Part 1 Growing Too Slow

Joint Foreign Chambers
Advocacy Paper
ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE
The Philippine Economic Landscape in 2010: Faster Growth is Essential
Decades Lost to Slow Growth
As it begins the second decade of the 21st Century, the Philippines faces a major challenge to
move its economy to a higher level of growth and job creation than it has experienced during
the past often turbulent decades.
Figure 1 presents Philippine economic growth rates from 1981 to 2009 and clearly shows the
boom-and-bust cycles triggered by the brutal assassination of former Senator Aquino in 1983,
the military coup attempt of December 1989, the power blackouts of 1991-1992, and the Asian
financial crisis in 1997. Each crisis forced GDP growth into negative territory and significantly
reduced the PCI for a fast-growing population.
However, the two shocks to the economy of the more recent decade, EDSA 2 in early 2001 – a
setback caused by internal political instability – and the 2008 global crisis – caused by external
JOINT FOREIGN
financial instability –CHAMBERS ADVOCACY
were cushioned by rising inflows of remittances PAPER
from the fast growing
diaspora ofARANGKADA
Filipinos seekingPHILIPPINES 2010: A
income opportunities BUSINESS
abroad. PERSPECTIVE
Remittances were 8.5% of GDP in
________________________________________________________________________
2001 and reached 10.8% of GDP in 2009. While GDP growth did not become negative, PCI growth
slowed after EDSA 2 in 2001 and also in 2008-2009 following the global financial crisis.

Figure
Figure 1: Philippinehistorical
1: Philippine historicalreal
real GNP
GNP and
andGDP
GDPgrowth
growthrates, 1981-2009
rates, 1981-2009
12% Global Financial
Fiscal
10% crisis
EDSA 1 BOP/Power Asian crisis EDSA 2 crisis
8%
crisis, coup
6%
4%
2%
0%
-2%
-4%
-6% GDP growth
-8% GNP growth
-10%
-12% Aquino Ramos Estrada Arroyo
1986
1989
1981
1982
1983
1984
1985
1987
1988
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sources: NSCB; Bernardo and Tang, 2008
President Gloria2:Macapagal
Figure Average Arroyo often
real GDP pointedrates,
growth out that GDP grew
ASEAN-6, every one of the 38
1961-2010
quarters since she became president in January 2001. In the 2nd quarter of 2007 the rate reached
8.3%,
12%5 its highest since 12.4% in the 4th quarter of 1988, a year before the December 1989 coup
Vietnam Indonesia Philippines Malaysia Singapore Thailand
attempt
10% scared off foreign investors and traders. For the 38 quarters through mid-2010, GDP growth
averaged
8% 4.6%.
6%
4%
5
There is a break in the National Income Accounts series. Data from Q1-2004 going forward are not comparable to data from
2%
Q4-2003 back due to methodological revisions. Some Philippine economists also deem that growth rates are “overestimated” by 1-2
0%
percentage points after the Asian Financial Crisis (particularly after 2000).
1961-1970 1971-1980 1981-1990 1991-2000 2001-2009
Sources: World Bank, IMF and respective national statistics offices; Note: No data for Vietnam before 1985
6 DECEMBER 2010
Figure 3: Real GDP growth rates, ASEAN-6, 1990-2009

Joint Foreign Chambers Advocacy Paper
She also often refers to her vision for the Philippines to attain first world economic status in a
generation. No one can disagree with this vision. The country certainly has the potential to grow at
much higher rates and is in a region with an increasing number of first world economies. But the
vision requires concrete detail within the framework of a master reform plan.
“Much work remains to be done, but I am determined to turn over to the new government a
new Philippines ready for the challenge of giving the nation First World status in 20 years.”
President Gloria Macapagal Arroyo, February 5, 2010 Lipa, Batangas
Figure
Figure 2: Average
2: Average realGDP
real GDPgrowth
growth rates,
rates, ASEAN-6,
ASEAN-6,1961-2009
1961-2009
12%
Vietnam Indonesia Philippines Malaysia Singapore Thailand
10%
8%
6%
4%
2%
0%
1961-1970 1971-1980 1981-1990 1991-2000 2001-2009
Sources: World Bank, IMF and ASEAN Secretariat statistics offices; Note: No data for Vietnam before 1985
Among the ASEAN-6 economies over the last five decades the Philippines has been the poorest
performing economy for both GDP growth and PCI growth. Figure 2 clearly shows Singapore’s
fast growth averaging around 8% for four decades, until reaching its current mature economy status
during the present decade when average growth has slowed to some 4%.6 The figure also shows
that Malaysia and Thailand were the next two fastest growing ASEAN-6 economies until Vietnam
commenced the high growth track it has maintained for the last two decades.
While the Philippines with average growth of 5-6% was respectably placed among these fast
growers in the 60s and 70s, the political instability of the 80s pushed its average annual growth
below 2%, lower than its population growth rate of 2.64% (1980-1990). In the 90s economic
growth of 3% slightly exceeded population growth of 2.34% (1991-2000) (see Figure 9 average
annual population growth, 1961-2008).
Only in the current decade does Philippine economic growth at 4.4% again - after two decades
- approximate that of the other ASEAN-6 (except Vietnam) as remittances grow and the population
growth rate declines to 1.90% (2001-2009). Figure 8 shows two decades of almost flat PCI growth
in the Philippines, while the other ASEAN-6 economies steadily increased the average PCI of their
citizens.
6
Highly dependent on exports, the Singapore economy rebounded in Q1 2010 with an all-time record increase of 32%.
DECEMBER 2010 7
6%
4%
2%
0%
1961-1970 1971-1980 1981-1990 1991-2000 Advocacy
2001-2009 Paper
Sources: World Bank,ARANGKADA
IMF and respectivePHILIPPINES
national statistics 2010: A BUSINESS
offices; Note: PERSPECTIVE
No data for Vietnam before 1985
Figure 3:3:
Figure Real
RealGDP
GDPgrowth
growth rates, ASEAN-6,1990-2009
rates, ASEAN-6, 1990-2009
15%
10%
5%
Vietnam
Indonesia
0%
Philippines
-5% Malaysia
Singapore
-10% Thailand
-15%
Sources: IMF
Philippine Growth Has Not Been Inclusive

__________________________________________________________________ 4
While growth has improved from the dismal levels of the 80s and 90s, the average GDP
DECEMBER 2010
growth of the last decade will not be enough to address some major challenges the Philippines
faces. Although the highest of the last three decades, growth has not been enough to achieve any
significant reduction in the percent of the population living in poverty. Growth in the Philippines
has not been inclusive. By contrast, Malaysia and Thailand, with comparable GDP growth rates
JOINT
in FOREIGN
the decade CHAMBERS
but lower ADVOCACY
population growth rates, have nearly eliminated PAPER
their lowest cohort of
poverty. Indonesia and Vietnam have reduced their poverty incidence by roughly 50% from 1990
________________________________________________________________________
to 2006 (see Figures 4 and 5).
Figure
Figure4:4:Poverty
Povertyincidence, ASEAN-5,1990-2006
incidence, ASEAN-5, 1990-2006
70% Philippines
60% Vietnam
Indonesia
50%
Malaysia
40%
Thailand
30%
20%
10%
0%
1990-1995 1996-2000 2001-2003 2004-2006
Sources: PovcalNet (World Bank); Balisacan, Arsenio "Pathways out of Poverty." 2008; UNICEF for the urban-rural
population distribution in Indonesia; Note: Indonesia's national poverty estimates are derived using the country's rural
and urban poverty estimates of the World Bank.
Figure 5: Poverty trend in the Philippines, 1985-2006

30 No. of poor, million, lhs 50%
8 Poor, as % of total population, rhs 45% DECEMBER 2010
25
40%
35%
20
30%
15 25%
0%
1990-1995 1996-2000 2001-2003 2004-2006
Sources: PovcalNet (World Bank); Balisacan, Arsenio "Pathways out of Poverty." 2008; UNICEF for the urban-rural
JOINT FOREIGN CHAMBERS ADVOCACY PAPER
population distribution in Indonesia; Note: Indonesia's national poverty estimates are derived using the country's rural
ARANGKADA
PHILIPPINES 2010: A BUSINESS PERSPECTIVE Advocacy Paper
________________________________________________________________________
Figure 4: Poverty incidence, ASEAN-5, 1990-2006

Figure5:5:Poverty
Figure Poverty trend
trend in
in the
thePhilippines,
Philippines,1985-2006
1985-2006
70% Philippines
60% 30 No. of poor, million, lhs Vietnam
50%
Poor, as % of total population, rhs Indonesia
45%
50% 25
40%
Malaysia
40% 20 35%
Thailand
30%
30%
15 25%
20% 23.6 20%
10
22.2 21.7 21.6 21.5 20.6
19.2 18.2 15%
10%
10%
5
0% 5%
0 1990-1995 1996-2000 2001-2003 2004-2006 0%
1985 (World1988
Sources: PovcalNet 1991
Bank); Balisacan, 1994"Pathways
Arsenio 1997out of Poverty."
2000 2003
2008; 2006
UNICEF for the urban-rural
population distribution
Sources: in Indonesia;
Balisacan, Note:various
2008; FIES, Indonesia's
yearsnational poverty estimates are derived using the country's rural
“My biggest frustration as presidential adviser is that 34 quarters of uninterrupted expansion

in the past 9 yearsFigure 6:reduce
did little to Sharepovertyin ASEAN-6+4
and the numberGDP, 1990-2009
of poor people,” Albay Gov. Joey
Salceda said... While the Arroyo administration continued to crank out glowing economic
6% Figure 5: Poverty trend in the Philippines, 1985-2006
growth data, “these rosy figures cannot hide the fact that there are more poor people now
than when 5% the President started
Indonesiaher term.” He Thailand
cited data from the NSCB which showed
Malaysia Singapore
that the number of poor
30 No. of Filipinos—5-member
poor, million, lhs families living on a little more than50%P1,200 a
Poor, as % Philippines
of total population, rhs Vietnam 45%
month—rose
25 4% to 27.6 million in 2006 from 25.5 million in 2001. In addition, the incidence of
40%
hunger nearly doubled from 11.4% in 2000 to 20.3% last year. “Given our average35% economic
20 3%
growth in the last four decades, it would take 37 years for these poor to get out of poverty.” 30%
15 25%
2%
23.6 20%
Albay 10
22.2
Governor Joey Salceda, PDI,
21.7March 21.6
8, 2010 21.5 20.6
19.2 18.2 15%
1%
10%
5
5%
0%
In the fast
0 growing Asian region, the Philippine economy is slowly becoming 0% smaller than
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
the other ASEAN-5 in percentage share of GDP (see Figure 6) and in PCI (see Figure 7). Based
1985 1988 1991 1994 1997 2000 2003 2006
Sources: Balisacan, 2008; FIES, various years
on current trends, Vietnam’s PCI may pass the Philippine in 2014. Indonesia’s PCI (measured in
Source: IMF; Note: +4 includes China, India, Japan and S.Korea
dollars) passed the Philippines in 2009.
Figure 6:6:Share
Figure Sharein
inASEAN-6+4 GDP,1990-2009
ASEAN-6+4 GDP, 1990-2009
__________________________________________________________________ 5
DECEMBER 2010
6%
Indonesia Thailand
5%
Malaysia Singapore
Philippines Vietnam
4%
3%
2%
1%
0%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: IMF; Note: +4 includes China, India, Japan and S.Korea
__________________________________________________________________ 5
DECEMBER
DECEMBER 2010 2010 9
Figure 7: Annual GDP per capita, US$ PPP, ASEAN-6, 1990-2015P

Figure 7: Annual GDP per capita, US$ PPP, ASEAN-6, 1990-2015P
80,000 20,000
Singapore, lhs
Malaysia, rhs 18,000
70,000
Thailand, rhs 16,000
60,000 Indonesia, rhs
JOINT FOREIGN CHAMBERS
50,000
ADVOCACY
14,000
Philippines, rhsPAPER
Vietnam, rhs
12,000
40,000 10,000
________________________________________________________________________
8,000
Figure30,000
7: Annual GDP per capita, US$ PPP, ASEAN-6, 1990-2014P
6,000
20,000
4,000
70,000 Singapore, lhs 20,000
10,000
Malaysia, rhs 2,000
18,000
60,000 0 Thailand, rhs 0
Indonesia, rhs 16,000
2012P
2010P
2011P
2013P
2014P
2015P
2001
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2002
2003
2004
2005
2006
2007
2008
2009
50,000 Philippines, rhs 14,000
Vietnam, rhs
12,000
40,000 Source: IMF; Note: Data for 2010 onwards are projections of IMF; As of Oct 2010
10,000
30,000
Figure 8 demonstrates how PCI growth in the Philippines lagged far behind the ASEAN-6
8,000
Figure 9: Average annual population growth, ASEAN-6, 1961-2009
economies during
20,000 1981-2000 period when per capita growth was much higher 6,000 in the other
economies. High 3.5% population growth and political instability dragged down PCI 4,000growth in the
10,000
80s and 90s. In the current decade PCI growth has increased in the Philippines2,000
3.0%
to a level closer
to the other five 0economies, except Vietnam. During this decade, inward remittance 0 flows from
2.5%
an increasing number of Filipinos abroad rose to 10% of GDP and provided much of the 4.4%
average annual GDP 2.0%
growth over the period. At the same time, the population growth rate eased
from an average of
Source: 2.21%
IMF;
1.5% in 1991-2000
Note: Data toare
for 2009 onwards 1.90% in of2001-2008,
projections IMF according to World Bank data
(see Figure 9). 1.0%
Figure 8: Real
Figure GDP
0.5%
8: Real GDPper
percapita
capitagrowth, averageby
growth, average bydecade,
decade, ASEAN-6,
ASEAN-6, 1981-2008
1981-2009
0.0%
7% 1961-70 1971-80 1981-90 1991-00 2001-09
6% Singapore Philippines Malaysia Vietnam Indonesia Thailand

5%
Source: World Bank
4%
3% Figure 10: Share in world GDP, 1990-2009

2% 50%
45%
1%
United States
40%
0% Euro area
35% ASEAN-6 + 4
-1%
30%
-2% 25%
1981-1990 1991-2000 2001-2009
20%
Vietnam
15% Thailand Indonesia Malaysia Singapore Philippines
10%
Source: IMF; 2009 data are estimated figures
5%
0%
Figure 9: Average annual population growth, ASEAN-6, 1961-2008

Source: World Bank
3.5%
3.0%
10 DECEMBER 2010
2.5%
2.0%
1.5%
1.0%
0.5%
6,000
20,000
4,000
10,000
2,000
0 0
2012P
2010P
2011P
2013P
2014P
2015P
2001
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2002
2003
2004
2005
2006
2007
2008
2009
Source: IMF; Note: Data for 2010 onwards are projections of IMF; As of Oct 2010
Figure
Figure9:9:Average annual
Average annual population
population growth,growth,
ASEAN-6,ASEAN-6,
1961-2009 1961-2009
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1961-70 1971-80 1981-90 1991-00 2001-09
Singapore Philippines Malaysia Vietnam Indonesia Thailand
Source: World Bank
Figure 9 shows Figure 10: Share ingrowth

population world GDP,
rates1990-2009
of the ASEAN-6 over nearly a half century. Singapore
is well-known for 50%
growing through immigration and Malaysia considers its population too small
and encourages larger
45% families. The other four countries have all experienced population growth
United States
rate declines over 40%
these five decades,
Euro area
with the Philippines still at a high rate near 2% per year,
Vietnam and Indonesia
35% below 1.5% ASEAN-6 + 4Thailand close to 1%, the only ASEAN-6 economy near
and
the stable population
30% replacement rate.
25%
20%
“The world has been passing the Philippines by, literally. Back in 1960, the country had the
15%
second-highest per capita income in Asia, lagging behind only Japan. But by the following
decade, South10%
Korea and Taiwan had surpassed it, and by the 1980s, Malaysia and Thailand
had, too. China5%overtook it in the late 1990s. And now – an event that many Philippine elite
thought they would
0%
never live to see – Indonesia has sailed past the Philippines.”
Ruchir Sharma, Newsweek, January 22, 2010

Source: World Bank
Living in the High Growth Neighborhood
The Philippines is located in the world’s fastest growing region. Figure 10 shows that the
ASEAN-6 plus 4 (China, India, Japan, and Korea) in 2009 had about the same share 23.4% of
world GDP as the United States (24.5%) and the EU (21.4%).
DECEMBER 2010 11
1.0%
0.5%
0.0%
Joint Foreign Chambers 1961-70 1971-80 1981-90 1991-00 2001-09 Advocacy Paper
ARANGKADA
Singapore
PHILIPPINES
Philippines
2010: A Vietnam
Malaysia
BUSINESSIndonesia
PERSPECTIVE
Thailand
Source: World Bank
Figure
Figure 10: Share 10: Share
in world in world
GDP, 1990-2009 GDP, 1990-2009
50%
45%
United States
40%
Euro area
35% ASEAN-6 + 4
30%
25%
20%
15%
10%
5%
0%
Source: World Bank
In its April 2010 report Emerging Stronger from the Crisis, the World Bank emphasized the
significance of China in keeping the region stable amid rough global economic conditions.7 The
report noted that “largely thanks to China, the region’s output, exports and employment have mostly
returned to the levels before the crisis.” Accordingly, latest projections of the Bank show that, real
GDP growth in developing East Asia is poised to rise to 8.9 percent in 2010 after slowing from 8.4
percent in 2008 to 7.3 percent in 2009 (see Table 1).
Similarly, in October the IMF projected real GDP growth for Developing Asia to be 9.4% and
8.4% in 2010 and 2011, respectively.8 Better than expected trade recovery and wavering real sector
risks have likewise prompted the multilaterals to revise short-term growth projections in the region
upwards.
Table 1: Growth forecasts, East Asia, 2010-2011
World Bank 2008 2009 2010f 2011f

Countries Nov-09 Apr-10 Jun-10 Oct-10 Apr-10 Jun-10 Oct-10
East Asia 6.3 4.7 6.4 7.6 ... 8.4 7.0 ... 6.8
Developing East Asia 8.4 7.3 7.8 8.7 ... 8.9 8.0 ... 7.8
Developing East Asia ex China 4.6 1.2 4.5 5.5 ... 6.7 5.2 ... 5.1
China 9.6 9.1 8.7 9.5 9.5 9.5 8.7 8.5 8.5
Indonesia 6.0 4.5 5.4 5.6 5.9 6.0 6.2 6.2 6.2
Malaysia 4.7 -1.7 4.1 5.7 5.7 7.4 5.3 5.3 4.8
Philippines 3.7 1.1 3.1 3.5 4.4 6.2 3.8 4.0 5.0
Thailand 2.5 -2.2 3.5 6.2 6.2 7.5 4.0 4.0 3.2
Vietnam 6.2 5.3 6.5 6.5 6.5 6.5 6.5 6.5 7.0
7
“China’s massive stimulus package was a major factor in the country’s and region’s economic resilience. The program was
centered in government infrastructure spending, combined with increases in transfers, consumer subsidies and tax cuts. The surge in
government-led investment boosted overall GDP by 5.9 points in 2009, though most of the spending was financed through quasi-fiscal
measures such as lending by state-owned banks,” (World Bank. Global Economic Prospects. June 2010)
8
IMF. Regional Economic Outlook. Oct. 2010; IMF. World Economic Outlook. Oct. 2010.
12 DECEMBER 2010
Developing East Asia 8.4 7.3 7.8 8.7 ... 8.9 8.0 ...
Developing East Asia ex China 4.6 1.2 4.5 5.5 ... 6.7 5.2 ...
China 9.6 9.1 8.7 9.5 9.5 9.5 8.7 8.5
Indonesia 6.0 4.5 5.4 5.6 5.9 6.0 6.2 6.2
Malaysia 4.7 -1.7 4.1 5.7 5.7 7.4 5.3 5.3
Philippines 3.7 1.1 3.1 3.5 4.4 6.2 3.8 4.0
ThailandARANGKADA PHILIPPINES 2010: 2.5 A BUSINESS
-2.2 PERSPECTIVE
3.5 6.2 6.2 7.5 4.0 4.0
Vietnam 6.2 5.3 6.5 6.5 6.5 6.5 6.5 6.5
IMF 2008 2009 2010f 2011f
Countries Oct-09 Apr-10 Jul-10 Oct-10 Apr-10 Jul-10
IMF
Emerging Asia 2008 2009 6.8 2010f
5.8 7.0 8.5 ... 2011f 9.4 8.4 ...
Countries Emerging Asia exc China Oct-09
4.8 Apr-10 2.5 Jul-10 4.3 Oct-10 6.8Apr-10 ... Jul-10 8.2 Oct-10 6.6 ...
Emerging Asia Emerging Asia exc 6.8 China &5.8 India 7.0
3.1 8.5
0.4 ... 3.8 9.4 5.5 8.4 ... ... 7.28.1 5.3 ...
Emerging AsiaDeveloping
exc China Asia 4.8 2.5 4.3
7.7
6.8
6.9
... 7.3 8.2 8.7 6.6 9.2 ... 9.4
6.4 8.7 8.5
Emerging Asia exc China & India 3.1 0.4 3.8 5.5 ... 7.2 5.3 ... 4.9
Developing Asia China 7.7 6.9 9.6
7.3 9.1
8.7 9.2 9.0 9.4 10.0 8.7 10.5 8.5 10.58.4 9.9 9.6
China Indonesia 9.6 9.1 6.0
9.0 10.0 4.5 10.5 4.8 10.5 6.0 9.9 6.4 9.6 6.09.6 6.2 5.5
Indonesia Malaysia 6.0 4.5 4.8
4.7 6.0
-1.7 6.4 2.5 6.0 4.7 6.2 6.7 5.5 6.76.2 5.0 5.3
Malaysia Philippines 4.7 -1.7 2.5
3.7 4.7
1.1 6.7 3.2 6.7 3.6 5.0 6.0 5.3 7.05.3 4.0 4.0
Philippines 3.7 1.1 3.2 3.6 6.0 7.0 4.0 4.0 4.5
Singapore 1.8 -1.3 4.3 8.9 9.9 15.0 6.8 4.9
Singapore 1.8 -1.3 4.3 8.9 9.9 15.0 6.8 4.9 4.5
Thailand Thailand 2.5 -2.2 2.5
3.7 -2.2
5.5 7.0 3.7 7.5 5.5 5.5 7.0 4.5 7.54.0 5.5 4.5
Vietnam Vietnam 6.3 5.3 6.3
5.3 5.3
6.0 6.5 5.3 6.5 6.0 6.5 6.5 6.8 6.56.8 6.5 6.8
Sources: East Asia and the Pacific Update (Nov 2009, Apr 2010 & Oct 2010) and Global Economic
Sources: East Asia and the Pacific Update (Nov. 2009, Apr. 2010 & Oct. 2010) and Global Economic Prospects, Jun. 2010, World Prospects, Jun 2010, World B
Bank; IMF’s WEO IMF's
andWEO and REO-Asia
REO-Asia & Pacific,
& Pacific, various various
periods; WEO periods; WEO database
database
“Emerging
Emerging Asia” refers Asia”
to China, refers
Hong to SAR,
Kong China,India,
Hong Kong SAR,
Indonesia, India,
Korea, Indonesia,
Malaysia, Korea, Malaysia,
the Philippines, the Philippines,
Singapore, Singapore, Taiwan Province
Taiwan Province
China,
of China, Thailand, and Thailand, and Vietnam.
Vietnam. Singapore is notSingapore is not part
part of Developing of Developing Asia
Asia
2008 data for economic
2008 datablocs
for (ex Developing
economic blocsAsia) were taken from
(ex Developing Asia) Oct.
were2009
takenREO-Asia
from OctPacific; Country & Pacific;
2009 REO-Asia Developing Asia & Developing Asia data
Country
data were taken taken
from the updated
from WEO database
the updated as of Oct.
WEO database as2010
od Oct-2010
Figure 11: Real GDP growth rate forecast, annual percent change, ASEAN-6, 2010-2011
Figure 12: Real GDP growth rate, annual percent change, ASEAN-6, 2008-11
8%
7%
6%
Figure
5%
23: Net FDI, ASEAN-6, 1990-2009, Bn US$
40
4% Singapore
35
Thailand
3%30 Malaysia
IMF 2010f
25 Vietnam
2% IMF 2011f
Indonesia
20 WB 2010f
Philippines
1% WB 2011f
15
0%10
5 Indonesia Malaysia Philippines Thailand Vietnam
Sources:
0 IMF and World Bank; As of Oct 2010
-5
The World Bank -10

Figureuses
23: US$ 12,000
Net FDI, per capita
ASEAN-6, as the
1990-2009, Bn current
US$ threshold a country must cross to
reach high income status
40
in its country income classification. Per the World Bank, the Philippines has
been classified as a “lower
Source:
35
middle
UNCTAD income”
Singapore economy at least since 1975.9
The average high income
Thailand
country in 2009, with 30
a PCI of US$ 36,000, more than twenty times the level of the Philippines in
Malaysia
2009, is indeed an Impossible
25
Dream.
Vietnam With an annual population growth rate of around 2%, growth
of 5% means the PCI
Table of FDI,
6:20Net the Philippines increasesBnonly
Indonesia1990-2009,
ASEAN-6, US$ 3% a year.
Philippines
15
Countries 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200
9 10
The USG Millenium Challenge
Indonesia 1.1Corporation
1.5 (MCC),
1.9 while
2.0 using2.2 the same
4.4 data 6.2as the 4.7
WB, uses-0.2a different
-1.8 set-4.5of parameters
-2.8 to
0.2 -0.5 1.9 8.3
classify “low income” and “lower
Malaysia 5 middle
2.6 income”
4.0 countries.
5.1 According
5.7 4.6 to MCC’s
5.8 authorizing
7.3 legislation,
6.3 2.7 parameters
3.9 for “low0.6
3.8 income”
3.2 2.5 4.6 4.1
candidate countries are whether
0
Philippines PCI0.6is equal
0.6to or 0.8
less than1.2
the historical
1.6 ceiling
1.5 of1.5
the IDA 1.2for the1.8
FY involved
1.2 (for
2.2 example,
0.2 US$ 1.5 0.5 0.7 1.9
1855 for FY10). “Lower middle income” candidate countries must be both classified as a lower middle income country by the World
Singapore
-5 5.6 4.9 2.2 4.7 8.6 11.5 9.7 13.8 7.3 16.6 16.5 15.1 6.4 11.9 21.0 15.
Bank and have an income greater than the historical ceiling for IDA eligibility for the FY involved. By contrast, the WB defines “low
Thailand 2.6 2.0 2.2 1.8 1.4 2.1 2.3 3.9 7.5 6.1 3.4 5.1 3.4 5.2 5.9 8.1
income” countries (in FY10) as those countries with a GNI per capita of US$ 975 or below and “lower middle income” countries as
-10
those countries with aVietnam
GNI per capita 0.2
between0.4US$ 976
0.5 and US$
0.9 3855.1.9There1.8 1.8 of countries
is a subset 2.6 1.7 MCC1.5
that defines1.3
as “low1.3 1.2
income”, 1.5 1.6 2.0
based on the definitions in USUNCTAD
Source: legislation, that the WB considers “lower middle income.” Source, email correspondence with World Bank
and MCC offices.
Source: UNCTAD
1. P. 25 - Updated/revised Figure 24
DECEMBER 2010 TableFigure24: NetASEAN-6,

6: Net FDI, FDI, % of 1990-2009,
GDP, ASEAN-6, 1990-2009
Bn US$ 13
30%
Countries 1990 Singapore
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200
Indonesia
25% 1.1 Thailand1.9
1.5 2.0 2.2 4.4 6.2 4.7 -0.2 -1.8 -4.5 -2.8 0.2 -0.5 1.9 8.3
Malaysia
Malaysia 2.6 4.0 5.1 5.7 4.6 5.8 7.3 6.3 2.7 3.9 3.8 0.6 3.2 2.5 4.6 4.1
JOINT FOREIGNARANGKADA
CHAMBERS ADVOCACY PAPER
PHILIPPINES 2010: A BUSINESS PERSPECTIVE
________________________________________________________________________
Figure 12: GDP growth, ASEAN-6, by quarter, 2007-2010
Figure 12: GDP growth, ASEAN-6, by quarter, 2007-2010
25%
Singapore Thailand
20% Malaysia Philippines
Vietnam Indonesia
15%
10%
5%
0%
-5%
-10%
-15%

Sources: Respective national statistics offices, ASEAN Secretariat
________________________________________________________________________
Figure 13: Labor market, key indicators, 1990-2009
Figure 12Table
shows2:GDP
Growthgrowth Rateof ofthe11.6%
three ASEANNeededeconomies (Malaysia, to
for the Philippines Singapore, and
50 35%
Thailand) with the highest exports
Labor Reach as percentage
High
force, in Mn, lhs of
Income Status GDP declined
in 2030
Labor force the most
growth rate, rhs with the impact of the
45
global financial
40
crisis andUnemployment
then recovered rapidly beginning
rate, rhs in the second
Underemployment half of 2009. GDP growth
rate, rhs 30%
of the three 35economiesYear

(Indonesia, Philippines,
GDP and
PerVietnam)
Capita not as integrated into
Population
25%
global trade
declined less30but also are recoveringbillion
more slowly. million 20%
25 2010 $179 $1,905 94 15%
A much higher rate2015

20 of growth than $310 5% will be needed $2,998 to reach the 103World Bank’s 10% current high
income threshold
15
of US$ 2020 12,000 by 2030.
$537 Table 2 shows
$4,747 a growth rate
113 of 11.6% is
5%needed for the
10
Philippines to reach a PCI2025
of US$ 12,000
$930
in two decades
$7,562
assuming a
123
2% population
0%
growth rate
5
(declining to 01.5%). A declining population growth rate will reduce the number of-5%years to reach
2030 $1,600 $12,087 133
the US$ 12,0001990level.
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Amcham ICIP
Source: Table 2: Definitions

NSO; Note: Growthchanged
Rate inofApril
11.6%
2005 Needed for the Philippines to
Table 3: 13Reach
Success Stories of Sustained High Growth
High Income Status in 2030
Figure 14: Labor market, sector share in total employment,
Per capita income1990-2009
at the
Economy Year GDP of highPer
Period Capita
growth** Population
beginning and 2005***
70% Botswana
billion US$ US$ million
1960-2005
Agriculture & Fishery 210 3,800
2010 179 1,905 94
60% Brazil Industry 1950-1980 960 4,000
China 2015 Services 310
1961-2005 2,998 105 103 1,400
50%
2020 China*
Hong Kong, 537 1960-1997 4,747 3,100 113 29,900
40% Indonesia2025 930 1966-1997 7,562 200 123 900
30% Japan*
2030 1,600 1950-1983 12,087 3,500 133 39,600
Rep Source:
of Korea*Amcham ICIP 1960-2001 1,100 13,200
20%
Malaysia 1967-1997 790 4,400
10% Malta* 1963-1994
World Bank Philippines Country Director Bert Hofman 1,100 spoke about these9,600 different growth
Oman
formulas in a speech in early 2010:
0% 10 1960-1999 950 9,000
Singapore* 1967-2002
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2,200
2003 2004 2005 2006 200725,400
2008 2009
-10%
Taiwan, China* 1965-2002 1,500 16,400
Thailand
Source: NSO 1960-1997 330 2,400
10
Speech to the 13thSource:
AnnualWorld
Foreign
BankCorrespondents of the Philippines Conference entitled “Making Growth Work for the Poor” on
February 15, 2010, with Figure
most of thethat
* Economies 201015: Employment
presidential
have reached by class
candidates present.
industrialized countries of worker,
per capita 2009
income levels
** Period in which GDP growth was 7% per year or more
*** In constant US$ of 2000
Private Household, 5.4%
14 Unpaid family DECEMBER 2010
workers, 12.0%
__________________________________________________________________ 8
DECEMBER 2010
Informal Private
sector, 42.6% Establishment, 39.4%
“At current growth rates, the Philippines would be as rich as today’s China in
25 years. In roughly half a century from today, it would reach income levels of
Malaysia today to become an upper middle income country, and seventy years
from now it will reach the US$ 12,000 per capita high income threshold that the
World Bank uses…. The blessings of compounded growth imply, however, that
higher growth more than proportionally eats into the time it takes to reach high
income level. With 5 percent per capita growth, it takes a little over 4 decades to
reach high income status and with 7 percent per capita income growth the same
can be achieved in little over 3 decades. Moreover, international experience shows
that as growth accelerates, fertility and population growth declines, so per capita
growth can accelerate more rapidly than GDP growth.”

In 2008 the World Bank released “The Growth Report: Strategies for Sustained Growth and
Inclusive Development” prepared by the Commission on Growth and Development, chaired by
Nobel Laureate Dr. Michael Spence. The commission studied 13 economies that have grown in the
post WWII period for 25 years or longer at an average annual rate of 7% in order to learn what they
did to achieve such high rates of growth. This high growth club of countries included Botswana,
Brazil, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Malta, Oman, Singapore, Taiwan
and Thailand, and members of the Commission were senior economic policy makers from these
countries (see Table 3). In addition to this small group of 13 economies, the Commission judged
that India and Vietnam were “on their way” to increasing the group.
Table 3: 13 Success Stories of Sustained High Growth
Economy Period of high growth** Per capita income at the

beginning and 2005***
Botswana 1960-2005 210 3,800
Brazil 1950-1980 960 4,000
China 1961-2005 105 1,400
Hong Kong, China* 1960-1997 3,100 29,900
Indonesia 1966-1997 200 900
Japan* 1950-1983 3,500 39,600
Rep of Korea* 1960-2001 1,100 13,200
Malaysia 1967-1997 790 4,400
Malta* 1963-1994 1,100 9,600
Oman 1960-1999 950 9,000
Singapore* 1967-2002 2,200 25,400
Taiwan, China* 1965-2002 1,500 16,400
Thailand 1960-1997 330 2,400
Source: World Bank
* Economies that have reached industrialized countries per capita income levels
** Period in which GDP growth was 7% per year or more
Thus the Philippines does not have to look any further than Asia to find examples of sustained
high growth. The Asian region is famous and admired for its economic tigers. Four of its ASEAN
partners – Indonesia, Malaysia, Singapore, and Thailand – are in the group, while Vietnam is on a
fast track to join them. Other Asian economies – China, Japan, Korea, and Taiwan – are also among
the 13 economic success stories.

DECEMBER 2010 15
What policies did these countries have in common to achieve such economic success? The
Growth Report listed several that these rapid growers did right. They:
• fully exploited the world economy;

• maintained macroeconomic stability;
• mustered high rates of saving and investment;
• let markets allocate resources; and
• had committed, credible, and capable governments.
During the recent decades of political and economic turmoil, it is clear that these five key
elements have not been consistently present in the Philippines. On the positive side, the
Philippines since 1986 has maintained macroeconomic stability under a succession of excellent
finance secretaries and Bangko Sentral ng Pilipinas (BSP) governors. In the last decade remittances
have improved currency stability, external debt has fallen as a percent of GDP, and international
reserves have substantially increased to almost US$ 50 billion, enough for nine months of imports,
up from four months previously. However, the country has only partially exploited the international
economy (e.g. with its Overseas Filipino Workers) as exemplified by its low volume of exports -
which are not well-diversified - and low levels of investment, especially foreign. While there are
many committed and capable individuals in government, the Philippines has yet to create sustained
good governance, and growth has not been inclusive.
Another perspective on Philippine potential for

“Our great economic challenge is to grow economic growth comes from the American
by at least eight percent per annum; to investment bank firm Goldman Sachs, which
raise per capita income of US$ 1,900 to
famously invented in a 2003 paper the term BRIC
US$ 3,200 when (my) term ends in 2016
and double by 2018. That’s a tall order,
for the large emerging markets of Brazil, Russia,
but it must be our goal… to sustain India, and China. In late 2005 Goldman Sachs
growth in the face of competition.” identified the Next Eleven (N-11) countries with
high potential of becoming the world’s largest
Presidential candidate Gilbert Teodoro, economies in the 21st century along with the BRICs.
Makati Business Club speech, February 18, The N-11 are Bangladesh, Egypt, Indonesia, Iran,
2010 Mexico, Nigeria, Pakistan, the Philippines, South
Korea, Turkey, and Vietnam.
Inadequate Skills + Insufficient Jobs = High Unemployment/Underemployment
Creating new jobs and training workers and students with skills needed in existing and emerging
labor markets are the two most serious challenges for the Philippine economy in the next two
decades.
Figure 13 shows the Philippine labor force of 38 million has increased by more than 50% since
1990. The combined unemployment and underemployment rate exceeds 25%.11 Figure 14 shows
11
The definition of employed includes persons 15 years old and above who work at least one hour per week for pay or profit or in a
family enterprise.
16 DECEMBER 2010
20%
20%
Malaysia
Malaysia Philippines
Philippines
Vietnam
Vietnam Indonesia
Indonesia
15%
15%
10%
10%

5%
5% Advocacy Paper
ARANGKADA
0%
0% PHILIPPINES 2010: A BUSINESS PERSPECTIVE
-5%
-5%
-10%
-10%
percentage changes in the distribution of the work force between agriculture, industry and services
-15%
-15%
over the last two decades. As part of an economy’s growth, industry usually absorbs excess labor
JOINT
JOINT
from FOREIGN
FOREIGN
agriculture, butCHAMBERS
this is not happening in the Philippines. InsteadADVOCACY
CHAMBERS ADVOCACY
the PAPER
PAPER
share of services is rising
ARANGKADA
as a result ofARANGKADA
the growing PHILIPPINES
PHILIPPINES
retail sector supported 2010:
2010:
by A BUSINESS
A BUSINESS
increasing PERSPECTIVE
PERSPECTIVE
remittances.
________________________________________________________________________
________________________________________________________________________
Figure
Figure
Figure 13:
13:
13: Labor
Labormarket,
Labor market, key
market, keyindicators,
key indicators,
indicators, 1990-2009
1990-2009
1990-2009
Table 2: Growth Rate of 11.6% Needed
5050Table 2: Growth Rate of 11.6% Needed for the Philippines35%
for the Philippines toto
35%
4545
Labor
LaborReach
Reach
force, in High
Mn, lhs Income
High
lhs
force, in Mn, Income Status
Labor in
Status
Labor
in
force 2030
2030
growth
force rate,
growth rhs
rate, rhs
30%
Unemployment rate, rhs
Unemployment rate, rhs Underemployment rate, rhs 30%
Underemployment rate, rhs
4040
25%
3535 Year
Year GDP
GDP Per
PerCapita
Capita Population
Population
25%
3030 billion
billion million
million 20%
20%
2525 2010
2010 $179
$179 $1,905
$1,905 9494 15%
15%
2020
2015
2015 $310
$310 $2,998
$2,998 103
103 10%
10%
1515
2020
2020 $537
$537 $4,747
$4,747 113
113 5%
5%
1010
55 2025
2025 $930
$930 $7,562
$7,562 123
123 0%
0%
00 2030
2030 $1,600
$1,600 $12,087
$12,087 133
133 -5%
-5%
1990 1991
1990 1992
1991 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1992
Source: 1993
Amcham1994 1995
ICIP
Source: Amcham ICIP 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source:
Source:NSO;
NSO;Note:
Note:Definitions
Definitionschanged in in
changed April
April2005
2005
Table
Table3:3:13
13Success
SuccessStories
StoriesofofSustained
SustainedHigh
HighGrowth
Growth
Figure
Figure14:
Figure
14:Labor
14:
Labor market,
Labor market,sector
market, sectorshare
sector share total
shareinintotal employment,
totalemployment,
employment,
Per
Percapita 1990-2009
1990-2009
capitaincome
income1990-2009
atatthe
the
Economy Economy Period of high growth**Period of high growth** beginning
beginningand and2005***
2005***
70% Botswana
70% Botswana Agriculture && 1960-2005
1960-2005
Fishery 210
210 3,800
3,800
Agriculture Fishery
60% Brazil
60% Brazil Industry
Industry 1950-1980
1950-1980 960
960 4,000
4,000
Services
China
China Services 1961-2005
1961-2005 105
105 1,400
1,400
50%
50%
Hong
HongKong,Kong,China*
China* 1960-1997
1960-1997 3,100
3,100 29,900
29,900
40% Indonesia
40% Indonesia 1966-1997
1966-1997 200
200 900
900
30% Japan*
30% Japan* 1950-1983
1950-1983 3,500
3,500 39,600
39,600
Rep
RepofofKorea*
Korea* 1960-2001
1960-2001 1,100
1,100 13,200
13,200
20%
Malaysia
20%
Malaysia 1967-1997
1967-1997 790
790 4,400
4,400
10% Malta*
10% Malta* 1963-1994
1963-1994 1,100
1,100 9,600
9,600
0%
Oman
Oman 1960-1999
1960-1999 950
950 9,000
9,000
0%
Singapore*
Singapore*
1990 1991 1992 1993 1994 1995 1996 1967-2002
19971967-2002
1998 1999 2000 2001 2002 2,200
2,200
2003 2004 2005 2006 200725,400
25,400
2008 2009
-10% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Taiwan,
-10%
Taiwan,China*
China* 1965-2002
1965-2002 1,500
1,500 16,400
16,400
Thailand
Source: NSO
Thailand
Source: NSO 1960-1997
1960-1997 330
330 2,400
2,400
Source: World
Source: Bank
World Bank
Figure 15: Employment by class of worker, 2009
Figure 15: Employment in by class
is inofthe
worker,
informal2009
* Economies that
* Economies have
that reached
have industrialized
reached countries
industrialized per
countries capita
per income
capita levels
income levels
Figure 15 shows
** **
that
Period inin
43%GDP
which
of growth
the workforce
was 7% per
2009 sector, where most work
Period which GDP growth was 7% peryear oror
year more
more
in low-paying or***unpaid
In labor
constant US$ activities.
of 2000
Private
PrivateHousehold,
Household,5.4%
5.4%
Unpaid
Unpaidfamily
family
workers,
workers,12.0%
12.0%
__________________________________________________________________
__________________________________________________________________ 88
DECEMBER
DECEMBER 2010
2010
Informal
Informal Private Private
sector, 42.6%
sector, 42.6% Establishment,
Establishment,39.4%
39.4%
Government/
Government/
government
government
Self
Selfemployed,
employed,30.6%
30.6% corporation, 8.2%
corporation, 8.2%
DECEMBER 2010 17
Employer,
Employer,4.1%
4.1% With pay
With (family
pay (family
owned
ownedbusiness),
business),0.3%
0.3%
70% 30%
Agriculture & Fishery
70% 20%
60% Industry
Agriculture & Fishery
Services
60% 10% Industry
50%
Services
50%
40% 0% Advocacy Paper
40%ARANGKADA 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
30% -10% PHILIPPINES 2010: A BUSINESS PERSPECTIVE
30%Source: NSO
20%
20%
10%
Figure
Figure 15: Employment
15: Employment by of
by class class of worker,
worker, 2009 2009
10%
0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-10%0% Private Household, 5.4%
1990 1991 1992Unpaid family
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source:
-10% NSO workers, 12.0%
Source: NSO
Figure 15: Employment by class of worker, 2009
Informal Private
sector, 42.6% Figure 15: Employment by class of worker, 2009 39.4%
Establishment,
Private Household, 5.4%
Unpaid family
workers, 12.0% Private Household, 5.4%
Unpaid family
workers, 12.0%
Informal Private
sector, 42.6% Establishment, 39.4%
Informal Private
Government/
sector, 42.6% Establishment,
government 39.4%
Self employed, 30.6% corporation, 8.2%
Employer, 4.1%
With pay (family
owned business), 0.3%
ARANGKADA PHILIPPINES 2010: A BUSINESSgovernment PERSPECTIVE
Government/
Source: NSO; Informal sector - BLES definition
________________________________________________________________________
Self employed, 30.6% Government/
corporation, 8.2%
government
Self employed, 30.6% corporation, 8.2%
Figure 16 shows
Figure the level of education
16: Composition of the
of unemployed 4.1%unemployed with very
by educational
__________________________________________________________________
Employer, high percentages
attainment, 2009 having 9
JOINT FOREIGN
attended CHAMBERS
college (22%) or being college Employer,
graduates ADVOCACY
With pay (family PAPER
(19%). The high level of college students who
DECEMBER 2010 4.1% owned business), 0.3%
JOINT ARANGKADA
FOREIGN
are unemployed CHAMBERS
strongly PHILIPPINES
suggests they are2010: A BUSINESS
not acquiring theWith payPERSPECTIVE
right ADVOCACY
(family
skills
owned business), 0.3%
needed by PAPER
employers, that
________________________________________________________________________
there is ARANGKADA PHILIPPINES
insufficient investment
College in the 2010:
economy, A
and,BUSINESS
possibly, that PERSPECTIVE
minimum wages are too high
________________________________________________________________________
when compared with other countries in the ASEAN-6 (see Part 4 Business Costs).
undergraduate, 21.9%
College graduate, 19.2%
Figure 16: Composition of unemployed by educational attainment, 2009
__________________________________________________________________ 9
FigureFigure
DECEMBER 16: Composition
16: 2010
Composition of unemployed
of unemployed byby educationalattainment,
educational attainment, 2009
__________________________________________________________________ 2009 9
DECEMBER 2010 No grade
College completed, 0.5%
College College graduate, 19.2%
undergraduate, 21.9% Elem.
College graduate,undergraduate,
19.2% 5.9%
HS graduate, 33.1% Elem. No

graduate,
grade 7.4%
completed, 0.5%
No grade
completed, 0.5%
HS
Source: NSO Elem.
undergraduate, 5.9%
Elem.
undergraduate, 5.9%
HS graduate, 33.1% Elem. graduate, 7.4%
HS graduate, 33.1%
Figure 17: OFW remittance, Bn US$
Elem. graduate, 7.4%
HS
Source: NSO undergraduate, 12.1%
25 Annual, lhs HS 50%
Level (based on WB's prj growth), lhs 40%
20 YOY growth, rhs
WB's projected growth, lhs 30%
In early 2010 15 the National Competitiveness

Figure 17: OFW remittance, CouncilBn (NCC)
US$ released a study
20% calling on the
country to create 15 million “quality” jobs in the next
Figure 17: OFW remittance, Bn US$ five years. The study observed
10% 3-4 million
10
new jobs a year
25 are needed to reduce the unemployment
Annual, lhs rate to the East Asia
50%average of 2-6% and
0%
Level (based on WB's prj growth), lhs 40% -10%

25 5 Annual, lhs rhs 50%
20 YOY growth, -20%
Level
WB's (based on
projected WB'slhs
growth, prj growth), lhs 30%
40%
20 0 YOY growth, rhs -30%
15 20%
30%
WB's projected growth, lhs
2000
2001
2002
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2003
2004
2005
2006
2007
2008
2009
2010
2011
10%
18 15 20% DECEMBER 2010
10 0%10%
Source: BSP; World Bank for the projections
10 -10%
0%
5
-20%
-10%
5
0 -30%
-20%
to eliminate underemployment. The NCC urged that the GRP adopt a “sound industrial policy for
job creation” with a focus on manufacturing.
A recent projection (see box below) forecasted a 50% increase in the country’s labor force by
2030 to 52 million. Even with continued access to overseas job markets, the economy will need to
attract substantial investments to create new domestic jobs.
The weak employment situation has prompted increased calls for social programs to support
informal sector workers. In late April a coalition of non-governmental groups12 proposed that the
15th Congress extend social protection to marginalized sectors under a People’s Social Protection
Agenda. The group claimed informal workers comprise 25 million or 77% of the workforce, are
not covered by social security, and are inconsistently covered by health insurance. The group seeks
decent jobs for all Filipinos, urging improved productivity in agriculture, which employs about a
third of the country’s workers. It recommended a Magna Carta for Workers in the Informal Economy
who account for almost half of GDP. Also proposed were unemployment insurance, universal health
insurance, emergency employment, grassroots microinsurance and microfinancing, strengthening
of social security, and affordable housing for all.
“In the Philippines…unemployment is a ‘time bomb’. Between 2005 and 2030, the labor
force will increase by about 50 percent, that is, the number of people looking for a job will
increase from about 34 million to 52 million...will the economy be able to provide jobs?
Skills mismatch and the lack of human capital are the most commonly cited reasons of
unemployment. In reality, the systemic failure of the economy to create enough jobs is the
main cause of massive unemployment.”
“Employment is a basic right and full employment should be the primary objective of
economic policy… Nobody willing and ready to work for a just wage should be without
a job. Society must be able to provide jobs for all… And they should be able to provide
jobs for the workers they have and not for the workers they wish they had,” Dr. Felipe
added. “A full employment economy offers a great number of advantages…reduced
need for a social safety net, lower social costs, and higher political stability…immediate
policy priorities to achieve full employment should be population management and job
guarantee programs. Industrialization policies are also crucial. Education does matter for
long-term growth, but it is not a key constraint now… Individuals cannot be left out and
stigmatized for being ‘uneducated’.”
Philippine Institute for Development Studies (PIDS) press release quoting Asian Development Bank
(ADB) principal economist Dr. Jesus Felipe, author of Inclusive Growth, Full Employment, and
Structural Change: Implications and Policies for Developing Asia, April 20, 2010.
12
The University of the Philippines School of Labor and Industrial Relations’ Center for Labor Justice, College of Social Work and
Community Development Social Protection Cluster, Fair Trade Alliance, Association of Construction and Informal Workers, Magna
Carta for the Informal Sector Alliance, Homenet Southeast Asia and Homenet Philippines.
DECEMBER 2010 19
Remittances Are Important But Distort the Economy
Remittances from the nearly 10 million Filipinos abroad13 are the biggest change of the
past decade in the Philippine economy and are likely to have ever-increasing importance in
the years ahead. Remittances from Filipinos working abroad have become the economy’s second
largest source of foreign capital and may eventually exceed the size of the largest source, the
local value-added of exports. They have created an underlying floor for the economy that some
economists believe accounts for about 4% annual economic growth and shielded the conservative
Philippine elite from pressure to reform the status quo. The Philippines in 2009 was the world’s
fourth highest recipient of remittances from nationals, trailing only India (US$ 49 billion), China
(US$ 48 billion), and Mexico (US$ 22 billion).14
Global demographic trends favor the Philippines. Its young, fast-growing population
provides a large and growing labor pool for both domestic and overseas employment, so long as
education is improved to provide the next generation entering the workforce with skills equivalent
to their parents. During the last 9 years remittances increased 187 percent from US$ 6 billion in
2001 to US$ 17.35 billion in 2009 (see Figure 17). Predictions made in early 2009 that remittances
would decline as much as 10% as substantial numbers of Overseas Filipino Workers (OFWs)
lost jobs abroad and returned home proved to be inaccurate. By the end of 2009, remittances had
increased by 5.65% year-on-year and Filipino workers abroad were often retained in preference to
more expensive employees of other nationalities. In the first eight months of 2010 remittances grew
7.4% year-on-year.
Foreign labor markets in wealthy countries with aging populations (Europe, Japan, Korea,
Taiwan) or labor shortages (Canada, Middle East, US) are expected to remain open and welcoming
to Filipinos. A recent and optimistic projection of remittance
growth by Albay Governor Joey Salceda, an economic “The Philippines has still never
advisor to Philippine presidents, predicted remittances unleashed the full economic
would reach US$ 42 billion by 2015 and approach 20% of potential of its creative people
GDP, a doubling of their current 10% of GDP (see Table 4). thanks to multiple government
barriers and corruption. Too
His projection assumes remittance growth rates for the next
many of its young people feel
six years (2010-2015) will be very similar to the last six they must seek opportunity
years (2004-2009). Such a huge increase in inward capital abroad.”
flows warrants serious study of their potential effects on
the economy (e.g. on appreciating the peso) and how they Asian Wall Street Journal editorial,
can be captured and channeled into needed investment (e.g. August 3, 2009
bonds for infrastructure).
13
In 2009 the major country sources of remittances were the U.S., Saudi Arabia, Canada, Japan, U.K., Singapore, Italy and the UAE.
14
The World Bank, Migration and Development Brief, April 23, 2010.
20 DECEMBER 2010
undergraduate, 5.9%
HS graduate, 33.1% Elem. graduate, 7.4%
Joint Foreign Chambers HS Advocacy Paper

Figure
Figure 17: OFW
17: OFW remittance,
remittance, Bn1990-2011
Bn US$, US$
25 Annual, lhs 50%
Level (based on WB's prj growth), lhs 40%
20 YOY growth, rhs
WB's projected growth, lhs 30%
15 20%
10%
10 0%
-10%
5
-20%
0 -30%
2000
2001
2002
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2003
2004
2005
2006
2007
2008
2009
2010
2011
________________________________________________________________________
Figure 18:
Table 4: Fixed capital formation
Gov. Salceda’s Projection distribution, Philippines,
of OFW Remittances (% of % of GDP
GDP)
Table 4: Gov. Salceda’s Projection of OFW Remittances (% of GDP)
1990-2009
30% Year Levels US$ Rate of Growth % of GDP
Public
25% Year
2010 Levels
19 B Rate of Growth
12.2 % of GDP
11.15
Private
20% 2010
2011 $1922BB 12.2
17.0 11.15
12.48
15%
2011
2012 $2228BB 17.0
24.0 12.48
14.79
10%
2012
2013 $2833BB
24.0
18.0 14.79
16.68
5%
2013
2014 $33 B
37 B 18.0
13.0 16.68
18.02
0%
2014
2015 $37 42B B 13.0
13.0 18.02
19.47
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: NSCB2015 $42

Source: Albay B Joey Salceda
Gov. 13.0 19.47
Source: Albay Gov. Joey Salceda
Twice as Much Investment Needed for Higher Growth

Figure 19: Gross fixed capital formation, East Asia, % of GDP, 1990-2008
Many Filipinos believe that the Philippine economy should not rely to such an extent on the
diaspora of35%
its citizens for growth in the decade ahead. MuchEastern
higher Asiainvestment in the domestic
Southeast Asia
economy –30%above the steady base of growth that remittances
__________________________________________________________________ provide – is seen as a means 10
Philippines to
DECEMBER 25%
2010to an increasingly higher rate of growth. Even sustained double-digit growth
propel the economy
of 10% or20% more is possible, if the investment climate can be greatly improved to make the
economy more
15% attractive to both domestic and foreign investors. Subsequent sections of Arangkada
Philippines10%
2010 spell out many recommendations that can enable this to happen, if the nation’s
leaders muster
5% sufficient political will.
0%
However, recent levels of overall investment in the Philippine economy have been very
low. As a percent of GDP, public and private sector investment has fallen from 25% in 1997 to 15%
Source: UN Statistics Division
in 2009, while in the East Asia and Pacific region the figure exceeds 30% and in Southeast Asia
25% both in 2008 (see Figures 18 and 19).
Figure 20: Gross fixed investment, % of GDP, ASEAN-6, 1990-2008
75% Vietnam
Singapore
65% Thailand
Indonesia
55% Malaysia
Philippines
45%
DECEMBER 2010 21
35%
25%
15%
10 0%
-10%
5
-10%
-20%
5
0 -20%
-30%
JOINT FOREIGN 0 CHAMBERS ADVOCACY
-30% PAPER
2000
2001
2002
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2003
2004
2005
2006
2007
2008
2009
2010
2011
JOINTChambers
Joint Foreign FOREIGN CHAMBERS
ADVOCACY PAPER
Advocacy Paper
2000
2001
2002
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2003
2004
2005
2006
2007
2008
2009
2010
2011
ARANGKADA
Source: BSP; World PHILIPPINES
Bank for the projections 2010: A BUSINESS
________________________________________________________________________
ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE PERSPECTIVE
________________________________________________________________________
JOINT FOREIGN
Figure 18: CHAMBERS
Fixed capital formation distribution, Philippines, ADVOCACY% of GDPPAPER
FigureARANGKADA
Figure
Table 18:
18:4: Gov.
Fixed Fixed PHILIPPINES
capital
Salceda’s
capital formation
Projection
formation 2010: A
of OFW
distribution,
1990-2009 BUSINESS
distribution, PERSPECTIVE
Philippines,
Remittances
Philippines, % of(% % of GDP
of GDP)
GDP, 1990-2009
________________________________________________________________________
Table
30% 4: Gov. Salceda’s Projection of OFW Remittances (% of GDP)
1990-2009
30%
Public
25% Year Levels Rate of Growth % of GDP Private
Public
Figure
25%
20% 18: 2010
Fixed
Year capital formation
Levels
$19 B
distribution,
Rate of Growth
12.2
Philippines,
% of GDP %
11.15
of
Private GDP
20%
15% 2010
2011 $19 B
$22 B
1990-2009
12.2
17.0 11.15
12.48
30%
15%
10% 2011
2012 $22 B
$28 B 17.0
24.0 12.48
14.79 Public
25%
10% Private
5% 2012
2013 $28 B
$33 B 24.0
18.0 14.79
16.68
20%
5%
0% 2013
2014 $33 B
$37 B 18.0
13.0 16.68
18.02
15%
0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2014
2015
1990 1991
$37
$42
1992 1993 1994
B 13.0
1995B1996 1997 1998 199913.0
18.02
19.47
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
10%
Source: NSCB
Source:
5% NSCB2015 $42 B
Source: Albay Gov. Joey Salceda
13.0 19.47
0% Source: Albay Gov. Joey Salceda
Figure
Figure 19:19:
Gross
Grossfixed
fixedcapital
capital formation, EastAsia,
formation, East Asia,%%
of of GDP,
GDP, 1990-2008
1990-2008
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Figure
Source:19:
NSCBGross fixed capital formation, East Asia, % of GDP, 1990-2008
35% Eastern Asia

Southeast
Eastern AsiaAsia
35%
__________________________________________________________________
Figure
30%
30% 19: Gross fixed capital formation, East Asia, % of GDP, 1990-2008
Philippines
Southeast Asia 10
__________________________________________________________________
DECEMBER25%
2010
Philippines 10
DECEMBER25%
20%
2010 Eastern Asia
35%
20%
15%
Southeast Asia
30%
15%
10% Philippines
25%
10%
5%
20%
5%
0%
15%
0%
10%
5%
0%
Further, in comparison to the other ASEAN-6 economies, the Philippines is investing much
Figure
less (see Figure 2020:
andGross
Table 5). fixed investment,
Over the last two % of GDP,
decades ASEAN-6,
the other five ASEAN1990-2008
economies have
Figure
Source: UN 20:
invested considerably Gross
Statistics Divisionfixed investment, % of GDP, ASEAN-6, 1990-2008
higher percentages of GDP than has the Philippines. The investment ratio in
theJOINT FOREIGN
Philippines averaged
75% CHAMBERS
22.4% in 1990-1996 but declined to 14% by 2009. ADVOCACY
Vietnam PAPER
ARANGKADA
75%
65% PHILIPPINES 2010: A BUSINESS PERSPECTIVE
Singapore
Vietnam
Thailand
Figure 20:
Figure Gross fixed investment, % of GDP, ASEAN-6, 1990-2008
Singapore
________________________________________________________________________
65% 20: Gross fixed investment, % of GDP, ASEAN-6, 1990-2009
Indonesia
Thailand
55% Malaysia
Indonesia
55% Philippines
Malaysia
75%
Table 5: Domestic investment ratio, ASEAN-6, % of GDP, 1990-2009
45%
45% Vietnam
Philippines
Singapore
65%
35% Thailand
Indonesia
35% 1990-1996 2000-2008
55%
25% 2009*
Malaysia
ave ave Philippines
25%
45%
15% Indonesia 31.2 24.1 31.0
15%
35%
5% Malaysia 38.1 22.6 14.0
5%
25% Philippines 22.9 16.8 14.0
-5%
-5% Singapore 35.8 23.7 27.6
15%
Thailand
Source: ADB; 2009 data from Asian 41.2
Development Outlook26.4 21.9
2010 (ADB); No data
for
5% Vietnam
Source: in 2009
ADB; 2009 data from Asian Development Outlook 2010 (ADB); No data
for Vietnam in 2009
Vietnam 21.6 35.7 41.1
-5% Source: ADB
Note: *Latest data for Vietnam is 2008
Source: ADB; 2009 data from Asian Development Outlook 2010 (ADB); No data
for Vietnam in 2009
Figure 21: Gross domestic investments, as % of GDP, ASEAN-6, 1990-2009

__________________________________________________________________ 11
22 __________________________________________________________________ DECEMBER
11 2010
DECEMBER 201070% Vietnam Singapore
DECEMBER 2010 Thailand Indonesia
60%
__________________________________________________________________
50%
11
Source: NSCB
Figure 19: Gross fixed capital formation, East Asia, % of GDP, 1990-2008
35% ARANGKADA PHILIPPINES 2010: A Eastern PERSPECTIVE
BUSINESS Asia
Southeast Asia
30% Philippines
25%
20% Table 5: Domestic investment ratio, ASEAN-6, % of GDP, 1990-2009

15%
10% 1990-1996 2000-2008 2009*

5%
Indonesia 31.2 24.1 31.0
0%
Malaysia 38.1 22.6 14.5
Philippines 22.9 16.8 14.6
Source: UN Statistics Singapore
Division 35.8 23.7 27.2
JOINT FOREIGN CHAMBERS
Thailand 41.2 26.4 ADVOCACY PAPER
21.8
ARANGKADA Vietnam PHILIPPINES
21.6 2010: A 35.6
BUSINESS 38.1
PERSPECTIVE
Figure 20: Gross fixed investment, % of GDP, ASEAN-6, 1990-2008
________________________________________________________________________
Source: ADB
75%
ReasonsTablefor5:low
Domestic investment
gross domestic ratio,
capital ASEAN-6,
formation % low
include of GDP,
foreign 1990-2009
Singapore direct investment
Vietnam
65% Thailand
(FDI), inadequate public sector revenues, anemic spending on infrastructure,
Indonesia weak domestic
1990-1996 2000-2008
market created55%by low income consumers
ave
despite a large
ave
population,
2009* among
Malaysia others. While the
Philippines
savings rate in
45%the Philippines
Indonesia
has been growing
31.2
to around
24.1
30% of GDP,
31.0
15
not enough is being
invested in capital assets essential for sustained long-term growth. Furthermore, the country
35% Malaysia 38.1 22.6 14.0
appears to be exporting capital which otherwise could be invested toward long-term growth at
Philippines 22.9 16.8 14.0
home. 25%
Singapore 35.8 23.7 27.6
15%
Figure 21 5%shows that Thailand
the Philippines 41.2almost 30 years
26.4 ago had21.9 about the same 30% gross
domestic investment ratio as other ASEAN-6 economies35.7
Vietnam 21.6 41.1 Investment fell sharply
except Singapore.
in the 1983-1986
-5%
period during
Source: ADB the political crisis preceding the ouster of the dictator president
Marcos and recovered under Presidents

Note: *Latest Aquino
data for Vietnam is 2008and Ramos and then declined steadily after the
1997 Asian financial
for Vietnamcrisis
in 2009to its current level below 15%.
Figure 21:21:
Figure Gross domestic
Gross domesticinvestments, as %
investments, as %of
ofGDP,
GDP,ASEAN-6,
ASEAN-6, 1990-2009
1990-2009
70%
Vietnam Singapore
Thailand Indonesia
60%
__________________________________________________________________
50%
11
DECEMBER 2010
40%
30%
20%
10%
0%
1992
1999
2006
1990
1991
1993
1994
1995
1996
1997
1998
2000
2001
2002
2003
2004
2005
2007
2008
2009
-10%
Source: ADB; 2009 data from Asian Development Outlook 2010 (ADB); No data for
Vietnam in 2009
Figure 22: Net FDI, Philippines, 1990-2009, Bn $

15
According to data from the BSP, gross savings as a percent of GDP was 22.7 in 2001. In 2008, this grew to 27.7.
3.5
3.0
2.5
DECEMBER 2010 2.0 23
1.5
1.0
0.5
0.0
75%
Table 5: Domestic investment ratio, ASEAN-6, % of GDP,
Vietnam
1990-2009
Singapore
65% Thailand
Indonesia
1990-1996 2000-2008
55% 2009*
Malaysia
Joint Foreign Chambers ave ave Philippines Advocacy Paper
45%
Indonesia 31.2 24.1 31.0
35% Malaysia 38.1 22.6 14.0
25% Philippines 22.9 16.8 14.0
Singapore
A major challenge
15% for the Philippines is to funnel the abundant 27.635.8
financial resources available 23.7
Thailand 41.2 26.4 21.9
to the country more into investment by creating better opportunities for the private sector through
5%
an improved investment Vietnam
climate. Higher 21.6 35.7 and more
revenue collection 41.1effective public spending
will improve public sector
-5%
investment.
Source: ADB Doubling spending on physical infrastructure16 (to 5-6% of
GDP) and social infrastructure (to 8-9% of GDP), thereby reaching levels of more developed East
17 data for Vietnam is 2008
Note: *Latest
Asian economies would
for Vietnam greatly improve the overall investment climate and would support higher
in 2009
and sustainable rates of growth. Doing so would give investors more confidence that a large and
Figure 21:
well-educated labor Gross
force domestic investments,
will be available as %
in the future ofthat
and GDP, the ASEAN-6, 1990-2009
quality, cost and efficiency of
power, transportation, telecommunications and water infrastructure would become more cost and
Vietnam Singapore
quality competitive. 70%
Thailand Indonesia
60%
Low Foreign Direct Investment Flows
__________________________________________________________________ 11
50%
DECEMBER 2010
The figures and40%tables in this section contain data of the last two decades and show FDI flows
into ASEAN-6 economies
30% in relation to the ASEAN-6 with the Philippines ranking low in many of
these measures of FDI.
20%
Political instability
10%
deters foreign investment. Figure 22 shows the annual net FDI of the
Philippines from 1990-2009.
0% Over this period annual FDI averaged US$ 1.4 billion. During the
two-decade period-10%
1970-1989, which encompassed continuing political turmoil, net FDI of the
1992
1999
2006
1990
1991
1993
1994
1995
1996
1997
1998
2000
2001
2002
2003
2004
2005
2007
2008
2009
Philippines averaged US$ 200 million (see Table 12). During the nearly two-decade period 1990-
2009, net FDI of the Philippines has averaged a much higher US$ 1.4 billion. Net FDI reached
Source: ADB; 2009 data from Asian Development Outlook 2010 (ADB); No data for
Vietnam in 2009
nearly US$ 3 billion in 2006 and 2007, declined sharply to US$ 1.54 billion in 2008. 2009 saw
an increase to US$ 1.95 billion.
Figure 22:Net
Figure 22: NetFDI,
FDI,Philippines,
Philippines, 1990-2009,
1990-2009, Bn $
Bn US$
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2004
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2005
2006
2007
2008
2009
Source: BSP
Figure 23 compares annual net FDI of the ASEAN-6 from 1990-2009. In most years, the
Philippines received less net FDI than the other five ASEAN-6 economies. Table 6 provides the
annual FDI flow amounts on which Figure 23 is based.
__________________________________________________________________ 12
DECEMBER
16 2010
Government Capital Outlay (% of GDP, 2005): Philippines (2.5), Indonesia, (8.5), Vietnam (8.2), and Malaysia (6.5) per Dr. Raul
V. Fabella
17
2009 levels of social spending as % of GDP: Education – 2.9%; Health – 0.5%; Social security and welfare – 1.2%; Housing and
other amenities – 0.1% (Source: ADB Key Indicators, 2010)
24 DECEMBER 2010
Thailand 2.5 -2.2 3.7 5.5 7.0 7.5 5.5 4.5
Vietnam 6.3 5.3 5.3 6.0 6.5 6.5 6.5 6.8
Sources: East Asia and the Pacific Update (Nov 2009, Apr 2010 & Oct 2010) and Global Economic Prospects, Jun 2010, World Ban
IMF's WEO and REO-Asia & Pacific, various periods; WEO database
“Emerging Asia” refers to China, Hong Kong SAR, India, Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan Province o
China,
Joint Foreign Chambers Thailand, and Vietnam. Singapore is not part of Developing Asia Advocacy Paper
2008 data for economic blocs (ex Developing Asia) were taken from Oct 2009 REO-Asia Pacific; Country & Developing Asia data w
ARANGKADA
taken from the updated WEOPHILIPPINES
database as 2010: A BUSINESS PERSPECTIVE
od Oct-2010
Figure 12: Real GDP growth rate, annual percent change, ASEAN-6, 2008-11
Figure 21: Gross domestic
Figure 23: Netinvestments, as %1990-2009,
FDI, ASEAN-6, of GDP, ASEAN-6,
Bn US$ 1990-2009
8%
Ê
70% 7%
Vietnam Singapore
60% 6% Thailand Indonesia
50% Figure
5%
23: Net FDI, ASEAN-6, 1990-2009, Bn US$
40
40%
4% Singapore
35
30% Thailand
3%30 Malaysia
IMF 2010f
20% 25 Vietnam
2% IMF 2011f
Indonesia
10% 20 WB 2010f
Philippines
1% WB 2011f
15
0%
0%10
2008
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2009
5 Indonesia Malaysia Philippines Thailand Vietnam
Source: ADB
Sources:
0 IMF and World Bank; As of Oct 2010 Ê
-5
-10
Table 6: Net FDI, ASEAN-6, 1990-2009, Bn US$
Figure 23: Net FDI, ASEAN-6, 1990-2009, Bn US$
40
Countries 1990 1991
1992 1993 1994Singapore
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source:
35 UNCTAD
Indonesia 1.1 1.5 1.9 2.0 2.2 Thailand
4.4 6.2 4.7 -0.2 -1.8 -4.5 -2.8 0.2 -0.5 1.9 8.3 4.9 6.9 9.3 4.9
30 Malaysia
Malaysia 2.6 4.0 5.1 5.7 4.6 Vietnam
5.8 7.3 6.3 2.7 3.9 3.8 0.6 3.2 2.5 4.6 4.1 6.1 8.5 7.3 1.4
25
Philippines 0.6 Table
0.6 6:0.8 1.2 1.6 1.5
Indonesia 1.5 1.2
Net FDI, ASEAN-6, 1990-2009, Bn 1.8 1.2
US$ 2.2 0.2 1.5 0.5 0.7 1.9 2.9 2.9 1.5 1.9
20 Philippines
Singapore 5.6 4.9 2.2 4.7 8.6 11.5 9.7 13.8 7.3 16.6 16.5 15.1 6.4 11.9 21.0 15.5 29.1 35.8 10.9 16.8
15
Thailand 2.6 Countries
2.0 2.2 1.8
1990 1.419912.1 1992
2.3 3.9
1993 7.519946.1 1995
3.4 5.1
1996 3.419975.2 1998
5.9 8.1
1999 9.52000
11.4 2001
8.5 5.9
2002 2003 2004 2005
10
Vietnam 0.2 Indonesia
0.4 0.5 1.1 1.9 1.51.8
0.9 1.9
1.8 2.0 1.7 2.21.5
2.6 4.4
1.3 6.2 1.2 4.71.5 -0.2
1.3 1.6 -1.8 2.4 -4.56.7 -2.8
2.0 8.0 0.2
4.5 -0.5 1.9 8.3
5
Source: UNCTAD Malaysia
2.6 4.0 5.1
5.7 4.6 5.8
7.3 6.3 2.7
3.9 3.8 0.6
3.2 2.5 4.6 4.1
0
Philippines 0.6 0.6 0.8 1.2 1.6 1.5 1.5 1.2 1.8 1.2 2.2 0.2 1.5 0.5 0.7 1.9
Singapore
-5 5.6 4.9 2.2 4.7 8.6 11.5 9.7 13.8 7.3 16.6 16.5 15.1 6.4 11.9 21.0 15.5
Figure 24Thailand
compares
-10
annual2.0net FDI
2.6 2.2 of 1.8
the ASEAN-6
1.4 2.1 from
2.3 1990-2009
3.9 7.5 as a6.1
percentage
3.4 of GDP.
5.1 3.4 5.2 5.9 8.1
The Philippines (followed
Vietnam 0.2 by Indonesia)
0.4 0.5 has
0.9 the1.9
lowest
1.8 percentage
1.8 2.6– less
1.7 than1.52% in
1.3 recent
1.3 years
1.2 1.5 1.6 2.0
– by this measure. By contrast for Singapore and Vietnam annual net FDI inflow exceeds 10% of
Source: UNCTAD
GDP. Table 7 provides

Source:the annual percentages on which Figure 24 is based.
UNCTAD
1. P. 25 - Updated/revised Figure 24
Figure 24: %Net FDI, ASEAN-6,

% of GDP, ASEAN-6, 1990-2009
TableFigure24: NetASEAN-6,
6: Net FDI, FDI, of 1990-2009,
GDP, 1990-2009
Bn US$
30%
Countries 1990 Singapore
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Indonesia
25% 1.1 Thailand1.9
1.5 2.0 2.2 4.4 6.2 4.7 -0.2 -1.8 -4.5 -2.8 0.2 -0.5 1.9 8.3
Malaysia
Malaysia 2.6 4.0 5.1
Indonesia 5.7 4.6 5.8 7.3 6.3 2.7 3.9 3.8 0.6 3.2 2.5 4.6 4.1
20%
Philippines 0.6 0.6
Vietnam0.8 1.2 1.6 1.5 1.5 1.2 1.8 1.2 2.2 0.2 1.5 0.5 0.7 1.9
Singapore
15% 5.6 Philippines
4.9 2.2 4.7 8.6 11.5 9.7 13.8 7.3 16.6 16.5 15.1 6.4 11.9 21.0 15.5
Thailand 2.6 2.0 2.2 1.8 1.4 2.1 2.3 3.9 7.5 6.1 3.4 5.1 3.4 5.2 5.9 8.1
10%
Vietnam 0.2 0.4 0.5 0.9 1.9 1.8 1.8 2.6 1.7 1.5 1.3 1.3 1.2 1.5 1.6 2.0
Source:5%
UNCTAD
1. P. 0%
25 - Updated/revised Figure 24
-5%
Figure24: Net FDI, % of GDP, ASEAN-6, 1990-2009
30%
Sources: UNCTADSingapore
and World Bank
25% Thailand
Malaysia
20% Indonesia
Vietnam
DECEMBER 2010 Philippines
25
15%
10%
5%
Table 7: Net FDI, % of GDP, ASEAN-6, 1990-2009
Countries 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Indonesia 1.0 1.2 1.3 1.3 1.2 2.2 2.7 2.2 -0.2 -1.3 -2.7 -1.8 0.1 -0.2 0.7 2.9 1.3 1.6 1.8 0.9
Malaysia 5.9 8.2 8.7 8.6 6.2 6.5 7.2 6.3 3.8 4.9 4.0 0.6 3.2 2.2 3.7 2.9 3.9 4.6 3.3 0.7
Philippines 1.2 1.2 1.5 2.3 2.5 2.0 1.8 1.5 2.7 1.6 3.0 0.3 2.0 0.6 0.8 1.9 2.5 2.0 0.9 1.2
Singapore 15.1 11.3 4.4 8.1 12.1 13.7 10.5 14.3 8.9 20.1 17.8 17.6 7.2 12.8 19.2 12.3 20.0 20.2 5.6 9.2
Thailand 3.0 2.1 1.9 1.4 0.9 1.2 1.3 2.6 6.7 5.0 2.8 4.4 2.6 3.7 3.6 4.6 4.6 4.6 3.1 2.3
Vietnam 2.8 3.9 4.8 7.0 11.9 8.6 7.3 9.6 6.2 5.2 4.1 4.0 3.4 3.7 3.5 3.8 3.9 9.5 8.9 4.9
Sources: UNCTAD and World Bank (for GDP)
Table 8 contains data for per capita FDI of the ASEAN-6 for 2009. The Philippines with
US$ 21 per capita ranks with Indonesia with US$ 22. However, it should be noted Indonesia is
receiving a strong inflow of FDI capital in 2010.
Table 8: Net FDI, ASEAN-6, 2008-2009, Bn US$
Population, FDI per FDI, % of

Countries 2008 Distribution 2009 Distribution
mil capita (2009) GDP(2009)

Indonesia 9.32 15.8% 5.30 13.9% 243.30 22 0.9
Malaysia 7.24 12.3% 1.61 4.2% 28.30 57 0.7
Philippines 1.54 2.6% 1.95 5.1% 92.20 21 1.2
Singapore 22.72 38.5% 16.35 42.7% 5.10 3,205 9.2
Thailand 8.57 14.5% 6.15 16.1% 67.8 91 2.3
Vietnam 9.58 16.2% 6.90 18.0% 87.3 79 4.9
ASEAN-6 Total 58.98 100.0% 38.25 100.0% 524.00 73 2.7
Sources: UNCTAD, World Bank and Population Reference Bureau
Tables 9, 10, 11, and 12 show FDI accumulation and annual averages in intervals of 5 and
20 years for four decades 1970 to 2009. With the exception of Vietnam, which was at war and a
closed economy until the 90s, the Philippines has consistently received less FDI than the other
ASEAN-6. For the entire period the ASEAN-6 each received (in descending order of magnitude)
Singapore US$ 286 billion, Malaysia US$ 103 billion, Thailand US$ 104 billion, Indonesia US$ 58
billion, Vietnam US$ 44 billion and the Philippines US$ 32 billion. During the period 2000-2009,
the Philippines received 5.1% of total FDI flowing into the ASEAN-6, while Singapore received
45.6%, Thailand received 16.6%, Malaysia received 16.4%, Indonesia received 9.3%, and Vietnam
received 7.0%.
Table 9: FDI accumulation, 5-year interval, Bn US$, 1970-2009
Countries 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-09 % Share,
2000-09
Indonesia 1.461 2.919 1.052 2.209 8.629 13.357 -5.714 34.373 7.9%
Malaysia 1.051 2.211 5.654 3.994 22.114 26.044 14.642 27.361 11.6%
Philippines 0.215 0.586 0.934 2.244 4.711 7.227 5.156 11.183 4.5%
Singapore 1.063 1.950 6.933 12.135 25.903 58.862 70.941 108.013 49.3%
Thailand 0.416 0.382 1.434 3.719 9.951 21.873 22.920 43.431 18.3%
Vietnam 0.003 0.004 0.033 0.022 3.900 9.355 6.849 23.710 8.4%
Total 4.209 8.051 16.041 24.322 75.208 136.718 114.794 248.072 100.0%
Source: UNCTAD
26 DECEMBER 2010
Table 10: FDI annual average, 5-year interval, Bn US$
Countries 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-09

Indonesia 0.292 0.584 0.210 0.442 1.726 2.671 -1.143 6.875
Malaysia 0.210 0.442 1.131 0.799 4.423 5.209 2.928 5.472
Philippines 0.043 0.117 0.187 0.449 0.942 1.445 1.031 2.237
Singapore 0.213 0.390 1.387 2.427 5.181 11.772 14.188 21.603
Thailand 0.083 0.076 0.287 0.744 1.990 4.375 4.584 8.686
Vietnam 0.001 0.001 0.007 0.004 0.780 1.871 1.370 4.742
Total 0.842 1.610 3.208 4.864 15.042 27.344 22.959 49.614
Source: UNCTAD
Table 11: FDI accumulation Table 12: FDI annual average

20-year interval, Bn US$ 20-year interval, Bn US$
Countries 1970-89 1990-09 Countries 1970-89 1990-09

Indonesia 7.641 50.645 Indonesia 0.382 2.532
Malaysia 12.909 90.162 Malaysia 0.645 4.508
Philippines 3.978 28.277 Philippines 0.199 1.414
Singapore 22.081 263.718 Singapore 1.104 13.186
Thailand 5.951 98.175 Thailand 0.298 4.909
Vietnam 0.063 43.814 Vietnam 0.003 2.191
Total 52.624 574.791 Total 2.631 28.740
Source: UNCTAD Source: UNCTAD
Many analysts predict FDI in SEA will take several years to regain its robust levels prior to
the financial crisis. However, the interest of large manufacturing firms in a China+118 strategy
for ASEAN operations, the coming into force of ASEAN FTAs making ASEAN economies
more attractive for international investment, the interest of the EU to enter into bilateral FTAs
with some of the ASEAN countries, the appreciation of the yen and the growing interest of
investors from China in the region are positive indicators for improved trans-border capital flows.
Multinationals that reduced or postponed new investment decisions may decide to go ahead in
2010 and 2011.
With some important exceptions (i.e. business process outsourcing, consumer goods,
mining, semiconductors, shipbuilding, tourism) many multinational firms not already present in
the Philippines do not see the country as attractive for new investment, preferring to focus on
opportunities elsewhere in Asia.
However, there are thousands of multinational firms that are investors in the Philippines – some
for more than a century – who are quite familiar with the Philippine investment climate. Table
13 shows the top sectors where foreign capital has been invested. Most of these companies have
steadily expanded their operations in the country, either for export or for the growing domestic
18
China+1 strategy is followed by large multinationals that seek to have operations in the Asian region in China and at least one
additional economy.
DECEMBER 2010 27
market. Only a few have left, usually to consolidate manufacturing within ASEAN in another
ASEAN-6 economy, as ASEAN Free Trade Area (AFTA) established its zero tariff regime for the
ASEAN-6.
Table 13: Philippine Net FDI, top six sectors, 1999-2009, Bn US$
Information Technology-Business Process Outsourcing (IT-BPO) is the fastest growing

sector involving FDI in employment terms. An estimated US$ 700 million in new investment is
expected in 2010 and 2011. The electronics sector, which has averaged almost US$ 700 million a
year in new investment since 2000, counted US$ 400 million in 2008 and US$ 480 million in 2009,
and should move back towards its average with the high growth in Asia in 2010 and the strong
growth of the recovering US economy.19
Mining investment, despite its great potential and having attracted serious interest of global
majors in several multi-billion dollar projects, is moving slowly due to local community opposition
and depressed commodity prices. However, demand for minerals such as copper, gold and nickel
(which the country has large deposits of) remains strong. The largest project to date, a leading
global mining firm with a minority partner from China has confirmed plans to go forward with a
potential US$ 5.2 billion 10-year investment in copper and gold in Mindanao.20 New FDI in job-
generating shipbuilding should resume when global demand for new ships recovers in several
years.
As noted many multinationals already operating in the Philippine domestic market invest steadily
to meet rising domestic consumer demand, but new FDI manufacturing is often deterred by high
labor, logistics, and power costs, and bypasses the Philippines. Some new FDI in infrastructure21
(power, telecommunications, transportation, water) continues but at levels far below the many
19
Semiconductor and Electronics Industries in the Philippines Inc (SEIPI) data is based on member surveys. Most electronic
exporters are members.
20
The Chinese investor withdrew after the outgoing governor of one of the provinces where the mine is located signed a ban on open
pit mining.
21
A large Hong Kong-based conglomerate is investing in hospitals, telecommunications, toll roads, and water. Foreign financing is
being arranged for a US$ 1.4 billion light rail project and several power plants.
28 DECEMBER 2010
Vietnam
Singapore 5.6 4.9 2.2
-5
0.0634.7 8.646.020
11.5 9.7 13.8 7.3 16.6Vietnam
16.5 15.1 6.4 11.8 20.1 14.4 2.301
0.003 27.7 31.6 22.7 16.3
ThailandVietnam
2.4 -10
2.0 2.1
0.0631.8 1.446.020
2.1 2.3 3.9 7.3 6.1 3.4 5.1 3.3 5.2 5.9 8.0 9.5 11.3 8.6 6.1
ThailandSources:
2.4UNCTAD
2.0
-10 2.1
and 1.8
ADB 1.4 2.1 2.3 3.9 7.3 6.1Vietnam
Sources:
3.4 UNCTAD
5.1 3.3 and 0.003
ADB5.9 8.0 2.301
5.2 9.5 11.3 8.6 6.1
VietnamSources:
0.1UNCTAD
0.2 and
0.3 ADB0.3 1.0 1.8 2.4 2.2 1.7 1.4Sources:
1.3 UNCTAD
1.3 1.4 and
1.5
ADB1.6 1.4 1.8 6.6 9.3 6.9
Vietnam 0.1 0.2 0.3 0.3 1.0 1.8 2.4 2.2 1.7 1.4 1.3 1.3 1.4 1.5 1.6 1.4 1.8 6.6 9.3 6.9
Source: ADB
Source: ADB Source: ADB; 2009 data from Asian Dev't Outlook 2010 (ADB)
Joint Table 13: Philippine
Foreign ChambersSource: ADB; 2009 Net
data from AsianFDI, top six
Dev't Outlook 2010 sectors,
(ADB) 2004-2009, Bn US$
Table 13: Philippine Net FDI, top six sectors, 2004-2009, Bn US$ Advocacy Paper

Figure
1999 24:
2000Net FDI,
2001 % 2003
2002 of GDP, 2004ASEAN-6,
2005 2006 1990-2009
2007 2008 2009 Total
Figure
Table
1999 24:
2000 Net
6: NetFDI,
2001 FDI, %ASEAN-6,
2002 of GDP,
2003 2004ASEAN-6,
2005 2006 1990-2009
1990-2009, Bn $ 2008 2009 Total
2007
TOTAL EQUITY
30%
Table 6: Net FDI, ASEAN-6, 1990-2009, Bn $
1,178.0 1,333.0 556.0 1,607.0 249.0 750.0 1,181.0 1,324.0 1,949.0 1,235.0 1,806.0 13,168.0
TOTAL EQUITY 1,178.0 1,333.0 Singapore
556.0 1,607.0 249.0 750.0 1,181.0 1,324.0 1,949.0 1,235.0 1,806.0 13,168.0
Manufacturing 30% 149.6 237.5 275.1 744.4 89.5 83.6 531.6 408.7 548.6 311.9 887.8 4,268.3
billions
Countriesthat1990
Manufacturing could
1991be
25%
attracted
1992149.6 with
1993 237.5
1994 1995a 1996
better
Singapore
Thailand
275.1 1997
744.4 investment
1998
89.5 1999
83.6 climate.
2000 Some
2001 2002
531.6 408.72003new
2004FDI
548.6 2005 is
311.9 entering
2006 from
2007 4,268.3
887.8 2008 2009
Electricity,
Countries gas and water 199218.0
1990 1991 25% 1993 1994 Thailand
Malaysia
0.0 1995 0.01996 0.0 0.0 1999
1997 1998 8.62000 -6.3 200.42003
2001 2002 699.2
2004 224.7
2005 2006389.6
2007 1,534.2
2008 2009
Kuwait and
Electricity,
Indonesia gas Saudi
and 1.5Arabia
1.1 water in hotels
1.818.02.0 and
2.1 Malaysia
0.0 4.3
0.0 6.2
Indonesialogistics 0.0and
0.04.7 -0.2 from
8.6 -4.6 Asia
-1.9 -6.3 0.1agriculture.
-3.0 in
200.4 -0.6 8.3Investment
1.9 224.7
699.2 4.9 from5.3
389.66.9 1,534.2
9.3
Financial intermediation
1.1 1.5 20%
China
Financial
(inc has
Indonesia remained
intermediation
insurance)
Malaysia weak
2.3 4.0 20% due
1.8291.1
2.0 to
2.1 local
38.6 4.3 corruption.
6.2 68.8
Indonesia
67.8
Vietnam 22 -1.9
4.7 -35.9
-0.2 6.8 -4.6199.5
-3.0 -20.1
0.1 -0.6
5.2 5.0 4.3 4.2 5.1 5.1 2.2 3.9 3.8 0.6 3.2 2.5 4.6 4.1 6.1 8.5 7.2 1.6
1.9 215.7
-22.6 8.3 4.9 312.5 6.9 1,122.1
9.3 5.3
291.1 38.6 67.8
Vietnam 68.8 -35.9 6.8 199.5 -20.1 -22.6 215.7 312.5 1,122.1
(inc insurance) 2.3 4.0 15%5.2 5.0 4.3 Philippines
Malaysia 4.2 5.1 5.1 2.2 3.9 3.8 0.6 3.2 2.5 4.6 4.1 6.1 8.5 7.2 1.6
Real estate
Philippines 0.5 0.5 15%0.2 0.01.2 2.6 6.7 1.5 0.01.2 27.5
1.6 Philippines
1.5 2.3 1.2 54.8 2.2 111.9
0.2 120.5
1.5 0.5 137.70.7 158.3 89.1 2.9 709.1
1.9 2.9 1.5 1.9
Weak
Real Export
estate
Philippines
Mining
0.5Volume
and quarrying
0.5 10% Lacks
0.2 0.01.2 Diversification
2.6
1.6 6.7 1.5 0.01.2 27.5
1.5 2.3 1.2 54.8 2.2 111.9
0.2 120.5
1.5 0.5 137.70.7 158.3 89.1 2.9 709.1
1.9 2.9 1.5 1.9
Singapore 5.6 4.9 2.231.04.7 80.5 0.0 9.7 21.5
8.6 11.5 13.8 -7.2
7.3 16.60.2 16.5 0.4 32.4 11.8
15.1 6.4 154.6
20.1 154.9 6.2 31.6 474.4
14.4 27.7 22.7 16.3
10% 31.0
Mining and quarrying
Singapore 5.6 4.9 2.2 4.7 80.5 0.0 9.7 21.5
8.6 11.5 13.8 -7.2
7.3 16.60.2 16.5 0.4 32.4 11.8
15.1 6.4 154.6
20.1 154.9 6.2 31.6 474.4
14.4 27.7 22.7 16.3
Transport,
Thailand storage
2.4 and
2.0 5%2.112.11.8 360.0
1.4 2.1
104.0 2.3 0.03.9 7.3
0.0 6.11.6 3.4 -32.4
5.1 3.3
-8.5 5.212.85.9 -27.0
8.0 9.57.3 11.3 429.8
8.6 6.1
communication
Philippines
Transport,
Thailand storage exports
and 5% (Figure
2.4 2.0 2.112.11.8 360.0 25),
1.4 2.1which reached
104.0 2.3 0.03.9 7.3
a record high
0.0 6.11.6 3.4 -32.4
of
5.1 3.3 US$ 50.5 billion
-8.5 5.212.85.9 -27.0
8.0 9.5 in 2007, 8.6fell
7.3 11.3 429.8 6.1
Vietnam
communication 0.1 0.2 0% 0.3 0.3 1.0 1.8 2.4 2.2 1.7 1.4 1.3 1.3 1.4 1.5 1.6 1.4 1.8 6.6 9.3 6.9
sharply
Vietnam in 2008
Others 0.1 and 2009
0.2 0%0.3676.3in 613.2
0.3 reaction
102.4
1.0 1.8 to2.4sudden
771.7 reduced
2.2 174.8
1.7 demand
594.11.3
1.4 376.3 from1.5418.8
1.3 590.6
1.4 all 1.6
top196.6
ten
1.4 export
113.66.6markets
1.8 4,628.2
9.3 6.9
Others
led by the US, Japan,-5%China,
Source: ADB 676.3 613.2 102.4 771.7 174.8 594.1 376.3 590.6 418.8 196.6 113.6
and Europe. The top exports – electronics, garments, auto parts, 4,628.2
and
Source: BSP (as of Mar 25, 2010)
Source: ADB -5%
furniture/home furnishings – are produced for these markets, and the majority of employee layoffs
Source: BSP (as of Mar 25, 2010)
and workweek reductions in manufacturing occurred in these industries in the late 2008 and early
2009. Figure
Source: ADB24: Net FDI, % of GDP, ASEAN-6, 1990-2009
and IMF
Figure
Source: ADB24: Net FDI, % of GDP, ASEAN-6, 1990-2009
and IMF
Figure 25:
30%Philippine goods
Singaporeand services exports, current prices, Bn $
Figure
Figure 25:
30%Philippine
25: Philippine goods
goods and and services
services
Singapore
Thailand
exports, exports, current
current prices, Bnprices, Bn $
US$, 1990-2009
25% Thailand
70 Malaysia 8
25%
70 Malaysia
Indonesia
Services, Bn US$, lhs 8
20%
60 Services,
Goods, BnBn Indonesia
US$,
US$, lhslhs
Vietnam
20% 4
Vietnam
__________________________________________________________________
60 15% Trade Philippines
Goods,Balance,
Bn US$, lhsUS$, rhs
Bn 4 13
__________________________________________________________________
50
DECEMBER 2010
15% Philippines
Trade Balance, Bn US$, rhs
0
13
50 10%
DECEMBER
40 2010 10% 0
40 5% -4
5% -4
30
0%
30
0% -8
20 -8
-5%
20
-5%
-12
10
-12
10
0 Source: ADB and IMF -16
0 Source: -16
1990 1991 1992 ADB and 1995
1993 1994 IMF 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: BSP (BOP concept)

Source: BSP (BOP concept)
Fortunately, stronger-than-expected rebound in international trade this year provided a much

__________________________________________________________________
needed breather to exporters. Official data for the first eight months show that value of trade flows13
__________________________________________________________________
DECEMBER
(imports 2010are on track to match revenues in 2007. Likewise, prospects for rapid growth13
and exports)
__________________________________________________________________
of DECEMBER 2010to fill depleted inventories are excellent, and service exports from the fast-
electronics exports
15
__________________________________________________________________
DECEMBER 2010 15
growing IT-BPO
DECEMBER 2010 sector are projected to grow by some 25% annually (approximately US$ 2 billion)
in 2010 and 2011.23
22
Chinese firms have reportedly had difficulty completing stand-alone business deals in mining and telecommunications and are
beginning to acquire significant minority equity ownership in several foreign ventures operating in the Philippines.
23
Services exports projection is from Business Processing Association of the Philippines (BPAP).
DECEMBER 2010 29
Indonesia 0.382 2.532
Malaysia 0.645 4.508
Philippines 0.199 1.414
Singapore 1.104 13.186
Thailand
Joint Foreign Chambers 0.298 4.909 Advocacy Paper
Vietnam 0.003 2.191
Total 2.631 28.740
Source: UNCTAD
Figure 26: Export of goods and services as % of GDP, ASEAN-6, 1990-2009

Figure 26: Exports of goods and services as % of GDP, ASEAN-6, 1990-2009Ê
300%
Singapore
Malaysia
250% Thailand
Vietnam
Philppines
Table 18: Ease of
200% business establishment,
Indonesia foreign companies
150% Ease of
Procedures Time Days per
1 establishment
(number) (days) procedure
index (0-100)
100%
Indonesia 12 86 7.2 52.6
Malaysia 11 14 1.3 60.5
50%
Philippines 10 108 10.8 57.9
Singapore 4 9 2.3 78.9
0%
Thailand 9 34 3.8 60.5
Vietnam 12 94 7.8 57.9
Source: Investing Across Borders, World Bank; 1 - computed
Sources: UN Statistics Division and ASEAN Secretariat
Because the Philippines

Figure is less
45: Voice and dependentpercentile
accountability, on exports than more
rankings, developed Asian economies,
1996-2009
the impact of the
100
drop was less severe than in Asia’s powerhouse export economies such as
Singapore, where 90 exports are more than 200% of GDP and Malaysia at around 100% (see
Figure 26). However,
80 by mid-2010 Singapore had largely recovered as had Malaysia, where the
drop in palm oil70prices was short-lived. Philippine exports net of imported raw materials have
consistently contributed
60 10-14% of GNP over the last decade.24 BSP data shows the value-added
of exports was US$
50 18 billion in 2008. Their reduced levels brought about by the crisis cost the
economy perhaps40 US$ 5-10 billion dollars and reduced GDP growth by several percentage points
from its high of 7%
30 in 2007.
20
Figure 27 shows Philippine exports of goods in 2009 by product segment. Electronics

10
have grown to over0 60% of total exports, twice the value of other manufactured goods exports
(24.5%) and far greater 1996
than 2000
1998
agro-based
2002 2003
products
2004 2005
(5.5%)
2006
and 2008
2007
mineral
2009
products (3.8%). If
included, IT-BPO service exports valued at US$ 6.7 billion in 2009 would
Indonesia Philippines Singapore Malaysia Thailand Vietnam
be about 15% of
Sources: World Bank and author's calculations
the total, with very high local content and value-added. Agro-based and mineral products also
have high local content.
Figure 46: Political stability & absence of violence, percentile rankings, 1996-2009
100
90
80
70
60
50
40
30
20
10
0
24
Dr. Emilio Antonio, President,
1996 CRC, April
1998 2000 23, 2009 2003
2002 2004 2005 2006 2007 2008 2009
Singapore Vietnam Malaysia Indonesia Thailand Philippines
Sources: World Bank and author's calculations

30 DECEMBER 2010
250%
Thailand Vietnam
100%
200% Philppines Indonesia
50%
150%
0%
100%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Advocacy Paper
50% ARANGKADA PHILIPPINES 2010: A BUSINESS PERSPECTIVE
0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Figure 27:27:
Figure Philippine
Philippineexports,
exports,product
productdistribution, 2009
distribution, 2009
Other
Manufactures, 24.
Figure 27: Philippine exports, product distribution,
5%
Special
Transactions,
2009
3.7%
Other
Manufactures, 24. Total Agro-Based
5% Products, 5.5%
Special
Transactions,
Electronics, 3.7%
61.6% Forest
Products, 0.1%
Total Agro-Based
Mineral
Products, 5.5%
Products, 3.8%
Electronics,
Petroleum Forest
61.6%
Products, 0.8% Products, 0.1%
Source: NSO
Mineral
Products, 3.8%
Petroleum
Figure 28 clearly shows 28:
Figure the high potential for export diversification
Products,if0.8%
exports of the agribusiness
Source: NSO Philippine exports, by destination, 2009
and mining sectors can be vigorously developed. Similarly, the potential for increased revenue is
high for services for medical visitors, retired foreigners, and
Others, 14.3% international tourist visitors.
US, 17.7%
Figure28:
Figure 28:Philippine
Philippine exports,
exports, by by destination,
destination, 20092009
ASEAN, 15.2% Others, 14.3% US, 17.7%

Japan, 16.2%
ASEAN, 15.2%
China
EU, 20.6% (Mainland+HK, excJapan, 16.2%
Source: NSO Taiwan), 16.0%
China
EU, 20.6% (Mainland+HK, exc
Source: NSO Taiwan), 16.0%
__________________________________________________________________ 16
DECEMBER 2010
“…ultimately accountability for a country’s failure to attract investment must lie with its
leadership and government institutions.”
__________________________________________________________________ 16
DECEMBER 2010
Oscar M. Lopez, Chairman, Lopez Group of Companies, FOCAP speech, January 15, 2008
DECEMBER 2010 31
Gita Wirjawan (head of Indonesian Investment Coordinating Board) said that Indonesia
should be able to achieve a “sweet spot” of total investment of US$ 25-35 billion a year.
Vice president Boediono…emphasized the need for more private sector investment. “To
accelerate growth from 6 to 7 %, we need improved infrastructure, roads and railways
without delay,” Boediono said. “This investment will not be possible without investment from
the private sector as the government does not have anywhere near enough money.” “We
have worked hard to reduce the hurdles to investment in infrastructure,” Boediono added.
“…we have…a rather ambitious infrastructure-development plan for the next 5years.”
Reuters, Indonesia News, March 22, 2010
“The present dispensation’s horrible image is the biggest deterrent. Benigno Aquino III
cited basics we must provide in order to increase FDI and local investments. Level playing
field. Rule of law and predictable policies. Provide infrastructure, upgrade communications,
secure reliable and reasonably priced power.”
Boo Chanco, The Philippine Star, February 24, 2010
“The primary incentive for investors will be the assurance of peace and order, especially
in areas like Mindanao, and the setting up of systems that will guarantee less graft and
corruption… such as increased private sector participation in government procurement by
creating an Economic Coordinating Council that will review all bids for projects.”
2010 Platform of Joseph Estrada, erap.ph, accessed May 12, 2010
“If we allow foreigners to own land they can compete with our local realtors and once (they
own land) they will develop that. Once they develop that, it will generate jobs.”
Joseph Estrada, Philippine Daily Inquirer, May 2, 2010
“When we started experiencing corruption in Subic… smuggling prospered, investments

went down. All we attracted as investors were the minnows. The moment we removed
corruption, we attracted Hanjin, and much more foreign investment.”
Dick Gordon, The Manila Times, April 25, 2010
“One cannot resolve poverty. One can only set the stage for people to get out of it… My goal
is to make the Philippines a favorable platform for investments both domestic and foreign,
with some conditions, for example protection of workers’ rights, of the environment, of our
farmers. The goal is to provide proper government investments, such as infrastructure, and
policies such as transparency, to afford confidence in our economy and in our people—
basic education reform.
Gilbert Teodoro, The Philippine Star, January 10, 2010
“In his first 100 days, Manny Villar plans to set up a one-stop shop for foreign and local
investors to encourage a healthy investment climate and eliminate red tape.”
Manila Bulletin, May 4, 2010
32 DECEMBER 2010
“Rationalizing investment incentives both local and foreign to favor labor-intensive industries
can be done. There is a mismatch in the availability of skills and the actual manpower
requirements of employers... Entrepreneurship is a long-term solution to joblessness… We
will focus on labor intensive industries like tourism, BPOs and the hospitality industries…
key engines of economic growth.”
Manuel Villar, Jr., Philippine Daily Inquirer, May 2, 2010

The Institute for International Finance (IIF) estimated in March 2010 that the Emerging Asia
region will receive US$ 300 billion in total capital inflows in 2010 and 2011, almost twice as much
as 2008
JOINTandFOREIGN
more than other developing regions (Africa/Middle East, Emerging
CHAMBERS ADVOCACYEurope, PAPER
and Latin
America) (seeARANGKADA
Table 14). Furthermore,
PHILIPPINES 2010: A BUSINESS PERSPECTIVE to be in
one-third of this forecast capital inflow is expected
the________________________________________________________________________
form of direct investment and one-fifth in equity investment (see Figure 29). China received the
majority of this FDI, over US$ 4,400 billion from 1997 to 2008.
Table 14: Private capital flows to emerging regions, Bn $US, 2008-2010 (F)
Table 14: Private capital flows to emerging regions, Bn US$, 2008-2010 (F)
2008 2009e 2010f 2011f
2008 2009e 2010f 2011f
Private Inflows
Private
Latin Inflows
America
130.6 135.7 176.5 172.5
Latin America
Emerging Europe 130.6
267.4 135.7
20.3 176.5
174.6 172.5
243.5
Emerging Europe 267.4 20.3 174.6 243.5
Africa/Middle East 105.5 43 68.5 82.8
Africa/Middle East 105.5 43 68.5 82.8
Emerging Asia 163.6 236.3 302 299.1
Emerging Asia 163.6 236.3 302 299.1

Official Flows 57.2 68 55.8 35.3
Official Flows 57.2 68 55.8 35.3
JOINT
Latin FOREIGN
America
Latin America
CHAMBERS 14
14
21.8
21.8
ADVOCACY
14.7
14.7
PAPER17.3
17.3
Emerging
Emerging ARANGKADA
Europe
Europe PHILIPPINES
20.7
20.7 2010: A33.8
BUSINESS PERSPECTIVE
33.8 18.4
18.4
-1.1
-1.1
Africa/Middle East 3.5 1.8
________________________________________________________________________ 6.3 4.8
Africa/Middle East 3.5 1.8 6.3 4.8
Emerging Asia 19.1 10.7 16.4 14.2
Emerging Asia 19.1 10.7 16.4 14.2
Sources: IIF and Macaranas, 2010
Sources: IIF and Table 15: Areas
Macaranas, 2010 of dissatisfaction, Philippines, 2003-2009

Issue Figure 29: Emerging Asia’s external

2003 2004 financing,
2005 2006by 2007
source,2008
2010 2009 Average
Figure 29: Emerging Asia’s external financing, by source, 2010
Corruption 91 86 88 77 72 84 88 84
Ê
Stable government and political system 70 70 68 70 55 59 47 63
Net private Net portfolio Net commercial
Infrastructure inflows, 24.9% 69 67 68 9.7% 50
investment, 55 banks,54 1.9% 49 59
Laws and regulations 48 61 63 52 51 47
Net private 48 53
creditors, 2.8%
Tax Structure 49 58 56 45 46 42 41 48
Net non-banks, 0.9%
Local Protectionism 40 53 46 39 51 45 43 45
Net official inflows, 2.9%
Availability of raw materials 22 40 42 35 23 21 49 39
Other, 6.7%
New business incentives by the government
Net equity 45 57 48 30 30 IFIs,
22 0.3% 31 38
investment, 22.1%
Personal Security 44 39 45 22 31 30 20 33
Bilateral creditors, 2.6%
Ease of moving products 29 33 26 14 15 39 36 27
Source: AmCham Philippines
Net direct
Sources: IIF and Macaranas, 2010 Investments, 31.8%
Figure 30: Top areas of dissatisfaction, Philippines, 2003-2009
100
90 Corruption
DECEMBER 2010 33
80
70 Stable government
and political system
Infrastructure
60
Philippine Government development plans targeted GDP growth in the 7-8% range when the
global economy was growing robustly.25 Economists and political leaders are confident that high
growth is again possible with better governance, modern infrastructure, and much higher domestic
and foreign investment. We suggest the GRP organize a Special Experts Group comprising leading
economists, businessmen and senior government leaders to recommend key reforms that will help
the economy recover and grow at least 9% by the middle of the next presidential term.
Headline Recommendations
1. The new Philippine administration should consider adopting as a major high

priority policy goal doubling the GDP growth rate to 9 percent and adopt and
implement a plan to achieve this within 3 years. This has to be supported by a
clear long-term industry policy.
2. Job creation by the private sector should receive extremely high priority, to
reduce unemployment and underemployment by 50% and to give Filipinos more
alternatives to working abroad.
3. FDI should be targeted to reach over US$ 7 billion26 a year in 3-4 years. FDI
should also be measured in terms of job creation and exports (products and
services) generated.
4. An export target of US$ 100 billion27 in 5-6 years should be set, with more
diversified exports and new markets.
5. Adequate funds should be made available for international promotion
of Philippine exports, inwards investments and tourism, medical travel and
retirement programs.28
6. A significant share of remittances should be channeled into productive

investments in the domestic economy through bonds and other funds.
7. Double funds available for physical and social infrastructure, civil service
quality improvement, investment, tourism and trade promotion, and other growth-
promoting expenditures through less waste in government spending, more
BLANK PAGE
effective tax collection, and selectively increasing the Expanded Value
Added Tax (EVAT), before other taxes.
8. Public and private sectors should organize a Special Experts Group comprising
economic, business, labor, and government leaders to recommend key reforms
to make the economy grow at least 9%.
25
The current Medium-Term Philippine Development Plan (2004-2010) targeted 7.0-8.0% GDP growth for 2010. The economy
achieved 7.2% GDP growth in 2007.
26
US$ 7.5 billion is 2.5 times the net FDI in 2006 and 2007.
27
US$ 100 billion is double the value of exports in 1987 and assumes a 20% rate of increase from 2010.
28
Department of Trade and Industry (DTI) launched a new Philippine Investment Promotion Plan in mid-2010 to coordinate the
efforts of 11 investment promotion agencies (IPAs). However, no additional budget for promotion was announced.
34 DECEMBER 2010

Part 1 Growing Too Slow

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Joint Foreign Chambers

The Philippine Economic Landscape in 2010: Faster Growth is Essential

Decades Lost to Slow Growth

Sources: NSCB; Bernardo and Tang, 2008

Figure 3: Real GDP growth rates, ASEAN-6, 1990-2009

President Gloria Macapagal Arroyo, February 5, 2010 Lipa, Batangas

Philippine Growth Has Not Been Inclusive

Figure 5: Poverty trend in the Philippines, 1985-2006

Figure 4: Poverty incidence, ASEAN-5, 1990-2006

“My biggest frustration as presidential adviser is that 34 quarters of uninterrupted expansion

Source: IMF; Note: +4 includes China, India, Japan and S.Korea

Figure 7: Annual GDP per capita, US$ PPP, ASEAN-6, 1990-2015P

6% Singapore Philippines Malaysia Vietnam Indonesia Thailand

3% Figure 10: Share in world GDP, 1990-2009

Figure 9: Average annual population growth, ASEAN-6, 1961-2008

Singapore Philippines Malaysia Vietnam Indonesia Thailand

Source: World Bank

Figure 9 shows Figure 10: Share ingrowth

Ruchir Sharma, Newsweek, January 22, 2010

Living in the High Growth Neighborhood

Source: World Bank

Source: World Bank

Table 1: Growth forecasts, East Asia, 2010-2011

World Bank 2008 2009 2010f 2011f

5 Indonesia Malaysia Philippines Thailand Vietnam

The World Bank -10

DECEMBER 2010 TableFigure24: NetASEAN-6,

JOINT FOREIGN CHAMBERS ADVOCACY PAPER

of the three 35economiesYear

25 2010 $179 $1,905 94 15%

A much higher rate2015

Source: Table 2: Definitions

Table 3: 13 Success Stories of Sustained High Growth

Economy Period of high growth** Per capita income at the

• fully exploited the world economy;

Another perspective on Philippine potential for

Inadequate Skills + Insufficient Jobs = High Unemployment/Underemployment

Joint Foreign Chambers

HS graduate, 33.1% Elem. No

In early 2010 15 the National Competitiveness

Level (based on WB's prj growth), lhs 40% -10%

Remittances Are Important But Distort the Economy

HS graduate, 33.1% Elem. graduate, 7.4%

Joint Foreign Chambers HS Advocacy Paper

Source: NSCB2015 $42

Twice as Much Investment Needed for Higher Growth

35% Eastern Asia

Figure 21: Gross domestic investments, as % of GDP, ASEAN-6, 1990-2009

20% Table 5: Domestic investment ratio, ASEAN-6, % of GDP, 1990-2009

10% 1990-1996 2000-2008 2009*

Marcos and recovered under Presidents

Figure 22: Net FDI, Philippines, 1990-2009, Bn $

GDP. Table 7 provides

Figure 24: %Net FDI, ASEAN-6,

Table 7: Net FDI, % of GDP, ASEAN-6, 1990-2009

Table 8: Net FDI, ASEAN-6, 2008-2009, Bn US$

Population, FDI per FDI, % of

Table 9: FDI accumulation, 5-year interval, Bn US$, 1970-2009

Table 10: FDI annual average, 5-year interval, Bn US$

Countries 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99 2000-04 2005-09

Table 11: FDI accumulation Table 12: FDI annual average

Countries 1970-89 1990-09 Countries 1970-89 1990-09