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Financial Executives Institute of the Philippines

43rd Annual Conference14 October 2011

Neeraj Jain

Country Director

Philippines

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Stagnant Investment(gross fixed capital formation, % of GDP)

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0

5

10

15

20

25

30

35

40

45

50

1960 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

Stagnant Investment(gross fixed capital formation, % of GDP)

Indonesia Malaysia Philippines Thailand Vietnam

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0

1,500

3,000

4,500

6,000

7,500

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

0

2,500

5,000

7,500

10,000

12,500 Indonesia

Philippines

Thailand

Malaysia (RHS)

Economy-wide labor productivity (Y/L)

Constant 2000 $

2.62.9

0.4

4.0

2.2

3.4

0.6

3.83.5

2.7

2.0

3.3

0.0

1.0

2.0

3.0

4.0

5.0

6.0

INO MAL PHI THA INO MAL PHI THA INO MAL PHI THA

Annual average growth rate, %

1980 - 2007 1990 - 2000 2000 - 2007MAL(RHS)

THA

INO

PHI

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Long-term growth performance

0

500

1,000

1,500

2,000

2,500

Indonesia

Malaysia

Philippines

Thailand

PRC

Korea

Taipei,China

India

Real GDP per capita 1960($ constant)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

Indonesia Malaysia PhilippinesThailand Viet Nam PRCIndia

Real GDP per capita 1950

2008($ constant)

Once upon a time. After five decades.

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Chronic problems

61.9

44.0

85.7

7.8

45.0

11.5

48.4

12.3

0

20

40

60

80

100

Malaysia

(1984-2004)

Philippines

(1985-2006)

Thailand

(1980-2004)

Viet Nam

(1993-2006)

Unemployment rate (%)

Slow poverty reduction(headcount ratio at $2 a day PPP,

% of population)

0

2

4

6

8

10

12

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

PRC Korea Indonesia Malaysia

Philippines Thailand Viet Nam

High unemployment(% of total labor force)

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Service-led growth

50.149.4

26.3

48.3

26.5

46.9

38.5 43.5

66.6

43.2

61.9

43.5

11.4 7.2 7.1 8.6 11.7 9.6

0

20

40

60

80

100

INO MAL PHI THA IND PRC

Industry Services Agriculture

% Contribution to GDP Growth: 1980-2008

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MAJOR POSITIVE FACTORS MAJOR NEGATIVE FACTORS

Stable Macroeconomic Environment:- Fiscal consolidation program

- Low inflation- Healthy banking system- Ample Liquidity

Robust BOP Position:- Stable and growing inflow of remittances- High international reserves- Modest external debt

Favorable Demographics:- Young population- Relatively well skilled- English speaking population

Location Advantages:- Gateway to emerging Asia- Well positioned to benefit from emerging

Asian giant economies- ASEAN economic integration

Prominent Success Stories:- From coconut chips to computer chips story

of the electronics industry- Spectacular growth of BPO industry- Liberalized telecom sector

Challenging Governance:- Weak institutions

- Red-tape; corruption- Lack of policy predictability, continuity, and

coordination (also between NG and LGUs)- Weaknesses in legal and regulatory

processes and institutions Regulatory risks in PPPs Labor laws

Lack of holistic competition protection andpromotion framework

Contract enforcement Inadequate Infrastructure

- Expensive and unreliable electric power- High road and maritime transport costs due to

specific sector policies and poor quality of

road network and port infrastructure- Low infrastructure investment by the

government (fiscal constraints) and by privatesector (due to high risks)

Security Concerns in Southern Philippines Prominent Investment Disputes

- NAIA III Terminal

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Investment Climate

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Central Government CapitalExpenditures and Net Lending

(average annual % of GDP)

1996-2000 2002-2008

Philippines 3.6 2.7

Malaysia 6.0 7.3

Thailand 5.4 3.5

Viet Nam 6.9 9.2

Sample mean 6.1 6.6

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