Philippines Country Profile - PESTLE 03012021

The Philippines
In-depth PESTLE Insights
Country Profile Series
Report Code: ML00002-045

Published: March 2021
Overview
Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental (PESTLE) structure in the
Philippines. Each of the PESTLE factors is explored on four parameters: current strengths, current challenges, future
prospects and future risks.
Summary
Key findings
The country improves ties with Malaysia, but rising tension with China over South China sea
is a concern
In March 2019, Malaysia and Philippines discussed and confirmed their commitments on imperative issues such as
economic cooperation, the South China Sea dispute, and the Korean Peninsula conflict. The two presidents have
agreed to enhance trade and infrastructure investment to foster competitiveness in the country, according to a joint
statement released by the countries on March 8, 2019. With the signing of RCEP in November 2020, trade between
Malaysia and Philippines is to increase in the coming years amid strong regional integration. This is expected to
facilitate the development of cross-border supply chains.
However, the ongoing dispute regarding Spartly Islands located in South China Sea with China is of a growing
concern in 2021. As of February 2021, Philippines and Vietnam have decided to fortify their positions in the disputed
waters through expanding naval patrols in the concerned area. The Philippines along with the US is trying to
strengthen its security cooperation in the disputed waters against China. In response to China’s rapid militarization,
the Philippines, Vietnam and other small countries around the disputed waters have tightened their efforts to
safeguard their maritime interests. Manila hopes to secure military help from the Biden administration amid ongoing
negotiations to reverse Duterte’s earlier repeal of the key defense agreement, which allows for large-scale entry of
American troops for annual joint exercises with their Filipino counterparts, including in the South China Sea.
Robust recovery expected in 2021 aided by stimulus measures, but rising debt and deficit
amid increasing expenditure is a concern
According to MarketLine, GDP growth is expected to rebound to 8.36% in 2021 compared to -7.63% decline in 2020
amid pandemic. This sharp V-shaped recovery is backed up by huge fiscal stimulus infused by the government to
revive business, healthcare and social sectors of the economy. The government announced a stimulus package
worth US$56.37bn, to mitigate the effect of the coronavirus pandemic on the economy. It includes a cash aid
program for 18 million low-income households, social protection measures for vulnerable workers, ensuring safety
of frontline medical workers and credit guarantee for small businesses and aiding the agriculture sector.
However, according to the IMF, general government debt and deficit is on the rise and pose a future risk for the
government in 2021. According to the IMF, Philippine general government borrowing increased to 8.06% of GDP in
2020 from 1.78% in 2019 given the pandemic situation in 2020 amid huge fiscal expenditure to contain the spread of
Covid-19. It is further expected that, due to procurement and roll-out of vaccines in 2021, fiscal deficit will shoot up.
The government’s gross debt rose to 48.85% in 2020 from 36.9% in 2019.The debt is further forecast to rise to
PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

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52.51% of GDP in 2021. Rising debt levels along with rising deficit will put the government spending under pressure
for 2021 and put the economy on a slower pace of recovery.
The country has narrowed the gender gap, but the increasing crime rate is an area of
concern
In the Global Gender Gap Index 2020, the Philippines was ranked 16th out of 153 countries, well ahead of other
Southeast Asian countries like Singapore (54th), Thailand (75th), Vietnam (31st), Indonesia (85th), Malaysia (97th)
and Cambodia (89th). The Philippines was the highest-ranking Asian country in the 2020 index. It performed well in
education and health indicators for women and secured first position. Furthermore, it was the only Asian country to
close the gender gap in both health and education. With a reduced gender gap, the country enjoys greater labor
force participation rate, which is a positive signal for the country.
To foster investment and economic growth, a safe and secure environment is an important factor. According to
statistics released by Philippines National Policy in November 2020, there were 4,521 murders between January 1
and October 31, 2020. An area of concern is the rising crime rate in urban areas. The most common forms of crime
are pickpocketing, credit card fraud and acquaintance scams. There are sporadic incidents of robbery, violent
assaults, kidnappings and carjacking as well. This increasing crime rate, if not controlled, is likely to affect the
country’s tourism industry in the medium term.
The Philippines has a robust IT-BPO sector, but piracy remains an area of concern
The emerging Information Technology and the Business–Process Outsourcing (IT–BPO) sector could lead to an
economic boom in the country. According to the industry’s new roadmap for 2016–2022, the sector could provide
7.6 million direct and indirect jobs. Around 500,000 of the jobs will be located outside the national capital region. Of
these jobs, around 73% will be mid-to-high level jobs, generating US$40bn in revenues. The country is expected to
host about 15% of the world’s entire IT-BPM market. The BPO sector is expected to hire more workers amid rising
demand for support services and e-commerce, logistics and healthcare in post pandemic times (2021). The booming
IT–BPO sector is likely to accelerate the country’s economic development and help it become the largest BPO service
provider.
According to the 2018 BSA Software Piracy report International Intellectual Property Association (IIPA) report, the IT
industry lost significant revenues in 2015 as a result of unlicensed software usage, which impacted growth of the
industry. The software piracy rate was 64% in 2017, which was above the Asian average of 57% and the world
average of 37%. In the same year, the value of unlicensed software was US$388m, according to 2018 BSA Software
Piracy Report. According to a 2018 poll by BSA, around 64% of corporations in the Philippines use pirated software.
In a new survey conducted by Asia video industry association's Coalition Against Piracy (CAP), nearly 47% of Filipinos
stream piracy websites or torrent sites as of October 2020.
The country introduced a law for whistleblower protection but suffers from restrictions in
freedom of expression
In April 2012, the House of Representatives passed a bill known as the Whistleblower Protection, Security and Benefit
Act of 2011. The aim of the bill is to shield and provide benefits to whistleblowers. According to the bill, a whistleblower
is a person who is an informant or has knowledge or access to information that constitutes corruption. The bill requires
a whistleblower to be admitted into the Whistleblower’s Program of the Office of the Ombudsman. The individual has
to sign a memorandum of agreement, which will clearly state the responsibility of the person as a whistleblower before
the provision of protection; the agreement can be terminated if there is any breach. The bill seeks to encourage people
to raise their voice against corrupt government officials.
Cyberspace in the Philippines is among the freest in the world, with the country scoring 64 out of 100 and
categorized as a ‘partly free’ nation in the 2020 Freedom on the Net report. In the 2020 Index of Press Freedom the
country was ranked 136th among 180 economies. In the index, the countries are evaluated on pluralism, media
independence, media environment, self-censorship, legislative framework, and transparency. The rank of the

country clearly indicates the grave threat to freedom of press in the country. The anti-terrorism act of 2020 came
into effect in July 2020 and focuses on prevention, prohibition, and penalizing terrorism. According to the new law,
any individual can be ‘named’ a terrorist for being suspected of committing or assisting in committing a ‘deemed’
terrorist act under Sections 4 to 12 of the legislation. This law is subject to many controversies and considered a
threat to human rights.
The country is rich in biodiversity, but improper sewage disposal remains a concern
The Philippines is one of the most bio-diverse countries in Southeast Asia. With more than 53,000 species, it is one of
17 mega diverse countries and harbor two-thirds of the Earth's species. The new species discovery rate in the
country is one of the highest in the world; a total of 16 new mammal species were discovered in the last 10 years. As
a result, the rate of endemism for the Philippines has increased, and is likely to rise further. Over 65% of the
country's plants are found nowhere else on Earth, and more new species are discovered every year than in any other
nation. Biodiversity is a valuable asset, as low-income families depend on forest resources for food, fuel, shelter,
medicines and livelihood.
According to the World Wide Fund, improper sewage disposal is damaging groundwater resources in the Philippines.
Only around 10% of sewage is disposed of in an environmentally friendly manner. The rest is disposed of in an open
manner into the sea.
PESTLE highlights
Political landscape
• In the residential elections held in May 2016, Rodrigo Duterte was declared the winner after his rival
Mar Roxas accepted defeat. The new president was previously the mayor of Davao, a town in the
southern Philippines. His image as a tough enforcer of law and order was attractive to voters.
• In the 2019 World Bank's Worldwide Governance Indicators, the country performed poorly in voice and
accountability, political stability and absence of violence, rule of law and control of corruption.
Corruption is perceived to be high, as the enforcement of anti-corruption laws is inconsistent and slow
and faces many obstacles.
Economic landscape
• The services sector has been the best performer in recent years. This is especially true of the financial
sphere, which has been supported by strong inflows of remittances through the banking sector. The
government of Philippines plans to invest 21.8% of GDP fiscal funds to revive the economy from the
Covid-19 pandemic in FY2021. The FY2021 budget would focus on “Reset, Rebound, and Recover:
Investing for Resiliency and Sustainability.”
• According to the IMF, general government borrowing increased to 8.06% of GDP in 2020 from 1.78% in
2019 owing to the pandemic. According to the IMF, government borrowing is forecast to ease to 7.3%
in 2021. The government’s gross debt rose to 48.85% in 2020 from 36.9% in 2019.
Social landscape
• Although government expenditure on healthcare has increased marginally over the years it remains
low when compared with other developing countries. According to MarketLine estimates, the total

healthcare expenditure rose from US$9.43bn in 2011 to US$14.61bn in 2018, which corresponds to
4.41% of its GDP.
• According to MarketLine estimates, as of 2020, 4.9% of the population was aged above 65 years, 62.7%
were in the 15–64 years age group, and 32.4% were in the 0–14 years age group. The country has a
very low percentage of old age people and has a large working population. According to MarketLine
estimates, in 2020, the total life expectancy of the population was 70 (66.5 for men and 73.8 for
women). The infant mortality rate has been falling and stood at 20 deaths per 1,000 live births in 2020.
Technological landscape
• R&D expenditure in the Philippines has been very low. In the Networked Readiness Index 2020, the
country ranked 74th out of 121 countries. The country’s performance is poor compared to other Asian
countries like Singapore (3rd), Malaysia (34th), and China (40th).
• In 2020, the mobile penetration rate per 100 people was 127.4. From 2016 to 2020, the number of
mobile subscribers grew at an average annual rate of 3.9%. MarketLine forecasts the number of mobile
subscribers to reach 154.5 million by 2025.
Legal landscape
• The Philippines ranks poorly as a business-friendly country in the World Bank’s Doing Business 2020
report. In terms of ease of doing business, the country ranks 95th out of 190 economies. Firing costs
are also high in the country. However, the country jumped 29 ranks from the previous global ranking of
ease of doing business and witnessed improvement in three areas: starting a business, dealing with
construction permits, and protecting minority investor.
• The Philippines scored 64.5 and was ranked 70th out of 180 economies in the 2020 Index of Economic
Freedom and is considered moderately free according to the index.
Environmental landscape
• The country's carbon dioxide emissions rose from around 74.5 million metric tons in 2009 to 140.1
million metric tons in 2019 with an average annual growth rate of 6.6% during 2010–19, according to
MarketLine estimates.
• The country is focused on attracting US$20bn of investment in the renewable energy sector in the
coming years under the Green Energy Tariff Program, recommended by Department of Energy (DOE) in
February 2020. The program is focused on promoting healthy competition to entice more investments
in the energy sector.

Impact of Covid-19 on Philippines economy
Snapshot
As of February 10, 2021, the country has had about 540,227 confirmed cases and 11,296 deaths, with a fatality rate
of around 2.1% and a recovery rate of 92.5%.
Government Measures
• Stimulus packages, adding up to a minimum of US$56.37bn, were announced to mitigate the

effect of the coronavirus pandemic on the economy. They include a cash aid program for 18
million low-income households, social protection measures for vulnerable workers, ensuring
safety of frontline medical workers and credit guarantee for small businesses and aiding the
agriculture sector.
• The Bangko Sentral ng Pilipinas (BSP) reduced its policy rate thrice in 2020 by a cumulative 1.25
bps to 2.75%.
• BSP reduced the reserve requirement ratio for banks by 200 basis points; advanced the
remittance of 20 billion pesos of dividends to the national government; and implemented
regulatory relief measures for banks and other BSP-supervised financial institutions.
Lockdown Measures
Banned
• January 15, 2021: Travelers from all US territories, including Puerto Rico and Guam including
Puerto Rico and Guam, were restricted from entering the Philippines until January 15, 2021.
• December 27, 2020: Philippines suspended all commercial flights from the UK until the second
week of January 2021.
• October 28, 2020: Authorities extended Covid-19 restrictions until November 30, 2020, to curb
the spread of coronavirus.
• September 29, 2020: Authorities extended partial Covid19 restrictions in Manila until October
31, 2020.
• September 25, 2020: Philippine authorities tighten restrictions in Iloilo City until October 9, 2020.
• September 15, 2020: The lockdown in Philippine National Police Academy (PNPA) extended until
September 30, 2020 amid coronavirus outbreak.
• September 1, 2020: Metro Manila to remain under GCQ until September 30, 2020.

• August 3, 2020: The country’s capital Manila reimposed partial lockdown starting amid surging
cases of coronavirus.
• August 1, 2020: The country tightened lockdown measures in Lipa from August 1, 2020.
• July 5, 2020: The country imposed parts of Manila under strict lockdown for two days with
surging coronavirus cases in the region.
• June 16, 2020: The government extended its General Community Quarantine (GCQ) until June
30, 2020.
• May 15, 2020: Local governments announced overnight curfew from 8pm to 5am. Aviation
authorities announced cancellation of flights until May 31, 2020.
• March 8, 2020: Residents over 60 advised not to leave home. President declared a public health
emergency on March 8, 2020, extended till May 15, 2020 on April 24.
Exempted
• July 5, 2020: The government allowed reopening of Manila terminal 3 with rising demand for
international flights.
• June 1, 2020: The government allowed some ease in restrictions imposed.
• May 18, 2020: The Philippines Airlines announced resumption of flights from June 1, 2020, with
restrictions in place.
• May 11, 2020: Manila’s International Airport resumed international flight from May 11, 2020
with limited passengers.
• May 15, 2020: The Philippine government placed provinces Metro Manila, Cebu City, and Laguna
under a new Modified Enhanced Community Quarantine with eased restrictions from May 16 to
Sunday May 31.
• March 12, 2020: Train services in the capital to remain operative throughout the lockdown
period.
• March 8, 2020: Supermarkets, healthcare, pharmacies, and food manufacturing companies to
remain operational. Transportation to be allowed only for essential services.
Travel Restrictions
• January 29, 2021: The Philippines will relax travel curbs on foreigners coming from more than 30
nations that have identified instances of the more infectious British variation of the Covid beginning
from February 2021.
• January 19, 2021: The Philippines extended a travel ban for foreign nationals until the end of January
2021.

• January 15, 2021: The Philippine government is expanding travel limitations on 34 nations until January
31 in a push to control the section of the B117 variation of the infection causing Covid-19. The
countries are United Arab Emirates, Hungary, United Kingdom, United States, Portugal, India, Finland,
Norway, Jordan, Brazil, Denmark, Ireland, Japan, Australia, Israel, the Netherlands, Switzerland, France,
Germany, Iceland, Italy, Lebanon, Singapore, Sweden, South Korea, South Africa, Canada, Spain,
Austria, China (including Hong Kong), Luxembourg, Oman, Pakistan, and Jamaica.
• January 12, 2021: The Philippines finally imposed travel restrictions on China almost fourteen days after
the Asian giant detected its first case of the new Covid-19 strain. The Philippines government on
January 12, 2021 included China, Pakistan, Jamaica, Luxembourg, and Oman in the list of areas with
travel restrictions because of the presence of another Covid-19 variation accepted to be more
infectious.
• January 9, 2021: Travelers from all US territories, including Puerto Rico and Guam including Puerto Rico
and Guam, restricted from entering the Philippines until January 15, 2021.
• January 5, 2021: The Philippines banned entry of US travelers from January 3, 2021, to January 15, 2021
with the possibility of an extension.
• December 27, 2020: The Philippines has extended the travel ban for flights from the UK until mid-
January. The initial ban was imposed till December 31, 2020. Travelers arriving from countries where
the new Covid-19 strain has been found will have to serve a mandatory 14-day quarantine period.
• December 23, 2020: The Philippines indefinitely suspended all flights to the UK from December 24 to
December 31, 2020. Philippine Airlines announced it is extending its flight suspension to and from
London to the end of February.
• December 8, 2020: The Philippines Bureau of Immigration restricted entry of foreigners.
Stimulus Measures
Fiscal Stimulus
• October 30, 2020: The budget department released P78bn (US$1.61bn) to improve and provide
impetus to the government's pandemic response.
• September 11, 2020: The president signed into a law a stimulus relief package worth P165.5
(US$3.4bn) which would increase healthcare and help businesses from recession after the
pandemic is over.
• August 20, 2020: A joint congressional committee passed a package of about P165bn
(US$3.39bn) to help the economy recover from the pandemic.
• June 5, 2020: The House of Representatives approved a bill worth P1.5tn (US$30.33bn) to fund
infrastructure projects in rural areas for the next three years.

• June 4, 2020: The House of Representatives approved on third and final reading a PHP1.3tn
(US$26.04bn) stimulus package called the ARISE (Accelerated Recovery and Investments
Stimulus for the Economy) bill, the new name for what had been known as the proposed
Philippine Economic Stimulus Act (PESA). The government launched a PHP595.6bn (US$11.81bn)
fiscal package for vulnerable individuals and groups, which includes the cash aid program for 18
million low-income households, social protection measures for vulnerable workers, to ensure
safety of frontline medical workers and credit guarantee for small businesses and support to the
agriculture sector.
Monetary Stimulus
• November 19, 2020: The Central Bank cut the key interest rate by 25 basis points to 2%. It also
cut overnight deposit rate to 1.5% and lending facilities rate to 2.5%.
• June 25, 2020: Bangko Sentral ng Pilipinas lowered its key rate to 2.25% by 50 bps from 2.75%.
• April 16, 2020: The Monetary Board decided to cut the interest rate on the BSP’s overnight
reverse repurchase (RRP) facility by 50 basis points (bps) to 2.75 %. The interest rates on the
overnight lending and deposit facilities were reduced to 3.25 % and 2.25 %, respectively.
• March 19, 2020: The Monetary Board decided to cut the interest rate on the BSP's overnight
reverse repurchase (RRP) facility by 50 basis points (bps) to 3.25%. The interest rates on the
overnight lending and deposit facilities were reduced to 3.75 % and 2.75 %, respectively.
• February 6, 2020: The Monetary Board decided to cut the interest rate on the BSP’s overnight
reverse repurchase (RRP) facility by 25 basis points (bps) to 3.75 %. The interest rates on the
overnight lending and deposit facilities were reduced to 4.25 % and 3.25 %, respectively. To
support the government’s programs to counter the impacts of Covid-19, the BSP purchased
PHP300bn (US$5.93bn) worth government securities and remitted PHP20bn (US$0.4bn) as
dividend to the government even though it is no longer required to make dividend payments to
the government under the newly amended BSP charter. To encourage extension of loans to
enterprises, particularly, micro-, small-, and medium-sized enterprises (MSMEs), the BSP allowed
loans to MSMEs to be counted as part of banks’ compliance with reserve requirements and
assigned zero risk weight to loan exposures guaranteed by the Philippine Guarantee
Corporation.

Key fundamentals
Table 1: The Philippines - Key Fundamentals, 2018–2025f
2018 2019 2020e 2021f 2022f 2023f 2024f 2025f

GDP, constant 2010 prices (US$ bn) 326.0 345.7 319.3 346.0 368.0 391.5 416.4 443.0
GDP growth rate (%) 6.34 6.04 -7.63 8.36 6.36 6.38 6.37 6.39
GDP, constant 2010 prices, per capita
(US$)
3069.0 3201.3 2909.4 3102.7 3248.4 3402.3 3563.9 3734.6
Inflation (%) 5.2 2.5 2.6 3.1 3.0 3.1 3.0 2.9
Volume of Exports growth (%) 8.0 8.1 -20.2 18.2 8.4 7.3 4.9 6.3
Volume of Imports growth (%) 9.7 -1.9 -21.5 29.6 8.9 6.7 4.1 5.0
Mid-year population, total (millions) 106.2 108.0 109.7 111.5 113.3 115.1 116.8 118.6
Unemployment rate (%) 5.3 5.3 10.4 7.4 6.7 6.2 5.6 5.1
Mobile penetration (per 100 people) 126.2 127.0 127.5 128.0 128.6 129.2 129.7 130.3
Source: Country Statistics, MarketLine MARKETLINE

Table of Contents
OVERVIEW 2
Catalyst 2
Summary 2
Key findings 2
PESTLE highlights 4
Impact of Covid-19 on Philippines economy 6

Snapshot 6
Government Measures 6
Lockdown Measures 6
Travel Restrictions 7
Stimulus Measures 8
Key fundamentals 10
KEY FACTS AND GEOGRAPHIC LOCATION 18
Key facts 18
Geographical location 19
PESTLE ANALYSIS 20
Summary 20
Political analysis 21
Overview 21
Current strengths 21
Current challenges 22
Future prospects 23
Future risks 23
Economic analysis 25
Overview 25

Future prospects 28
Future risks 28
Social analysis 30
Overview 30
Future prospects 32
Future risks 33
Technology analysis 34
Overview 34
Future prospects 36
Future risks 36
Legal analysis 37
Overview 37
Future prospects 38
Future risks 39
Environmental analysis 40
Overview 40
Future prospects 42
Future risks 43
POLITICAL LANDSCAPE 45
Summary 45
Evolution 45

Pre-1950 45
1951–1990 46
1991 onwards 46
Structure and policies 48

Key political figures 48
Structure of government 48
Key policies 50
Performance 52
Outlook 53
ECONOMIC LANDSCAPE 54
Summary 54
Evolution 54
1950–1990 54
1991–2019 54
Performance 56
GDP and growth rate 56
Fiscal situation 61
Current account 61
Exports and imports 61
External debt 63
International investment position 63
Monetary situation 63
Banking sector 64
Employment 64
Outlook 65
SOCIAL LANDSCAPE 66
Summary 66
Evolution 66

Education 67
Social welfare 68
Social welfare policies 68
Performance 68
Healthcare 68
Poverty/income distribution 69
Education 69
Outlook 70
TECHNOLOGICAL LANDSCAPE 71
Summary 71
Evolution 71

Research and development 71
Intellectual property 72
Performance 73
Opportunity sectors 73
Outlook 74
LEGAL LANDSCAPE 75
Summary 75
Evolution 75

Tax regulations 76
Performance 77
Effectiveness of the legal system 77
Outlook 77
ENVIRONMENTAL LANDSCAPE 78

Summary 78
Evolution 78
Environmental regulations 78
Participation in global efforts, agreements, and pacts 79
Performance 79
Environmental impact 79
Outlook 80
APPENDIX 81
ISO codes of selected countries 81
Ask the analyst 82
Disclaimer 82

List of figures
Figure 1: Map of the Philippines, 2021 19
Figure 2: Unemployment and underemployment across regions, July 2020 27
Figure 3: General government net lending/borrowing (US$ bn/ % of GDP) 29
Figure 4: The Philippines: Age Group Structure, 2020e 31
Figure 5: High-Technology Exports (% of Manufactured Exports), 2019 35
Figure 6: Annual Natural Disasters Statistics in the Philippines, 2007–2018 42

Figure 7: The Philippines – Key Political Events 47
Figure 8: The Philippines – Key Political Figures 48
Figure 9: Elected Members of the Philippines’ House of Representatives, 2016 50

Figure 10: Historical Real GDP Growth, 2011–2020e 55
Figure 11: Real GDP and Real GDP Growth Rate in the Philippines, 2016–2025f 57
Figure 12: GDP Composition by Sectors, 2020e 58

Figure 13: Agricultural Output of the Philippines, 2016–2021f 59
Figure 14: Industrial Output of the Philippines, 2016–2021f 60
Figure 15: Services Output of the Philippines, 2016–2021f 61

Figure 16: External Trade of the Philippines, 2016–2025f 62
Figure 17: External Debt of the Philippines, 2010–2019 63
Figure 18: Consumer Price Index and CPI-based Inflation in the Philippines, 2016–2025f 64
Figure 19: Unemployment Rate (%), 2016–2025f 65
Figure 20: Expenditure on Healthcare in the Philippines, 2009–2018 69
Figure 21: Expenditure on Education in the Philippines, 2011–2016 70

Figure 22: Internet Users and Penetration in the Philippines, 2016–2020e 73
Figure 23: Carbon Dioxide Emissions in the Philippines, 2010–2019 80

List of Tables
Table 1: The Philippines - Key Fundamentals, 2018–2025f 10
Table 2: The Philippines - Key Facts, 2021 18
Table 3: Analysis of the Philippines's Political Landscape 21
Table 4: Analysis of the Philippines's Economic Landscape 25
Table 5: Analysis of the Philippines's Social Landscape 30
Table 6: Analysis of the Philippines's Technology Landscape 34

Table 7: Analysis of the Philippines's Technology Landscape 37
Table 8: Analysis of the Philippines's Environmental Landscape 40
Table 9: Mid-Year Population by Age (as a Percentage of the Total Population), 2020e 67
Table 10: Patents Granted by the US Patent and Trademark Office, 2014–2020 72

Key Facts and Geographic Location
Key facts
Table 2: The Philippines - Key Facts, 2021

Country and capital
Full name Republic of the Philippines
Capital city Manila
Government
Government type Republic
Chief of state and head of President Rodrigo Duterte (since June 30, 2016)
government
Vice president Leni Robredo (since June 30, 2016)
Population (2020 est.) 109.7 million
Currency Philippine Peso (PHP)
GDP per capita, adjusted by PPP (2020 US$8119.7

est.)
Internet domain .ph
Demographic details
Life expectancy (2020 est.) 70 years (total population)
66.5 years (men)
73.8 years (women)
Ethnic composition (2010 est.) Tagalog (24.4%), Bisaya/Binisaya (11.4%), Cebuano (9.9%), Ilocano (8.8%), Hiligaynon/Ilonggo (8.4%),
Bikol/Bicol (6.8%), Waray (4%), other local ethnicity (26.1%), other foreign ethnicity (1%)
Major religions (2010 est.) Roman Catholic (80.6%), Protestant (8.2%) Philippine Council of Evangelical Churches (2.7%),
National Council of Churches in the Philippines (1.2%), other Protestant (4.3%), other Christian
(3.4%), Muslim (5.6%), tribal religions (2%), other (1.9%), none (1%).
Country area 300,000 sq. km (total)
Languages Filipino (based on Tagalog) and English are the two official languages
Exports Semiconductors and electronic products, transport equipment, garments, copper products,
petroleum products, coconut oil, fruits
Imports Electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics,
grains, chemicals, plastic
Source: CIA – The World Factbook and Country Statistics, MarketLine MARKETLINE

Geographical location
The Philippines is located in Southeast Asia, in the archipelago between the Philippine Sea and the South China Sea,
east of Vietnam.
Figure 1: Map of the Philippines, 2021
Source: CIA – The World Factbook MARKETLINE

PESTLE Analysis
PESTLE Analysis
Summary
The Philippines’ foreign policy places emphasis on strengthening its relationship with Malaysia and the US. However,
disputes with neighboring countries over the areas of the Spratly Islands in the South China Sea remain a major
challenge for the government of Rodrigo Duterte. The new government is improving relations with other neighboring
countries, which strengthens its relationship with the US, its long-time strategic partner.
Due to Covid-19, the economy’s real GDP declined in the first three quarters of 2020 by 0.7%, 16.5% and 11.5%
respectively (Y-o-Y %), according to the IMF. However, with effective fiscal stimulus packages and the country’s four-
pillar socioeconomic strategy, which focuses on improving the conditions of the vulnerable and expanding resources,
will put the economy on a growth path for 2021 and beyond. According to MarketLine, the GDP growth rate is forecast
to be around 8.36% for 2021.
According to MarketLine estimates, in 2020, 62.7% of the country’s population belonged to the 15–64 age group,
32.4% to the 0–14 age group, and just 4.9% to the 65-plus group. The old age population constitutes a low percentage
while the proportion of those of working age is substantial. While many developed nations face the problem of an
aging population and rising social expenditure, the Philippines’ demographic structure works in its favor by providing
a regular boost to its labor force.
The country has a strong business process outsourcing (BPO) sector due to the abundance of manpower with English
language skills. Over the years, the country’s high technology exports have increased, and the Philippines performed
better when compared to other Southeast Asian countries. According to the World Bank data, high technology exports
(as percentage of manufactured exports) were 62% in 2019. This was higher than countries such as Malaysia (52%),
Japan (17%) and Thailand (24%). The high proportion of high technology exports is indicative of the country’s
technological expertise.
The Philippines has passed laws to reduce corruption in the country. The passing of the Whistleblowers Act in 2012
and steps to curb money laundering in 2013 highlight this fact. However, a series of laws proposed by the government
paints a poor picture of the regulatory environment of the country. The Mining Act is likely to decrease the faith of
private investors in the country’s legal framework and the proposed Cybercrime act is expected to infringe upon basic
rights.
The Philippines is home to a high number of endemic species and has been designated a global biodiversity hotspot.
The country has strong environmental legislation in place that is expected to support ecological balance and
sustainable development. As the country’s ecological footprint has increased, it decided to incorporate ecological
footprint accounting to reduce its impact. However, its vulnerability to climate change and overfishing is likely to
remain a problem. The government is taking steps to mitigate the harmful effects of flooding but increasing
deforestation may pose a challenge.

PESTLE Analysis
Political analysis
Overview
Rodrigo Duterte of the Philippine Democratic Party won with a large majority and assumed office as the country’s
16th president on June 30, 2016. The country has maintained strong relations with the US based on economic,
commercial, and security considerations. The relations between the Philippines and Taiwan — which were strained
as a result of the killing of a Taiwanese fisherman by the Philippines coast guards — have deteriorated further
following Taiwan’s support for the Chinese claims over the control of islands in South China Sea. The 2019 Philippine
general election was conducted on May 13, 2019, to select the Senate of the Philippines, House of Representatives
of the Philippines, Governors, Provincial Councils and City Councils. The new Biden administration is committed to
helping the Philippines against aggression from China. The recent US-Philippines defense treaty to strengthen
defense forces in South China Sea is a bold step to counter the Chinese presence in the region.
Table 3: Analysis of the Philippines's Political Landscape
Current Strengths Current Challenges

• Strengthening ties with Malaysia • Territorial disputes
• Improving relations with the US
Future Prospects Future Risks

• Increasing ties with Japan • Terrorism risk
Source: MarketLine ©MARKETLINE
Current strengths
Strengthening ties with Malaysia

In March 2019, Malaysia and Philippines discussed and confirmed their commitments on imperative issues such as
economic cooperation, the South China Sea dispute, and the Korean Peninsula conflict. The two presidents have
agreed to enhance trade and infrastructure investment to foster competitiveness in the country, according to a joint
statement released by the countries on March 8, 2019. With the signing of RCEP in November 2020, the Philippines
and Malaysia’s trade is expected to increase in the coming years amid strong regional integration. This is expected to
facilitate the development of cross-border supply chains.
However, infrastructure development is of paramount importance to the Philippines, and the Chinese government is
ready to provide cheap loans, especially for infrastructure development. China is also contemplating opening its fruit
market to the Philippines. President Duterte’s controversial war on drugs has the support of the Chinese, unlike its
western counterparts. Relations improved further after the Chinese allowed fisherman from the Philippines to return
to the fishing grounds near Scarborough seal. In October 2016, president Duterte visited China to improve the
bilateral economic relations between the nations. As a result of president Duterte’s visit to China, the country was
able to secure financial assistance and investment pledges worth US$15bn in business deals and US$9bn in official
financial assistance. In November 2017, Chinese Premier Li Keqiang visited the Philippines and both countries agreed

PESTLE Analysis
to enhance mutual cooperation to resolve the differences over the South China Sea. During the visit, both countries
signed 14 agreements to improve their bilateral economic relationship. In March 2018, both nations agreed on the
joint exploration of oil and gas in the South China Sea. In April 2019, president Duterte’s visit to China saw the
signing of several business agreements during the Belt and Road Forum in Beijing. The agreements are expected to
bring US$12.165bn (P619.8bn) worth of fruitful investments leading to a rapid rise in employment and creating new
opportunities for individuals in the country.
Improving Relations with the US

The country has maintained strong ties with the US based on economic, commercial and security considerations. The
country’s foreign policy has placed emphasis on strengthening its relationship with the US, having maintained strong
relations with the country ever since it became independent in 1946. In the past, the US had two important bases in
the Philippines—a naval facility at Subic Bay and an air base at Clark Field. Both of these bases were closed in the
early 1990s. However, in June 2012, the Philippine government approved limiting the deployment of American
warships and fighter planes in the Subic Bay and Clark Air Force Base. The US has remained an important ally, as both
countries have faced problems with terrorism. The Philippines had been accorded the status of a major non-North
Atlantic Treaty Organization ally. Since 2002, US troops, hardware and intelligence have supported the country’s
campaign against Muslim separatists. Moreover, both countries have an important commercial relationship, with the
US being one of the largest export partners of the Philippines. The US in April 2012 offered to provide surveillance
aircraft in the West Philippines Sea, which is disputed. Strong relations with the US have been a positive for the
country’s political landscape. In June 2016, the US navy deployed two aircraft carriers in its bid to support the nation
ahead of ruling from the Permanent Court of Arbitration in the Hague over the maritime dispute voiced by the
nation against Chinese aggression in Scarborough Shoal and the Spratly Islands.
The relation between the two countries hit rock bottom when Mr. Duterte took power in May 2016. His use of
profane language against then president Barack Obama led to the cancellation of his scheduled visit to the country in
September 2016. The new president’s all-out war on drugs has brought him onto the radar of institutions like
Amnesty International. These institutions have warned that the war has threatened the existence of certain
fundamental rights in the country. However, when Donald Trump took over office in January 2017 the tone of the
Philippines’ president towards the US changed. The new Biden administration is committed to helping the
Philippines against aggression from China. The recent US-Philippines defense treaty (February 2021) to strengthen
defense forces in South China Sea is a bold step to counter the Chinese presence in the region.
Current challenges
Territorial disputes
Relations between Malaysia and the Philippines continue to be strained due to the latter’s claim on Sabah, one of
Malaysia’s 13 states — a dispute also known as the North Borneo dispute, which has smoldered for nearly 50 years.
Prior to the formation of the Federation of Malaysia, Sabah was inhabited by ethnic Filipino groups, which included
the Sama-Bajaus and Tausugs. The formation of strict maritime patrols prevented the frequent movement of these
groups across the boundaries of present day Indonesia, Malaysia and the Philippines. In the 1970s, many Filipinos
took refuge in Sabah to escape the conflicts in Mindanao and Sulu, and Sabah eventually became a home to many of
them.
The Philippines claims the island due to the heritage of the Sultanate of Sulu, which exerts considerable influence
among the Filipinos in the southern part of the country. The conflict originated from the misinterpretation of an
agreement signed between the Sultan of Sulu and the British commercial syndicate in 1878. The Philippines claims it
on the basis that Sabah was only leased to the British North Borneo Company in return for the payment of a certain
amount of money per year. The agreement never claimed that the sultanate gave up its sovereign right to the
islands. However, when the Federation of Malaysia was formed after receiving independence from the British, Sabah

PESTLE Analysis
became one of its states. Sabah is the second largest state and is rich in forests and fertile agricultural lands.
Furthermore, 25% of the country’s total raw palm oil exports, a major source of revenue, comes from Sabah.
However, Malaysia continues to pay around US$1,700 as lease payment to the sultan. The Philippines initially
refused to forge diplomatic relations with Malaysia after its formation in 1963, but full ties were established in 1966.
However, the ongoing dispute regarding Spartly islands is a growing concern in 2021. As of February 2021, the
Philippines and Vietnam have decided to fortify their positions in the disputed waters through expanding naval
patrols in the concerned area. The Philippines along with the US is trying to strengthen its security cooperation in the
disputed waters against China. In response to China’s rapid militarization, the Philippines, Vietnam and other small
countries around the disputed waters have tightened their efforts to safeguard their maritime interests. Manila
hopes to secure military help from the Biden administration amid ongoing negotiations to reverse Duterte’s earlier
repeal of the key defense agreement, which allows for large-scale entry of American troops for annual joint exercises
with their Filipino counterparts, including in the South China Sea.
Future prospects
Increasing ties with Japan

In June 2015, former president Benigno Aquino visited Tokyo, Japan, to meet his counterpart Shinzo Abe in a bid to
boost ties, especially in the fields of defense and investment. In the meeting, which lasted four days, a strategic
agreement was finalized according to which Japan will sell military hardware and technology to the Philippines.
Consultations between the two sides have also begun for the establishment of a Visiting Forces Agreement (VFA),
which will provide Japanese troops with proper logistics support and refueling centers in the Philippines. The
Philippines already has VFAs with the US and Australia. In January 2017, the Japanese Prime Minister, Shinzo Abe,
visited the country. The Prime Minister has announced a hefty package of JPY1tn (US$8.5bn) over the next five years
in order to boost the infrastructure in the country, especially the metro system in Manila. Japan is also the biggest
importer of Filipino products in the region, and the biggest foreign investor in the country. According to the Filipino
Ministry of Finance (MOF), the economic ties between the nations are expected to strengthen further in 2018 with a
number of deals signed during the Japanese Prime Minister’s visit to the Philippines in 2017. The new investment
deals were in the areas of transport, infrastructure, iron and steel, agri-business, manufacturing, shipbuilding,
renewable energy, information and communication technology, mineral processing, and retailing. The recent visit of
president Duterte to Japan in May 2019 saw the signing of 26 agreements between the countries. One of the major
deals was a Memorandum of Cooperation signed by the Philippine Department of Trade and Industry and Japan’s
External Trade Organization.
Future risks
Terrorism risk
Growing cooperation between militant groups, such as the Abu Sayyaf Group (ASG), the Moro National Liberation
Front (MNLF) and the Bangsamoro Islamic Freedom Fighters (BIFF) was evident after the attack on government
troops in Mindanao in September 2013. The violence is an outcome of the government’s success in their
negotiations with the Moro Islamic Liberal Front (MILF). The signing of a peace deal between the government and
MILF in October 2012 led to the formation of the Bangsamoro semi-autonomous region in Mindanao. Furthermore,
as the region is rich in natural resources, a wealth sharing agreement was signed between the government and MILF
in July 2013. However, other groups like the BIFF and the MNLF, which are operating in the region, were excluded
from these negotiations and it is unlikely that they will receive any benefits from this pact. As a result of this, these
groups have increased their attacks to undermine the peace process and to stake their claims to the territory. The

PESTLE Analysis
Zamboanga siege in 2013 indicated that other militant groups were also present along with the MNLF militants. The
attack in Basilan also demonstrated that the militant groups were well coordinated.
The extremism sentiments are shoring up in the islands off South-east Asia. The intelligence agencies of these
nations are of the view that the decline of the Islamic State (IS) in the Middle East could force Asian jihadists to take
a more aggressive stance. The Muslim-majority areas of Mindanao forests are a breeding ground for Abu Sayyaf,
which operates mainly in the Jolo and Basilan islands. Its activities include kidnapping foreign nationals from boats in
the Sulu Archipelago.
Moreover, if the coordination between the ASG, the MNLF and the BIFF continues, it might become difficult for the
military to conduct operations against any one group, as it could lead to counter attacks by other groups. These
groups could increase attacks and kidnappings to compel the government to start negotiating with them.
According to the Global Terrorism Index 2020, the Philippines ranked tenth in the world in terms of increase in the
number of terrorist activities with a score of 7.099 out of 10, where 0 represents no impact from terrorism and 10
represents the highest measurable impact of terrorism. The Philippines is the only country in the Southeast Asian
region to be ranked in the ten countries most impacted by terrorism.

PESTLE Analysis
Economic analysis
Overview
The Philippines has shown resilience amidst global economic crisis and inflationary pressures. The Philippines was
once termed the “sickman of Asia” as it was badly managed, poor and corrupt. However, the current government
has been able to partially address some of the pressing issues. Pragmatic policies helped the country to gain an
investment-grade rating by the three major credit rating agencies over the last four years (2015–2019). However,
poor infrastructure and the inability to create proper jobs are areas of concern. The Philippines new development
plan for 2017–2022 focuses on economic recovery and its first mid-term plan to be represented on a 0–10 point
socioeconomic agenda from 2017.
Table 4: Analysis of the Philippines's Economic Landscape
• Investment ratings • Covid-19 impact on key macroeconomic

• Resilient banking sector indicators
• Inflation within the target is stimulating growth • Poor infrastructure
• Job creation
• Philippine Development Plan (2017–2022) • Political threats to outsourcing

• Philippine Stimulus package • Rising government debt levels
Source: MarketLine MARKETLINE
Current strengths
Investment ratings
The Philippines was once termed the “sickman of Asia” as it was badly managed, poor and corrupt. Under the
Aquino-led government, the country was partially able to address some of the pressing issues and has seen progress,
especially in getting the investment-grade rating awarded by the three major credit rating agencies. In March 2013,
Fitch raised its rating from BB+ to BBB- on the grounds of improved fiscal management. The country’s moderating
inflation, strong external profile and declining dependence on foreign currency debt also influenced the decision.
Based on similar reasoning, Standard & Poor’s upgraded the nation’s debt to investment grade with a stable outlook
in May 2013.
The country received its third investment grade rating with a positive outlook from Moody’s in October 2013. In May
2014, Standard & Poor’s (S&P) raised the country’s foreign long-term debt from BBB- to BBB, and foreign short-term
debt to A-2 from A-3, with a stable outlook. The rating reflected the country’s strong external liquidity and
investment position, and effective monetary policy. In its recent rating action, which happened in September 2016,

PESTLE Analysis
S&P maintained the rating that it conferred the country in May 2014. This time the agency cited its strong forex
position and low debt levels as the chief reasons behind the rating. The improved ratings are likely to draw the
attention of investors as very few countries are growing as strongly as the Philippines. In December 2017, Fitch
upgraded the credit rating of the Philippines to BBB from BBB-, citing consistent and strong economic performance
with no investment risk from the drug war. In April 2019, the country was rated BBB+ with stable outlook by S&P and
Baa2 stable rating by Moody’s Analytics in October 2019. In May 2020, the country was rated BBB+ with a stable
outlook by Standard & Poor's credit rating. Moody's credit rating for Philippines was last set at Baa2 with stable
outlook. As of February 2021, Fitch's credit rating for the country was reported at BBB with stable outlook. The
stable outlook is based on effective vaccine rollouts, picking up of business activity and effective government
stimulus packages.
Resilient banking sector

Despite the pandemic, the banking sector of the country remained intact and its assets grew by 70% in 2020. The
total resources of the banks increased to US$0.41tn in 2020, higher than US$0.38tn in 2019. The total assets of big
banks and commercial banks grew by 7.5% in 2020, while that of mid-sized banks or thrift banks decreased by about
1% in 2020. The banking and financial systems are in a strong position to counter the adverse effects of the Covid-19
pandemic and support the country’s economic recovery in 2021 and beyond.
Inflation within the target is stimulating growth

According to the government, inflation is all set to settle down within its target range of 3% (+/-1%) for 2020–2021.
The volatility in global crude oil prices, appeals for electricity rates and transport fare adjustments, the proposed
increase in the excise taxes of alcoholic beverages, and rising meat prices remain the main upward risks to inflation.
Meanwhile, with the global pandemic and uncertainty in the markets may pose downward risks to inflation.
According to MarketLine, the inflation rate stood at 2.6% in 2020 and is forecast to increase to 3.2% in 2021. A
healthy inflation will spur economic growth along with increasing fiscal stimulus by the government to revive the
pandemic hit economy.
Current challenges
Covid-19 Impact on key macroeconomic indicators

The pandemic in 2020 led to disruption of supply chains, huge job loss, poverty, fall in production along with huge
fiscal deficits in the country. According to MarketLine, 16.2% of GDP has been allocated to stimulus packages. Covid-
19 continues to pose threat to the manufacturing sector and services sector as businesses are shut and unable to
cope with the loses they incurred during lockdowns in 2020. According to MarketLine, PMI manufacturing showed a
slow recovery in February 2021 at 52.5 which signals a strong recovery in the manufacturing sector. The policy
makers will focus on the sustained improvement in manufacturing operating conditions during February 2021.
Poor infrastructure
Sound infrastructure is very crucial in attracting foreign investment and economic development. The Philippines lags
behind other Southeast Asian countries in terms of quality infrastructure. The country has one of the longest road
networks in South East Asia; however, it is of inferior quality and does not provide efficient connectivity. The level of
infrastructure in a country depends on public as well as private investment.
The Philippines’ infrastructure is one of the biggest impediments and poor compared to other ASEAN countries. In
the Global Competitiveness Report 2019, the country was ranked 64th out of 141 economies. The country lags
behind Malaysia (27th), Thailand (40th) and Indonesia (50th) due to its poor infrastructure, amongst other reasons.
As far as infrastructure is concerned, the country was in 96th position, much below Malaysia (35th) and Singapore

PESTLE Analysis
(1st). A major reason behind this is the low collection of taxes due to the massive incentives given by the
government. According to Logistics Performance Index 2018 developed by the World Bank, the country ranked 67th
out of 160 economies in 2018.
Job creation
The problem of unemployment and lack of new jobs is chronic. Consequently, there is an exodus of Filipinos leaving
the country to work abroad. In many other countries, shifts from agriculture to industry to services have been
complemented by the emergence of new industries that boosted employment. This, however, did not take place in
the Philippines. In countries like Indonesia, Thailand and Malaysia, sectoral shifts were accompanied by an increase
in output as well as employment. The unemployment rate in the Philippines varies across regions, and between rural
and urban areas. Furthermore, poor infrastructure rules out the possibility of market connectivity that could
generate employment opportunities. According to the World Bank, the Philippines needs to create 10 million new
jobs each year. Challenges to job creation have risen from distortions in policy, including a reduced emphasis on
agriculture and manufacturing, over the last six decades. Complex regulations, underinvestment by public and
private sectors, the insecurity of property rights and the lack of competition in the main sectors have contributed to
this pattern of growth. As a result, economic growth has failed to provide good jobs. The rise in job creation when
compared to the size of the labor force is negligible. Moreover, when variations in unemployment and
underemployment are seen across the regions, the magnitude of the latter is a cause for concern. According to the
Department of Labour and Employment, more than 420,000 Filipinos lost their jobs in 2020 because of the pandemic
raising the unemployment rate to 10.2%.
Figure 2: Unemployment and underemployment across regions, July 2020
Source: The Philippine Statistics MARKETLINE
According to the Philippine Statistics Authority, high underemployment is indicative of structural inadequacies in job
creation. As the unemployment rate fluctuates across various regions, identifying ways to create jobs is going to be a
challenge for the country. Amid the pandemic, the unemployment rate shot up due to business closures.

PESTLE Analysis
Future prospects
Philippine Development Plan (2017–2022)

The Philippine Development Plan (PDP) was approved on February 20, 2017, and focuses on inclusive growth for the
country along with globally competitive knowledge for the economy. The plan focuses on achieving a growth of 7–
8% in the near future. The plan also expects to focus on reducing poverty incidence in rural areas from 30% in 2015
to 20% in 2022. Furthermore, to set the direction for future growth, the PDP (2017–2022) adopts a National Spatial
Strategy (NSS), identifying that population, geography, and cities are engines of economic growth. The NSS identifies
specific strategies and policies in order to decongest Metro Manila and connect rural areas to key growth areas and
improving linkages between settlements for higher elasticity against natural disasters.
Philippine Stimulus package

To combat Covid-19, the government launched a PHP595.6bn (US$11.81bn) fiscal package in June 2020 for
vulnerable individuals and groups, which includes the cash aid program for 18 million low-income households, social
protection measures for vulnerable workers, to ensure safety of frontline medical workers and credit guarantee for
small businesses and support to the agriculture sector. The House of Representatives approved on third and final
reading a PHP1.3tn (US$26.04bn) stimulus package called the ARISE (Accelerated Recovery and Investments Stimulus
for the Economy) bill, the new name for what had been known as the proposed Philippine Economic Stimulus Act
(PESA). The president signed into a law a stimulus relief package worth P165.5 (US$3.4bn) which would increase
healthcare and help businesses after the pandemic is over. The budget department released P78bn (US$1.61bn) to
improve and provide impetus to the government's pandemic response.
Future risks
Political threats to outsourcing

The change of guards in both the Philippines and the US has seen the emergence of leaders who do not hesitate to
indulge in verbal barbs. Mr. Duterte’s aggressive stance towards the US, its longstanding ally, has cast a shadow on
the future prospects of one of its most important service industries: outsourcing. The IT and outsourcing business
garnered revenues of around US$22bn in 2015, which accounted for more than 7% of GDP. It also provides
employment to around 1.1 million people directly. More than 70% of the country’s outsourcing business comes from
the US. The sector expects annual revenue of around US$40bn and employment of around 1.8 million people by
2025.
Rising government debt levels

According to the IMF, the general government debt is forecast to rise to 52.51% of GDP in 2021 amid huge fiscal
expenditure to combat Covid-19 and aid economic recovery. The general government debt stood at 36.9% of GDP in
2019 and rose to 48.85% in 2020 due to the pandemic. For 2021, gross borrowings is forecast to rise to ease the
effects of Covid-19 and aid economic recovery.

PESTLE Analysis
Figure 3: General government net lending/borrowing (US$ bn/ % of GDP)

PESTLE Analysis
Social analysis
Overview
According to MarketLine estimates, the Philippines has a young society, with nearly 62.7% of the population at
working age, as of 2020. The country rank of 16th out of 153 countries in the Global Gender Gap Index 2020 showed
that it has made efforts to bridge the gender gap. In fact, the Philippines was the highest ranking country from Asia
in the 2020 index. However, child labor and poverty continue to be a problem
Table 5: Analysis of the Philippines's Social Landscape

• A young society • Child labor
• Bridging the gender gap

• Universal health insurance • Rising crime rate
• Education reforms • Slow pace of land reform
• Declining poverty level
Current strengths
A young society
According to MarketLine estimates, in 2020, 62.7% of the country’s population belonged to the 15–64 age group,
32.4% to the 0–14 age group, and just 4.9% to the 65-plus group. The old age population constitutes a low
percentage while the proportion of those of working age is substantial. While many developed nations face the
problem of an aging population and rising social expenditure, the Philippines’ demographic structure works in its
favor by providing a regular boost to its labor force. The country’s working age population has been mounting from
56.08 million in 2010 to 68.8 million in 2020. According to the World Bank, the country had a low old age
dependency ratio at 8% in 2019, when compared to other countries such as Japan, which had a ratio of 47% in 2019.

PESTLE Analysis
Figure 4: The Philippines: Age Group Structure, 2020e
Bridging the gender gap

Women make up one-half of the country’s population, so it is essential to promote their participation in the
economy. Encouraging the participation of women in the work force is important for businesses, especially in the
face of the skilled labor shortage witnessed by almost all countries. In the Global Gender Gap Index 2020, the
Philippines was ranked 16th out of 153 countries, well ahead of other Southeast Asian countries like Singapore
(54th), Thailand (75th), Vietnam (31st), Indonesia (85th), Malaysia (97th) and Cambodia (89th). The Philippines was
the highest-ranking Asian country in the 2020 index. It performed well in education and health indicators for women
and secured first position. Furthermore, it was the only Asian country to close the gender gap in both health and
education. With a reduced gender gap, the country enjoys greater labor force participation rate, which is a positive
signal for the country.
Current challenges
Child labor
According to the latest available data from a national survey on children conducted by the Philippine Statistics
Authority (PSA) in 2011, 2.1 million children were working. The survey also revealed that out of the total number of
children working, three million (between 0 and 14 years) were considered as working in hazardous conditions.
Almost 54.1% of the children were involved in farm work, 40.5% were involved in the services sector, and 5.3% of
the children were found to be working in the industrial sector. The highest child labor rates were seen in Central
Luzon, Bicol, Northern Mindanao, Western Visayas and Central Visayas. Poverty has been identified as the main
cause for increasing child labor in the country. There has been an increasing use of children in illicit activities such as
procuring and selling of drugs. However, the government has been working against these and has authorized the

PESTLE Analysis
Free Internet Access in Public Places Act which requires the Department of Information and Communications
Technology (DICT) to prevent the online sexual exploitation of children, as of 2017. The Department of Labor and
Employment and Department of Social Welfare Development are aiming to fully eradicate child labor by 2025. Due
to pandemic, child labor is on the rise as families are forcing them to take up work. The aim of the government is to
strengthen its social security systems to reduce the percentage of minors in employment especially those who are
engaged in dangerous environments.
Future prospects
Universal health insurance

In June 2013, former president Benigno Aquino signed the Republic Act 10606, which extended the National Health
Insurance Program (NHIP)’s coverage throughout the country. The act makes NHIP compulsory in all provinces.
According to the act, PhilHealth was introduced to all regions of the country, and will also cover those who are
unable to pay the monthly premiums. Under the existing system, the coverage provided was very small and health
spending as a percentage of GDP increased by a negligible amount while the spending burden borne by patients was
stagnant at 56%. In September 2017, the House of Representatives passed an Act providing for a Universal Health
Coverage for Filipinos and Appropriating Funds bill that entitles all Filipino citizens to universal health coverage. In
February 2019, president Rodrigo passed an Act providing for a Universal Health Coverage for Filipinos that entitles
universal health coverage and equitable access to quality and affordable healthcare services to all citizens.
Education reforms
In 2014, former president Aquino finalized three laws to tighten the educational infrastructure of the country. He
approved the Ladderized Education Act, Iskolar ng Bayan Act of 2014 and Open Distance Learning Act or Republic Act
10650. The education secretary affirmed that the approvals of the above measures will complement the K to12
program. The Iskolar ng Bayan Act of 2014 will provide additional resources to the graduates of high schools in order
to provide a basic platform for their higher education which will improve their chances of becoming professionals.
The Ladderized Education Act will aim to streamline the educational qualification framework so that students of
various technical degrees and vocational programs will be eligible to pursue higher educational degrees without
repeating their subjects. The Open Distance Learning Act or Republic Act 10650 provides the framework for
government support towards distance learning. In 2015, the Education for All (EFA) initiative covered provisions to
ensure that Filipinos were able to achieve “functional literacy”. These reforms have sought to boost enrollment
levels, graduation rates and mean years of schooling in secondary education and has the potential to improve quality
of education in the coming years.
Declining poverty level

Poverty and inequality have declined over the last decade in the Philippines. According to the World Bank, the
poverty head count ratio stood at US$1.90 per day (2011 PPP) as the percentage of the population declined from
14.5% in 2006 to 6.1% in 2015. Sustained economic growth, along with increased job creation, has helped to reduce
the poverty level in the nation. A number of initiatives were also adopted by the government to eradicate extreme
poverty such as Pantawid Pamilyang Pilipino Program and Sustainable Livelihood Programs. Pantawid Pamilyang
Pilipino Program (4P) is a conditional cash transfer program started in 2007 to improve the health, nutrition and
education of children between 0 and 18 years. As of December 2016, the program covered 20 million Filipinos. The
government initiated another program known as Sustainable Livelihood Program (SLP) to link the recipients of cash
transfers to sustainable livelihood development. The National Anti-Poverty Commission (NAPC) has rolled out a five
year development plan (2019–2023) known as Sambayanihan Serbisyong Sambayanan in September 2018 to deliver
basic social services highlighting the poorest countries. The national government has a plan of accelerating the
economic growth of the country and reducing overall poverty incidence from 21% in 2015 to 14% by 2023. The

PESTLE Analysis
government is on a track to eliminate poverty by 2040 through massive infrastructure upgrades and expansion of
human capital development programs.
Future risks
Rising crime rate

To foster investment and economic growth, a safe and secure environment is an important factor. According to
statistics released by Philippines National Policy in November 2020, there have been 4,521 murders since January 1
till October 31, 2020. An area of concern is the rising crime rate in urban areas. The most common forms of crime are
pickpocketing, credit card fraud and acquaintance scams. There are sporadic incidents of robbery, violent assaults,
kidnappings and carjacking as well. This increasing crime rate, if not controlled, is likely to affect the country’s
tourism industry in the medium term. Although the overall crime rate declined in 2019, the rape incidents in the
country witnessed a slight rise from 350 cases in 2018 to 432 cases in 2019. The anti-terrorism act of 2020 came into
effect since July 2020 and focuses on prevention, prohibition, and penalize terrorism in the country.
Slow pace of land reform

In 1988, the former president, Corazon Aquino, signed a land reform law that required large landowners to sell parts
of their land to the government to be redistributed to landless farmers. Hacienda Luisita is a 6,443-hectare sugar
plantation owned by the Cojuangcos family and it is also a symbol of failure of the reform process. To evade the
reforms, the Cojuangcos family “converted” parts of their land to non-agricultural use and gave workers a share in
the company. However, a Supreme Court ruling in favor of the plantation workers changed the scenario, entitling
each worker to 6,600 sq. m of land. Although it is a historic achievement, tough challenges lie ahead. Rodrigo
Duterte, is expected to push for faster implementation of land reforms, as promised in his election campaign. It
remains to be seen if his promises can be fully realized.

PESTLE Analysis
Technology analysis
Overview
The country has a strong BPO sector due to its abundant human resources and strong English language skills. The
government has contributed to the strengthening and improvement of the call center industry. Over the years, the
country’s high technology exports have increased. However, the country continues to suffer from high levels of
piracy. The regulatory framework to protect intellectual property rights (IPR) is fairly comprehensive, but patchy
implementation remains a challenge. Low R&D and a lack of innovation are a big risk in the current scenario, with
knowledge-based economies becoming increasingly dominant. The ICT market witnessed higher growth rates in
2020 with increase in demand for digital services amid pandemic. Around 84% of enterprises have increased their
ICT budget in 2020 compared to 66% in 2019.
Table 6: Analysis of the Philippines's Technology Landscape

• Strong IT-BPO sector • High levels of piracy
• High technology exports

• Reforms to boost the technological framework • Low R&D expenditure
Current strengths
Strong IT–BPO sector

The emerging Information Technology and the Business–Process Outsourcing (IT–BPO) sector could lead to an
economic boom in the country. According to the industry’s new roadmap for 2016–2022, the sector could provide
7.6 million direct and indirect jobs. Around 500,000 of the jobs will be located outside the national capital region. Of
these jobs, around 73% will be mid to high level jobs, generating US$40bn in revenues. The country is expected to
host about 15% of the world’s entire IT-BPM market. The BPO sector is expected to hire more workers amid rising
demand for support services and e-commerce, logistics and healthcare in post pandemic times (2021). The booming
IT–BPO sector is likely to accelerate the country’s economic development and help it to become the largest BPO
service provider.
High technology exports

High technology exports are products such as computers, pharmaceuticals, scientific instruments, aerospace
products, and electrical machinery. These products have high R&D intensity, and increasing export of these products
highlight the country’s technical knowhow. The Philippines performed better when compared to other Southeast
Asian countries. According to the World Bank data, high technology exports (as percentage of manufactured exports)
were 62% in 2019. This was higher than countries such as Malaysia (52%), Japan (17%) and Thailand (24%). The high
proportion of high technology exports is indicative of the country’s technological expertise.

PESTLE Analysis
Figure 5: High-Technology Exports (% of Manufactured Exports), 2019
Source: World Bank MARKETLINE
Current challenges
High levels of piracy

The IT industry lost significant revenues in 2015 as a result of unlicensed software usage, which impacted growth of
the industry. The software piracy rate was 64% in 2017, which was above the Asian average of 57% and the world
average of 37%. In the same year, the value of unlicensed software was US$388m, according to the 2018 BSA
Software Piracy Report. According to a 2018 poll by BSA, around 64% of corporations in the Philippines use pirated
software. A new survey conducted by Asia Video Industry Association's Coalition Against Piracy (CAP), nearly 47% of
Filipinos stream piracy websites or torrent sites as of October 2020.
Illegal commercial scale photocopying and selling of technical, scientific and medical books remain major problems in
the Philippines. According to the International Telecommunications Union, cases of wireless application protocol
(WAP) infringement are on the rise with increasing mobile penetration. Although the government has been praised
for the positive progress made in many key areas, further steps such as intensified enforcement of the IP code of the
Philippines are required to curb piracy.

PESTLE Analysis
Future prospects
Reforms to boost the technological framework

In February 2017, the Board of Investments (BOI) approved applications from Motor Philippines Corp. and Mitsubishi
Motors Philippines Corp to invest a collective amount of PHP8bn (US$160m) to improve their respective production
lines. The board said that the investments will create 14,000 new jobs while generating around PHP8bn (US$160m)
in salaries and wages. The government launched a Manufacturing Resurgence Program, with a budget of PHP289bn
(US$5.76bn) to shift to high value-added investment activities and link and integrate industries during the period
2018–2021. This will be implemented alongside the Comprehensive National Industrial Strategy (CNIS), which was
formulated in 2012 to renew the industrialization roadmap of the Philippines. A new National Cybersecurity Plan has
been launched. A total of US$50mn has been laid out to address online threat development and risk management
strategies. Therefore, the need of the hour for the government is to strengthen its technological framework to reap
the benefits.
Future risks
Low R&D expenditure

R&D expenditure in the Philippines has been very low. In the Networked Readiness Index 2020, the country ranked
74th out of 121 countries. The country’s performance is poor compared to other Asian countries like Singapore (3rd),
Malaysia (34th), and China (40th).
According to the Global Competitiveness Index 2019, the country ranked 64th out of 141 countries with the most
problematic factors being insufficient capacity to innovate, corruption, tax regulations and inadequate supply of
infrastructure. Although the private sector accounts for 60% of the country’s R&D expenditure, the level of
expenditure, according to the Department of Science and Technology (DOST), is very small in both absolute terms
and as a percentage of GDP. This low R&D funding has restricted innovation in the Philippines, reflected in the low
number of patents registered by local firms. The country was granted only 71 patents, according to the USPTO,
compared to 1,191 in Singapore and 24,218 in South Korea in 2020. The low number of patents strengthens the
perception that the country does not foster innovation. This is a big risk in the current scenario, which is
characterized by the dominance of knowledge-based economies. According to MarketLine, the R&D expenditure in
the country is very low at 0.46% of its GDP in 2019.

PESTLE Analysis
Legal analysis
Overview
The Philippines has favorable conditions for doing business. Moreover, the country has passed laws to reduce
corruption in the country. The passing of the Whistleblowers Act in 2012 and steps to curb money laundering in 2013
highlight this fact. In July 2014, the country passed a law to deregulate the banking sector, to enable foreign banks to
acquire 100% equity of local banks. In 2017, the International Development Law Organization (IDLO) implemented a
program in the Philippines to efficiently address the corruption in the country by focusing on enhancing the capacities
of Ombudsman lawyers.
However, the country’s complicated tax payment structure restricts investment. A series of laws proposed by the
government are indicative of the regulatory environment of the country. The Mining Act is likely to decrease private
investors’ faith in the country’s legal framework, and the Cybercrime act infringes upon basic rights. The anti-
terrorism act of 2020 came into effect in July 2020 and focuses on prevention, prohibition, and penalizing terrorism
in the country. According to the new law, any individual can be ‘named’ as a terrorist for being suspected of
committing or assisting in committing a ‘deemed’ terrorist act under Sections 4 to 12 of the legislation. This law is
subject to many controversies and a threat to human rights.
Table 7: Analysis of the Philippines's Technology Landscape

• Law to protect whistleblowers • Threat to freedom of expression

• New business reforms to encourage investment • Cumbersome starting-a-business procedure
• Deregulation in the banking sector • Controversial anti-terrorism act of 2020
Current strengths
Law to protect whistleblowers

In April 2012, the House of Representatives passed a bill known as the Whistleblower Protection, Security and Benefit
Act of 2011. The aim of the bill is to shield and provide benefits to whistleblowers. According to the bill, a whistleblower
is a person who is an informant or has knowledge or access to information that constitutes corruption. The bill requires
a whistleblower be admitted into the Whistleblower’s Program of the Office of the Ombudsman. The individual has to
sign a memorandum of agreement, which will clearly state the responsibility of the person as a whistleblower before
the provision of protection. The agreement can be terminated if there is any breach. The bill seeks to encourage people
to raise their voice against corrupt government officials.
Current challenges

PESTLE Analysis
Threat to freedom of expression
Cyberspace in the Philippines is among the freest in the world, with the country scoring 64 out of 100 and
categorized as a ‘partly free’ nation in the 2020 Freedom on the Net report. However, the Cybercrime Prevention
Act, passed in September 2012, threatens to infringe the free internet environment. The law allows the government
to restrict or block content without court orders. The restrictions imposed on the content are arguably
unconstitutional. Some of the controversial provisions include the introduction of punitive jail terms for online libel.
According to the law, online libel is punishable by up to 12 years in jail. The government justified the law on the
grounds of “legitimate concerns” regarding criminal and abusive online behavior. In order to prevent its
implementation and to question its constitutional validity, activist groups filed 15 petitions in the Supreme Court. In
May 2016, shortly after assuming office, Rodrigo Duterte advocated extrajudicial killings, asserting that corrupt
journalists should be assassinated. With the president taking such hard lines, the threat to freedom of expression
looms large. In the 2020 Index of Press Freedom the country was ranked 136th among 180 economies. In the index,
the countries are evaluated on pluralism, media independence, media environment, self-censorship, legislative
framework, and transparency. The rank of the country clearly indicates the grave threat to freedom of press in the
country. As of 2019, the Philippines had a percentile rank of 47.28 on voice and accountability. This parameter
measures the extent to which a country's citizens are able to participate in selecting their government, as well as
freedom of expression, freedom of association and freedom of the media, published by World Bank. The signing of
an anti-terrorism law in 2020 will give immense power to the government to initiate action against people and arrest
them without any warrants and standard legal procedures in practice.
Future prospects
New Business reforms to encourage investment

The Philippines’ economy ranked 95th out of 190 countries in Doing Business 2020 rankings by World Bank. Although
there has been a significant improvement in the rankings from 2019, the country still lags behind other founding
nations of ASEAN. According to the World Bank, it takes an average of 13 procedures to start a business, nine
procedures to register property, and 22 procedures to get construction permits in the Philippines. Once the business
has been set up, the company makes 13 annual tax payments. If a contract is broken and a business needs to resolve
a dispute with its customers or suppliers, it takes an average of 962 days to resolve an issue through the courts.
To attract more capital in the economy, the government of Philippines has taken some bold business measures
which will shape the future for investments. According to World Bank, the government of Philippines abolished the
minimum capital requirement to encourage more investment in setting up businesses. Furthermore, to ease
procedures regarding construction permits, the government has improved coordination and streamlined the
procedures to obtain an occupancy certificate. To encourage investments from small businesses, the government
strengthened investor protections through enhancing director liability for transactions with interested parties.
Deregulation in the banking sector

In July 2014, a new law was signed, which lifted restrictions on foreign ownership of banks and paved the way for
overseas lenders to establish new branches and subsidiaries, or to acquire 100% equity in existing banks. The new
law will streamline the entry of foreign banks and enhance their presence in the country. At present, foreign entities
can only own up to 60% of local banks. Overseas banks like J.P. Morgan Chase & Co., Bank of America Corp. and
Citigroup already have a presence in the Philippines. The law comes at a crucial time when a number of international
investors are looking to invest in the country’s banking sector due to its record of being one of the fastest-growing
Southeast Asian economies and the rising demand for bank loans.

PESTLE Analysis
Increasing labor costs and the rise of anti-Japanese sentiment in China have compelled many Japanese firms to
expand into South-east Asia, including the Philippines. Furthermore, political turmoil in Thailand has also made the
Philippines a more attractive option for many Japanese companies. Foreign banks can increase their local presence
significantly, as the new law is likely to spur mergers and acquisitions. The move may also help the local banks to
bulk up and enable them to compete with larger counterparts from other Southeast Asian countries. The entry of
foreign investors in the banking industry may usher the flow of FDIs in the country. MUFG Bank Ltd., is the latest
foreign bank that has made the Philippines the main site of its Global Services Operations Centre (GSOC) in 2018. In
February 2016, the country started with the process of lifting the ban against setting up of new banks in a bid to lure
local investors to the banking sector amid the opening of industry to foreign capital infusion. In 2019, the Philippines
government launched three more foreign banks to attract interest from foreign financial institutions due to its strong
macroeconomic fundamentals. As of July 2020, there are 26 foreign banks in the country.
Future risks
Cumbersome process of starting a business

In the World Bank’s ease of Doing Business 2020 report, the Philippines ranked 95th out of 190 countries. The
country’s score of 62.8 out of 100 is lower than Indonesia (69.96), Thailand (80.1), and Malaysia (81.5). It takes 33
days with 13 procedures to start a business in the Philippines compared to the East Asia and Pacific average of 25.6
days with 6.5 procedures.
Controversial Anti-terrorism Act of 2020

The anti-terrorism act of 2020 came into effect in July 2020 and focuses on prevention, prohibition, and penalize
terrorism in the country. The country is plagued by terrorism activities — from killings, kidnappings, and armed
attacks in the past, to increased use of improvised explosive devices in the last decade, and more recently a deadly
ramp up of suicide bombings. The law allows suspects to be detained without a judicial warrant of arrest for 14 days
and can be extended by 10 more days, and placed under surveillance for 60 days, that can also be extended by up to
30 days, by the police or military.
Moreover, this law has become controversial as it removes a section under the Human Security Act of 2007 which is
meant to safeguard against the unlawful accusation and detention of suspects. Major factors affecting the people’s
trust include the crimes committed by the police during the war against illegal drugs, the controversial red-tagging
by government agents and legitimate organizations and the lingering concerns over human rights violations across
various administrations which have been put into the limelight by this act.

PESTLE Analysis
Environmental analysis
Overview
The Philippines has a high number of endemic species and has been designated a global biodiversity hotspot. The
country has strong environmental legislation in place, which is expected to support ecological balance and
sustainable development. As the country’s ecological footprint has increased, it has decided to incorporate
ecological footprint accounting to reduce the environmental impact. However, the country’s vulnerability to climate
change and overfishing is likely to remain a problem. The government is taking steps to mitigate the harmful effects
of flooding but increasing deforestation may pose a challenge. In November 2020, the Philippines government
declared that the country would stop accepting new coal-based power proposals amid increasing global
temperatures.
Table 8: Analysis of the Philippines's Environmental Landscape

• Rich biodiversity • Prone to natural disaster
• Ecological footprint accounting • Problem of overfishing

• Flood control • Challenges ahead of disaster risk management
• New sewage treatment plan • Massive redraft of Philippines energy plan
Current strengths
Rich Biodiversity
The Philippines is one of the most bio diverse countries in Southeast Asia. As per the latest available data, with more
than 53,000 species, it is one of 17 mega diverse countries, which harbor two-thirds of the Earth's species. The new
species discovery rate in the country is one of the highest in the world; a total of 16 new mammal species were
discovered in the last 10 years. As a result, the rate of endemism for the Philippines has increased, and is likely to
rise further. Over 65% of the country's plants are found nowhere else on Earth, and more new species are
discovered every year than in any other nation. Luzon, the largest island, has at least 31 endemic species of
mammals, and even the tiny Camiguin Island has at least two. Of the 1,196 known species of amphibians, birds,
mammals and reptiles in the country, nearly 46% are endemic. Among plants, the number is around 40%.
Biodiversity is a valuable asset, as low income families depend on forest resources for food, fuel, shelter, medicines
and livelihood.
Ecological footprint accounting

The Philippines is known for its biodiversity and abundant natural resources. However, reports indicate that it has an
ecological deficit that has been growing since the mid-1960s. According to the Global Footprint Network report (A
Measure for Resilience: 2012 Report on the Ecological Footprint Network), prudent management of resources will

PESTLE Analysis
help the country address issues such as poverty. On the contrary, failures in this area will hamper any effort to create
better living conditions. According to the report, Filipinos were using more than twice the biological capacity of the
country. In 2008, the ecological footprint of an average Filipino was 1.3 global hectares, which was within the limits
of the world average available bio capacity of 1.8 global hectares. However, only 0.6 global hectares of bio capacity
per person was available in the country, implying that the Philippines’ demands exceeded its own bio capacity.
Based on the findings of the report commissioned by the Climate Change Commission (CCC) of the Philippines,
former president Aquino acknowledged the need to incorporate ecological accounting. The CCC, to understand how
resilience to climate can be increased, has adopted the ecological footprint approach. The Philippines adopted the
National Strategic Framework on Climate Change in 2010 and Climate Action Plan in 2009 to ensure a climate-risk
resilient country with a thriving and productive ecosystem. The Philippines became the first country in Southeast
Asia to adopt ecological footprint accounting. To support footprint analysis in the region, Global Footprint Network
now has an office in Manila, which opened in 2014. The Philippines implemented the National Land-Use Act in 2017,
which focuses on the importance of the ecological footprint as a national indicator.
Current challenges
Prone to natural disaster

The Philippines is believed to be among the nations that are most vulnerable to climate change. The country has
suffered from extreme weather conditions, droughts, food scarcity and periodic inundation. Those living in coastal
areas and lower rung urban communities have suffered the most due to the lack of proper disaster preparation.
According to the UN Office for Disaster Risk Reduction’s project Prevention Web, there were 363 natural disasters in
the country during 1980–2010. The disasters affected 116 million people and claimed 33,000 lives. Economic
damages from natural disasters were estimated to be around US$7.5bn.
The country is prone to earthquakes and volcanic eruptions. An earthquake in October 2013, and a typhoon in
November 2013 followed by deadly floods due to a tropical depression that ended in January 2014, left the country
battered. The floods displaced around 360,000 people while the super-typhoon Haiyan claimed 6,201 lives and left
4.1 million homeless. Total damage caused due to the natural disaster in the Philippines in 2013 amounted to
US$12.4bn. Factors such as deforestation have aggravated the risk of floods and landslides. Furthermore, climate
change and uncontrolled urban growth have also exacerbated the risks from natural hazards. The poor, especially
those who live in the most hazard-prone areas, are affected the most. Typhoon Haima in October 2016, followed by
another typhoon Nina in December 2016, caused massive destruction. The government needs to build durable
homes for the displaced and coordinate with the local governments to boost their capacity before any natural
disaster strikes. The tropical storm Usman entered the Philippines on December 25, 2018 and was the second
deadliest weather disaster in 2018, killing more than 60 people, after the Typhoon Mangkhut in September 2018. In
December 2019, Typhoon Phanfone pummeled several provinces of the country and led to the death of 28 people.
The recent occurrence of Typhoon Vamco in November 2020 caused floods in more than 60 cities and towns in the
Cagayan Valley. This resulted in devastation of crops and properties. The disaster has rekindled criticism of dam-
building in the Chico River. The government of Philippines needs to restructure its dam construction as the
indigenous communities in the northern Philippines have pushed back against the planned construction of
hydropower dams on the Chico River system.

PESTLE Analysis
Figure 6: Annual Natural Disasters Statistics in the Philippines, 2007–2018
SOURCE: MarketLine Statistics and Philippines Statistics Authority MARKETLINE
Problem of overfishing
According to the World Wide Fund for Nature (WWF), overfishing has emerged as a major problem. Overfishing has
resulted in a 90% drop in the quantity of fish major fishing areas in the country. Apart from the economic loss, there
has also been a loss of biodiversity. Almost 80% of the coral reefs in the Philippines are at high risk due to overfishing
and destructive fishing practices. According to the report released during the International Coral Reef Symposium
held in Australia in 2012, some areas of the Philippines are part of the Coral Triangle, which is the global nodal point
of marine biodiversity and contains 76% of all coral species. The country’s coral reef, considered the third largest in
the world, is under grave danger due to poor enforcement of fishery laws, weak fisheries management and
ineffective policies. According to the United States Agency for International Development (USAid), 70% of the
Philippines’ fishing grounds are overfished, as of 2019. Amid pandemic, illegal fishing rose in the country as
commercial fishermen took advantage of reduced patrols to ply coastal waters. According to Visible Infra-Red
Imaging Radiometer Suite data, 3,602 instances of apparent commercial fishing vessels within municipal waters was
recorded before lockdown in 2020. Since lockdown measures began in March 2020, the number jumped to 5,950.
The commercial vessels fishing within municipal waters remain a persistent problem in the Philippines’ fisheries
sector.
Future prospects

PESTLE Analysis
Flood control
Heavy floods over the years have affected the Philippines and have resulted in the loss of life and property. Bad
urban planning and uncollected trash often lead to such floods. Heavy floods caused by tropical storm Maring
(international name Tram) in August 2013 completely paralyzed Manila and inundated the surrounding provinces of
Bulacan, Rizal and Pampanga. The city is not in a position to cope with flooding resulting from storms. Indiscriminate
development of commercial and residential buildings blocked the path of many rivers in Metro Manila and this
phenomenon is still prevalent.
In 2009, devastating floods, due to the typhoons Ondoy (international name Ketsana) and Pepeng (international
name Parma), have forced the government to propose a flood management development plan. The typhoons caused
massive damage and the losses amounted to US$4.4bn or 2.7% of GDP in 2009 according to the Post Disaster Needs
Assessment (PDNA) for the Philippines. The World Bank administered Global Facility for Disaster Reduction and
Recovery (GFDRR) Trust Fund sponsored the US$1.5m Metro Manila Flood Management Master plan in 2011. In
September 2012, the government approved the plan, which proposed a number of structural and non-structural
measures, including building a dam in the upper catchment of Marikina city and improving the river systems,
especially in the Pasig-Marikina River. According to the plan, flood plain will be raised to ensure the safety of some
300,000 people along Laguna Lake who are frequently affected by floods. The plan initially targeted Metro Manila
and Laguna, and later the World Bank was tasked with preparing similar flood master plans for Bulacan and
Pampanga. The government has undertaken various flood control projects and three such projects are likely to be
completed in 2014 according to the Department of Public Works and Highways. In January 2016, an amount of
PHP1.7bn (US$34m) was allotted to Manila for flood control. The measures are likely to reduce the catastrophic
impact of floods in the long term. According to the Department of Finance, as of January 2018, the government of
the Philippines has initiated work on the Metro Manila Flood Control Management Project worth US$500m, which is
partly financed by the Asian Infrastructure Investment Bank (AIIB). The three projects, namely Sto. Domingo section
Flood Control structure in Bambang town, Sta. Cruz River Flood Control Project in Kayapa town and the Sta. Lucia
Flood Control Project in Bagabag town were completed in October 2020 to shield itself from the occurrence of La
Nina in November 2020.
New sewage treatment plan

A new sewage treatment plant is under construction near the Dagat-dagatan Avenue Extension in Barangay
Maypajo, Caloocan City, Philippines. This facility is expected to help clean the waterways flowing to Manila Bay, treat
the wastewater generated by 1.2 million Maynilad customers and also improve sanitation conditions in South
Caloocan, Malabon and Navotas. The total amount spent on this new sewage treatment plan is around US$207mn.
Future risks
Massive redraft of the Philippines Energy Plan (PEP)

The latest draft of PEP which plans to map out the country’s energy landscape till 2040 fails to address key issues and
sets targets which are way below the potential of the country. The draft proposes a significant share of coal and oil in
the energy mix – 58.9% by 2030 and 55.6% by 2040. The draft PEP’s goal of 20 GW renewable energy capacity by
2040 will not be enough to meet the energy department’s target of 35% by 2030. Moreover, main issues with the
draft PEP include lacks explicit mention of green energy auction program and renewable energy zones and fails to
outlay a plan on efficient use of battery energy storage systems. The need of the hour is to focus towards a modern,
low-carbon energy path which will help create jobs, address climate change and improve public health.

PESTLE Analysis
Challenges ahead of disaster risk management

The Philippines has taken considerable steps over the past few years to enhance its disaster risk reduction practices
but the threat of natural disasters remains. According to the National Disaster Risk Reduction and Management Plan,
the main challenges are to address the main causes of people’s vulnerability and increase close cooperation between
the Disaster Risk Reduction (DRR) and Climate Change Adaptation (CCA) programs. In order to develop
understanding between DRR and CCA, there is a need to further develop new information and institutionalize
knowledge-sharing mechanisms. Budgeting DRR activities is important so that extra resources such as international
aid can be used flexibly and efficiently according to the country’s needs. Furthermore, the uncontrolled pace of
urbanization is also a major impediment to DRR. Therefore, the government needs to improve land use and
planning, and build preventive infrastructure.

Political Landscape
Political Landscape
Summary
The Philippines is one of the key members of the Association of Southeast Asian Nations (ASEAN), and generally has
good relations with its neighbors. In the 2019 World Bank's Worldwide Governance Indicators, the country performed
poorly in parameters such as voice and accountability, political stability and absence of violence, rule of law and control
of corruption. Corruption is perceived to be high, as the enforcement of anti-corruption laws is inconsistent, slow and
faces many obstacles. The Philippines ranked 115th out of 180 countries in Transparency International's 2020
Corruption Perceptions Index.
The country lacks ideologically defined political movements. Instead, political parties are largely based around loyalty
to the major players on the political scene, and vast networks of patronage stretch from the national to the local level.
Corruption is alleged to be an established feature of political life, while party loyalty is minimal. Benigno “Noynoy”
Aquino III was elected as the president in the May 2010 elections. The president tightened the government’s anti-
corruption efforts, which was one of the main promises in his election manifesto. The Liberal Party gained five more
seats in the House of Representatives in the elections held in May 2013. Although it does not have a majority, the
party is likely to have greater control over the lower house as it has alliances with at least three other big political
parties.
In the presidential elections held in May 2016, Rodrigo Duterte was declared the winner after his rival Mar Roxas
withdrew from the race. The incumbent president was earlier the mayor of Davao, a town in southern Philippines.
Duterte’s image as a tough enforcer of law and order attracted voters. The legislative elections held in May 2016 saw
the Liberal Party secure 115 seats. The country witnessed a midterm general election on May 13, 2019.
Evolution
Pre-1950
A Spanish expedition in 1542 claimed the islands located in Southeastern Asia, in the archipelago between the
Philippine Sea and the South China Sea. They were named the Philippines after Phillip, the heir to the Spanish
throne. Between 1762 and 1764, the region was occupied by the British, who eventually left the country on their
way to India. In 1821, the islands became a province of Spain. It was not until the 1890s that the first signs of
insurrection against the Spanish rule began. Jose Rizal’s two novels, Noli me Tangere and El Filibusterismo, inspired
people to fight for independence from Spanish rule. His execution by the Spanish in 1896 led to the Philippine
Revolution.
The growing insurrection within the Philippines led to the Spanish-American War of 1898. In the war, the US navy
destroyed the Spanish fleet in Manila Bay. Under the Treaty of Paris in December 1898, Spain ceded the Philippines
to the Americans, who proclaimed military rule. However, in 1899, insurgency against the US forces began under the
leadership of Emilio Aguinaldo, who was captured in 1901. In 1902, the US replaced military rule with a civil
government, and after five years, a Philippine assembly was inaugurated. In 1935, a direct vote from the full
electorate approved the establishment of the Commonwealth of the Philippines with Manuel Quezon as the first
president. During World War II, Japan attacked the Philippines and invaded the country in 1941. However, the US
forces retook the islands by 1944. In 1945, the Philippines signed the United Nations (UN) charter along with 49

Political Landscape
allied countries. In 1946, the islands were granted full independence and renamed the Republic of the Philippines,
with Manuel Roxas as the president.
1951–1990
The country signed a peace treaty with Japan in 1951 and received $800 million in reparation payments from the
nation. In 1965, Ferdinand Marcos became the country’s president. In 1969, Marcos was re-elected, although there
were allegations of electoral fraud. President Marcos followed a pro-US policy that led to Muslim separatists starting
guerrilla warfare against the government. In 1972, President Marcos declared martial law, suspended parliament,
arrested opposition politicians and imposed censorship. In 1973, he introduced a new constitution that gave him
absolute power. This led to abuses of power against political rivals. In 1977, the opposition leader Benigno Aquino was
sentenced to death, but President Marcos delayed the execution and allowed Aquino to travel to the US for medical
treatment. In 1981, President Marcos lifted martial law in the country. He subsequently won the presidential elections
for a third time. In 1983, when Aquino returned to the Philippines after treatment in the US, he was assassinated,
allegedly by the military. In the 1986 presidential elections, Aquino's widow Corazon stood against Marcos. Although
Marcos declared himself the winner, Corazon Aquino disputed the result, leading to mass protests in Manila. This led
to the military withdrawing its support for Marcos, who fled to Hawaii. The new government claimed that Marcos
misappropriated billions of dollars during his presidency. In 1989, the Philippines government suppressed an
attempted coup with the help of the US armed forces.
1991 onwards
Corazon Aquino's defense minister Fidel Ramos won the 1992 presidential elections. In 1996, the government reached
a peace agreement with the Muslim separatist group the Moro National Liberation Front, while another group, the
Moro Islamic Liberation Front (MILF), carried on with its campaign. In 1998, Joseph Estrada became the president;
however, within three years he faced impeachment proceedings on allegations of corruption and violations of the
constitution. The impeachment trial was suspended in January 2001, which led to mass protests in the country. The
military withdrew its support, forcing president Estrada to step down, paving the way for Vice president Gloria
Macapagal-Arroyo to take over. In May 2004, Gloria Arroyo won the presidential elections, before resigning in July
2005 over allegations of vote rigging, though she survived an impeachment attempt. In June 2010, Benigno Aquino III
won the election to become the country’s 15th president. On October 15, 2012, a peace treaty was signed between
the Philippines’ president, Benigno Aquino, and the chief of Moro Islamic Liberation Front (MILF), Murad Ebrahim. The
peace pact aimed to settle all disputes by 2016. The legislative elections held in May 2016 saw the Liberal Party secure
115 seats, five more than in the elections held in May 2013. Although it is not in majority, the party is likely to have a
greater control over the lower house as it has alliances with at least three big political parties. In the presidential
elections held in May 2016, Rodrigo Duterte was declared the winner after his rival Mar Roxas accepted defeat. The
next presidential elections are scheduled in May 2022.

Political Landscape
Figure 7: The Philippines – Key Political Events

Political Landscape
Structure and policies
Key political figures
Key political figures

Key political figures in the Philippines include:
• President Rodrigo Duterte
• Vice president Leni Robredo
Figure 8: The Philippines – Key Political Figures
Structure of government
The political system in the country is modeled on that of the US. There is an executive presidency and a bicameral
legislature, comprising the Senate (24 seats) and the House of Representatives (297 seats). The presidential term of
office is six years, and the presidents are limited to one elected term. Discussions are continuing to change the
government from the current presidential form to a parliamentary system.

Political Landscape
Key political parties
The Philippine Democratic Party–People's Power, more commonly known as PDP–Laban, is the ruling political
party in the Philippines and was founded on February 6, 1982, following a merger between the parties Partido
Demokratiko Pilipino and Lakas ng Bayan.
The Nationalist Party (NP) was founded on April 25, 1905, and is the oldest political party in the Philippines. The
idealogy of the party revolves around populism, conservatism and national conservatism. Two other parties, the
Liberal Party and the Nationalist People’s Coalition are breakaways from the Nationalist Party.
The Liberal Party of the Philippines (Filipino) (LP) was founded on November 24, 1945, following a breakaway from
the Nacionalista Party (NP). It is the current ruling party after the victory of Benigno Aquino III in the 2010 elections,
which saw him elected as the president. It is the country’s second oldest political party, and the oldest active political
party.
The Nationalist People’s Coalition or NPC was founded in 1922 by Eduardo Cojuangco Jr and has the idealogy of
social and liberal conservatism.
Lakas-Kabalikat ng Malayang Filipino-Christian Muslim Democrats (Lakas Kampi CMD) is a centrist political party and
is currently in opposition. The party's influence on society is very evident, especially after the People Power
Revolution, which inspired the country to elect two presidents from the party, namely Fidel V. Ramos, a United
Methodist, and Gloria Macapagal-Arroyo, a Roman Catholic.
Composition of government
After the May 2016 elections, the Liberal Party held 31.3% of votes by party at Senate and 41.7% in the House of
Representatives. The other parties in the House of Representatives are the Nationalist Party (Nacionalista) with
9.4%, Nationalist People's Coalition (17%), the National Unity Party (9.7%), the independent (6.0%), United National
Alliance (6.6%) and others (9.6%).

Political Landscape
Key policies
Figure 9: Elected Members of the Philippines’ House of Representatives, 2016
Source: CIA-The World Factbook MARKETLINE
Economic policies
The national budget for 2020 was set at PHP4.1tn (US$80bn) with infrastructure, education, and law and order being
the focus areas. This is the biggest budget ever to be approved by the country and the first one under Duterte’s
administration. The budget has earmarked PHP972.5bn (US$19.09bn) for infrastructure development in 2020. The
second biggest allocation was made for the Department of Education (DepEd) worth PHP673.0bn (US$13.21bn) to be
used to improve education facilities, hire teachers and develop learning materials for students. The president of
Philippines signed US$93.7bn funds for budget 2021 to aid economic recovery and fund the purchase of millions of
vaccine doses for Covid-19.
Social
The Philippine constitution stipulates full respect for social, economic and cultural rights, and gives special attention
to the rights of women and workers, who are seen as a primary economic force whose welfare is in need of
advancement. Employers and employees bear the cost of social security by contributing proportionally. The public
social insurance system is centrally managed and comprises two programs: social security and industrial injury-related
services. The Social Security System (SSS) administers the program for private sector employees, and the Government
Service Insurance System handles it for the government workers. The SSS has been found to benefit the wealthy,
because they know how to use the system and tend to live in urban areas where most services are accessible.
The Philippine Health Insurance Corporation (PhilHealth) runs the National Health Insurance Program, which gives
Filipinos access to inpatient and outpatient services in accredited medical facilities across the country. The PhilHealth

Political Landscape
program covers the employed sector, the poor, individually paying entrepreneurs, self-earning professionals and
farmers, paying elderly members, and overseas workers. Under the 2020 budget, PHP1,525.2bn (US$29.94 bn) has
been allocated for social services, occupying 37.2% of the budget.
For FY2021 budget, the government is likely to allocate PHP752bn (US$15.62bn) for education sector and PHP696bn
(US$14.45bn) for public works. Both education and public sector works account for nearly a third of the FY2021 budget.
To smoothen out the Covid-19 cases curve, the government intends to allocate PHP210bn (US$4.36bn) for health
sector. On the other hand, PHP72.5bn (US$1.51bn) is specially allotted to buy, store and distribute Covid-19 vaccines.
Foreign
The Philippines was a founding member of the ASEAN in 1967. The country has generally enjoyed good relations with
its neighbors. The country's foreign policy pursues constructive relations with its Asian neighbors through bilateral and
multilateral agreements as well as membership of the ASEAN, the ASEAN Regional Forum and the Asia-Pacific
Economic Cooperation forum. The Philippines maintains strong economic, commercial and security ties with the US.
A strategic bilateral dialogue was held between both countries in January 2011 to expand their co-operation. The
country has close military relations with the US, which improved further under the leadership of former president
Arroyo. The two nations conduct joint military training exercises annually. The country has also been designated as a
major non-North Atlantic Treaty Organization ally by the US. Under Duterte’s administration relations between both
sides have been strained, especially due the violation of human rights during the Duterte administration’s war on
drugs. The country is increasing its dealings with China.
The territorial dispute in the Spratly Islands continues to strain the relations between the Philippines and China. China,
Malaysia, the Philippines, Taiwan, Vietnam and Brunei have laid claim to all or part of about 100 islets that are believed
to have abundant oil and natural gas reserves. A Philippine law passed in 2008 that outlined Manila's claims to parts
of the Spratly Islands strained its ties with China. Tensions are simmering between the two over the disputed areas,
which the Philippines is defending and claiming as its territory under the UN Convention on the Law of the Sea. In June
2011, the government sent warships to patrol its areas of the Spratly Islands following incursions by Chinese vessels
into the disputed area. However, the government does not want this issue to impact its trade and commerce with
China, which is one of its top five external trade partners. The government has tried to settle the issue with China
through multilateral negotiations under the auspices of the ASEAN, but China’s response has not been clear.
In August and September 2011, President Aquino paid a visit to China to strengthen bilateral ties. During the meetings,
both countries agreed to strengthen economic co-operation. The leaders decided to resolve the maritime dispute in
the South China Sea through consultation; however, there has been no letup in the military presence in the area. In
mid-September 2011, the Philippine government announced that it would spend PHP5bn (US$99.75m) on a naval
vessel, helicopters and other military infrastructure to protect the Malampaya natural gas project on the northwestern
side of the Palawan Island in the South China Sea. In September 2011, the country also established the National Coast
Watch System Act as a nationwide central agency for maritime security, which looks like a direct response to the
situation in the South China Sea.
The August 2010 Manila hostage crisis, which resulted in the death of eight Hong Kong tourists, has also been a subject
of tension between the countries. The problem between the two countries further escalated in 2012. In November
2012, the Department of Foreign Affairs (DFA) of the Philippines handed over a “note verbale” to the Chinese embassy
in Manila to protest against China’s decision to imprint the images of its nine sea claims (South China Sea) in the pages
of its new e-passports. A solution to this dispute appears far from imminent. On July 24, 2012, the Senate of Philippines
ratified a military pact with Australia. Another defense procurement deal was signed between the Philippines and
Canada on November 10, 2012. The deal allows The Philippines to buy military equipment from Canada to defend its
territory. Malaysia-Philippines ties continue to be strained due to the latter’s claim on Sabah, which is one of the 13
states in Malaysia. This issue has remained unresolved for nearly 50 years. The incidence of infiltration into Sabah in
February 2013 by the Sultan of Sulu’s descendants along with his supporters known as the Royal Security Forces (RSF)
led to renewed tensions. In 2015, a strategic agreement was reached with Japan which will allow the Philippines to

Political Landscape
buy military equipment from Japan. Closer relations with Vietnam were also cited as a ploy to form a coalition against
China’s territorial advances in the South China Sea. In October 2017, president Duterte visited Tokyo and both
countries agreed to strengthen their bilateral cooperation to combat transnational crimes, and improve
counterterrorism, and maritime security over the next five years. In November 2018, the Philippines and China signed
a memorandum of understanding (MOU) on cooperation on oil and gas development, as an effort to settle their
conflicting territorial claims. However, strengthening relations with China may hamper the country’s relation with the
US in the long term. As of September 2020, the Philippines and India agreed on a preferential trade agreement to take
advantage of their strategic partnership in the region.
Performance
Governance indicators
The World Bank report on levels of governance uses factors such as voice and accountability, political stability and
absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption as indicators
for 215 countries and territories over 1996–2019. The study was conducted by Daniel Kaufmann of the Brookings
Institution, Massimo Mastruzzi of the World Bank Institute, and Aart Kraay of the World Bank Development Economics
Research Group. For any country, a percentile rank of zero corresponds to the lowest possible score, and a percentile
rank of 100 corresponds to the highest possible score.
As of 2019, the Philippines had a percentile rank of 47.28 on voice and accountability. This parameter measures the
extent to which a country's citizens are able to participate in selecting their government, as well as freedom of
expression, freedom of association and freedom of the media. The country was ranked ahead of Malaysia, which had
a percentile rank of 43.35 in 2019.
The Philippines fared poorly on the political stability and absence of violence parameter, with a percentile rank of
16.67 in 2019. The country’s score is very low compared to Malaysia, which registered a score of 50.95 in 2019.
Repeated attempts were made to impeach the former president, but these attempts were defeated in the House of
Representatives. However, the country’s political administration remains dependent on the armed forces for its
survival. The government has faced coups and attempted coups, the most recent occurring in 2007. All of these factors
explain its poor performance in this parameter.
In the government effectiveness indicator, the Philippines had a percentile rank of 54.81 in 2019, which is lower than
Malaysia’s percentile rank of 79.33. This indicator measures the quality of public and civil services and the degree of
independence from political pressures, the quality of policy formulation and implementation, and the credibility of the
government's commitment to such policies.
The Philippines’ percentile ranking in terms of regulatory quality was 55.29 in 2019. Regulatory quality measures the
ability of the government to formulate and implement sound policies and regulations that permit and promote private
sector development. The country's performance on this parameter is lower than that of Malaysia, which had a
percentile ranking of 73.56. The Philippines’ bureaucracy is slow and susceptible to influence from local vested
interests, while the implementation of rules remains patchy.
The Philippines had a percentile rank of 34.13 in the rule of law index in 2019. This index measures the extent to which
agents have confidence in and abide by the rules of society, in particular the quality of contract enforcement, the
police, and the courts, as well as the likelihood of crime and violence. Once again, Malaysia is well ahead, with a
percentile rank of 73.08 in 2019. Political killings are common occurrences in the Philippines, and there have been
allegations of human rights abuses, especially concerning the war against armed movements such as Abu Sayyaf and
the MNLF. Consequently, the country performs poorly in this parameter.

Political Landscape
The Philippines’ percentile ranking in the control of corruption parameter was 31.25 in 2019, up from 32.2 in 2005.
Malaysia's percentile rank was 62.5. The Philippines ranked 115th out of 180 countries in Transparency International's
2020 Corruption Perceptions Index. The country has been troubled with high levels of corruption, and the enforcement
of anti-corruption laws has been ineffective and inconsistent. No national institution, including the judiciary, executive
and legislature, is perceived to be free from corruption.
Outlook
The general public responded positively to the victory of Rodrigo Duterte in the elections in May 2016. The Liberal
Party gained five more seats in the House of Representatives in the elections held in 2016 compared to the election
held in May 2013. Although it does not have a majority, the party is likely to have a greater control over the lower
house as it has alliances with at least three other big political parties. Nevertheless, territorial disputes with China in
the South China Sea have long been an issue, which has led the Philippines to forge stronger alliances with its
neighbors, including Vietnam and Japan. The strategic alliance with Japan will help the country’s defense sector as it
will allow it to procure military equipment from Japan. The Biden administration is keen on strengthening its ties with
the Philippines. The two countries have discussed increasing the interoperability of militaries through bilateral security
cooperation activities.

Economic Landscape
Economic Landscape
Summary
The Philippines is a developing country with a diversified economy. The important sectors of the economy include
services (which accounted for 61.67% of GDP in 2020) and industry (30.2% of GDP), particularly food processing,
textiles and garments, and electronics and automobile parts. The services sector has been the best performer in recent
years. This is especially true of the financial sphere, which has been supported by strong inflows of remittances through
the banking sector. Like other Asian nations, the Filipino economy stumbled due to the global pandemic, and growth
fell to -7.63% in 2020. The government of Philippines plans to invest 21.8% of GDP fiscal funds to revive the economy
from Covid-19 pandemic in FY2021. The FY2021 budget is focused on generating employment opportunities and
assisting communities to adapt to post-pandemic scenarios.
Evolution
1950–1990
Before 1970, the Philippines mainly exported agricultural or mineral products in raw or minimally processed form.
The country started exporting manufactured commodities, especially garments and electronic components in the
1970s. By 1988, the country’s traditional agricultural exports had declined substantially, and non-traditional goods
comprised 75% of the total value of exports. The economy grew at a high average annual rate of 5.79% during the
1970s, financed largely by foreign currency borrowing. The country’s external debt grew from US$2.4bn in 1970 to
US$24.2bn in 1983, much of which was owed to transnational commercial banks. In the early 1980s, the economy
ran into trouble due to a decline in the world market for Philippine exports, difficulty in borrowing on the
international capital market and a domestic financial scandal. In the late 1980s, the country’s mining industry was
relatively well-developed. The Philippines was the world's 10th largest producer of copper, the sixth largest producer
of chromium, and the ninth largest gold producer in 1988.
1991–2019
The Philippines’ economy performed relatively strongly in the first half of the 1990s, on the back of a robust export
performance. However, the regional financial crises of 1997–98 led to a sharp growth slowdown and left banks’
balance sheets in a precarious state. Although growth recovered to reasonable levels during 1999–2003, the financial
system was still hampered by a significant volume of bad debt, while unemployment remained high. However, the
unemployment rate has stayed below 10% since 2006.
In 2001, the growth rate fell slightly due to the fallout from the country’s political crisis and the global technology
sector slowdown. Exports from the Philippines include computer chips and electronic products, which accounted for
almost 90% of total merchandise exports in 2003. The economy showed renewed strength during 2002–2004.
Although the average annual economic growth rate was recorded at around 5.31% during 2006 and 6.51% in 2007,
the global economic crisis led to a slowdown, with growth falling to 4.34% in 2008. It further decelerated to 1.14% in
2009. However, the economy rebounded to register growth of 7.33% in 2010. In 2011, growth declined to 3.85%, but
recovered to 6.89% in 2012 due to a rise in exports, and an increase in private consumption and government spending.

Economic Landscape
In 2013, economic growth was 6.78%. In 2014, real GDP growth was recorded at 6.34%. During the period from 2015
to 2018, the economy grew at an average annual rate of 6.69%. According to MarketLine estimates, the country grew
at a shrinking rate of 6.04% in 2019 amid lack of budget approvals, challenging climatic vulnerabilities and palpable
slowdown in investment sentiment. It slipped to -7.63% in 2020.
Figure 10: Historical Real GDP Growth, 2011–2020e
Financial authorities and regulators

The Bangko Sentral ng Pilipinas (BSP) is the central bank of the Republic of the Philippines. It was established in 1993
in accordance with the provisions in the Philippine constitution of 1987 and the New Central Bank Act of 1993. The
BSP succeeded the Central Bank of the Philippines, which was established in 1949, as the country’s central monetary
authority. The BSP enjoys fiscal and administrative autonomy while discharging its mandated responsibilities, which
include fostering and maintaining price stability and creating the regulatory framework for the functioning of a strong
and stable financial system. Consequently, the BSP is entrusted with the supervision of financial institutions under its
jurisdiction.
The Securities and Exchange Commission (SEC) was established in 1936 in accordance with the Securities Act. It was
created in response to the stock market boom at that time. It was abolished during the Japanese occupation and

Economic Landscape
replaced with the Philippine Executive Commission, only to be reactivated in 1947. The SEC was reorganized by the
former president Ferdinand Marcos in 1975 as a collegial body with three commissioners and was given quasi-judicial
powers. In 1981, the SEC was expanded to include two additional commissioners and two departments, one for
prosecution and enforcement and the other for supervision and monitoring. In December 2000, the SEC was
reorganized as per the stipulations of the Securities Regulation Code. The SEC has a mandate to strengthen the
corporate and capital market infrastructure of the country and is expected to maintain a regulatory framework based
on international standards and practices. It is also entrusted with the responsibility of promoting the investors’
interests in a free, fair and competitive business environment.
The Insurance Commission supervises and regulates the operations of life and non-life companies, mutual benefit
associations and trusts for charitable uses. It issues licenses to insurance agents, general agents, resident agents,
underwriters, brokers, adjusters and actuaries. It also has the authority to suspend or revoke such licenses. It is a
government agency under the Department of Finance.
Stock Exchange
The Philippines Stock Exchange (PSE) has its roots in the country's two former exchanges: the Manila Stock Exchange
(MSE) and the Makati Stock Exchange (MkSE). The MSE, founded in 1927, was the first stock exchange in the
Philippines and is one of the oldest in Asia. The MkSE was established in 1963 and became the second exchange to
operate in the country. The country has followed the MakTrade System since the 1990s. The MakTrade System was
replaced with the PSEtrade system in 2011. The PSE maintains trading floors in two cities, Makati and Pasig.
Performance
GDP and growth rate
Overview
The country recorded robust growth of 6.51% in 2007. Growth slowed down to 4.34% in 2008 and plunged to 1.14%
in 2009 but bounced back to 7.33% in 2010. The economy grew at a rate of 3.85% in 2011, but the growth rate
increased to 6.89% in 2012. In 2013, GDP growth was 6.75%. In 2014 and 2015, the economy recorded growth of 6.3%
and 6.34%, respectively. From 2015 to 2018, the economy grew at an average annual rate of 6.69%. The high inflation
registered in 2018 was due to high taxes under the TRAIN (Tax Reform for Acceleration and Inclusion). According to
MarketLine estimates, the economy grew by 6.04% in 2019 at the back of subdued investment sentiment as a result
of trade wars between the US and China. The country witnessed a sharp decline in growth rates to -7.63% in 2020.
MarketLine forecasts a robust recovery in growth rates for 2021.

Economic Landscape
Figure 11: Real GDP and Real GDP Growth Rate in the Philippines, 2016–2025f

Economic Landscape
GDP composition by sector

The services sector is the largest contributor to the country’s GDP. According to MarketLine estimates, in 2020, the
services sector’s output accounted for 61.67% of GDP, the industry sector contributed 30.2%, and agriculture around
8.13%.
Figure 12: GDP Composition by Sectors, 2020e

Economic Landscape
Agriculture
The country’s agricultural output recorded an average annual growth rate of 3.38% during the period 2016–2019. The
country is one of the leading producers of rice and coconuts in the world, but the agricultural sector generally suffers
from low economies of scale, poor productivity and inadequate infrastructural support. According to MarketLine
estimates, the agriculture sector grew by 0.68% in 2020 amid pandemic and is forecast to grow at 4.94% in 2021.
Figure 13: Agricultural Output of the Philippines, 2016–2021f
Note: the sectoral breakdown is given in local currency due to the impact of foreign exchange fluctuations on
growth figures.

Economic Landscape
Industry
In the industrial sector, electronics and food processing are the two most important activities. The average industrial
growth rate was 8.2% in 2016–2019. In 2020, the sector grew at a slower rate of 3.03%, compared to the growth rate
of 5.2% in the previous year.
Figure 14: Industrial Output of the Philippines, 2016–2021f
Note: the sectoral breakdown is given in local currency due to the impact of foreign exchange fluctuations on
growth figures.

Economic Landscape
Services
Tourism is a significant industry within this sector, and an important revenue generator for the country's economy.
According to MarketLine estimates, the sector registered a growth of 3.8% in 2020. A sharp V-shaped recovery is
forecast by MarketLine with 10.5% growth in 2021.
Figure 15: Services Output of the Philippines, 2016–2021f
Note: The sectoral breakdown is given in local currency due to the impact of foreign exchange fluctuations on
growth figures.
Fiscal situation
According to the IMF, the Philippine general government borrowing increased to 8.06% of GDP in 2020 from 1.78% in
2019. According to the IMF, government borrowing is forecast to ease to 7.3% of GDP in 2021. The government’s gross
debt rose to 48.85% in 2020 from 36.9% in 2019.
Current account
According to the IMF, the country’s current account posted a surplus of 1.61% of GDP in 2020. The surplus is forecast
to narrow down and 1.5% current account deficit of GDP in 2021.
Exports and imports

Economic Landscape
According to IMF, both exports and imports witnessed a steep downfall due to pandemic in 2020. Volume of exports
fell to -20.16% in 2020 from 8.14% in 2019 and volume of imports fell to -21.4% in 2020 from -1.86% in 2019. However,
with government support and trade agreements, IMF forecast a V-shaped recovery in exports and imports for 2021.
According to UN Comtrade Database, China was the Philippines major import partner, as it accounted for 22.8% of
imports and the US was a major export partner in 2019, accounting for 16.31% of total exports. Besides China, Japan
(9.56%), South Korea (7.47%), US (7.29%) and Indonesia (6.22%), were the main import partners, while Japan (15.05%),
China (13.83%), Hong Kong (13.5%) and Singapore (5.4%) were its other main export partners.
Figure 16: External Trade of the Philippines, 2016–2025f
Source: IMF MARKETLINE

Economic Landscape
External debt
External debt has showcased a declining trend since 2014 until 2017. The external debt was US$77.67bn in 2014; in
2015, the external debt declined to US$77.5bn and dropped to US$74.8bn in 2016. In 2017, the external debt reached
US$73.1bn, registering a decline of 2.32% from 2016, according to the MarketLine. In the year 2018, value of external
debt inched up to US$79bn, marking an increase of 8.01% from the previous year. The debt further shot up to
US$83.6bn in 2019.
Figure 17: External Debt of the Philippines, 2010–2019
International investment position
Foreign direct and portfolio investments

According to the United Nations Conference on Trade and Development’s World Investment Report 2020, FDI in the
Philippines dwindled to US$4.99bn in 2019, as compared to US$6.60bn in 2018. The country had the second highest
number of Special Economic Zones (SEZ) in Asia with 528 zones in 2019.
Monetary situation
Key monetary indicators

Inflation increased sharply from 2.9% in 2007 to 8.26% in 2008 but declined to 4.2% in 2009. This decline was primarily
driven by base effects from record high commodity prices in 2008, as well as low domestic demand. Inflation declined
to 3.7% in 2010. In 2011, the inflation rate was 4.72%, ahead of 3.03% in 2012 due to moderate easing of food prices.
Additionally, stable global commodity prices and an appreciating peso have helped to contain inflation. In 2013,

Economic Landscape
inflation decelerated to 2.58% due to lower electricity rates and domestic petroleum prices. In 2014, inflation
accelerated to 3.6%. Inflation dropped to 0.67% in 2015 and 1.25% in 2016. In 2017, with the recovery in oil prices,
the inflation rate in the country accelerated to 2.9%. In 2018, the inflation rate jumped to 5.2% induced by
implementation of tax reforms leading to a raise in the price pressures. The country observed an inflation rate of 2.5%,
within the target range of the government, and it increased to 2.6% in 2020 amid pandemic. MarketLine forecasts a
further increase in inflation rates to 3.22% in 2021.
Figure 18: Consumer Price Index and CPI-based Inflation in the Philippines, 2016–2025f
Banking sector
The country has a relatively underdeveloped financial sector; however, it is open to foreign competition and has high
capital standards. The banking division dominates the financial sector. Furthermore, a small government-run Islamic
bank caters to the Muslim population in the south. The banks offer credit at market terms; however, legal
stipulations require them to lend specified portions of their funds to preferred sectors.
Employment
According to MarketLine, the unemployment rate was 5.5% in 2016, down from 6.3% in 2015 as the economy was
boosted by improved employment opportunities in the industry and service sectors. The unemployment rate was at

Economic Landscape
5.7% in 2017 and marked a slowdown at 5.3% in 2018. In 2019, the unemployment rate stood at 5.3% and it increased
to 10.4% in 2020 amid pandemic and closure of business activities worldwide. However, with effective government
policies and unlocking initiatives, the unemployment rate is forecast to decline to 7.4% in 2021, according to
MarketLine estimates.
Figure 19: Unemployment Rate (%), 2016–2025f
Outlook
The Philippines economy deteriorated in 2020 due to lockdowns, closure of business activities and travel restrictions.
The real GDP growth rate fell to -7.63% in 2020 from 6.04% in 2019, according to MarketLine estimates. However, with
stimulus packages and easing of restrictions, the economy is set to witness a V-shaped recovery with growth rate of
8.36% in 2021. Global demand is slowly picking up. With easing of restrictions in the APAC region, the Philippines is
set to witness positive growth in business and services sectors for 2021. The latest PMI Manufacturing shows a strong
rebound in business activities, with uptick of 52.5 in February 2021. However, delays in vaccine procurement and
distribution along with uncertainty in global export markets pose downside risks to economic recovery.

Social Landscape
Social Landscape
Summary
The Philippines has operated a range of social security programs for decades. These are categorized into social
insurance, pensions and other forms of long-term savings, social safety nets, welfare and social payments, and labor
market interventions. However, the coverage is incomplete, and the delivery is ineffective, while financing remains
uncertain and is vulnerable to corruption. Nearly 62.7% of the population is of working age as of 2020, according to
MarketLine estimates, which reduces the social security expenditure. The Philippines has a large pool of workers
with good English language skills. More than 90% of the children of school-going age are being educated, which is an
encouraging sign. The Philippines became the first Asian country to pledge itself to respect and implement the new
ILO labor standard. Digital learning and online classes have become more prominent among school children amid
pandemic which had raised concerns about online safety. Moreover, unwanted social interactions through online
platforms have to be reduced to ensure more safety for children, according to a Google online safety education
survey.
Evolution
The social security system in the Philippines was established in 1957, and contributions are mandatory for all
employees in the public and private sectors. Retirement is optional from the age of 60 and compulsory at 65. The
Philippine government created an employees’ compensation program in 1975 that pays double compensation for
work-related death, injury or illness to employees who are not self-employed. The Philippine Health Insurance
Corporation was established in 1995 to administer the National Health Insurance Program, which aims to provide
universal coverage.
Demographic composition
Composition by age and gender

According to MarketLine estimates, as of 2020, 4.9% of the population was aged above 65 years, 62.7% were in the
15–64 years age group, and 32.4% were in the 0–14 years age group. The country has a very low percentage of old age
people and has a large working population. According to MarketLine estimates, in 2020, the total life expectancy of
the population was 70 (66.5 for men and 73.8 for women). The infant mortality rate has been falling and stood at 20
deaths per 1,000 live births in 2020.

Social Landscape
Table 9: Mid-Year Population by Age (as a Percentage of the Total Population), 2020e
Age Female Male

0–4 10.9 11.3
5–9 10.6 11.0
10–14 10.4 10.7
15–19 9.8 10.1
20–24 9.0 9.4
25–29 8.0 8.4
30–34 7.3 7.7
35–39 6.6 6.9
40–44 5.8 6.0
45–49 4.9 4.9
50–54 4.2 4.0
55–59 3.6 3.2
60–64 3.1 2.5
65–69 2.4 1.8
70–74 1.6 1.1
75–79 1.0 0.6
80+ 0.9 0.4
Urban/rural composition and migration

Filipinos have been migrating continuously from rural to urban areas since 1991. According to MarketLine estimates,
47.4% of the population was urban, and the remaining population was rural in 2020.
Religious composition
According to the 2010 census, the country’s population comprises the following religious groups: Roman Catholic
(80.6%), Protestant 8.2% (includes Philippine Council of Evangelical Churches 2.7%, National Council of Churches in
the Philippines 1.2%, other Protestant 4.3%), other Christian (3.4%), Muslim (5.6%), tribal religions (2%), other (1.9%)
and none (1%). The main ethnic groups are Tagalog (24.4%), Bisaya/Binisaya (11.4%), Cebuano (9.9%), Ilocano (8.8%),
Hiligaynon/Ilonggo (8.4%), Bikol (6.8%), Waray (4%) and other (26.1%).
Education
The law in the country allows for six years of free and compulsory primary education, while the four-year secondary
stage education is free but not obligatory. The Philippines has a good human resource base with strong English
language skills. Although fluency in English has been declining in the last few years, the country’s labor force is
flexible and adept at finding jobs overseas. The skill levels of emigrants from the Philippines are improving, which
increases the prospect of growth in remittances. The nation has encouraged public-private partnerships to raise the
standards of science and technology teaching. For instance, a teacher training initiative run by the Foundation for
Upgrading Standards in Education, a program led by the private sector, trains tutors to effectively teach mathematics

Social Landscape
and science. However, the country is lagging behind according to the PISA survey in 2018. Over 80% of students in
the Philippines did not reach a minimum level of proficiency in reading, which is one of the largest shares of low
performers amongst all PISA-participating countries and economies.
Social welfare
Social welfare policies
PhilHealth runs the National Health Insurance Program, which grants Filipinos access to inpatient and outpatient
services in accredited medical facilities. Individuals have to pay around US$22 as an annual premium towards health
insurance. Retirees who have reached the age of 65 or who are older than 60 but not yet 65 and have already paid
120 monthly premiums, pay nothing. Depending on the income level, poorer households may pay one standard
annual premium to cover four family members or have their entire premium payment shared by the national and
local governments. Benefits do not necessarily cover the full costs of medical expenses and many poor people
cannot afford to pay the difference. In June 2013, former president Benigno Aquino signed the Republic Act 10606,
which expands PhilHealth’s coverage to all regions of the country and even to those who are unable to pay the
monthly premiums. The Social Welfare Development and Reform Project focuses on the country’s CCT program, the
Pantawid Pamilya Pilipino Program, or the 4Ps, which provides cash grants to poor households as incentives for
parents to keep their children healthy and also offers education. The Philippine government approved a Conditional
Cash Transfer Bill in February 2019. The social security system (SSS) is paying unemployment benefits to workers
who lost their jobs due to the pandemic. The premium-paying members of SSS get equivalent of half of their average
monthly salary credit for two months if they are displaced amid the pandemic. As of February 2021, a lawmaker filed
a bill which seeks to triple the amount of unemployment benefits that laid-off workers can receive. This bold step
would amend the Social Security Act of 2018, wherein the current claim is around 50% of monthly salary for a period
of two months.
Performance
Healthcare
Although government expenditure on healthcare has increased marginally over the years it remains low when
compared with other developing countries. According to MarketLine estimates, the total healthcare expenditure rose
from US$9.43bn in 2011 to US$14.61bn in 2018, which corresponds to 4.41% of its GDP. The House of Representatives,
in 2011, approved the Healthcare Services Price Disclosure Act of 2011, which requires all healthcare facilities to
publicize the cost of their healthcare services to the public. As of March 2021, employers intend to vaccinate two-
thirds of their workforce. By providing timely vaccines to employees, companies will benefit as productivity may rise.

Social Landscape
Figure 20: Expenditure on Healthcare in the Philippines, 2009–2018
Poverty/income distribution
Poverty continues to be a serious problem in the country. More than half of the population consistently rated
themselves as "mahirap" (the Tagalog word for poor) over the last two decades. The Philippines was the only
country in Southeast Asia to record an increase in the absolute number of poor people since 1990. The global
economic crisis and natural disasters in 2008 and 2009 are believed to have worsened the situation. The data
highlights the fact that the gains from higher growth have failed to trickle down to the poorest Filipinos. Disparity
across regions was very high with the poverty rate exceeding 50% in the Autonomous Region in Muslim Mindanao,
while it was just 5.4% in the national capital region. According to Human Development the United Nations
Development Programme's Report 2020, the Human Development Index value of the country was 0.718 in 2019, and
it ranked 107th out of 189 nations. The country was in the medium development category.
Education
According to MarketLine estimates, public spending on education as a percentage of GDP was 3.9% in 2016 and
amounted to US$10.8bn.

Social Landscape
Figure 21: Expenditure on Education in the Philippines, 2011–2016
Outlook
The social landscape includes education, healthcare, poverty and basic human rights. Development in all the
aforementioned parameters helps to build a strong society and accelerates economic development. In 2020, the
pandemic hurt the livelihoods of the vulnerable. Anti-poverty schemes such as Pantawid Pamilyang Pilipino and the
Sustainable Livelihood programs have failed to have the desired results. However, the government of Philippines came
up with Social Amelioration Program (SAP) to minimize the adverse impacts of Covid-19 such as job loss, closure of
businesses, and travel restrictions. The effectiveness of this program is based on four pillars: human capital
development program, alternative mode of delivering social protection and social safety nets, structural reforms and
identifying the targeted population.

Technological Landscape
Summary
The Philippine government has initiated programs to foster science and technology in the country. The incumbent
government has created a core science and technology complex, modeled after Stanford Research Park in Silicon
Valley, to provide impetus to new startups in the country. Compared with other Asian nations, the number of
patents acquired by Philippine companies is very low. The Philippines has witnessed healthy growth in the number of
internet and mobile phone users. The country is witnessing the renaissance of its technological ecosystem with the
launch of Roadmap for Digital Startups with the Department of Information and Communications Technology (DICT)
in 2015, which will provide an impetus to the startup community in the coming years. The country ranked fourth in
the lower middle-income group in the Global Innovation Index 2020.
Evolution
The Philippines evolved slowly from being predominantly agricultural to a service-oriented economy. The
manufacturing sector developed rapidly during the 1950s, but then leveled off and did not increase either in its output
or employment in the overall economy. The evolution of technology in the country is, to some extent, linked with the
development of the services sector.
Internet access in the Philippines started to take shape in 1994 when the Philippine Network Foundation, an
association of private and government institutions, enabled Filipinos to be connected live via a 64-kbps link to Sprint
in the US. It was supposed to be the country’s only public internet gateway. During the following year, the Public
Telecommunications Act of the Philippines was made into a law, which exempted the need for value-added services
providers to secure a franchise. This enabled many organizations to establish internet connections, create websites
and run their own online services. These developments outline the history of internet in the country.
Research and development
The government has taken a series of measures to promote science and technology in the country. A meeting held in
August 2006 between the government and the Philippine-American Academy of Science and Engineering led to the
development of 22 hectares by Diliman University as the core science and technology complex with technology
incubation, modeled after Stanford Research Park in Silicon Valley. The National Science Complex in Diliman, Quezon
City, was established at the cost of around US$30m during 2006–2010. The Department of Science and Technology –
Advanced Science and Technology Institute launched new research and development (R&D) programs in April 2008 to
support the use of ICT for natural resource and environmental management, research collaboration over computer
networks, and e-governance for the Department of Science and Technology (DOST).
The three new programs that commenced in 2008 were:
• ICT for the Environment

• Philippine eScience Grid (PsiGrid) Program

• eDOST
The ICT for the Environment program builds on the gains made from previous climate and weather information
monitoring system projects to develop technology applications that will enhance the country’s capabilities in the
observation, collection and transmission of environmental data. The PsiGrid Program aims to establish a computing
grid infrastructure as well as applications that will run over the grid for use in collaborative research activities. Finally,
the eDOST program plans to enable DOST through ICT and further improve the internal operations and delivery of
front-line services. The program consists of infrastructure and connectivity, information systems improvement, open
standards, and change management. By upgrading its ICT capabilities, DOST expects to enhance its productivity and
efficiency, and promote inter-agency collaboration. In February 2021, the government introduces eight new data and
science R&D projects for good governance. This will be soon be implemented to improve operations of local
government units and national government agencies which will work together to reduce the gap in the country’s
workforce for data scientists.
Intellectual property
The Philippines performed poorly when compared with other Asian economies, as shown in Table 10. The country was
granted only 43 patents by the US Patent and Trademark Office (USPTO) in 2015, compared to 1,074 and 19,615
patents granted to Singapore and South Korea, respectively.
In 2010, the government enacted two laws to strengthen intellectual property protection and to promote technology
transfer. The Anti-Camcording Act of 2010 was passed in May 2010 to prohibit the unauthorized use of audiovisual
recorders in exhibition facilities and cinemas, while the Technology Transfer Act of 2009 was passed in March 2010 to
act as a legal framework for intellectual property generated from government-funded R&D activities.
In the Intellectual Property Rights Index 2020, the Philippines obtained a score of 5.32 and scored a rank of 69th place
among 129 economies, registering a jump of three notches when compared to 2018. The index evaluates the initiatives
undertaken by countries in protecting intellectual-property (IP) rights.
Table 10: Patents Granted by the US Patent and Trademark Office, 2014–2020
2014 2015 2016 2017 2018 2019 2020

Japan 56639 54487 53044 51741 50012 53172 55899
South Korea 17815 19615 21867 22689 22054 22427 24218
Singapore 963 1074 1019 1046 1071 1103 1191
Malaysia 242 266 301 270 239 296 310
The 71
45 43 46 66 82 88
Philippines
Source: USPTO MARKETLINE

Performance
Telecoms
The country witnessed robust growth in the number of mobile phone users during 2016–2019, rising from 119.0 million
subscribers in 2016 to 137.1 million subscribers in 2019. In 2020, the mobile penetration rate per 100 people was
127.4. From 2016 to 2020, the number of mobile subscribers grew at an average annual rate of 3.9%. MarketLine
forecasts the number of mobile subscribers to reach 154.5 million by 2025.
Internet
The number of internet users increased consistently during 2016–2020, rising from 57.0 million in 2016 to 72.0 million
in 2020. According to MarketLine estimates, the number of internet users grew 4.6% in 2020. MarketLine forecasts
the number of internet users to grow at an average annual rate of 3.7% during 2021–2025 to reach 85.8 million by
2025.
Figure 22: Internet Users and Penetration in the Philippines, 2016–2020e
Opportunity sectors
The main opportunities are in the business process outsourcing (BPO) sector and the biotechnology industry.

BPO
The BPO sector has great potential due to the following reasons:
• An abundance of workers with excellent English language skills
• The similarity of the Philippines’ legal, accounting, medical and other social systems with those of
the US
• Greater cost-competitiveness in the country’s BPO and IT services industries following an increase
in labor costs and real estate prices in India
Biotechnology
The Philippines has stepped up the R&D of various agri-biotech products with the Department of Agriculture in a bid
to become a leader in biotechnology. In 1990, with the establishment of the National Biosafety Committee of The
Philippines, the country became the first member of the Association of Southeast Asian Nations (ASEAN) to initiate a
biotechnology regulatory system. The country's biosafety regulation system follows strict scientific standards and has
become a model for ASEAN members seeking to become producers of agricultural biotechnology crops.
Outlook
Strengthening the technological landscape helps a country to be more competitive globally. The roadmap of 2016–
2022 for the IT-BPO industry aims to increase revenues to US$40bn by 2022. The plan for the resurgence of
manufacturing could be a game changer for the country’s long-term employment prospects. The approval of the BOI
for the expansion of production lines of Toyota and Mitsubishi will increase wages and salary levels while providing a
boost to manufacturing. Artificial Intelligence (AI) is a vital component of the Philippine Development Plan 2017–2022,
with DOST being the major department to develop an AI program for the country’s manufacturing sector. Recently in
June 2019, the Globe Telecom launched the country’s first 5G services, making the next generation connectivity
commercially available in the Philippines. The advent of 5G services is anticipated to revolutionize the telecom industry
of the country.

Legal Landscape
Legal Landscape
Summary
The Philippines' judiciary is independent of the legislature and executive. However, judicial delays are a major problem.
Lawyers exploit procedural loopholes to delay proceedings, resulting in cases dragging on for years. Several Supreme
Court judgments have caused controversy, including the one in which the mining service contracts were deemed
unconstitutional; this decision, however, was later rescinded. The Supreme Court cancelled the automated counting
of votes in the 2004 elections. The court also suspended the implementation of the extended VAT scheme, another
judgment that was subsequently revoked. Although the regulatory system is transparent, domestic players with vested
interests tend to influence events in their favor.
The number of procedures and days required to start a business in the country is higher than the regional and OECD
averages. The Philippines ranks poorly as a business-friendly country in the World Bank’s Doing Business 2020 report.
In terms of ease of doing business, the country ranks 95th out of 190 economies. Firing costs are also high in the
country. However, the country jumped 29 ranks from previous global ranking of ease of doing business and witnessed
improvement in three areas: starting a business, dealing with construction permits, and protecting minority investor.
Furthermore, the government of Philippines plans to cut income tax levied on companies under a proposed law to
help companies recover from Covid-19. According to the proposed Corporate Recovery and Tax Incentives for
Enterprises Act, the income tax rate for corporates will be reduced to 25% for large companies and 20% for small
enterprises from February 2021.
Evolution
Under the 1973 constitution, the Supreme Court is the highest judicial body of the state and holds supervisory
authority over the lower courts. The entire court system was overhauled with the creation of new regional courts of
trials and appeals in 1981. Justices at all levels are appointed by the president and the courts do not have juries. The
country’s judicial system is plagued with delays, and detention periods in national security cases are often long. Cases
dealing with national security in the 1972–81 period of martial law were tried in military courts. The 1987 constitution
restored the system to what it was in 1973. However, the delivery of justice is slow, despite the reinstating of many
procedural safeguards and guarantees. The Philippines PM signed a contentious antiterrorism bill which aims at
combating Islamic militancy in the south. The new law allows for terrorism suspects to be detained without a warrant,
prolongs the amount of time that they can be detained without being charged in court.

Legal Landscape
Judicial system
Spanish and Anglo-American laws form the basis of the legal code in the Philippines, while Muslims living in some of
the southern parts of the country are subject to Islamic law. The constitution of the Philippines gives the accused the
right to be represented by a counsel and to have a speedy and fair public trial. Defendants are presumed innocent
until proven guilty and have the right to confront witnesses, present evidence and appeal convictions. However,
judicial delays, corruption and inefficiency plague the system.
Structure of the system

Spanish and Anglo-American laws form the basis of the legal code in the Philippines, while Muslims living in some of
the southern parts of the country are subject to Islamic law. The constitution of the Philippines gives the accused the
right to be represented by a counsel and to have a speedy and fair public trial. Defendants are presumed innocent
until proven guilty and have the right to confront witnesses, present evidence and appeal convictions. However,
judicial delays, corruption and inefficiency plague the system.
Tax regulations
Income tax
Filipinos are subject to tax rates between 0% and 35%. Managers and highly technical staff employed by regional
headquarters, regional operating headquarters, offshore business units, multinational companies, and petroleum
services contractors are taxed at a standard 15% on gross income.
Corporate tax
As of 2020, domestic and resident foreign corporations are taxed at a rate of 30%. However, resident and non-
resident foreign corporations are taxed only on income derived from sources within the Philippines. Regional
operating headquarters are taxed at a rate of 10% of taxable income.
Capital gains tax

For PHP100,000 (US$2,000.7) or less, capital gains from the sale of shares of domestic corporations not traded on
the stock exchange are taxed at 5%, increasing to 10% for any amount exceeding PHP100,000 (US$2,000.7).
Withholding tax
Dividends paid by the Philippine corporations to a non-resident are generally subject to a withholding tax of 15%
provided that the country of the non-resident foreign corporation allows a tax credit of 15%. Otherwise, dividends are
taxed at 30%. Withholding tax can be reduced under an applicable tax treaty. An interest if paid to a non-resident is
subjected to a 20% withholding tax, while royalties to a non-resident are taxed at 30%, and 20% in case of residents.
VAT
A VAT rate of 12% is applied to the provision of services, the sale of goods and property, and the import of goods
into the country. As of February 2021, the bureau of internal revenue simplified the documentary requirements for
VAT refund claims to speed up the process. The agency has reduced the number of documentary requirements to 30
from the previous 39 to simplify the filing and processing of VAT refund claims.
Corporate Governance
The SEC, a principal player in matters of corporate governance, issued the Code of Corporate Governance in 2002. If
the code is not adhered to, penalties are bound to follow. The code aims to promote corporate governance reforms

Legal Landscape
that will raise investor confidence, develop the capital market, and help achieve sustained growth for the corporate
sector and the economy. The code applies to corporations with securities that are registered or listed, corporations
that are grantees of permits or licenses and secondary franchises from the SEC, and public companies including
branches or subsidiaries of foreign corporations operating in the Philippines, the securities of which are registered or
listed. Some of the salient features of the code are:
• The code prescribes that the board of directors shall be primarily responsible for the corporation’s
governance. The board should establish the corporation’s vision and mission, its strategic
objectives, the policies and procedures that guide and direct its activities, and the mechanism for
monitoring managerial performance.
• The following stockholder’s rights should be respected: voting rights, pre-emptive rights, power of
inspection, the right to information, the right to dividends and appraisal rights. Management may
establish a performance evaluation system to measure the board’s performance and the
corporation's top-level management.
Performance
Effectiveness of the legal system
The Philippines ranks poorly in the World Bank’s Doing Business 2020 report. In the ease of doing business index, the
country ranks 95th out of 190 economies; and in terms of starting a business in the country it ranks 171st. Starting a
business takes an average of 33 days. The number of procedures required to start a business is 13. The constitution
also bans foreign companies from owning mass media and marine resources companies. It also restricts foreign
ownership in advertising and equity participation in public utilities, private lands, and educational institutions. The
government needs to work towards simplifying processes and removing impediments to business investment. The
Philippines scored 64.5 and was ranked 70th out of 180 economies in the 2020 Index of Economic Freedom and is
considered moderately free according to the index. According to the Global Competitiveness Report 2019, the country
ranked 109th out of 141 economies in the parameter efficiency of legal framework in settling disputes. This clearly
indicates the need to improve the effectiveness of the legal system.
Outlook
A sound legal landscape is crucial to a country’s development. It not only sends the right message to foreign
investors but also creates a society that abides by its laws and reduces crime rate. Trade regulations in the
Philippines are detrimental to foreign investment and are one of the reasons for the country’s poor ranking in the
World Bank’s Doing Business 2020 report. In the ease of doing business index, the country ranks 95th out of 190
countries and in terms of starting a business the Philippines is in 171st place. However, according to reports, in 2020,
the country made starting a business easier by abolishing the minimum capital requirement domestic firms.
Moreover, dealing with construction permits was made easier by introducing greater transparency in building
regulations and streamlining the process for obtaining an occupancy certificate. The country also introduced Senate
Bill No. 182 in July 2019 to address the slow and ineffective justice system in the Philippines.

Environmental Landscape
Summary
The country is encouraging the development of alternative and sustainable sources of energy, both for power and
transport, as it seeks to ensure its energy security. The introduction of Clean Development Mechanism projects
under the Kyoto Protocol has provided the country with opportunities to develop its energy infrastructure, on the
basis of utilizing renewable sources of energy. However, in line with its rapid GDP growth, the country’s carbon
dioxide emissions increased from around 74.5 million metric tons in 2009 to 140.1 million metric tons in 2019.
Evolution
The government set out rules on the use and protection of the environment in the country's 1935 constitution.
Section 1 of the charter asserts the sole rights of the Filipino people to use, exploit, and develop the nation's
abundant natural resources. Until the 1980s, the environment was hardly given any thought in the course of policy
formulation. The country's various natural resources were perceived as mere instruments to be utilized by the
people for the greater goal of economic development.
The 1987 constitution also took account of the high impact of developmental activities on the welfare of the
indigenous population, mandating that the state safeguard the rights of native cultural communities of their
ancestral lands and ensures their economic, social, and cultural wellbeing. For the first time, the right of the
individual to a balanced and healthy ecology was recognized, not only as an abstract policy statement, but as an
enforceable legal right. This is clear from the discussion of the Constitutional Commission’s members that drafted
the 1987 constitution. Among the most significant of these statutes are the Clean Air Act, the Ecological Solid Waste
Management Act and the National Integrated Protected Areas Systems Act.
Environmental regulations
The major legal instruments guiding the environmental and natural resource management in the country are:
• the 1998 Fisheries Code
• the 1975 Forestry Code
• the 1976 Water Code
• the 1976 Pollution Control Law
• the 1978 Philippines Environmental Impact Statement System
• the 1992 Toxic Substances, Hazardous and Nuclear Waste Law

• the 1992 National Integrated Protected Areas System Act

• the 1987 Comprehensive Agrarian Reform Law
• the 1991 Local Government Code
• the 1997 Indigenous People’s Rights Act
• the 1999 Clean Air Act
• the 1997 Agriculture and Fisheries Modernization Act.
Furthermore, the ongoing institutionalization of the Philippine Economic-Environmental and Natural Resource
Accounting System aims to incorporate the costs of using environmental resources for production into the nation's
accounts.
Participation in global efforts, agreements, and pacts
The country is a member of major international pacts and agreements such as the Convention on Biological Diversity,
Stockholm Convention, the UN Framework Convention on Climate Change, the Kyoto Protocol, the Convention to
Combat Desertification, the Convention on the International Trade in Endangered Species of Wild Flora and Fauna, the
Basel Convention on the Control of Trans boundary Movements of Hazardous Wastes and their Disposal, the UN
Convention on the Law of the Sea, the Convention on the Prevention of Marine Pollution by Dumping Wastes and
Other Matter, the Vienna Convention on the Protection of the Ozone Layer, the International Convention for the
Prevention of Pollution from Ships, the International Tropical Timber Agreement, the Ramsar Convention on Wetlands
of International Importance, and the International Convention for the Regulation of Whaling.
Performance
Environmental impact
The country's carbon dioxide emissions rose from around 74.5 million metric tons in 2009 to 140.1 million metric tons
in 2019 with an average annual growth rate of 6.6% during 2010–19, according to MarketLine estimates. Uncontrolled
logging and "slash-and-burn" agriculture has led to the destruction of forests, critically impacting the ecological
balance of the country. According to the Worldwide Fund for Nature (WWF), overfishing has emerged as a major
problem for the Philippines. Overfishing has resulted in a 90% drop in the quantity of fish that could be trawled out
from major fishing areas in the country. This has also led to economic losses due to mismanagement of fishery
resources which amount to US$420m annually. Apart from the economic loss, the country’s biodiversity was also
affected. Almost 80% of the coral reefs in the Philippines are at risk from overfishing.
In the 2020 EPI, the Philippines was ranked 111th out of 180 countries as a result of improvements in water and
sanitation. The United Nations University (UNU) publishes the World Risk Report (WRR) that includes an index, a
priority topic, and case studies. The index describes the disaster risk for various countries and regions. The Philippines
ranks ninth in the 2020 World Risk Index of most disaster prone countries in the world.

Figure 23: Carbon Dioxide Emissions in the Philippines, 2010–2019
Outlook
As floods often paralyze the country, the World Bank-administered Global Facility for Disaster Reduction and
Recovery (GFDRR) Trust Fund began funding the US$1.5m Metro Manila Flood Management Master plan. According
to this plan, which was approved by the government in September 2012, a number of structural and non-structural
measures will be taken. The government is taking steps to increase the utilization of renewable energy for the
generation of electricity. In June 2013, representatives from the Philippines Climate Change Commission (CCC) met
with the Worldwatch Institute’s Climate and Energy program’s representative to discuss the plan for a Sustainable
Energy Roadmap for the nation for the next 10 years. The Philippines is also all set to sign the historic COP21
agreement. Under the agreement, it has to pledge to reduce CO2 emissions by 70% by 2030. The Department of
Energy (DOE) has also ramped up its efforts towards promoting use of renewable energy in the country. Under the
National Renewable Energy Program for 2017–2040, the DOE targets to increase the installed capacity of renewable
energy at 20,000 megawatts. The country is also focused on attracting US$20bn of investment in the renewable
energy sector in the coming years under the Green Energy Tariff Program, recommended by the Department of
Energy (DOE) in February 2020. The program is focused on promoting healthy competition to entice more
investments in the energy sector.

Appendix
Appendix
ISO codes of selected countries
Country ISO code Country ISO code

Australia AUS Japan JPN
Austria AUT Korea KOR
Belgium BEL Luxembourg LUX
Canada CAN Mexico MEX
Chile CHL Netherlands NLD
Czech Republic CZE New Zealand NZL
Denmark DNK Norway NOR
Estonia EST Poland POL
Finland FIN Portugal PRT
France FRA Slovak Republic SVK
Germany DEU Slovenia SVN
Greece GRC Spain ESP
Hungary HUN Sweden SWE
Iceland ISL Switzerland CHE
Ireland IRL Turkey TUR
Israel ISR United Kingdom GBR
Italy ITA United States USA
Brazil BRA Indonesia IDN
China CHN Russian Federation RUS
India IND South Africa ZAF

Appendix
Ask the analyst

MarketLine’s Country Analysis Practice consists of a team of economists, analysts, and researchers, all with expertise in
their given fields. For any questions or comments about this report you can contact the author directly at
reachus@marketline.com.
Disclaimer
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electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher,
MarketLine.
The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that
the findings, conclusions and recommendations that MarketLine delivers will be based on information gathered in good
faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such
MarketLine can accept no liability whatever for actions taken based on any information that may subsequently prove to
be incorrect

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The Philippines

In-depth PESTLE Insights

Country Profile Series

Report Code: ML00002-045

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

• Stimulus packages, adding up to a minimum of US$56.37bn, were announced to mitigate the

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Table 1: The Philippines - Key Fundamentals, 2018–2025f

2018 2019 2020e 2021f 2022f 2023f 2024f 2025f

Source: Country Statistics, MarketLine MARKETLINE

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Impact of Covid-19 on Philippines economy 6

KEY FACTS AND GEOGRAPHIC LOCATION 18

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Structure and policies 48

Structure and policies 55

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Social welfare policies 68

Structure and policies 71

Structure and policies 75

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Structure and policies 78

Participation in global efforts, agreements, and pacts 79

ISO codes of selected countries 81

Ask the analyst 82

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Figure 6: Annual Natural Disasters Statistics in the Philippines, 2007–2018 42

Figure 9: Elected Members of the Philippines’ House of Representatives, 2016 50

Figure 12: GDP Composition by Sectors, 2020e 58

Figure 15: Services Output of the Philippines, 2016–2021f 61

Figure 21: Expenditure on Education in the Philippines, 2011–2016 70

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Table 6: Analysis of the Philippines's Technology Landscape 34

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Key Facts and Geographic Location

Table 2: The Philippines - Key Facts, 2021

Population (2020 est.) 109.7 million

Currency Philippine Peso (PHP)

GDP per capita, adjusted by PPP (2020 US$8119.7

Internet domain .ph

Country area 300,000 sq. km (total)

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Figure 1: Map of the Philippines, 2021

Source: CIA – The World Factbook MARKETLINE

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Table 3: Analysis of the Philippines's Political Landscape

Current Strengths Current Challenges

Future Prospects Future Risks

Source: MarketLine ©MARKETLINE

Strengthening ties with Malaysia

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Improving Relations with the US

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021

Increasing ties with Japan

PESTLE Country Analysis Report: The Philippines ML00002-045/Published 03/2021