,2% of the country’s 2015 GDP and is still projected to rise by 5% annually in the following ten years. Tourism in the country is mostly driven by local tourists. The Philippines is as well emerging at an international level, the country welcomed more than 5 million foreign tourists in 2015, with an increase of 5% per year over the past five years. The potential and growth of the tourism industry will continue to stimulate opportunities for local and international investments. Metro Manila alone is expected to add over 7000 hotel rooms in the next 4 years.

 

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