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Strong Indicators of a Growing Philippine Economy Strongest performing stock market in Asia in 2011 Philippines = 4.07% YTD 10% 5% 0% -5% -10% -15% -20% Philippines -25% Sep-11 Oct-11 Source: Presentation of Dr. Bernardo Villegas, Trade and Investments Talks, BOI, February 2012 Nov-11 Indonesia Dec-11 Stable and resilient economic growth 9.0 8.0 7.0 6.0 GDP (Q1 2012) 6.4% GNP (Q1 2012) 5.8% Headline inflation (May 2012) 2.9% 5.0 4.0 3.0 2.0 1.0 0.0 2000 2001 2002 2003 2004 2005 2006 GDP 2007 2008 2009 2010 2011 2012 GNP Headline Inflation Rates in the Philippines, All Items (2006 = 100) Continuous inflow of OFW remittances • 2011 OFW remittances crossed the US$20 Billion barrier with full year record of US$20.1 Billion • Jan-Feb 2012: US$3.1 Billion, 5.60% higher relative to last year’s US$3 Billion • No expected decrease despite global slowdown due to geographically diversed sources Steady export growth despite global economic slowdown Service Exports: • 2011 Service Exports hit an all-time high of US$11 Billion o Anchored on the BPO sector that directly employs 640,000 people Merchandise Exports: • 2010: 34% Merchandise exports growth at US$51.4 Billion • 2011: Electronics exports decreased by 23.7%, but overall decrease was only 6.9% at US$47.8 Billion • Q1 2012: Electronics exports was at US$6.75 Billion, an increase of 5.55% from previous year’s US$6.40 Billion o Q1 2012 also saw the growth of other top earners: o o o o woodcraft & furniture (31.18%, US$506M); apparel & clothing accessories (1.08%, US$470M); ignition wiring sets (9.51%, $324M); metal components (12.02%, $232M); 15.3% surge in Gross International Reserves to US$76.13 Billion by March 2012 (US$10.15 billion higher than March 2011) Steady investment flows 22% Increase in BOI Investment Approvals in Y2011 (P369 Billion) 6 Robust domestic financial sector coupled with credit growth • Outstanding loans of universal and commercial banks amounted to P2.79 Trillion by end of 2011, up by 19.3% from last year • As of end February 2012, non-performing loans ratio of universal and commercial banks improved to 2.34%, lower by 0.59 percentage points from past year’s 2.93% ratio Efficient revenue collection effort • P197.8 Billion national government deficit in 2011 was 37.1% lower than last year • 2012 budget puts the government on track for a reduced deficit at 2.0% of GDP by 2013 Improving global competitiveness rankings Improvement in Rank World Economic Forum Global Competitiveness Index (2010 – 2012) +20 (from #85 to 75 in 2011 from #75 to 65 in 2012 out of 142 countries) Fraser Institute Economic Freedom (2012) +16 (from #77 to 61, 141 countries) World Bank (2010) Government Effectiveness Indicator +1 (from #51 to 52, 207 countries) Transparency International (2011) Corruption Perceptions Index +5 (from #139 to 134, 178 countries) 9 Other Notable Information Asia’s friendliest country 8th World’s friendliest country ~ HSBC World Explorer Survey 2011 ~ 12th largest population in the world Set to become the world’s 16th largest economy, up 27 places from today One of the new emerging countries due to favorable demographics and strong economic fundamentals ~ HSBC’s “The World in 2050” Report The Philippine Advantage Rich Talent Pool Robust Infrastructure Strategic Business Location First-Class Lifestyle Attractive Investment Incentives Attractive Investment Incentives INCENTIVE Income Tax Holiday (ITH) ITH Bonus BOI (Executive Order No. 226, as amended) PEZA (Republic Act No. 7916, as amended) 4 – 6 years (max of 8 years) 3 years provided the firm meets certain conditions Special Tax Rate of 5% on Gross Income Importation of Capital Equipment, Spare Parts and Supplies Wharfage Dues and Export Tax, Duty, Impost and Fees Simplication of Customs Procedures Employment of Foreign Nationals CDC / SBMA (Republic Act No. 7227 – Bases Conversion Devt Authority Exempted from all local and national taxes - value-added taxes, franchise taxes, excise and ad valorem taxes) Special Tax Rate of 5% on Gross Income 0% duty-free Tax and Duty-Free Exempted None Available Foreign nationals may be employed in supervisory, technical or advisory positions within 5 years from a project’s registration, extendible for limited periods. The positions of president, general manager, and treasurer or their equivalents, of foreign-owned registered firms may be retained by foreign nationals for a longer period. All foreign employees may bring with them their spouses and unmarried children under 21 years of age. Investment Priorities Plan 2012 I. Preferred Activities Regular List: Agriculture/ Agri-business and Fishery Creative Industries/Knowledge-Based Services Shipbuilding Mass Housing Iron and Steel Energy Infrastructure Research and Development Green Projects Motor Vehicles Tourism Strategic Projects Hospital /Medical Services Disaster Prevention, Mitigation and Recovery Projects II. Export Activities Production and manufacture of export products Services exports Activities in support of exporters III. Mandatory List IV. ARMM List Sectoral Opportunities ENERGY - Gross Generation and Installed Capacity, 2011 (Per Type of Fuel/Energy Source) Installed Capacity Generation 68,279 GWh Note: • Preliminary gross generation as of January 2012 • Excluding off-grid generation • Installed capacity as of June 2011 16,233 MW Total Required Additional Capacity (2011-2030) LUZON - 10,450 MW VISAYAS - 2,200 MW MINDANAO - 1,950 MW Philippines: 14,400 MW Source: DOE PDP 2011-2030 Renewable Energy - Capacity Installation Targets (and FIT) Sector Installed Capacity (MW) Total Required Additional Capacity (2011-2030) Feed-In-Tariff (EUR / KWH) Geothermal 1,966.0 1,495.0 - Hydro 3,400.0 5,394.1 0.1092 Biomass 39.0 276.7 0.1228 Wind 33.0 2,345.0 0.1580 Solar 1.0 284.0 0.1792 Ocean 0.0 70.5 - TOTAL 5,438.0 9,865.3 Source: Department of Energy Innate Advantage in Renewable Energy one of the largest producers (second to the US) of geothermal energy in the world abundant water resources that can be tapped for power generation the top wind power producer in Southeast Asia high amount of solar radiation that can be converted into useful energy a big ocean energy resource due to the country’s archipelagic nature abundant supply of biomass Government Support RA 9513 Incentives – For RE Developers: 1. Income Tax Holiday (7 years) 2. Duty-free Importation of RE M/E & Materials 3. Special Realty Tax Rates on M/E 4. Net Operating Loss Carry-Over (NOLCO) 5. Corporate Tax Rate of 10% after the ITH 6. Accelerated Depreciation 7. Zero Percent Value – Added Tax Rate 8. Tax Exemption on Carbon Credits 9. Tax Credit on Domestic CE and Service Agriculture/Agribusiness and Fishery major producer of tropical fruits such as banana, pineapple and mango world’s eight largest fish producer market leader in canned pineapple and juice market leading producer and exporter of seaweeds Agriculture/Agribusiness 1st in global share of coconut production viable location for rubber plantation & processing Palm Oil (one of five countries in Asia with palm oil plantations) abundant supply of mango fruit seed (mango seed oil - ingredients for cosmetics) Tourism 2010 visitor arrivals reach all time high at 3.52 M Top 3 Markets Korea Jan-Apr 2011 growth rate: 13% USA Japan Top 5 Destinations CEBU CAMSUR BORACAY DAVAO CAGAYAN VALLEY Areas for investments: • Retirement villages • Medical tourism • Healthcare & wellness products & services • Tourist accommodation facilities Mining • Located in the “Ring of Fire” • 5th most mineralized country in the world 2nd in Gold 4th in Copper 5th in Nickel 6th in Chromite • 9 million hectares of mineralized land Only 1.4% with mining permits so far 2.2 million sq. km. offshore mineral potential • 7 billion tons of ore reserves • Large pool of professional geologists and mining engineers • Presence of highly organized institutions and professional organizations Ideal Locations Most prolific copper and gold producers are found in the Baguio and Mankayan districts • The Surigao-Davao districts also contribute much to Philippine gold production • Nickel major producers are in Palawan and Surigao • Potential areas and deposits identified by the Mines and Geosciences Bureau: - Zambales – Cr, Ni, Co, Pt, Cu, Au Samar-Eastern Mindanao – Au, Cu, Fe, Cr, Ni, Pt, Mn Palawan – Cr, Ni, Co, Pt, Au IT & BPO Industry Snapshot Contact Center • Contact Centers in PH: 220+ • Revenues in 2011:US$7.4B • Full time employees as of 2011: 416,000 • Revenue Growth Y-o-Y: 21% Back-office and KPO: Best-kept secret • No. of service providers: 100+ • Full time employees as of 2011: 128,650 • Revenue in 2011: US$2.05B • Revenue growth Y-o-Y: 24% Software Development • No. of development companies: 135 (export only) • Total professionals employed: 49,908 • Revenue in 2011: US$993M, 37% growth Y-o-Y Animation & Game Development • 20yr wealth of experience in the field of Animation • Capabilities in 2D, 3D, Maya, 3DMax, Medical/Educ. Graphics & Animation • Revenue in 2011: Animation at US$128M, Game Dev’t at US$8M Engineering Design • Over 75,000 licensed professionals • Revenue in 2011:US$172M • 40,000 graduate of engineering courses annually (CAD-enabled) Why the Philippines is a Top Offshore BPO Location Scalable Educated Talent Pool Cost Competiveness Excellent Infrastructure • • • • 3rd-largest English-speaking country, 12th most populous country 90+ million population, 39+ million work force 470,000+ college graduates per year; 93% literacy rate Western-based legal and accounting curriculum and certification • Labor costs for English-speaking professionals among lowest in the world • All-in costs among lowest in the world • Predictable and manageable inflation • • • • Abundant low-cost & high quality real estate in several urban areas Reliable, redundant, low-cost telco infrastructure Reliable power and building 100-200% back-up as a standard Available 24/7 low cost transportation Government Support & Public-Private Partnership • Government support in education, locator support (PEZA, ICTO) • Income tax holiday (4-8 years), 5% tax on GI post holiday, VAT exemption • Comprehensive BPAP Road Map 2016 to achieve 20% YOY growth Proven Track Record • No. 1 in Voice: customer care, tech, financial services, sales, collections • Mature/growing industry-specific and cross-industry capability: IT, F&A, HR, Health & Care BPO, Procurement, Banking, Utilities, Telco • Primary English-based services plus other Asian and European languages • Analytics & KPO capabilites 29 Electronics • Driver for export growth • Home to seven of the world’s top 30 chipmakers and three of the largest HDD producers • Supplies the world with 2.5 million HDDs per month • Accounts for 10% of the SMS world supply Market Opportunities • Integrated Industry-Government Strategy for Market Growth Shift from its present electronics products portfolio to Electronics Manufacturing Services (EMS) and later to other segments of the electronics value chain which offers spillover/linkages opportunities Investment promotion for Solar Power, Aerospace, Automotive, Medical and Military companies • Supply Chain Development Supplier Development/Matching (for robust supplier base) Infrastructure • The country only spent less than 2% of GDP on infrastructure in recent years; target 5% of GDP • Building infrastructure consequently a cornerstone of the Aquino administration • Given the large financial requirements, the government pushes PUBLIC PRIVATE PARTNERSHIP • Since 2011, 2 infrastructure projects bidded out • 8 in the pipeline. More to follow Infrastructure • The PPP ‘product’ is still being perfected • Projects are in transport (rail and road), power (LNG, coal, natural gas and renewable energy), airports, seaports, water... • Our contact at the PPP Center: Ferdinand D. Tolentino Deputy Executive Director [email protected] www.ppp.gov.ph