A research paper in Economics

PHILIPPINES

Members:
Early History

The Vietnamese trace the origins of their culture and nation to the fertile plains of the
Red River Delta in northern Vietnam. After centuries of developing a civilization and economy
based on the cultivation of irrigated rice, in the tenth century the Vietnamese began expanding
southward in search of new rice lands.

Under the Chinese, Vietnam evolved through the combined influence of two
contradictory factors. On the one hand, there was a policy of economic exploitation and cultural
assimilation, and on the other, there was a steadfast popular resistance marked by armed
insurrection against foreign domination. When the Vietnamese finally began to rule themselves
in 10th century one of the main goals was founding a centralized power structure capable of
assuming direction of the economy —particularly management of the dyke system. French
colonial rule was, for the most part, politically repressive and economically exploitative.

North, South, and Central Vietnam historically were divided by ethnolinguistic

differences, but until the midnineteenth century and the beginning of the French colonial period,
they were all agrarian, subsistence, and village-oriented societies. The French, who needed raw
materials and a market for French manufactured goods, altered these commonalities by
undertaking a plan to develop the northern and southern regions separately. The South, better
suited for agriculture and relatively poor in industrial resources, was designated to be developed
agriculturally; the North, naturally wealthy in mineral resources, was selected as the region in
which industrial development was to be concentrated. The separation distorted the basic
Vietnamese economy by overly stressing regional economic differences. [Source: Library of
Congress]

Despite the return of peace after the Vietnam War ended in 1975, for over a decade
the country experienced little economic growth because of conservative leadership policies, the
persecution and mass exodus of individuals - many of them successful South Vietnamese
merchants - and growing international isolation. However, since the enactment of Vietnam's "doi
moi" (renovation) policy in 1986, Vietnamese authorities have committed to increased economic
liberalization and enacted structural reforms needed to modernize the economy and to produce
more competitive, export-driven industries.
Population of the Philippines

Fast-paced population growth and rampant urbanization represent some of the major
population concerns in the Philippines, a country of 80 million people where the average number
of children born to a woman is close to four and where a sizeable 37 percent of the population is
under age 15.

These issues represent major stumbling blocks in efforts to reduce poverty and improve
living standards in the Philippines. In 2000, roughly one-third of the population (nearly 27
million Filipinos) lacked the roughly US$275 required annually to satisfy food and non-food
basic needs, the National Statistical Coordination Board (NSCB) estimates. Such poverty,
exacerbated by prolonged El Niño-induced drought and the residual effects of the 1997/1998
financial crisis that shook the region, limits the ability of the poor to gain access to health and
other services.

The Philippines is also among the world’s fastest urbanizing countries, and overcrowded
cities present their own challenges. With some 47 percent of the population living in urban areas,
compared with 31 percent in Thailand and 16 percent in Cambodia, the country has more than
200 urban areas that have populations of more than 50,000, notes the country’s Commission on
Population (POPCOM). By World Bank estimates, these urban centers could expand to some
600 by 2020, largely because high levels of rural poverty are pushing people into the cities.

The concentration of economic development in relatively few urban areas and rapid
population growth throughout the country are other factors contributing to urban sprawl.
Compared with other countries in the region, the Philippines is experiencing rapid population
growth. The rate of natural increase — the birth rate minus the death rate — is 2.2 percent,
compared with 0.8 percent in Thailand and Singapore and 1.9 percent in Malaysia.

In addition to fleeing to urban commercial centers, many people leave the country for
work. An average of 2,500 Filipinos leave the country every day for work abroad, and the
Philippines is second only to Mexico as an exporter of labor. An estimated 10 percent of the
country’s population, or nearly 8 million people, are overseas Filipino workers distributed in 182
countries, according to POPCOM. That is in addition to the estimated 3 million migrants who
work illegally abroad. According to official statistics of the Philippine Overseas Employment
Administration, Filipino workers abroad sent home US$6.8 billion in 1999 alone. A large
proportion of these remittances come from women who are the majority of overseas Filipino
workers.

Last July 27,2014, the Philippines reached 100 million of its population. Because of its
rapid growth of population, the country has a broad and limitless needs- education, health care,
shelter , employment, and better sanitation to name a few. But is population growth really the
root cause of these problems and needs? History seems to indicate otherwise.

Rapid human population growth has a lot of outcome. Population grows fastest in the
world’s poorest countries. A lack of basic needs results in physical weakness and poor health.
Poor health decreases the ability of the poor to work and put them deeper into poverty.
Overpopulation and poverty have long been associated with increased death, and disease.

Many countries lack adequate supplies of basic materials needed to support their current
population. Excess and extra portion of population with nowhere to put and of use because of the
imbalance in the ratio of birth and death of the Filipinos. Rapid population growth can affect
both the overall quality of life and the degree of human suffering on Earth.
Year Philippines

2007 89.2935 Million

2008 90.7519 Million

2009 92.2209 Million

2010 93.7266 Million

2011 95.2779 Million

2012 96.8666 Million

2013 98.481 Million

2014 100.1022 Million

2015 101.7164 Million

2016 103.3202 Million

2017 104.9181 Million

GDP/GNP/GROWTH RATE AND DEVELOPMENT

Gross National Product of Philippines

Year GNP (current USD) GNP Growth (annual%)

2007 174.831 Billion 5.844
2008 204.478 Billion 4.432
2009 204.243 Billion 4.686
2010 240.579 Billion 6.917
2011 268.494 Billion 2.89
2012 301.388 Billion 7.141
2013 330.277 Billion 8.199
2014 344.879 Billion 5.784
2015 354.141 Billion 5.984
2016 367.012 Billion 6.534
2017 377.089 Billion 6.486

9 8.199
8
6.917 7.141
7 6.534 6.486
5.844 5.784 5.984
6
4.686
Percent

5 4.432

4 Philippines
2.89
3

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
 Gross Domestic Product of Philippines
Year GDP (current USD) GDP Growth (annual%)
2007 149.36 Billion 6.617
2008 174.195 Billion 4.153
2009 168.335 Billion 1.148
2010 199.591 Billion 7.632
2011 224.143 Billion 3.66
2012 250.092 Billion 6.684
2013 271.836 Billion 7.064
2014 284.585 Billion 6.145
2015 292.774 Billion 6.067
2016 304.889 Billion 6.876
2017 313.595 Billion 6.685

8 7.632
7.064 6.876 6.685
6.617 6.684
7
6.145 6.067
6
Percent

5
4.153
3.66 Philippines
4

2
1.148
1

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
 The economy in the Philippines in 2009 is the lowest in 11 years, as the country struggled
amid the global financial crisis. It expanded by 7.6% in 2010. The recovery of the global
economy played a big part in the strong performance by helping boost exports and revive key
industries. GDP in 2017 was good, but 2016 was better when it grew by 6.9%. from the
production side, industry, was the leading growth sector in 2017, followed by services and
agriculture. From the expenditure side, the growth was lead by investment or capital formation
followed by government final consumption expenditures and household final expenditures. Net
exports was 1.6% of 2017 GDP.

Philippine economy in 2007 was a period of growth rates, due to the emergence of the
Overseas Filipino Worker (OFW) and the Business Process Outsourcing (BPO). It improved the
contributions of OFW remittances and investments to growth. In 2008, Philippines was affected
by global economic crisis. High inflation rates for rice and oil started to plague the country anew,
and this led to another fiscal crisis, which actually came along with the major recession that the
United States and the rest of the world were actually experiencing. The E-VAT policy was
enacted and established to address the worsening fiscal deficits. The administration during this
period also advocated for investments to improve tourism, and encouraged foreign investments
for the betterment of the Philippine economy and its development. From that period, the
government managed foreign debts falling from 58% in 2008 to 47% of total government
borrowings. At the same time, the country’s merchandise exports were constrained by weaker
global demand, especially for electronics goods, one of the Philippines’ biggest export products.
Net exports contracted in 2008. Private investment in building expanded, but investment in the
manufacturing sector remained weak due to nagging problem in the domestic investment
environment. Foreign direct investment, an important source of funding ad technology for
manufacturing was low compared to other countries in Asia. Services sector growth dipped, as
retailing and finance sectors slacken.

The downturn of the Philippine economy in 2009 was much sharper than initially
anticipated. Two main reasons of the adverse outcome were, one, the recession in industrialized
economies was deeper and longer than initially forecast resulting in a sharp contraction in
exports from emerging markets, including Philippines. Two, the country was buffeted by severe
natural disasters in the last quarter of the year. On the production side, significant contractions
occurred in manufacturing and electricity, gas, and water leading to a fall in industry sector
output. Meanwhile, there was a sharp deceleration in the agriculture sector and the transport,
communication and storage sub-sector.

The Philippine economy picks up in 2010. According to the 2012 World Wealth Report,
the Philippines is the fastest growing economy in the world in 2010 with a GDP growth of 7.6%
driven by the growing BPO and overseas remittances.

The country markedly slipped to 3.6% in 2011 after the government placed less emphasis
on exports, as well as spending less on infrastructure and the sustained decline in the fisheries
subsector. At the same time, typhoons, flooding and low pressure area adversely affected
agriculture production and damaged infrastructure.

Remarkably, the economy grew by 6.68% in 2012. The Philippine economy has been
growing steadily over decades and the International Monetary Fund in 2014 reported it as the
39th largest economy in the world. However, its growth has been behind that of many of its Asian
neighbours, the so-called Asian Tigers, and it is not part of the group of 20 nations. Instead it is
grouped in a second tier for emerging markets or newly industrialized countries. In the years
2012 and 2013, the Philippines posted high GDP growth rates, reaching 6.6% in 2012 and 7.06%
in 2013.

In 2016, The Philippine economy remained resilient to global headwinds, as robust

domestic demand pushed the GDP growth rate to 6.9 percent. Capital formation drove overall
growth for the first time since 2013, supported by an expansionary fiscal policy focused on
public infrastructure spending, which spurred construction activity. Consumption growth
accelerated significantly for the second consecutive year, as an accommodative monetary policy
kept interest rates low, supporting consumer lending while low inflation boosted households’
purchasing power. Meanwhile, a continued increase in remittance inflows bolstered household
consumption. However, import growth outpaced export growth due to softer external demand in
a weaker-than-expected global economy. The industrial and services sectors expanded, while the
agriculture sector contracted due to structural vulnerabilities. Growth has become more inclusive
in recent years, and the expansion in 2016 contributed to increased job creation. By the end of
the year, the unemployment rate had fallen to a historic low of 4.7 percent. However,
underemployment has remained high at around 20 percent over the last ten years, raising job-
quality concerns. The industrial and services sectors drove job creation in 2016, largely
offsetting substantial job losses in the agriculture sector. The latest available poverty estimates,
which are based on 2015 data, show a significant reduction in national poverty levels, with the
incidence of poverty declining from 25.2 percent in 2012 to 21.6 percent in 2015.

The Philippine economy grew by 6.7 percent in 2017. This is within the official target
growth range of 6.5-7.5 percent, but slower than the 6.9 percent growth recorded in 2016.
Philippine economic growth is poised to be the fastest amongst the ASEAN-5 countries,
although it lagged behind that of Vietnam. The services sector continued to be the main growth
driver. Economic growth was also supported by the robust expansion of manufacturing and the
strong performance of trade in goods. The agriculture sector, likewise, posted its highest growth
rate in recent years. Macroeconomic fundamentals remained intact and helped anchor consumer
and business confidence. Despite the depreciation of the peso, inflation was within the
pronounced target and consequently, interest rates remained steady. The economy also benefited
from the continuous inflow of remittances, foreign direct investments, export earnings and sound
fiscal and external accounts position.

INFLATION RATE

The inflation environment remained benign in the third quarter of 2007 despite uptrends in
the prices of certain food items, energy and educational services. Headline inflation rose slightly
compared to the second quarter of 2007 but remained lower compared to the average recorded a
year earlier. The year-to-date average inflation rate remained at 2.9 percent, well below the
average inflation a year ago and the target range of 4-5 percent for 2007.
Inflation pressures intensified in July and peaked in August, as headline inflation
averaged higher during Q3 2008 driven by the momentum of the global commodity price
increases. However, with the abatement of food and oil prices, September inflation declined after
10 months of continued acceleration. Nevertheless, supply constraints and low inventories are
expected to persist for some time and the momentum in demand growth in large emerging
economies still remains considerable. Supply and demand balance in the commodities market is
therefore expected to remain tight.
 Headline inflation was benign for most of 2009 largely due to base effect and stabilizing
commodity prices. Full‐year average inflation stood at 4.2 percent, well within the target range
of 2.5 to 4.5 percent. This allowed the Bangko Sentral ng Pilipinas (BSP) to increase system
liquidity by slashing its key policy rate by a total of 200 basis points (bps) from December 2008
to July 2009.

The December inflation figure, which was in line with market expectations, brought the
average headline inflation rate for 2010 to 3.8%, near the low end of the central bank's target
range of 3.5% to 5.5%. The NSO said higher rates of price increases in food, beverages and
tobacco (FBT) as well as clothing were offset by slower annual growths registered in fuel, light
and water (FLW), services and miscellaneous items indices.

Year-on-year (y-o-y) headline inflation continued to decelerate in Q2 2012 to 2.9 percent

from the quarter-ago and year-ago rates of 3.1 percent and 5.0 percent, respectively. This brought
the ytd average inflation rate to 3.0 percent, which is at the low end of the Government’s
inflation target range of 3-5 percent for 2012. The slowdown in headline inflation was due
largely to slower price increases of key food items, notably rice, corn, meat, and oils, as supply
remained adequate. Lower non-food inflation, owing to lower electricity rates and downward
price adjustments for LPG, gasoline and diesel, was also recorded during the quarter.

In year 2014, Statistics Office said inflation quickened to 4.1 percent in December from 3.3
percent in November and from 3 percent a year earlier. Economic Planning Secretary Arsenio
Balisacan, who is also the NEDA secretary general, said major food items rose across the board,
especially in storm-hit areas. Yolanda lashed central Philippines in November, leaving 6,000
people dead or missing and more than four million homeless. It also destroyed key infrastructure,
which led to gridlocks resulting in artificial supply crunches, the government said. Almost all
food items in the average consumer basket increased, which can be mainly attributed to the
impact of Typhoon Yolanda

In year 2015, the food inflation could have been lower if not for consumers’ high demand for
vegetables and fish during the Lenten season, NEDA Director-General Arsenio M. Balisacan
noted. Local bread producers also contributed to within target inflation, as they committed to cut
down prices since transportation and production costs declined due to cheaper fuel.
In the years 2016 and 2017, the consumer price index (CPI) has risen. The NSO reported price
rise in food and non-alcoholic beverages, alcoholic beverages and tobacco, furnishing, household
equipment and routine maintenance of the house, transport, communication, and restaurant and
miscellaneous goods and services. Also, slower annual average rates were recorded in the other
commodity groups with the health index.

Year Inflation Rate in Philippines

2007 2.9

2008 8.3

2009 4.2

2010 3.8

2011 4.7

2012 3.1

2013 3

2014 4.1

2015 1.4

2016 1.8

2017 3.2
LABOR FORCE

PHILIPPINES LABOR FORCE

65 64.6
64.4
64.1 64.2
64 64 63.9
64 63.6 63.7
63.5

63

62
61.2
61

60

59
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Series 1 64 63.6 64 64.1 64.6 64.2 63.9 64.4 63.7 63.5 61.2

Philippines Labour Force Participation Rate is data reached the an all-time high of
64.6% in 2011 and a record low of 61.2% in 2017. The decline of labor force participation rate
was attributed primarily to young Filipinos still completing their formal education as a result of
the implementation of the “K to 12” programs as well as to the increase in females assuming
household duties. In terms of class of workers, the number of wage and salary workers
decreased, even as employment in private establishments and in government/government
corporations increased slightly. Meanwhile, vulnerable employment (i.e., the proportion of self-
employed and unpaid family workers to total employment) declined as the number of unpaid
family workers contracted.

In conclusion, the labor force participation rate in Philippines decline in 2017 and the
economic condition needs to be improved since labor force participation rates have a significant
impact on a country’s economic vitality.
Philippines Labor Force 2007

The number of employed persons in July 2007 was estimated at 33.3 million. This placed the
employment rate at 92.2 percent, which is not significantly different from last year's rate of 91.9
percent.

Five regions have a high employment rate, with 96 for every 100 of their labor force reported as
employed in July 2007. These are Cagayan Valley (96.2%), Zamboanga Peninsula (96.1%),
SOCCSKSARGEN (95.9%), Autonomous Region in Muslim Mindanao (95.7%) and
MIMAROPA (95.6%). The National Capital Region (NCR) (87.0%) and Central Luzon (88.5%)
both registered low employment rate.

2008

The number of persons in the labor force, or those who are either employed or unemployed, was
estimated at 36.4 million out of the estimated 57.4 million population 15 years old and over in
January 2008.

These numbers translate into a labor force participation rate (LFPR) of 63.4 percent compared to
last year figure of 64.8 percent.

The LFPR was highest in Northern Mindanao at 69.5 percent, while lowest in Autonomous
Region in Muslim Mindanao (ARMM) at 57.1 percent.

Philippines Labor Force 2011

In 2011, out of the 61.9 million population 15 years old and over, about 40.0 million were in the
labor force or economically active. This figure translates to an annual labor force participation
rate (LFPR) of 64.6 percent. In 2010, the LFPR was 64.1 percent. Among regions, MIMAROPA
and Northern Mindanao registered the highest annual LFPR both at 70.0 percent, while ARMM
posted the lowest at 55.6 percent (Table 1).
The annual employment rate or the proportion of employed persons to total labor force in 2011
was estimated at 93.0 percent. This rate is slightly higher than the annual estimate in 2010,
which was 92.7 percent. There were four regions with employment rate less than the annual
national rate: National Capital Region (lowest at 88.7%), CALABARZON (90.3%), Ilocos
Region and Central Luzon (both 91.5%). The regions that posted an employment rate higher
than 95 percent were: Cagayan Valley (highest at 97.1%). Zamboanga Peninsula (96.8 %), the
Autonomous Region of Muslim Mindanao or ARMM (96.6 %), MIMAROPA and
SOCCSKSARGEN (both at 96.1%), and Northern Mindanao (95.5%).

Philippines Labor Force 2012

The annual employment rate for 2012 was estimated at 93.0 percent and the annual
unemployment rate, at 7.0 percent. Meanwhile, the underemployment rate was 20.0 percent
 EMPLOYMENT RATE

Philippines Employment Rate

95

94.5 94.5

94 94.3

93.5 93.7
93.7

93
93 93 93.2
92.5
92.8
92.6 92.7
92 92.5

91.5
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year Employment Rate in Philippines

2007 93.7
2008 92.6
2009 92.5
2010 92.7
2011 93
2012 93
2013 92.8
2014 93.2
2015 93.7
2016 94.5
2017 94.3

Philippines employment rate data reached an all-time high of 94.5 % in 2016 and a record low
of 92.5% in 2009. During 2016, the services sector continued to be the highest employer and
the key driver for the robust expansion in employment in the services sector was wholesale and
 retail trade, repair of motor vehicles and motorcycles. The industry sector also supported
employment and this was attributed to the vibrant construction sub-sector.

In conclusion, the services sector drives strong employment growth in 2016 and the
increased level of employment growth involves both a high economic performance, expressed
mainly by the high level of work performance and especially the development and diversification
of the services sector.

UNEMPLOYMENT RATE

Philippines Unemployment Rate

8
7.4 7.5
7.3 7.2
7
7 7
6.8 6.3
6 6.3 5.7

5 5.5

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
 Year Unemployment Rate in
Philippines

2007 6.3

2008 7.4

2009 7.5

2010 7.3

2011 7

2012 7

2013 7.2

2014 6.8

2015 6.3

2016 5.5

2017 5.7

The unemployment rate of 6.3 percent in October 2007 was lower than last year's estimate of 7.3
percent. Among the regions, only the National Capital Region (NCR) recorded a double-digit
unemployment rate of 10.6 percent, which is also the highest among the regions. The proportion
of males to total unemployed (63.5%) in October 2007 is greater than that of females (36.5%).
Unemployed persons who had attained high school level comprised 46.2 percent of the total
unemployed, of which 33.2 percent were graduates. About 39.5 percent of the total unemployed
had reached college level, and 13.7 percent attained elementary level.

Unemployed rate in 2008 persons in the labor force who are reported as: (1) without work; and
(2) currently available for work; and (3) seeking work or not seeking work because of the belief
that no work is available, or awaiting results of previous job application, or because of temporary
illness or disability, bad weather or waiting for rehire or job recall.

Unemployment rate is 7.7 percent in January 2009. The number of unemployed in January 2009
was estimated at 2.9 million which translated to an unemployment rate of 7.7 percent. Two of the
seventeen regions recorded a two-digit unemployment rate, National Capital Region at 14.0
percent and CALABARZON at 10.9 percent. For every ten unemployed, five (49.2%) were in
the age group 15 to 24 years, while three were in the age group 25 to 34. About 41.0 percent of
the unemployed had attained college level while about 32.7 percent were high school graduates.

About 2.9 million Filipinos were unemployed in 2010 representing an unemployment rate of 7.3
percent for the year. The unemployed persons who have attained high school accounted for 45.2
percent of all unemployed. The proportion of unemployed males was greater than that of their
female counterparts (63.3% compared to 36.7%).

Unemployment rate is 7.2 percent in April 2011. The number of unemployed in April 2011 was
estimated at 2.9 million which translated to an unemployment rate of 7.2 percent. For every ten
unemployed, five were in the age group 15-24 years, while three were in the age group 25-34.
Around 23 percent of the unemployed had attained college level, 20.4 percent were college
graduates, and 32.6 percent were high school graduates (Table 10). Among the regions, only
NCR and CALABARZON recorded a 2-digit unemployment rate of 11.6 and 10.0 percent.

In year 2012, the unemployed persons numbered 2.8 million persons resulting in an
unemployment rate of 7.0 percent (Tables 3 and 4). Half of the unemployed were in the age
group 15 to 24 years. By education, among the unemployed, high school graduates comprised
33.3 percent, college graduates, 19.6 percent; and elementary graduates, 7.4 percent.

The number of new entrants was estimated at 912 thousand, accounting for 2.3 percent of the
total labor force population of 40.4 million (Table 5). The employed persons who were new
entrants totaled 672 thousand or 73.6 percent of the total new entrants, while the unemployed
new entrants, 241 thousand or 26.4 percent. More than 29 percent of the total new entrants were
high school graduates while about one-fourth (24.4%) were college graduates.
The unemployment rate in 2013 was estimated at 7.3 percent, which translates to a number of
unemployed which is approximately 3.0 million. Of this number, 62.1 percent were males. The
largest number of the unemployed were in the age group 15 to 24 years (48.8%), followed by the
age group 25 to 34 years (30.0%). By educational attainment, one-fifth (20.0%) of the
unemployed were college graduates, 13.8 percent were college undergraduates, and 32.7 percent
were high school graduates.

The unemployed in year 2014, persons reached 2.7 million persons resulting in an
unemployment rate of 6.8 percent (Tables 3 and 4). Close to half (49.1%) of the unemployed
were in the age group 15 to 24 years. Among the unemployed, 63.6 percent were males. By
highest grade completed, among the unemployed, high school graduates comprised 33.2 percent;
college graduates, 21.6 percent; and elementary graduates, 6.8 percent.

In year 2015, the unemployed persons numbered about 2.6 million resulting to an unemployment
rate of 6.3 percent (Tables 3 and 4). Of this number, 79.8 percent belonged to age group15 to 34
years wherein those in age group 15 to 24 years comprised 49.0 percent and those in the age
group 25 to 34 years, 30.8 percent. There were more unemployed males (63.7%) than
unemployed females (36.3%). One-third of these unemployed persons were high school
graduates (33.5%) and more than one-fifth were college graduates (21.8%).

The total employed persons was approximately 40.8 million in 2016 (Table 1). Employed
persons are grouped into three major sectors - agriculture, industry and services sector. Those in
the services sector comprised more than half (55.6 %) of the total employed persons. About 19.6
percent were engaged in wholesale and retail trade or in the repair of motor vehicles and
motorcycles. Workers in the agriculture made up the second largest sector accounting for 26.9
percent, while those in the industry sector, 17.5 percent. As to occupation groups, workers in
the elementary occupations remained the largest group making up 28.1 percent among the total
employed persons in 2016. Managers comprised the second largest occupation group (17.0%),
followed by service and sales workers (14.8%) and skilled agricultural, forestry and fishery
workers (12.4%). Employed persons fall into any of these classes of workers - wage and salary
workers, self-employed workers without any paid employee, employers in own family-operated
farm or business, and unpaid family workers. Those classified as wage and salary workers
accounted for 61.7 percent of the total employed persons in which those who worked in private
establishments was the largest in proportion (48.2%), followed by workers in government and
government-controlled corporations (8.1%), workers in private households (5.1%) and workers
with pay in own family-operated farms or businesses (0.3%). The self-employed workers
without any paid employee was estimated at 26.9 percent of the total employed, while the unpaid
family workers, 8.0 percen. Employed persons are classified as either full-time workers or part-
time workers. Full-time workers are those who work for 40 hours or more in a week, while
part-time workers work for less than 40 hours. Two-thirds (66.6%) of the total employed
persons worked for 40 hours or longer in a week whereas, those who worked for less than 40
hours, 32.5 percent. Those who did not report for work during the reference week comprised 1.0
percent.

The unemployment rate in January 2017 was estimated at 5.7 percent. Among the regions,
Ilocos Region (8.7%), National Capital Region (NCR) (8.5%), Caraga (8.5%), and
CALABARZON (8.2%) were the regions with the highest unemployment rates (Table 4).
Among the unemployed persons in January 2017, 69.6 percent were males. Of the total
unemployed, the age group 15 to 24 years comprised 44.1 percent, while the age group 25 to 34,
29.6 percent. By educational attainment, 16.5 percent of the unemployed were college
graduates, 14.6 percent were college undergraduates, and 31.1 percent were high school
graduates.
 UNDEREMPLOYMENT RATE

Philippines Underemployment Rate

25

20.1 20
20 19.3 18.3
19.1 18.8 19.3 19.3
18.4 18.5

16.1
15

10

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year Underemployment Rate in

Vietnam

2007 20.1

2008 19.3

2009 19.1

2010 18.8

2011 19.3

2012 20

2013 19.3

2014 18.4
 2015 18.5

2016 18.3

2017 16.1

The underemployed represents the human resources who are not working at full capacity. 1
Since 2007, the underemployment rate has been declining from 20.0 percent to 16.1 percent in
2017, the lowest in over a decade. This is a positive development as it implies an improvement in
the quality of jobs. "The lower underemployment rate and the higher proportion of wage and
salary workers indicate improvement in the quality of employment in the country," said
Socioeconomic Planning Secretary Ernesto Pernia in a statement.

CENTRAL BANKING

The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the
Philippines. It was established on 3 July 1993 pursuant to the provisions of the 1987 Philippine
Constitution and the New Central Bank Act of 1993. The BSP took over from the Central Bank
of Philippines, which was established on 3 January 1949, as the country’s central monetary
authority. The BSP enjoys fiscal and administrative autonomy from the National Government in
the pursuit of its mandated responsibilities.

The BSP Vision

The BSP aims to be recognized globally as the monetary authority and primary financial
system supervisor that supports a strong economy and promotes a high quality of life for all
Filipinos.

The BSP Mission

To promote and maintain price stability, a strong financial system, and a safe and efficient
payments and settlements system conducive to a sustainable and inclusive growth of the
economy.
BSP Laws and Regulations of the Bangko Sentral ng Pilipinas

R.A. 7653 The New Central Bank Act

The Bangko Sentral ng Pilipinas (lit. Central Bank of the Philippines;

commonly abbreviated as BSP in both Filipino and English) is the central bank of
the Philippines. It was established on 3 July 1993, pursuant to the provision of
Republic Act 7653 or the New Central Bank Act of 1993.

R.A. 3591 An act establishing the Philippine Deposit Insurance Corporation (PDIC Charter)

The Philippine Deposit Insurance Corporation (Filipino: Korporasyon ng

Segurong Deposito ng Pilipinas, abbreviated as PDIC) is a government-
run Philippine deposit insurance fund. It was established on June 22, 1963 by
Republic Act 3591. It guarantees deposits up to P500,000.[1] Primary Functions of
PDIC is to protect the small investors/depositors and to build a strong banking
confidence

R.A. 7353 An Act Providing for the Creation, Organization and Operation of Rural Banks,
and For Other Purposes

Act that was passed in the Republic of Philippines for the creation,
organization, and operation of rural banks. It states that the objective of the Act
was to encourage and assist the establishment of rural banking system that would
make credit readily available in the rural areas on reasonable terms.

R.A. 7721 An Act liberalizing the entry and scope of operations of foreign banks in the
Philippines and for other purposes

The state shall develop a self-reliant and independent national economy

effectively controlled by Filipinos and encourage, promote, and maintain a stable,
competitive, efficient, and dynamic banking and financial system that will
stimulate economic growth, attract foreign investments, provide a wider variety of
financial services to Philippine enterprises, households and individuals, strengthen
linkages with global financial centers, enhance the country’s competitiveness in
 the international market and serve as a channel for the flow of funds and
investments into the economy to promote industrialization.

R.A. 7906 An Act providing for the regulation of the organization and operation of Thrift
Banks, and for other purposes

The act recognizes the vital role of banks providing an environment

conducive to the sustained development of the national economy and the fiduciary
nature of banking that requires high standards of integrity and performance. In
furtherance thereof, the State shall promote and maintain a stable and efficient
banking and financial system that is globally competitive, dynamic and
responsive to the demands of a developing economy.

R.A. 9160 Anti-Money Laundering Act of 2001

Anti-Money Laundering Act No. 9160 (as amended by Republic Act No.
9194) of 2001 sets forth the anti-money laundering laws of the Philippines. The
act seeks to protect and preserve the integrity and confidentiality of bank
accounts. Section 9 of this act focuses on the prevention of money laundering
through customer identification requirements and record keeping.

R.A. 9178 An Act to promote the establishment of Barangay Micro Business Enterprises
(BMBEs), providing incentives and benefits therefor, and for other purposes

It is an act to hasten the country's economic development by encouraging

the formation and growth of barangay micro business enterprises which
effectively serve as seedbeds of Filipino entrepreneurial talents, and inter granting
those in the informal sector with the mainstream economy, through the
rationalization of bureaucratic restrictions, the active granting of incentives and
benefits to generate much-needed employment and alleviate poverty.

R.A. 9505 An Act Establishing a Provident Personal Savings Plan, known as the Personal
Equity and Retirement Account (PERA)

It is an act to promote capital market development and savings

mobilization by establishing a legal and regulatory framework of retirement plans
 for persons, comprised of voluntary personal savings and investments. The state
recognizes the potential contribution of PERA to long-term fiscal sustainability
through the provision of long-term financing of social pension benefits.

R.A. 10000 An Act Providing for an Agriculture and Agrarian Reform Credit and Financing
System Through Banking Institutions

It is hereby declared the policy of the State to promote equal access to

opportunities under an environment of sustained growth and expanding
productivity as the key to raising the quality of life for all. Towards this end, the
State shall promote rural development by enhancing access of the rural
agricultural sector to financial services and programs that increase market
efficiency and promote modernization in the rural agricultural sector.

MONETARY POLICIES

Monetary Policies measures or actions taken by the central bank to influence the
general price level and the level of liquidity in the economy. Monetary policy actions of the BSP
are aimed at influencing the timing, cost and availability of money and credit, as well as other
financial factors, for the main objective of stabilizing the price level.

Expansionary Monetary Policy – monetary policy setting that intends to

increase the level of liquidity/money supply in the economy and which could also result in a
relatively higher inflation path for the economy. Examples are the lowering of policy interest
rates and the reduction in reserve requirements. Expansionary monetary policy tends to
encourage economic activity as more funds are made available for lending by banks. This, in
turn, increases aggregate demand which could eventually fuel inflation pressures in the domestic
economy.

Contractionary Monetary Policy - monetary policy setting that intends to

decrease the level of liquidity/money supply in the economy and which could also result in a
relatively lower inflation path for the economy. Examples of this are increases in policy interest
rates and reserve requirements. Contractionary monetary policy tends to limit economic activity
as less funds are made available for lending by banks. This, in turn, lowers aggregate demand
which could eventually temper inflation pressures in the domestic economy.
 Inflation Targeting (IT) – a framework for monetary policy that focuses mainly
on achieving price stability as the ultimate objective of monetary policy. The IT approach entails
the announcement of an explicit inflation target that the monetary authority promises to achieve
over a policy horizon of two years.

The primary objective of the BSP's monetary policy is “to promote price stability
conducive to a balanced and sustainable growth of the economy” (Republic Act 7653). The
adoption of inflation targeting framework of monetary policy in January 2002 is aimed at
achieving this objective.

Inflation targeting is focused mainly on achieving a low and stable inflation,

supportive of the economy’s growth objective. This approach entails the announcement of an
explicit inflation target that the BSP promises to achieve over a given time period.

To achieve the inflation target, the BSP uses a suite of monetary policy instruments in
implementing the desired monetary policy stance. The reverse repurchase (RRP) or borrowing
rate is the primary monetary policy instrument of the BSP.

Other monetary policy instruments include:

 encouraging/discouraging deposits under the term deposit auction facility (TDF);

 standing liquidity facilities, namely, the overnight lending facility (OLF) and the
overnight deposit facility (ODF);
 increasing/decreasing the reserve requirement;
 adjusting the rediscount rate on loans extended to banking institutions on a short-term
basis against eligible collateral of banks' borrowers;
 outright sales/purchases of the BSP's holding of government securities

HOW DOES BSP KEEP INFLATION LOW AND STABLE?

Preventing erratic changes in the inflation rate has several benefits. It enables households
and firms to make better and informed decisions on consumption, investment, saving and
production. For example, when prices are low and stable, manufacturers are protected
against risks related to the fluctuating cost of raw materials and finished goods.
Uncertainty is lessened and firms can price their products competitively, since risks like a
sudden rise in the cost of raw materials are reduced. With managed inflation, a higher
level of savings and investments is encouraged, greater productive activities are
promoted, and job opportunities are increased. This improves the well‐being of Filipinos.
In particular, price stability also preserves the purchasing power of the poor who lack
adequate assets to protect themselves against the effects of high and unstable inflation.
Sustained low inflation benefits Filipino lives and supports economic growth!

WHY IS IT IMPORTANT TO KEEP INFLATION LOW AND STABLE?

Money has a price or cost as expressed in the interest rate. The BSP maintains stable
prices by influencing the cost or the volume of money circulating in the economy. The
money circulating in the economy is also called “the money supply.” In general, money
supply consists of: currency in circulation, peso savings and time deposits in banks, and
peso deposit substitutes, such as commercial papers and promissory notes. It is the BSP’s
task to ensure that money supply (money circulating in the economy) is neither too much
nor too little.

HOW DOES THE BSP KEEP INFLATION WITHIN THE TARGET RANGE?
The BSP manages inflation by influencing interest rates that apply to loans and other
financial transactions. This influences market liquidity. The BSP uses monetary measures
to affect the lending rates of banks and the amount of money circulating in the economy
(by influencing the money supply). Monetary policy measures influence the cost and
availability of money and credit, as well as other financial factors.
By influencing money supply, the BSP is able to affect the general price level of
goods and services. By setting its policy interest rate, the BSP is able to affect the overall
demand by households and firms for goods and services. This, together with the
aggregate supply of goods and services, determines the level of prices.
CURRENCY AND EXCHANGE RATES

Year Philippine Peso Taiwanese New

Dollar
PHP
TWD

2007 1 0.715634

2008 1 0.711904

2009 1 0.694702

2010 1 0.699742

2011 1 0.679238

2012 1 0.700756

2013 1 0.699700

2014 1 0.682692

2015 1 0.697726

2016 1 0.679262

2017 1 0.603825
Year Philippine Peso Malaysian Ringgit

PHP MYR

2007 1 0.074721

2008 1 0.075116

2009 1 0.074053

2010 1 0.071380

2011 1 0.070646

2012 1 0.073182

2013 1 0.074195

2014 1 0.073688

2015 1 0.085775

2016 1 0.087225

2017 1 0.085325
Year Philippine Peso Indonesian Rupiah

PHP IDR

2007 1 198.889259

2008 1 217.816796

2009 1 218.480627

2010 1 201.555796

2011 1 202.644783

2012 1 222.274180

2013 1 245.132463

2014 1 267.213896

2015 1 294.288876

2016 1 280.157859

2017 1 265.444491
Year Philippine Peso Vietnamese Dong

PHP VND

2007 1 349.833260

2008 1 370.689156

2009 1 372.403676

2010 1 424.310675

2011 1 476.340657

2012 1 493.927486

2013 1 495.072287

2014 1 477.147162

2015 1 481.263892

2016 1 470.957242

2017 1 450.559494
 Year Philippine Peso Thailand Baht

PHP THB

2007 1 0.701634

2008 1 0.743842

2009 1 0.721311

2010 1 0.703052

2011 1 0.704174

2012 1 0.736444

2013 1 0.723541

2014 1 0.731606

2015 1 0.752455

2016 1 0.743020

2017 1 0.673428

Security Features of Banknotes

1. Embossed prints: The embossed or raised print nature of the ink deposition combined
with the quality of cotton-based paper gives the traditional banknote a unique tactile effect that
makes it the first and the most important line of defense against counterfeiting. This can be felt
over the words “REPUBLIKA NG PILIPINAS,” denominational value in text, signatures, and
value panels particularly, the one located at the lower right corner of the obverse.

2. Asymmetric Serial Number: Alphanumeric characters at the lower left and upper right
corners of the note bearing one or two prefix letters and six to seven digits, with font increasing
in size and thickness.

3. Security Fibers: Visible red and blue fibers embedded on the paper and randomly
scattered on the face and back of the note.
 4. Watermark: Shadow image of the portrait with the highlighted denominational value
that is particularly seen against the light from either side of the blank space on the note.

5. See-Through Mark: The pre-Hispanic script (Baybayin) at the lower right corner of the
face of the note slightly above the value panel. This is seen in complete form only when the note
is viewed against the light. This script means “PILIPINO.”

6. Concealed Value: The denominational value superimposed at the smaller version

portrait at the upper left portion of the note. This becomes clearly visible when the note is rotated
45 degrees and slightly tilted.

7. Security Thread (Embedded or Windowed): Embedded thread that runs vertically

across the width of 20- and 50- piso notes when viewed against the light. Also, the stitch-like
metallic thread on the 100-, 200-, 500- and 1000-piso notes which changes color from red to
green and bears the cleartext of “BSP” and the denominational value on the obverse and “BSP”
on the reverse, both in repeated series.

8. Optically Variable Device (OVD) Patch: Found only in 500- and 1000-piso notes, this
patch is a reflective foil, bearing the image of the Blue-naped parrot for 500-piso/clam with
South Sea pearl for 1000-piso, changes color from red to green when the note is rotated 90
degrees.

9. Optically Variable Ink (OVI): Found only in the 1000-piso note, this embossed
denominational value at the lower right corner of the face of the note changes color from green
to blue when viewed at different angles.
GOVERNMENT REVENUES AND POLICIES

The national budget is financed form the following fund sources: 1) revenues from both
tax and non-tax sources; 2) borrowings from both domestic and foreign sources; and, 3)
withdrawals from available cash balances. The national budget is prepared by the government
every year. It is called the “General Appropriations Act”. Each head of government agencies and
institutions must submit to the Commission on National Budget a budget proposal for the whole
year. It is from these proposed budgets where the commission based the National Budget.

The budget is presented to the President of the Philippines then the President presents it
to the Congress of the Philippines within 15 days prior to the opening of its regular session. It is
the task of the Congress to make a law regarding the proposed-budget for a specific year.

Sources of Fund of National Budget

The Gross National Product or GNP is one way of measuring the status of a country’s
economy. The Gross Domestic Product or GDP and the Dollar Remittances of Overseas Filipino
Workers are also barometers in determining the economic situation of the country.

Here are some of the most important sources of funds for the National Budget – the many
taxes that people pay:

Income Tax

Foremost and primary source of fund for the National Budget is the Income Tax. It is
based on citizenship, residence and source of income. This tax is imposed to the Filipino people,
the state, tourists and corporations.

Excise Tax

Excise tax is the tax collected to the producers, retailers, businesses that sell special
products such as cigar & cigarette, gasoline, petroleum, cars, mineral products and others.

Inheritance Tax

Inheritance Tax is another source of fund for the National Budget. It is the amount
collected to people who inherited properties based on the amount or appraisal of the inheritance.

Percentage Tax
 Percentage Tax is the amount imposed by the Bureau of Internal revenue to contractors,
hotel owners, restaurants, recreational institutions, winnings such as Lotto and products from the
forests.

Miscellaneous Tax

Miscellaneous Tax is another source of fund for the National Budget. It is the amount
collected to banks, premium insurance, franchise and financial companies.

Value Added Tax

Value Added Tax or VAT is the tax from all the products being sold, exchanged and
bartered; commercial services; and, importation of products. Commercial ads for Television and
radios, videooke bars, malls, restaurants and many others pay Value Added Tax. The amount
collected is 10% of the product or service price.

Residence Tax

Residence Tax is the tax paid by Filipinos every year. It is usually obtain from the
Municipal/city hall. The amount paid is based on the income of the individual.

Others

The film-making industry also pays taxes and all citizens with motor vehicle pay taxes by
registering their vehicle to the Land Transportation Office or LTO.

*Expanded Value Added Tax or E-VAT

Expanded Value Added Tax or E-VAT is an additional burden to the tax-paying public.
The BIR imposed 12% additional tax to selected services and products such petroleum products
and fast food chains. The amount collected is not included to the National Budget but it goes
straight to the President's Special Fund.

Taxation in the Philippines

Tax law in the Philippines covers national and local taxes. National taxes refer to
national internal revenue taxes imposed and collected by the national government through the
Bureau of Internal Revenue (BIR) and local taxes refer to those imposed and collected by the
local government.
National Tax Law

I. 1987 Constitution

The 1987 Philippine Constitution sets limitations on the exercise of the power to tax.

The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation. (Article VI, Section 28, paragraph 1)

All money collected on any tax levied for a special purpose shall be treated as a special
fund and paid out for such purpose only. If the purpose for which a special fund was created has
been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the
Government. (Article VI, Section 29, paragraph 3)

The Congress may, by law, authorize the President to fix within specified limits, and
subject to such limitations and restriction as it may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts within the framework of the national
development program of the Government (Article VI, Section 28, paragraph 2) The President
shall have the power to veto any particular item or items in an appropriation, revenue or tariff
bill, but the veto shall not affect the item or items to which he does not object. (Article VI,
Section 27, second paragraph)

The Supreme Court shall have the power to review, revise, reverse, modify or affirm on
appeal or certiorari, as the law or the Rules of Court may provide, final judgments and orders of
lower courts in x x x all cases involving the legality of any tax, impost, assessment, or toll or any
penalty imposed in relation thereto. (Article VIII, Section 5, paragraph)

Tax exemptions are limited to those granted by law. However, no law granting any tax
exemption shall be passed without the concurrence of a majority of all the members of the
Congress. (Article VI, Section 28, par. 4). The Constitution expressly grants tax exemption on
certain entities/institutions such as (1) charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, and nonprofit cemeteries and all lands, buildings and
improvements actually, directly and exclusively used for religious, charitable or educational
purposes (Article VI, Section 28, paragraph 3); (2) non-stock non-profit educational institutions
used actually, directly and exclusively for educational purposes. (Article XVI, Section 4(3))
 In addition to national taxes, the Constitution provides for local government taxation.
(Article X, Section 5) (Article X, Section 6) Parenthetically, the Local Government Code
provides that all local government units are granted general tax powers, as well as other revenue-
raising powers like the imposition of service fees and charges, in addition to those specifically
granted to each of the local government units. But no such taxes, fees and charges shall be
imposed without a public hearing having been held prior to the enactment of the ordinance. The
levy must not be unjust excessive, oppressive, confiscatory or contrary to a declared national
economic policy (Section 186 and 187) Further, there are common limitations to the grant of the
power to tax to the local government, such that taxes like income tax, documentary stamp tax,
etc. cannot be imposed by the local government.

YEAR REVENUE EXPENSES

2007 149.36 149.506

2008 174.195 178.477

2009 168.335 170.23

2010 199.591 203.209

2011 224.143 232.293

2012 250.092 258.248

2013 271.836 283.28

2014 284.585 294.961

2015 292.774 310.044

2016 304.889 332.252

2017 313.595 343.651

Philippines Fiscal Policy

Since 1990, the Philippines' fiscal accounts have improved dramatically, with the
consolidated public sector deficit declining by about 5 percent of GNP, and
expected to reach approximate balance in 1996. Against this background, the paper
assesses the remaining agenda for fiscal reform in the Philippines--especially tax
reform--to fully satisfy sustainability conditions and meet the Government's
macroeconomic objectives.

A key condition for fiscal sustainability is that public debt obligations can be met
without discretionary policy changes (and without sharp cuts to investment
expenditure). A review of recent indicators suggests that this is likely to be
satisfied. However, a more rigorous econometric analysis suggests that it would be
more comfortably met with additional measures, such as the Government's planned
comprehensive tax and civil service reforms; this would ensure that needed
infrastructure investment would not need to be sacrificed for sustainability.

The second part of the paper examines how fiscal policy can contribute to meeting
the Government's broader macroeconomic objectives. It is argued that a significant
increase in government investment expenditure will be required to meet targets for
economic growth and that, to avoid pressure on the external current account, a
marked increase in domestic savings is needed. To achieve this, it will be prudent
to target for a substantial improvement in government savings over the medium
term. As noninterest government current expenditure is relatively low and largely
nondiscretionary, the paper concludes that this would need to be achieved mainly
through higher revenue.
TRADE POLICIES

1. Since its last Trade Policy Review in 2012, the Philippine economy has grown at an average
annual rate of about 6%. Growth was driven mainly by consumption and infrastructure
investment. GDP per capita in 2016 was some US$2,950, up from US$2,580 in 2012. The
poverty rate declined from 25.2% in 2012 to 21.6% in 2015. Services constitute the most
important sector in terms of contribution to GDP, and are also the fastest growing export sector.
The Philippine Development Plan 2017-2022 focuses on making the economy more competitive,
underpinned by sound regulatory practices and competition policy, and open services markets.

2. Machinery is the Philippines' main merchandise export category. Exports of electronics and
electrical goods recorded significant growth during the review period, accounting for 25.6% of
total exports in 2016, up from 9.6% in 2011. Exports of services and remittances have also
experienced fast growth. Imports of manufactured goods have increased significantly, from 50%
of total imports in 2011 to 76% in 2016. The surge of manufactures imports, in particular capital
goods and consumer products, can be attributed to increasing infrastructure investment and the
improvement of living standards. The United States, the European Union, Japan, China, and
ASEAN countries are the Philippines' main trading partners.

3. During the review period, the Government pursued a conservative fiscal policy, aiming at
strengthening resilience and building a fiscal buffer. Consequently, the total government debt to
GDP ratio decreased from 41% in 2012 to 35% in 2016. In order to achieve a higher growth
path, the Government has strongly increased infrastructure spending, from 2.7% of GDP in 2013
to 5% in 2016, particularly on inter-island connectivity, road connection, and addressing
congestion in Metro Manila and other urban areas. Currently, the budget deficit target is set at
3% of GDP.

4. As regards monetary policy, the central bank maintains an inflation-targeting policy, with the
current target set at 3%. During the review period, the Philippines received sizeable capital
inflows, from remittances and portfolio investment, which resulted in excess liquidity. To
improve policy transmission, the central bank has operated an interest rate corridor system since
June 2016; this has narrowed the interest spread between the policy rate and the market rates.
5. Over the review period, the Philippines recorded a strong inflow of foreign direct investment
(FDI) which reached US$7.9 billion in 2016, up from US$1.9 billion in 2011. The Netherlands,
Australia, the United States, Japan, and Singapore were the major source countries of FDI. More
than 60% of FDI was invested in the manufacturing sector. Attracting further FDI has been
hampered by factors such infrastructure problems and restrictions on foreign ownership.

6. The institutional framework for trade policy remains largely unchanged, although some
institutional changes did occur, notably in the area of SPS measures and agriculture. The
Department of Trade and Industry remains responsible for implementation and coordination of
trade and investment policies, as well as promoting and facilitating trade and investment.

7. The Philippines grants at least MFN treatment to all WTO Members. It has preferential trading
agreements with 15 partners: the other nine parties of ASEAN, and six countries that have
negotiated agreements with ASEAN (Australia and New Zealand, China, India, Japan, and the
Republic of Korea). An agreement between the Philippines and EFTA members has been signed,
but not yet ratified. FTA negotiations with the European Union are ongoing.

8. During the period under review, the Philippines provided well over 300 notifications to the
WTO (including over 200 SPS notifications). Nevertheless, some notifications remain
outstanding, notably in the area of agriculture. The Philippines is currently involved in one WTO
dispute settlement procedure as complainant; during the review period it was not involved in any
dispute settlement cases as defendant.

9. The foreign investment regime of the Philippines is governed, inter alia, by the 1987
Constitution and the Foreign Investments Act of 1991, which covers all activities except
financial services. Under the Act, the Philippines establishes (every two years) a Foreign
Investment Negative List (FINL) of activities in which FDI is restricted. The Philippines
continues to limit foreign investment in a number of activities (including agriculture, fisheries,
telecom services, and public utilities), but has also taken some liberalizing steps. Thus, various
FDI restrictions were WT/TPR/S/368 • The Philippines - 7 - eliminated for professional services
(subject to certain exceptions and reciprocity), and banking services. Foreign ownership of land
is not permitted, but foreign investors may lease land up to a maximum term of 75 years.
10. The Customs Modernization and Tariff Act of 2016 aims to modernize customs rules,
expedite customs procedures, reduce opportunities for corruption, and improve customs service
delivery. Pre-shipment inspection is mandatory for all bulk or break bulk cargo. All shipments
are classified according to risk. Customs clearance times for high risk consignments (about 50%
of all consignments) are between one and two days, while moderate risk consignments require
about four hours for clearance. The Philippines accepted the WTO Trade Facilitation Agreement
on 27 October 2016; it has also submitted a notification regarding its Category A commitments.

11. The Philippines' tariff comprises 10,813 lines at the HS 2017 eight-digit level (compared to
8,299 in 2011), with rates ranging from zero to 65%. All tariffs are ad valorem. The average
applied MFN tariff is 7.6%, up from 6.4% in 2011. The increase in the average tariff is mainly
due to transposition to HS 2017 and the splitting of lines carrying high tariffs. Tariff rate quotas
apply on 77 tariff lines. 65% of tariff lines (including all agricultural lines) are bound. The
simple average bound rate is 25.7%. A wide range of tariff and tax exemptions are provided
under specific laws. Revenue forgone under tariff and tax concessions is considerable,
amounting to PHP 549 billion in customs duties and PHP 301 billion in VAT in 2016.

12. Most imports, like domestically produced goods, are subject to value-added tax which has a
standard rate of 12%. Food products and agricultural inputs are exempt from VAT. Excise taxes
are levied on alcoholic beverages, tobacco products, automobiles, petroleum products, minerals,
perfumes and jewellery. A vast range of goods are subject to licences or permits when imported.
For certain products, multiple permits or licences are required, and informal payments have been
reported by the business community.

13. Registration and documentation requirements for exporters are similar to those for importers.
Only registered companies are allowed to export. No export taxes are levied in the Philippines,
apart from exports of plantation logs which are subject to a tax of 20%. Minimum export prices
for corn and rice are no longer applied. Export licences are required for a wide range of products.
Exports of rice, corn, and sugar remain restricted and may be exported only if there is a surplus.
Some tax incentives are contingent on export performance.

14. Economic zones are an important tool for export promotion in the Philippines. Incentives
include corporate and income tax reductions, VAT and tariff exemptions, and simplified import
and export procedures. As at October 2017, there were 376 economic zones with total
employment of more than 1.3 million. Exports by Filipino-owned companies are also promoted
through public loans, guarantees and insurance made available by the Philippine Export-Import
Credit Agency.

15. About 80% of standards are aligned to international standards. There are 72 mandatory
technical regulations, covering a wide range of goods. The Philippines Accreditation Bureau has
accredited 243 conformity assessment bodies. The Philippines has reformed its food safety
regime based on a "farm-to-fork" approach to enhance food safety. A new Food Safety Act was
promulgated in 2013; its implementing legislation entered into force in 2015. However, the
Philippines' SPS-related import requirements for food, which appear to be complex, remain
largely unchanged. During the period under review, the Philippines submitted 46 TBT
notifications and over 200 SPS notifications. Members have not raised any Specific Trade
Concerns regarding its SPS and TBT measures.

16. The Philippines passed its first Competition Act in 2015 and established a competition
authority in 2016. However, the overall competition environment remains weak in many sectors.
State-owned enterprises continue to play an important role in the Philippine economy, in
particular WT/TPR/S/368 • The Philippines - 8 - in transport, infrastructure, and housing. The
Philippines has notified the National Food Authority (NFA) as a state-trading enterprise. The
NFA has the exclusive authority to import rice, corn and other grains. New legislation on public
procurement entered into force in 2016. The nationality requirement for bidders continues to
restrict foreign-owned entities from participating in public procurement. The Philippines is
neither a signatory nor an observer of the Plurilateral Agreement on Government Procurement.

17. The legal framework on intellectual property rights has remained basically unchanged. The
Bureau of Copyrights, established in 2013, is responsible for promoting awareness of IP rights
and accreditation of organizations that collect royalties. Applications and registrations for most
types of IP have grown strongly during the period under review.

18. Agriculture and forestry contributes around 10% to GDP. The Philippines ranks among the
major world producers of bananas, coconuts, pineapples, and rice. The WTO waiver allowing the
Philippines to defer the tariffication of its quantitative restrictions (QRs) on rice expired in June
2017. A bill on tariffication of the QRs is pending in parliament as at December 2017. In the
meantime, the Philippines has extended its WTO waiver-related tariff concessions on rice and
other commodities. Thus, as at December 2017, the Philippine rice import regime remains under
the status quo. Ensuring food security remains the most important objective of agricultural policy
which includes a credit programme for farmers; a livestock, dairy and poultry programme; and a
government export marketing campaign for high-value crops.

19. The Philippines is a net importer of energy. The Government has issued a National
Renewable Energy Programme to encourage the development of renewable energies. Local
content requirements are applied to bioethanol: production must first exhaust domestic feedstock
sources before using any imported equivalent. The cost of energy remains high, hindering the
development of other sectors.

20. Manufacturing contributes about 25% to GDP and employs some 8% of the labour force.
The strongly growing sector mainly comprises: food and beverages, furniture and fixtures,
electronics, chemicals, petroleum refining, and motor vehicles. Most industries supply mainly
the domestic market, except the electronics industry whose products are mostly for export.

21. The services sector contributes some 51% to GDP; the share of financial services remained at
some 10% of GDP during the review period. Up to 100% foreign ownership of banks has been
allowed since June 2014. Foreign banks or their branches are also allowed to participate in
foreclosure proceedings and take possession of the mortgaged property, with certain restrictions.
National treatment has been applied, in terms of regulatory requirements, to foreign-owned
insurance companies since mid-2013, when the Insurance Code was amended.

22. In transport, the Philippines reserves cabotage for national carriers, both in aviation and
maritime transport. Most Philippine bilateral air services agreements cover third and fourth
freedoms. Since July 2015, international relays in maritime transport have been allowed: foreign
ships may carry goods that are bound for international trade between inter-island domestic ports;
the goods for international relays must be unloaded by another foreign vessel calling at that port
en route to the port of final destination.

23. The telecommunications sector in the Philippines is private-sector driven and dominated by
two companies. Foreign ownership in telecommunications is not allowed to exceed 40%.
Services providers must obtain a franchise from Congress before commencing business. In 2017,
the Government issued a National Broadband Plan, with the aim of improving telecom
infrastructure and promoting an open access network.

24. Tourism is considered to be central to the Philippines' social and economic development: in
2016, the sector contributed 8.6% to GDP and 12.8% to employment. During the review period,
the Government adopted a number of visa facilitation measures to boost tourist arrivals; it also
took steps to address infrastructure problems that affect the sector. Restrictions on foreign
ownership remain in various areas of the tourism sector. While 100% foreign ownership is
permitted for hotels, a minimum of 40% Filipino ownership applies to restaurants