DSpace at VNU: The Philippines in the AEC Trade and Investment Opportunities, Challenges and Preparation Myrna S. Austria

DSpace at VNU: The Philippines in the AEC Trade and Investment Opportunities, Challenges and Preparation Myrna S. Austri...

The Philippines in the AEC

Trade and Investment Opportunities,

Challenges and Preparation

Objectives

towards full integration in AEC

AEC as well as the opportunities the country can offer

to the other ASEAN members

addressed to enable the country participate actively

in the AEC and reap the expected benefits from the regional integration

 Opportunities from AEC

 The road ahead: issues and challenges

 Concluding remarks

The Philippines in the AEC: Background

 Overall arching goal of increasing competitiveness through

market-oriented reforms covering liberalization, privatization & deregulation

 Despite policy reforms, Philippines experienced boom-bust cycle

of economic growth, with the country lagging behind its

neighbors in the region (Aldaba, 2013)

 Philippine experience shows market-oriented reforms did not

produce expected benefits because of lack of efficient institutions, absence of good governance and poor infrastructure

 Philippine commitment to AEC and AEC Blueprint integral to

addressing remaining constraints to being globally competitive

Initiatives and milestones towards

integration into AEC

Trade Facilitation

 Customs reform and modernization program (1994-2005)

 Electronic to mobile (e2m) customs project (2005)

 One-stop shop export documentation center (OSEDC)

 Automation in the export processing zones

 Philippine National Single Window

 Phase 1 launched 2010 and now completed

 Being implemented in major seaports and airports and targets 100% completion by 2015; 38 government

agencies currently connected to NSW portal; and 50 by 2015; covers 95% of imports, 25% of exports and 75%

FDI Liberalization

 RA 7042, Foreign Investment Act (June 1991) – 100% foreign equity in all areas, except those specified in the negative lists

A, B and C

 RA 8179 (March1996) – abolished Negative List C;

 RA 7721(1994) - Foreign bank liberalization

 RA 879 (2000) – General Banking Law allowing foreign banks

to own 100% of one locally-incorporated commercial or thrift bank

 RA 8762 (March 2000) – Retail trade liberalization law

allowing 100% foreign equity with minimum US$7.5 million equity

Remaining FDI barriers

EO 858 (Feb 2010) – foreign equity restriction

a Mass media – no foreign equity

b Land ownership – 40%

c Natural resources – 40%

d Public utilities – 40%

e BOT – 40%

Investment promotion and facilitation

 Philippine Scorecard: 71%

State of the economy:

Is the Philippines ready for AEC?

Table 1 Global Competitiveness Index

Ranking, ASEAN Members

Note: 2011-2012:140 countries; 2012-2013: 144 countries; 2013-2014: 148 countries

Source: Global Competitiveness Index, World Economic Forum

Philippines moved up 16 places in GCI

Table 2 Pillars of Competitiveness

Ranking, ASEAN Members

Health & primary education 92 98 96

Higher education & training 71 64 67

Goods market efficiency 88 86 82

Labor market efficiency 113 103 100

market development,

& innovation

Table 3 Annual real GDP growth rates,

Note: Growth rates are based on GDP at constant 2005 prices

Source: UNCTAD, UNCTADstat

Philippines one of fastest growing

economies in Asia in 2012

Table 4 Real growth rate of per capita,

Table 5.GDP growth rate, by sector, Philippines,

Transport, storage & communication 4.3 8.1

Trade & repair of motor vehicles, etc 3.3 7.5

Financial intermediation 5.2 8.2

Real estate, renting & business activities 8.4 7.5

Public administration & defense 1.9 6.1

Source: NSCB

Services main engine

of growth

Table 6 GDP growth rate, by demand,

Figure 1 Philippine GDP Growth Rate, by

Quarter, Q1 2008- Q1 2013

Source: NSCB

 Economy continues to register high positive growth rate in 2013

 Growth driven by rising local

investment, household and government

Figure 2 Quarterly Growth Rate by

Sector, Q1 2008-Q1 2013

Source: NSCB

Industry registered highest growth

in first quarter

2013

Figure 3 Monthly Philippine Inflation Rate,

January 2006- June 2013

Source: NSO

Inflation remained moderate amidst steady energy prices and

modest rise in food costs

Figure 4 Monthly Philippines Exchange

Rate, January 2001-April 2013

Source: BSP

Philippine peso remains strong amidst problems in the global economy

Figure 5 Share of ASEAN in Philippine

Exports & Imports, 2001-2012 (%)

Source: Intracen.org

 Merchandise exports grew 10.3% in 2012 following a sharp contraction in 2011

 Electronic parts, which used to be the

country’s top exports, continued to take a backseat in 2012

 ASEAN – 17%

exports; 21% imports

Figure 6 Philippine Exports to ASEAN,

2001-2012 (US$000)

Source: Intracen.org

Figure 7 Average Share of ASEAN in Philippine

Exports, By Country, 2001-2012 (%)

Brunei (0.07) Cambodia (0.11) Indonesia (5.71) Laos (0.01) Malaysia (25.30) Myanmar (0.12) Singapore(43.98 Thailand (19.67) Vietnam (5.03)

Table 7.Top 5 Philippine export products

to ASEAN, by country, 2010 & 2012

Table 7.Top 5 Philippine export products

to ASEAN, by country, 2010 & 2012

Table 7.Top 5 Philippine export products

Country

HS Code Product % Share Code HS Product Share %

Singapore

'9999 Commodities not elsewhere specified 77.32 '8542 Electronic integrated circuits and microassemblies 51.51

8542 Electronic integrated circuits and micro assemblies 11.04 '8479 Machines&mech appl having indiv functions, nes 12.22 '2710 Petroleum oils, not crude 2.83 '8501 Electric motors and generators (excluding generating sets) 4.94 '8541 Diodes/transistors & sim semiconductor devices; etc 1.55 '8541 Diodes/transistors & sim semiconductor devices; etc 4.31 '8473 Parts&acces of computers & office machines 1.32 '2710 Petroleum oils, not crude 4.01

Thailand

'9999 Commodities not elsewhere specified 77.32 '8542 Electronic integrated circuits and micro assemblies 51.51 '8542 Electronic integrated circuits and micro assemblies 11.04 '8479 Machines & mech appl having indiv functions, nes 12.22 '2710 Petroleum oils, not crude 2.83 '8501 Electric motors and generators (excluding generating sets) 4.94 '8541 Diodes/transistors&sim semiconductor devices; etc 1.55 '8541 Diodes/transistors & sim semiconductor devices; etc 4.31 '8473 Parts&acces of computers & office machines 1.32 '2710 Petroleum oils, not crude 4.01

Table 7.Top 5 Philippine export products

Country

HS Code Product Share % Code HS Product Share %

Vietnam

'7403 Refined copper and copper alloys, unwrought 20.95 '3105

Mixtures of nitrogen, phosphorous or potassium fertilizers 15.84 '9999 Commodities not elsewhere specified 14.75 '7403 Refined copper and copper alloys, unwrought 8.95

Figure 8 Philippine Imports from

ASEAN, 2001-2012 (US$000)

Source: Intracen.org

Figure 9 Average Share of ASEAN in Philippine

Imports, By Country, 2001-2012 (%)

Brunei Cambodia Indonesia Laos

Malaysia Myanmar Singapore Thailand Vietnam

(0.03)

(0.00) (19.36) (0.06) (38.86) (20.62)

(13.46)

(7.49) (0.03)

Table 8 Top 5 Philippine imported products

from ASEAN, by country, 2010 & 2012

Cambodia

'2207 Ethyl alcohol & other spirits (if undenatured then higher than 80% by 59.47 '9504 Articles for funfair, table/parlor games&auto bowling alley equipment 24.21 '3808 Insecticides, fungicides, herbicides packaged for retail sale 6.19 '6203 Men's suits, jackets, trousers etc & shorts 16.86 '6110 Jerseys, pullovers, cardigans, etc, knitted or crocheted 5.89 '6110 Jerseys, pullovers, cardigans, etc, knitted or crocheted 15.53 '6203 Men's suits, jackets, trousers etc & shorts 4.04 '8473 Parts&acces of computers & office machines 14.10 '8517 Electric app for line telephony,incl curr line system 3.74 '6204 Women's suits, jackets,dresses skirts etc&shorts 6.65

Indonesia

'2701 Coal; briquettes, ovoids & similar solid fuels manufactured from coal 20.52 '2701 Coal; briquettes, ovoids & similar solid fuels manufactured from coal 26.50 '8473 Parts&acces of computers & office machines 11.40 '8703 Cars (incl station wagon) 13.95 '2603 Copper ores and concentrates 8.64 '2603 Copper ores and concentrates 6.50 '8703 Cars (incl station wagon) 6.81 '2101 Extracts essences & concentrates of coffee and tea 4.14 '8708 Parts & access of motor vehicles 2.24 '3004 Medicament mixtures (not 3002, 3005, 3006), put in dosage 2.49

Table 8 Top 5 Philippine imported products

from ASEAN, by country, 2010 & 2012

Country

HS Code Product Share % Code HS Product Share %

Malaysia

'2709 Crude petroleum oils 25.04 '8542 Electronic integrated circuits and microassemblies 18.00 '8542 Electronic integrated circuits and microassemblies 20.29 '2709 Crude petroleum oils 12.07 '8473 Parts&acces of computers & office machines 4.75 '1518 Animal or vegetable fats & oils chemically modified; inedible mixtures 6.14 '2711 Petroleum gases 3.24 '8473 Parts&acces of computers & office machines 5.16 '1518 Animal or vegetable fats & oils chemically modified; inedible mixtures 3.01 '4412 Plywood, veneered panels and similar laminated wood 2.34

Myanmar

'0713 Dried vegetables, shelled 87.19 '1006 Rice 37.82 '9006 Photographic camera;photograph flashlight app 5.95 '0713 Dried vegetables, shelled 33.80 '1001 Wheat and meslin 2.34 '1005 Maize (corn) 10.82 '8542 Electronic integrated circuits and microassemblies 1.32 '9006 Photographic camera;photograph flashlight app 9.96

'9001 Optical fibre, cables; sheets&plate of polarising mat 1.05 '8473 Parts&acces of computers & office machines 2.30

Singapore

'2710 Petroleum oils, not crude 28.70 '8542 Electronic integrated circuits and microassemblies 21.05 '8542 Electronic integrated circuits and microassemblies 25.38 '2710 Petroleum oils, not crude 17.58 '8473 Parts&acces of computers & office machines 8.43 '8473 Parts&acces of computers & office machines 9.80 '2709 Crude petroleum oils 3.91 '8525 Television camera, transmissn app for radio-telephony 3.45 '8479 Machines&mech appl having indiv functions, nes 2.29 '2714 Bitumen & asphalt, natural; shale & tar sands; asphaltites & asphaltic 3.36

Country

HS Code Product

% Share

HS Code Product

% Share

Thailand

'2710 Petroleum oils, not crude 28.70 '8542 Electronic integrated circuits and microassemblies 21.05 '8542 Electronic integrated circuits and microassemblies 25.38 '2710 Petroleum oils, not crude 17.58 '8473 Parts&acces of computers & office machines 8.43 '8473 Parts&acces of computers & office machines 9.80 '2709 Crude petroleum oils 3.91 '8525 Television camera, transmissn app for radio-telephony 3.45

'8479 Machines&mech appl having indiv functions, nes 2.29 '2714 Bitumen & asphalt, natural; shale & tar sands; asphaltites &

Table 8 Top 5 Philippine imported products

from ASEAN, by country, 2010 & 2012

Table 8 Top 5 Philippine imported products

from ASEAN, by country, 2010 & 2012

Country

HS Code Product Share % Code HS Product Share %

'0901 Coffee 1.90 '8507 Electric accumulator 3.66 '8525

Television camera, transmissn app for radio-

Mixtures of nitrogen, phosphorous or

potassium fertilizers 3.04

Table_GDP growth rate, by demand, Philippines,

2010-2011 & 2011-2012 (%)

Type of expenditure 2010-2011 2011-2012

Household final consumption 5.7 6.6

Government final consumption 2.1 12.2

Table 9 Trade facilitation indicators, ASEAN

& North-East Asia, 2008 & 2012

Table_GDP growth rate, by demand, Philippines,

2010-2011 & 2011-2012 (%)

Type of expenditure 2010-2011 2011-2012

Household final consumption 5.7 6.6

Government final consumption 2.1 12.2

Table 11 Inward foreign direct investment

flows, 2008-2012

Amount (US$ Million)'

Brunei Darussalam 330.1 371.4 625.7 1,208.3 850.0 Cambodia 815.2 539.1 782.6 901.7 1,557.1 Indonesia 9,318.0 4,877.4 13,770.6 19,241.3 19,852.6 Lao People's Dem Rep 227.7 189.5 278.8 300.8 294.4 Malaysia 7,172.0 1,453.0 9,060.0 12,197.6 10,073.9 Myanmar 863.0 972.5 1,284.6 2,200.0 2,243.0 Philippines 1,544.0 1,963.0 1,298.0 1,816.0 2,797.0 Singapore 12,200.0 24,939.3 53,622.7 55,922.7 56,650.9 Thailand 8,454.7 4,854.4 9,146.8 7,778.7 8,607.5 Viet Nam 9,579.0 7,600.0 8,000.0 7,430.0 8,368.0

Total ASEAN 50,503.6 47,759.6 97,869.8 108,996.9 111,294.3

% Distribution

Brunei Darussalam 0.65 0.78 0.64 1.11 0.76 Cambodia 1.61 1.13 0.80 0.83 1.40 Indonesia 18.45 10.21 14.07 17.65 17.84 Lao People's Dem Rep 0.45 0.40 0.28 0.28 0.26 Malaysia 14.20 3.04 9.26 11.19 9.05

Philippines 3.06 4.11 1.33 1.67 2.51 Singapore 24.16 52.22 54.79 51.31 50.90 Thailand 16.74 10.16 9.35 7.14 7.73 Viet Nam 18.97 15.91 8.17 6.82 7.52 Source:UNCTAD, UNCTADstat

Table 12 Foreign Direct Investment, by

IT-BPO Category, 2005-2011 Category 2005 2006 2007 2008 2009 2010 2011 Amount (US$ million) Contact Center 213 259 585 1,309 1,330 2,421 3,007

Transcription 1 2 8 13 13 30 46

Animation 4 18 23 23 40 73 75

Software Development 5 34 96 320 632 849 1,211

Other BPOs 107 64 109 161 361 916 1,016

TOTAL INDUSTRY 329 376 821 1,825 2,376 4,288 5,355

Growth rate (%)

Contact Center 21.7 126.1 123.7 1.6 82.0 24.2 Transcription 176.2 430.3 55.1 4.4 125.6 53.9 Animation 303.8 31.4 1.1 69.1 83.8 3.3 Software Development 656.6 179.8 233.2 97.6 34.3 42.7 Other BPOs (40.3) 71.2 47.5 124.5 153.9 10.8

TOTAL INDUSTRY 14.3 118.5 122.2 30.1 80.5 24.9

Figure 10 Distribution of FDI, IT

(63.58)

(0.63) (2.13)

(15.53) (18.13)

Contact Center Transcription Animation

Software Development Other BPOs

Table 13 Revenue, by IT-BPO Category,

2004-2011

IT-BPO Category Levels (in US$ million)

2004 2005 2006 2007 2008 2009 2010 2011 Sales revenue (US$ million)