OVERVIEW OF THE PHILIPPINES

AT THE OUTSET, LET ME THANK THE ORGANIZERS FOR GIVING ME THE OPPORTUNITY TO PROVIDE YOU WITH SOME INFORMATION ON THE PHILIPPINES AND MEET WITH COMPANIES INTERESTED TO DO BUSINESS IN MY COUNTRY.  I AM GLAD THAT YOU HAVE DECIDED TO LOOK AT THE PHILIPPINES, WHICH IS PERHAPS NOT AS WELL KNOWN HERE IN GERMANY AS OTHER ASIAN COUNTRIES SUCH AS CHINA, JAPAN, SINGAPORE, MALAYSIA, INDONESIA OR EVEN VIETNAM.   IN FACT WHEN OUTSOURCING IS MENTIONED IN GERMANY, MOST PEOPLE AUTOMATICALLY THINK OF INDIA.  I THINK IT IS ABOUT TIME THAT WE SPREAD THE NEWS ABOUT THE PHILIPPINES AS AN OUTSOURCING DESTINATION.

LADIES AND GENTLEMEN, LET ME TELL YOU A LITTLE ABOUT MY COUNTRY.

THE PHILIPPINES IS A BLEND OF CULTURES. IT WAS  A COLONY OF SPAIN FOR MORE THAN THREE CENTURIES AND CAME UNDER AMERICAN RULE FOR ANOTHER 48 YEARS.  THUS, ASIDE FROM SIMILIARITIES WITH ITS ASIAN NEIGHBOURS, THE PHILIPPINES ALSO HAS CULTURAL AFFINITIES WITH THE WEST.  IT IS THE THIRD MOST POPULOUS COUNTRY, AFTER THE UNITED STATES AND THE UNITED KINGDOM, IN WHICH ENGLISH IS AN OFFICIAL LANGUAGE AND THE ONLY PREDOMINANTLY CHRISTIAN COUNTRY IN ASIA.

THE PHILIPPINES IS A REPUBLICAN DEMOCRACY UNDER A PRESIDENTIAL SYSTEM OF GOVERNMENT.  SOVEREIGNTY EMANATES FROM THE FILIPINO PEOPLE WHO EXERCISE IT DIRECTLY THROUGH SUFFRAGE AND INDIRECTLY THROUGH THEIR ELECTED PUBLIC OFFICIALS.   IT IS IMPORTANT FOR YOU, THE BUSINESS SECTOR, TO KEEP IN MIND THAT AS A REPUBLICAN DEMOCRACY, CIVILIAN AUTHORITY IS SUPREME OVER THE MILITARY.     THE YEARS UNDER THE MARCOS DICTATORSHIP AND COUP ATTEMPTS DURING SUBSEQUENT ADMINISTRATIONS HAVE ONLY STRENGTHENED OUR RESOLVE ON THE SUPREMACY OF CIVILIAN AUTHORITY. 

THE PHILIPPINES PLACES GREAT EMPHASIS ON THE NEED FOR COLLECTIVE ACTION AMONG STATES IN DEALING WITH THE SERIOUS PROBLEMS CONFRONTING HUMANKIND, AS MOST OF THESE PROBLEMS ARE TRANSNATIONAL IN SCOPE.
 
WE CONSIDER OUR MEMBERSHIP AND PARTICIPATION IN THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN) AS THE CORNERSTONE OF OUR FOREIGN POLICY.  NOT ONLY DOES ASEAN PROVIDE ITS MEMBERS WITH A STRONGER VOICE IN THE INTERNATIONAL ARENA, BUT IT ALSO SERVES AS A FLEXIBLE REGIONAL FRAMEWORK FOR COOPERATION ON POLITICAL, ECONOMIC AND FUNCTIONAL ISSUES. 

AS A FOUNDING MEMBER OF THE UNITED NATIONS,  THE PHILIPPINES  RECOGNIZES THE PARAMOUNT ROLE OF THE UN IN THE MAINTENANCE OF INTERNATIONAL PEACE AND SECURITY AND IN THE PROMOTION OF DEVELOPMENT.  WE HAVE CONSISTENTLY BEEN IN THE FOREFRONT OF UN ADVOCACY OF HUMAN RIGHTS.  WE ARE FULLY COMMITTED TO COOPERATION WITH THE UN IN ITS WORK TOWARDS COMBATING TERRORISM AND THE WIDE MENACE OF TRANSNATIONAL CRIMES. WE ACTIVELY SUPPORT UN PEACEKEEPING OPERATIONS AND NATION-BUILDING EFFORTS.  OFTENTIMES THIS HAS PROVEN TO BE HAZARDOUS TO OUR CITIZENS, AS SHOWN BY THE RECENT ABDUCTION OF A FILIPINO DIPLOMAT IN AFGHANISTAN, WHO WAS PART OF THE UN TEAM IN CHARGE OF THE RECENT ELECTIONS IN THAT COUNTRY.  NEVERTHELESS, OUR COMMITMENT TO THE WORK OF THE UN REMAINS STRONG.   THIS COMMITMENT IS FURTHER STRENGTHENED BY OUR CURRENT MEMBERSHIP IN THE SECURITY COUNCIL.

THE PHILIPPINES ALSO TAKES ACTIVE PART IN THE WORK OF THE WORLD TRADE ORGANIZATION (WTO), THE ASIA PACIFIC ECONOMIC COOPERATION (APEC) AND THE ASIA-EUROPE MEETING (ASEM).

THE YEARS FOLLOWING THE MARCOS REGIME WERE, TO SAY THE LEAST, CHALLENGING ONES FOR THE PHILIPPINES. 

THE AQUINO ADMINISTRATION FROM 1986 TO 1992 ENCOUNTERED SERIOUS IMPEDIMENTS DUE TO THE UNUSUAL MANNER OF PRESIDENT CORAZON AQUINO’S RISE TO POWER.  INDEED, WHO DOES NOT REMEMBER THE IMAGES OF “PEOPLE POWER”  FLASHED ON TELEVISION SCREENS WORLDWIDE.  ALTHOUGH THE AQUINO ADMINISTRATION DID NOT FULLY REVOLUTIONIZE THE SOCIAL, ECONOMIC AND POLITICAL LANDSCAPE OF THE PHILIPPINES, IT IS CREDITED WITH RESTORING THE DEMOCRATIC INSTITUTIONS THAT WERE SUBVERTED FOR MORE THAN TEN YEARS UNDER MARTIAL LAW.    THE RESTORATION OF THESE DEMOCRATIC INSTITUTIONS PROVIDED SUBSEQUENT ADMINISTRATIONS WITH THE FRAMEWORK FROM WHICH TO BUILD ON AND MOVE FORWARD.

THE RAMOS ADMINISTRATION FROM 1992 TO 1998 ADOPTED A REFORMIST ECONOMIC POLICY ANCHORED ON THE CONCEPTS OF LIBERALIZATION AND GLOBALIZATION.    THIS POLICY ATTRACTED FOREIGN INVESTMENTS THAT RESUSCITATED AND ENERGIZED THE SLUGGISH ECONOMY.   THE RAMOS ADMINISTRATION IS CREDITED FOR SUCCESSFULLY INITIATING ECONOMIC REFORMS THAT ENABLED THE COUNTRY TO RECOVER AFTER A LONG PERIOD OF STAGNATION.  STATISTICS SHOW THAT THE PHILIPPINES ENJOYED SUSTAINED ECONOMIC GROWTH FROM 1992 TO 1996 AT AN AVERAGE RATE OF 4.7 PERCENT ANNUALLY.  

THE ESTRADA ADMINISTRATION FROM 1998 TO 2001 WAS BASICALLY ANCHORED ON A PRO-POOR AGENDA  : JUSTICE, ECONOMY, ENVIRONMENT AND PEACE.   IT WAS DURING THIS PERIOD THAT TWO IMPORTANT PIECES OF LEGISLATURE WERE PASSED : REPUBLIC ACT NO. 8749 OR THE PHILIPPINE CLEAN AIR ACT OF 1999 AND REPUBLIC ACT NO. 8792 OR THE ELECTRONIC COMMERCE LAW.    THE PHILIPPINE CLEAN AIR ACT RECOGNIZED THE GOVERNMENT’S RESPONSIBILITY TO FORMULATE A NATIONAL PROGRAM ON AIR POLLUTION MANAGEMENT.  THE ELECTRONIC COMMERCE LAW WAS CRAFTED TO ADDRESS ISSUES RELATING TO INFORMATION AND COMMUNICATIONS TECHNOLOGY.  ALTHOUGH PRESIDENT ESTRADA WON BY THE BIGGEST MARGIN IN ANY PRESIDENTIAL ELECTION IN PHILIPPINE HISTORY, HIS PRESIDENCY WAS ABRUPTLY ENDED BY A PEACEFUL PEOPLE’S REVOLT WHICH WAS TRIGGERED BY THE PERCEIVED FAILURE OF THE SENATE TO CONDUCT A FAIR AND BIPARTISAN TRIAL OF THE IMPEACHMENT CASE AGAINST THE PRESIDENT WHO STOOD ACCUSED OF GRAFT AND CORRUPTION, ECONOMIC PLUNDER, AND OTHER VIOLATIONS OF THE CONSTITUTION.

PRESIDENT GLORIA MACAPAGAL ARROYO ASSUMED THE PRESIDENCY ON 20 JANUARY 2001 AFTER THE SUPREME COURT DECLARED THE POSITION OF PRESIDENT VACANT.  THE NATIONAL AGENDA OF HER ADMINISTRATION FOCUSED ON POVERTY ALLEVIATION WITH FOUR COMPONENTS:

          
» ENSURING MACROECONOMIC STABILITY WITH EQUITABLE GROWTH BASED ON THE ECONOMIC PHILOSOPHY OF FREE ENTERPRISE 

» AGRICULTURAL AND FISHERIES MODERNIZATION

» THE PROMOTION OF COMPREHENSIVE HUMAN DEVELOPMENT WITH A SOCIAL BIAS TOWARD THE DISADVANTAGED

» THE PROMOTION OF GOOD GOVERNANCE AND THE RULE OF LAW

NATIONAL ELECTIONS WERE HELD LAST MAY 10 AND FOR THE FIRST TIME, FILIPINOS OVERSEAS WERE ABLE TO VOTE FOR THEIR LEADERS.  IN GERMANY WE HAD 224 VOTERS, WHICH, IF COMPARED TO OTHER EUROPEAN COUNTRIES WITH A LARGE CONCENTRATION OF FILIPINOS, SUCH AS ITALY AND SPAIN, IS NOT MUCH.  IT WAS HOWEVER A HISTORIC MOMENT FOR THE FILIPINOS OVERSEAS.  IT WAS ALSO A HISTORIC MOMENT FOR THOSE OF US IN THE FOREIGN SERVICE FOR THE ADDED REASON THAT IT WAS OUR FIRST TIME TO SERVE AS ELECTION OFFICERS.

PRESIDENT ARROYO WAS SWORN INTO OFFICE ON JUNE 30 THIS YEAR, THIS TIME ON HER OWN MANDATE AS PRESIDENT.  IN HER INAUGURAL SPEECH, SHE OUTLINED HER GOVERNMENT’S 10-POINT AGENDA FOR THE NEXT SIX YEARS:

    * The creation of 6 million jobs in six years via more opportunities given to entrepreneurs, tripling of the amount of loans for lending to small and medium enterprises and further development of agricultural business

    * The construction of new buildings, classrooms; provision of desks and chairs, books and computers for students and scholarships to poor families

    * The balancing of the budget through enhancing revenues and prudent spending that will result in a more healthy fiscal sector and ensure that funding for priority development programs are sustained

    * The “decentralization” of progress around the nation through the use of transportation networks like the roll-on, roll-off and the digital infrastructure

    * The provision of electricity and water supply to barangays nationwide

    * The decongestion of Metro Manila by forming new cores of government and housing centers in Luzon, Visayas and Mindanao.

    * The development of Clark and Subic as the best international service and logistic centers in the region

    * The complete automation of the electoral process

    * A just end to the peace process, particularly in Mindanao

    * A fair closure to the issues and divisiveness generated in Edsa I, II and III.

IN ORDER TO IMPLEMENT THIS PRO-POOR EMPOWERMENT AGENDA, FOUR REFORM PACKAGES HAVE BEEN CRAFTED :

    * Job Creation and Economic Growth

    * Energy Independence

    * Anti-Corruption through Good Government

    * Social Justice and Basic Needs

    * Education and Youth Opportunity

THE PHILIPPINES HAS SEEN SOME ROUGH TIMES SINCE THE MARCOS YEARS.   DOMESTICALLY, WE FACED NUMEROUS OBSTACLES WHICH AT TIMES SEEMED IMPOSSIBLE TO OVERCOME, YET WE MANAGED TO OVERCOME THEM AND MOVE AHEAD.  THE EXTERNAL ENVIRONMENT HAS ALSO NOT BEEN VERY CONDUCIVE FOR ECONOMIC GROWTH – THE SERIOUS FINANCIAL CRISIS IN 1997, THE THREAT OF TERRORISM AFTER SEPTEMBER 11, THE WEAK GLOBAL MARKET, WAR IN IRAQ AND THE OUTBREAK OF THE SEVERE ACUTE RESPIRATORY SYNDROME (SARS) – ARE JUST SOME OF THE MORE RECENT EVENTS WHICH HAVE THREATENED THE WORLD ECONOMY AND UNDERMINED GROWTH PROSPECTS.

SO YOU MAY ASK, HOW IS THE PHILIPPINE ECONOMY TODAY?   LET ME CITE SOME DATA FOR LAST YEAR, 2003 :

    * OUR GNP GREW 5.5 PERCENT, EXCEEDING THE GOVERNMENT’S FORECAST OF BETWEEN 4.5 TO 5.4 PERCENT GROWTH

    * DESPITE NUMEROUS THREATS, OUR GDP GREW BY 4.5 PERCENT 

    * GROWTH WAS BROAD-BASED, THE TOP THREE SECTORS BEING SERVICES (5.9 PERCENT), AGRICULTURE, FISHERY AND FORESTRY (3.9 PERCENT) AND INDUSTRY (3 PERCENT)

    * INFLATION REMAINED AT 3.1 PERCENT  FOR THE LAST TWO YEARS (2002-2003) 

    * JOB CREATION WAS BOOSTED ACROSS ALL MAJOR SECTORS

    * TOTAL TRADE AMOUNTED TO US$ 73.198 BILLION , UP 3.6 PERCENT FROM 2002.  TOP PHILIPPINE EXPORTS FOR 2003 WERE ELECTRONICS 67 PERCENT, GARMENTS 6 PERCENT, MACHINERY/TRANSPORT EQUIPMENT 5 PERCENT, PROCESSED FOOD 2 PERCENT, COCONUT PRODUCTS 1 PERCENT, AND PETROLEUM PRODUCTS 1 PERCENT.  

THE ELECTRONICS SECTOR HAS COME A LONG WAY SINCE 1976 WHEN IT COMPRISED ONLY 3 PERCENT OF TOTAL PHILIPPINE EXPORTS.   THE INDUSTRY CURRENTLY ACCOUNTS FOR 10 PERCENT OF THE WORLD SUPPLY OF SEMICONDUCTOR MANUFACTURING SERVICES.  MAJOR GLOBAL INDUSTRY PLAYERS ARE IN THE PHILIPPINES : INTEL PHILIPPINES, TEXAS INSTRUMENTS PHILIPPINES, TOSHIBA PHILIPPINES, PHILIPS, TEMIC, AND HITACHI LTD, AMONG OTHERS.

In its annual mid-year economic briefing with the business community and media HELD ON 8 September THIS YEAR, the Government’s economic team reviewed the current state of the Philippine economy :

    * GDP grew by 6.3 percent in the first half of 2004

    * Growth was driven by strong demand from both domestic and external markets pushing exports to grow by 13 percent, and contributing to a recovery in investments, which grew by 7.2 percent

    * Japan is currently the country’s leading export market

    * Electronics and semiconductors comprise the largest share of 45.2 percent in the country’s export base

    * BOI and PEZA-approved investments rose by 590.2 percent, exceeding the approved investments for 2002 and 2003 taken together

    * 37,604 jobs are expected to be generated from the 216 projects approved within the next 18 months as these companies begin their operations

    * Foreign investors accounted for 87.5 percent of total investments (P123.3 billion), an 866.2 percent increase over 2003 levels

    * Investment commitments from local sources grew by 130.2 percent, accounting for 12.5 percent of total approvals

    * 78 percent of the approved investments were related to energy projects

    * The peso’s volatility remains highly manageable

THE PHILIPPINE GOVERNMENT IS COMMITTED TO PURSUE MACROECONOMIC POLICIES THAT ARE GEARED TOWARDS PROMOTING AND FURTHER STRENGTHENING STABILITY ON ALL ECONOMIC FRONTS.    WE HAVE NO OTHER CHOICE.

WE ALL KNOW WHAT INVESTORS – FILIPINO AS WELL AS NON-FILIPINO- LOOK FOR IN A COUNTRY : SOUND TRADE POLICY, CONSISTENCY AND PREDICTABILITY OF POLICY, POLITICAL STABILITY, PEACE AND ORDER, THE ABSENCE OF CORRUPTION OR A REASONABLE LEVEL THEREOF, THE RULE OF LAW, ADEQUATE AND INEXPENSIVE TRANSPORTATION AND COMMUNICATIONS.  THE NATURE AND APPLICATION OF TAX POLICY, THE LEVEL OF TRANSACTION COSTS AND THE RELATIONSHIP OF WAGES TO PRODUCTIVITY ARE OTHER IMPORTANT CONSIDERATIONS.

WE WILL CONTINUE TO MOVE IN THIS DIRECTION.  THERE WILL NO DOUBT BE SETBACKS BUT WE WILL KEEP ON TRACK.
 
AS THIS ROUNDTABLE DISCUSSION IS ON OUTSOURCING, I SHOULD MENTION SOME OF THE ADVANTAGES OF THE PHILIPPINES IN THIS SECTOR :

    * WE ARE STRATEGICALLY LOCATED IN ASIA

    * WE HAVE RELIABLE INFRASTRUCTURE SUPPORT INCLUDING EXPANDING MULTI-MEDIA INFRASTRUCTURE,  A DEREGULATED TELECOMMUNICATIONS INDUSTRY, NATIONAL NETWORK CAPACITY AND THE PRESENCE OF DEDICATED IT PARKS RIGHT IN THE CENTER OF BUSINESS DISTRICTS

    * WE HAVE QUALITY HUMAN RESOURCES.  WE PRODUCE APPROXIMATELY 380,000 COLLEGE GRADUATES PER YEAR, 70,000 OF WHICH ARE IN THE IT/COMPUTER SCIENCES/ENGINEERING FIELDS AND 100,000 IN THE COMMERCE/BUSINESS-RELATED FIELDS.  ACCORDING TO THE 2002 GLOBAL TECHNOLOGY INDEX OF THE META GROUP (a US-based research group) WE RANK THIRD IN THE AVAILABILITY OF COMPETENT SENIOR MANAGEMENT PERSONNEL (AFTER THE UNITED STATES AND CHILE)

    * WE PROVIDE A WIDE RANGE OF INVESTMENT INCENTIVES FOR DOMESTICALLY INCORPORATED FIRMS AND BRANCH OFFICES AS WELL AS REGIONAL HEADQUARTERS

GIVEN THESE STRENGTHS, WHAT TRENDS DO WE ENVISION FOR THE NEXT FEW YEARS ?

FIRST, THE GROWTH OF THE CONTACT CENTER INDUSTRY. MAJORITY OF THE TOP CALL CENTERS HAVE SET UP OPERATIONS OVER THE LAST TWO YEARS , I.E. CONVERGYS, SYKES, TELETECH, AOL, APAC, ICT, WEST, SITEL.

SECOND, BUSINESS PROCESSES OUTSOURCED (BPO) TO THE PHILIPPINES.  THESE WOULD INCLUDE ACTIVITIES FALLING UNDER FINANCE AND ACCOUNTING, HUMAN RESOURCES AND OTHER BUSINESS PROCESSES SUCH AS DATA ENTRY/DATA PROCESSING, PRE-NEED ACCREDITATION, INVENTORY CONTROL, AND TECHNOLOGY SUPPORT, AMONG OTHERS.

THIRD, SOFTWARE DEVELOPMENT.  THE 2002 GLOBAL NEW ECONOMY INDEX OF THE META GROUP CITED THE PHILIPPINES FOR THE EXCELLENT AVAILABILITY OF SKILLED IT WORKERS AND FOR THEIR PROFICIENCY IN MAINFRAMES, MINICOMPUTERS AS WELL AS FOR THEIR TECHNICAL AND BUSINESS SKILLS FOR ICT PROJECTS.

FOURTH,  THE GROWTH AND STRENGTHENING OF ENGINEERING AND DESIGN.  WE PRODUCE OVER 40,000 ENGINEERING GRADUATES ANNUALLY AND ARE HOST TO SEVERAL DESIGN AND DEVELOPMENT CENTERS.

 IN ORDER TO SUSTAIN THE GROWTH AND QUALITY OF OUR OUTSOURCING STRENGTHS, THE GOVERNMENT HAS EMBARKED ON THE FOLLOWING STEPS :

    * THE SETTING OF BENCHMARKS AND STANDARDS DEVELOPED IN CONJUNCTION WITH INDUSTRY

    * THE STRENGTHENING OF EDUCATION AND TRAINING

    * BUILDING OTHER HUBS IN COORDINATION WITH PROVINCIAL GOVERNMENTS AND THE BUSINESS COMMUNITY

    * THE CREATION OF THE COMMISSION ON INFORMATION AND COMMUNICATIONS TECHNOLOGY AS A TRANSITORY MEASURE LEADING TO THE CREATION OF A DEPARTMENT OF INFORMATION AND COMMUNICATIONS TECHNOLOGY

    * ESTABLISHING THE BUSINESS PROCESSING ASSOCIATION OF THE PHILIPPINES

LADIES AND GENTLEMEN,

GROWING GOBAL COMPETITION THAT IS PART OF THE TREND TOWARDS GLOBALIZATION PRESENTS AN OPPORTUNITY AS WELL AS A THREAT.    WE IN THE PHILIPPINES SEE IT AS AN OPPORTUNITY TO PUT IN PLACE THOSE CONDITIONS THAT MAKE AN ECONOMY COMPETITIVE. 
LARGE, CONTINENT-SIZED COUNTRIES ARE SURGING, SMALLER MARKETS, INCLUDING OUR NEIGHBOURS, ARE COALESCING INTO LARGER ONES,AND THERE IS NOTHING WE CAN DO ABOUT IT EXCEPT TO JOIN THE TREND AND STRENGTHEN OURSELVES FOR THE COMPETITION THAT WILL, IN ANY CASE, BECOME FIERCER.  

THAT IS WHY I WISH TO THANK THE ORGANIZERS OF THIS EVENT FOR PUTTING THE SPOTLIGHT ON THE PHILIPPINES.  I HOPE THAT BY THE END OF THE DAY, YOU  WILL HAVE BEEN CONVINCED TO JOIN US AND BECOME PART OF ASIA’S EMERGING SOFTWARE AND BUSINESS PROCESS OUTSOURCING HUB.

THANK YOU.