by Dr. Alvin Ang, presented during New Leaf Ventures' Better Business Brunch last Aug. 3 2013

1. The Philippine Economy: Midway in
the Noynoy Administration
Alvin P. Ang, Ph.D.
University of Santo Tomas
Manila, Philippines
Professor,
Faculty of Arts and Letters

2. Flow of Presentation
 Past Philippine Economic Performance
 Where is the growth coming from?
 What are the new growth drivers?
 What is the short-term and long-term
direction of growth?

3. NUMBERS THAT MATTER
 GDP GROWTH – (UP)
 GDP BY CONTRIBUTION – (FEW)
 GDP BY AREA – (CONCENTRATED)
 EMPLOYMENT – (WEAK)
 BUDGET BALANCE (GOOD)
 REMITTANCES – (BEST)
 INTEREST RATES – (BEST)

4. GDP Growth – Breaking Out!
Death of
Aquino and
Political Crisis
-10
-8
-6
-4
-2
0
2
4
6
8
10
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Philippines Real GDP Growth, Percent
Balance of
Payments
Crisis
Asian
Financial
Crisis
Global
Financial
Crisis

5. Economic Structure
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Services Manufacturing Agriculture

6. Contribution per industry
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Other Services
Public Administration & Defense:
Compulsory Social Security
R. Estate, Renting & Bus. Actvt
Financial Intermediation
Trade and Repair of Motor
Vehicles, Motorcycles, Personal
and Household Goods
Transport., Stor., and Comm.
Electricity, Gas and Water Supply
Construction
Manufacturing
Mining & Quarrying
Forestry
Agriculture and fishing

7. Manufacturing
2011 2012 2013
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Food manufactures 122,956 83,642 157,285 141,995 130,009 92,920 166,780 159,340
Beverage industries 13,423 16,600 18,358 10,626 13,638 17,191 18,849 10,435
Tobacco manufactures 735 1,958 1,710 507 837 1,945 1,386 480
Textile manufactures 9,333 6,819 7,470 6,643 10,333 6,170 6,956 5,749
Wearing apparel 6,008 7,159 9,862 7,284 10,314 11,093 10,863 7,634
Footwear and leather and leather
products 677 1,216 2,385 1,004 1,009 1,288 2,968 1,278
Wood, bamboo, cane and rattan articles 3,123 2,282 4,988 2,637 4,252 2,170 5,258 2,104
Paper and paper products 4,286 4,728 2,449 2,721 3,937 4,243 2,690 2,609
Publishing and printing 2,735 878 2,608 2,251 2,630 977 2,651 1,761
Petroleum and other fuel products 13,527 10,038 13,234 14,581 11,606 8,955 13,648 11,449
Chemical & chemical products 18,976 22,782 30,983 18,652 21,029 23,527 32,058 22,092
Rubber and plastic products 5,013 6,066 5,952 5,303 5,457 6,961 4,796 5,409
Non-metallic mineral products 7,880 7,916 11,198 7,247 9,555 9,895 11,313 7,473
Basic metal industries 4,858 10,387 4,481 4,315 2,914 8,388 5,367 7,144
Fabricated metal products 6,007 2,542 3,568 2,057 6,053 2,539 3,311 1,964
Machinery and equipment except
electrical 4,344 5,804 4,828 4,888 4,488 5,832 5,063 5,799
Office, accounting and computing
machinery 3,318 6,748 3,889 3,862 3,431 8,787 4,860 4,087
Electrical machinery and apparatus 8,609 7,954 9,229 8,174 10,359 9,234 7,982 5,595
Radio, television and communication
equipment
and apparatus 62,909 70,817 38,306 67,216 56,284 68,960 45,936 80,824
Transport equipment 6,858 8,884 8,175 5,627 8,349 10,300 9,009 6,282
Furniture and fixtures 5,667 7,452 19,680 13,717 10,401 10,304 18,925 14,196
Miscellaneous manufactures 13,394 13,021 10,594 10,929 11,606 11,846 10,796 11,682

8. Why can’t I feel the growth?
 TWO THINGS:
 What is expanding? - Growth
 What is contributing to it? - Share

9. Where?
PERCENT DISTRIBUTION
REGION / YEAR 2010 2011 2012
NCR METRO MANILA 35.8 35.7 36.3
CAR CORDILLERA 2.2 2.2 2.0
I ILOCOS 3.1 3.1 3.1
II CAGAYAN VALLEY 1.7 1.7 1.8
III CENTRAL LUZON 8.8 9.1 9.1
IVA CALABARZON 17.3 16.9 16.8
IVB MIMAROPA 1.8 1.8 1.7
V BICOL 2.1 2.1 2.1
VI WESTERN VISAYAS 3.9 4.0 4.0
VII CENTRAL VISAYAS 6.0 6.1 6.3
VIII EASTERN VISAYAS 2.5 2.5 2.2
IX ZAMBOANGA PENINSULA 2.0 2.0 2.1
X NORTHERN MINDANAO 3.8 3.9 3.9
XI DAVAO REGION 4.2 4.2 4.0
XII SOCCSKSARGEN 2.8 2.8 2.8
XIII CARAGA 1.1 1.1 1.2
ARMM MUSLIM MINDANAO 0.9 0.9 0.9
Source: National Statistical Coordination Board

10. Share

11. Stagnant Manufacturing
0
5000
10000
15000
20000
25000
Employment by Sector
Agriculture
Manufacturing
Services

12. Productivity Issues
 Agriculture Employment of 33% only
produces 16% of GDP
 Industry employs about 15% of GDP but
contributes about 25% to GDP

13. Latest Employment Data
1Q11 2Q1
1
3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Labor Force
Mn
39.2 39.7 39.9 41.1 40.3 40.6 40.4 40.4 40.8 40.9
Employed
Mn
36.2 36.8 37.1 38.5 37.3 37.8 37.5 37.7 37.9 37.8
Unemployed
Mn
2.9 2.9 2.8 2.6 2.9 2.8 2.8 2.7 2.9 3.0
LFPR% 63.7 64.2 64.3 66.3 64.2 64.7 64.0 63.9 64.1 63.9
ER% 92.6 92.8 92.9 93.6 92.8 93.1 93.0 93.2 92.9 92.5
UR% 7.4 7.2 7.1 6.4 7.2 6.9 7.0 6.8 7.1 7.5
UnER% 19.4 19.4 19.1 19.1 18.8 19.3 22.7 19.0 20.9 19.2

14. Minimum Wage in Asian Countries
0
5
10
15
20
25
30
35
40

15. Manpower supply – long term
concern
 276,940 unfilled jobs with 1,969,976
applicants (BITS 09-10)
 Average time to fill up jobs is 3.7 months (09-
10) vs 5 months (07-08)

16. Difficulty more pronounced in middle
management
Source: WB Philippine Skills Survey 2010

17.  Stock of Overseas Filipinos: 10.4 Million (more than
10% of Population, as of end-2011) in 239 countries
and territories
– 45% Temporary Migrants (also called overseas Filipino
workers or OFWs in the Philippines);
– 48% Permanent Immigrants;
– 7% Irregular migrants
– Developing country comparisons: 0.9M overseas Albanians;
2.27M overseas Moroccans; 2.7M El Salvadorans
Filipinos’ Overseas Migration

18. Growth can be internally financed
0%
5%
10%
15%
20%
25%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Portfolio Investments as % of GDP Foreign Direct Investments as % of GDP
OFW Remittance as % of GDP Gross Domestic Savings as % of GDP

19. Savings boom!
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Gross domestic saving
Gross national saving
Gross domestic capital formation

20. Government balance
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
Total revenue
Taxes
Total expenditure
Overall budgetary surplus/deficit

21. Pushed Interest Rates to all time
lows

22. Reserves at all time high!
0
10
20
30
40
50
60
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Official Reserves and Exchange Rate
Official Reserve Assets, Million US$
Exchange Rates, PhP/US$

23. Foreign Debt
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
External debt percent of GNI
Total long-term debt percent of total debt
Short-term debt percent of total debt

24. Investment Grade
 Fitch, S&P, Japan Ratings Agency and soon
Moody’s
 Analysis of a country’s debt condition, tax
collection, low and stable inflation collectively
known as risk premium

25. Irony
 With lower risk premium, money flows in >
we no longer need too much external
borrowing
 Government can raise resources internally
 Enough fx to finance our requirements

26. Employment in BPO
-
100,000
200,000
300,000
400,000
500,000
600,000
2004 2005 2006 2007 2008 2009 2010 2011
Software Development
Animation
Transcription
Contact Center

27. Top Exports and Imports
Exports Share Imports Share
Electronics 58% Electronics 35%
Clothing 4% Fuel 22%
Furniture 3% Transport 5%
Wiring 2% Food 5%
Copper 2% Machinery 4%
Bananas 1% Chemicals 2%
Tuna 1% Iron 3%

28. Cities outside of Manila catching
up!
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00

29. Can we sustain investment grade?
 Macroeconomic policy can influence but not
totally change institutions/cultures
 We are faced with huge structural imbalance
favoring the present economic and political
groups
 Private sector must follow and government
infrastructure investments

30. Short term growth prospects

31. Richest follow their investments
HENRY SY 12.BN MALLS, BANKING, REAL ESTATE
LUCIO TAN 7.5BN TOBACCO, BANKING, AIRLINE
ANDREW TAN 4.6BN REAL ESTATE
ENRIQUE RAZON 4.5BN PORTS, CASINO
JOHN GOKONGWEI 3.4BN MALLS, REAL
ESTATE, AIRLINE, FOOD
MANUFACTURING
JAIME ZOBEL DE AYALA 3.1BN REAL ESTATE, BANKING, TELCO
ENRIQUE ABOITIZ 3.0BN POWER, BANKING, FOOD
DAVID CONSUNJI 2.7BN UTILITIES, REAL ESTATE
GEORGE TY 2.6BN BANKING, UTILITIES

32. What holds in the next 3 years?
 Philippines will need to prepare:
– ASEAN 2015
– Shift in OFW demand
– Immediate transformation of investments to
productive and job-sustaining activities
– Support infrastructure
 We are severely affected by internal
structure!

33. P-Noy Focus
 Focus on quality basic education including
financial literacy as a basic life skill
 Improving the business climate by now
extending fight of corruption at local levels
 Encourage and take the lead in investments
in sectors where productivity is low –
agriculture
 Overwhelming infrastructure development

34. Without these…
 Investment upgrade mostly reputational
impact – good for short- term
 Increase FDI to at least US$5Bn! – Argentina
and Egypt have lower credit ratings but
higher FDIs of 11 and 5 Bn!
 They need to be connected to smaller firms

35. Please attend…
 51st Annual Meeting of the Philippine
Economic Society on 15 November 2013
 Featuring the country’s top economists and
business leaders
 For further inquiry please log on to
www.pes.org.ph
Philippine Economic Society
50 years (1962 – 2012)

36. THANK YOU AND GOD
BLESS!
Twitter: @angalvin
Email: angalvinp@gmail.com
Blog: winninginvestor@wordpress.com