February 10, 2023
Hajimemashite (hah-jee-meh mash-teh).
(“Pleased to meet you” in a formal business introduction.)
I’d like to welcome you all to the first Philippine Business Opportunities Forum here in Tokyo, Japan. The Philippine economic team is happy to share with you the Philippines’ growth story.
As longtime strategic partners, the Philippines and Japan have enjoyed strong diplomatic relations covering political, security, trade and economic, and cultural cooperation.
Japan remains a major trade partner and top investment source. It was the Philippines’ second largest trading partner and the second largest source of investments.
Infrastructure is a key area of mutual interest for our countries. Japan has aggressively supported the Duterte administration’s infrastructure program. This includes the Philippines’ first-ever underground rail system.
All these attest to how Japan has become a valuable partner in our development story. We are hoping that Japan will continue to be a partner in our bright economic future.
We are pleased to report that the Philippines’ economic resurgence is kicking into high gear. In 2022, the economy grew by 7.6 percent, surpassing our full-year target and exceeding all expectations. This is among the highest growth rates among major emerging economies in the region.
Despite a string of global economic and financial crises in recent years, we managed to pull off our best full-year performance in 46 years.
The labor market has recovered strongly from the pandemic and has continued to reach record numbers. In December 2022, unemployment rate dropped to 4.3 percent – the second lowest we have seen since April 2005. This is even lower than the pre-pandemic rate of 4.5 percent.
Meanwhile, the labor force participation rate rose to 66.4 percent from the 65.1 percent recorded in 2021. This means that more workers have joined the labor force.
The quality of jobs continues to improve. The underemployment rate significantly dropped to 12.6 percent from the previous year’s 14.7 percent.
Our gross international reserves as of end-January 2023 stood at 99.7 billion US dollars. This level is equivalent to 7.5 months’ worth of imports. The received doctrine is that if you have 3 months’ worth of imports, you’re okay.
Clearly, the Philippines is brimming with economic energy ready to be unleashed and shared with the rest of the world.
We will continue to build on the back of the previous administration’s infrastructure initiatives.
But we plan to take it a step further. This time, we will harness the public-private partnerships mechanism to augment the massive “Build Better More” infrastructure program of the Marcos administration.
The public-private partnership mechanism will help speed up investments while upholding the highest standards for quality infrastructure development.
In fact, we have amended the implementing rules and regulations of the Build-Operate-Transfer Law within the first 100 days of the Marcos administration to enhance the transparency and soundness of our public-private partnership framework.
Last December, the House of Representatives approved on third and final reading an Act to foster the growth of public-private partnerships for infrastructure and development projects.
Moving forward, we will remain strongly committed to cooperating with our development partners on high-quality, private sector-led infrastructure as means of supporting economic growth and enhancing connectivity in the Philippines.
Maintaining our infrastructure spending at 5 to 6 percent of GDP annually will require prudent fiscal management. For this, we have crafted the Philippines’ first-ever Medium-Term Fiscal Framework.
The Framework aims to bring down the debt-to-GDP ratio to less than 60 percent by 2025, then further down to 51 percent by 2028, and reduce the budget deficit to 3.0 percent of GDP by 2028.
We have already made significant headway on this front. With our faster-than-expected growth in the last quarter of 2022, our debt-to-GDP ratio by the end of the year improved to 60.9, lower than the government’s target of 61.8 percent for 2022.
At this rate, we are optimistic that we will achieve our macroeconomic and fiscal targets on time or even earlier than expected. We have many reasons for this optimism.
With a median age of 25, the Philippines enjoys what is called a demographic sweet spot. We intend to capitalize on our positive demographic fundamentals to boost recovery and build a more inclusive and modern economy.
This presents our two countries a unique opportunity for a mutually beneficial partnership: the Philippines’ young, tech-savvy, and English-proficient workers. They will complement Japan’s forward-looking enterprises, advanced technology, and R&D programs.
We are actively taking stock of the many lessons from the pandemic. To reap the full benefits of having strong interlinkages, the government has crafted a comprehensive plan for deep economic and social transformation.
The Philippine Development Plan for 2023 to 2028 puts flesh into the Marcos administration’s comprehensive 8-Point Socioeconomic Agenda by laying out policies, programs, and legislative priorities for the next few years.
The medium-term plan outlines strategies to establish an enabling environment where life-enhancing opportunities abound and equip our workers with the skills to thrive in a globally competitive economy.
A 21st century economy requires 21st century policies. That is why we have enacted a number of structural reforms to facilitate the flow of foreign capital in key sectors, enhance the ease of doing business, and foster the growth of modern, transformative industries.
First, the amendments to the Retail Trade Liberalization Act have simplified foreign retailers’ requirements and lowered the minimum paid-up capital from 2.5 million US dollars to half a million US dollars.
Second, the amended Foreign Investments Act now provides flexibility and transparency in reviewing the Foreign Investment Negative List. It also liberalizes the practice of professions, making it easier for foreign investors that require foreign talent to do business in the Philippines.
We have also amended our nearly century-old Public Service Act to open up previously protected sectors such as telecommunications, toll roads, airports, shipping, and expressways to 100 percent foreign ownership.
And of course, the landmark Corporate Recovery and Tax Incentives for Enterprises or CREATE Act introduced the largest fiscal stimulus for businesses in Philippine history.
The CREATE Act lowered our corporate income tax rate, which used to be the highest in the region, to become comparable with our ASEAN peers.
More importantly, the same Act offers qualified enterprises in priority sectors a superior incentives package that is performanced-based, time-bound, targeted, and transparent.
To strengthen the culture of research, development, and innovation in the Philippines, CREATE Act grants a 100 percent additional deduction on R&D expenses for enterprises to incentivize the creation of new knowledge and products, in addition to other tax privileges.
The resulting investment-led growth will spawn many meaningful employment opportunities. In turn, more high quality and green jobs will transform the way we work and produce national output.
On the sustainability front, the Philippines is investing heavily in renewable energy. This is in line with the global call for sustainability and complements the rising demand for electricity, given the country’s growth potential and rising population.
The Philippines aims to increase the share of renewable energy in the power generation mix to 35 percent by 2030 and 50 percent by 2040.
To quicken our shift to clean energy, we have opened up our renewable energy sector to full foreign ownership, particularly in the exploration, development, and utilization of solar, wind, hydro, and ocean or tidal energy.
Given our geographical vulnerability to climate-related disasters, we are also ramping up all our efforts towards climate change mitigation and adaptation with a 56.4-percent budget increase in 2023.
On food security, we are investing heavily in medium and long-term efforts to increase local food production and modernize the agriculture sector through digital transformation.
The Philippines is determined to re-establish itself as a top exporter of agricultural products. Accordingly, our agriculture budget has received a boost of more than 40 percent of its previous year’s allocation at 3.1 billion US dollars or 401.6 billion Japanese yen.
As a mineral-rich country, we aim to tap into sustainable mining as a key driver for inclusive and rapid growth. With soaring global metal prices, the extractives sector can provide a significant boost to our economy.
Manufacturing is another area of cooperation. Situated in one of the busiest trade routes in the world, the Philippines can offer firms that are looking to diversify their supply chains a viable source of intermediate products and services.
In fact, with the successful reopening of the economy, manufacturing output has grown for 7 straight months and soared to a 7-month high in December 2022.
As a founding member of the Indo-Pacific Economic Framework alongside Japan, the Philippines is eager to strengthen ties with other nations through a more integrated supply chain.
In closing, I invite you all to discover the many emerging business and investment opportunities in the Philippines.
We look forward to traversing the road to sustainable growth and shared prosperity with you.
Domo arigato gozaimasu (doh-moh ah-ree-gah-toh goh-za-yee-mas).
(“Thank you very much.”)