The Philippines has embarked on economic
reforms and market liberalisation measures in the last two years. As a
result of these measures, the economy started to show signs of
recovery.
After a decline of 0.5 percent in 1991, the
Philippines' real gross domestic product (GDP) grew by 1.4 percent in
1993.
The rate of inflation was 7.5 percent 1993. The
Philippines' unemployment rate dropped to 9.8 percent in 1992 from 10.5
percent in 1991. Improvements were also registered in the overall balance
of payments, the current account and the reserve position of the
Philippines in 1992.
The Philippines government continues to take
steps to boost its economy and has embarked on economic reforms and
deregulation. The country has adopted an economic stabilisation programme,
supported by the International Monetary Fund (IMF), as part of the efforts
to reduce inflation and improve the balance of payments.
The Philippines' main priorities are to improve
political stability, restore economic growth and build investor
confidence. Liberalisation policies, including abolition of quantitative
restrictions on trade, have been announced to attract foreign investments
and to improve the competitiveness of the Philippines economy. The
government also recently announced the complete liberalisation of foreign
exchange controls.
Economic Outlook
The Philippines government intends to
liberalise the economy further and a higher economic growth of 1.1 percent
is expected in 1993. The economy is likely to rebound due to higher
government spending and the increase in foreign investments. The
government plans to spend US$26 billion on infrastructure in 1993-1998,
averaging about 7 percent of gross national product.
The Philippines forecast a further expansion in
its GDP over the next few years. The government is aiming for a GDP growth
of 4.5 percent in 1993, 6.5 percent in 1994 and 7.5 percent in 1995. In
its six-year medium term "government blueprint" plan, the Philippines
government aims to increase its per capita income from US$700 to US$1,000
and a yearly 12 percent rise in local and foreign investments.
Economic Structure
The Philippines is rich in natural resources.
Its economy is based largely on agriculture and manufacturing which
involve the processing of agricultural products. These two sectors have
together contributed a major share to the growth of the Philippines
economy.
Gross Domestic Product by Industrial Origin at Current Prices
(value in Peso million)
| Agriculture, forestry
and fisheries |
290,341 |
| Industrial
sector |
446,630 |
| mining,
quarrying |
16,161 |
| manufacturing |
329,828 |
| construction |
66,886 |
| electricity, gas,
water |
33,755 |
| Service
sector |
605,544 |
| transportation,
communication, storage |
77,896 |
| trade |
185,475 |
| finance |
53,175 |
| owner dwellings & real
estate |
86,213 |
| private
services |
110,589 |
| Government
services |
92,196 |
| GDP |
1,370,011 |
Source: Economic & Social Statistics
Office, National Statistical Co-ordination Board
Agriculture
Agriculture (including forestry and fishing)
accounts for 22.8 percent of GDP, provides about 40 percent of export
earnings and employs about 60 percent of the labour force. Some 13 million
hectares or 35 percent of the total land area are used to cultivate food
crops, mostly on smallholdings.
The Philippines is suitable for the cultivation
of various crops including rice, maize, coconut, sugar cane, tobacco,
abaca, sweet potatoes, cassava and mangoes. These crops are usually grown
in small holdings while export crops like bananas and pineapples are
mostly grown in plantations.
Sugar cane is grown mainly in Negros and
Central Luzon, and is essentially a plantation crop, with over 25 per cent
of the sugar plantations controlled by 600 farms. Rice and maize
production are the principal food crops grown to meet domestic demand
while livestock reared for local consumption include carabaos, cattle,
goats, pigs and poultry.
The majority of the Philippines' agricultural
products such as tobacco, abaca fibres, bananas, pineapples and rice are
produced for export. The country also exports semi-processed agricultural
products like coconut oil and copra, sugar, canned pineapple and pineapple
concentrates, and tobacco manufactures.
Coconuts are the most important cash crop,
mainly exported in the form of coconut oil. The Philippines accounts for
nearly 50 percent of the world's production of coconuts and over half the
area under cultivation is in Mindanao.
The Philippines' other major cash crops are
pineapples, bananas, sugar cane and copra. The other important crops
include hemp, coffee, cocoa, tobacco, peanuts and various tropical fruits.
Pineapples have become the second most export crop after coconuts, and
almost all production of pineapples comes from Mindanao.
Forestry
Forestry is a major agricultural activity in
the Philippines. The forests are among the Philippines' major resources.
Forests cover about 15 million hectares or 51 percent of the Philippines'
total land area. The commercial forestry production is concentrated mostly
in Mindanao while the Palawan Island, 90 percent of which is forested, is
the country's most heavily forested province.
The tropical rain forests are the most dominant
types of forests found in the Philippines and contain predominantly the
dipterocarp varieties. Besides the extensive reserves of tropical
evergreen hardwoods, considerable areas of pine are found in the mountain
regions of Northern Luzon.
The Philippines' main forestry products are
hardwood logs, lumber and plywood, mainly for exports to Japan and the
United States, while some are used for the local timber and furniture
industries. The exports of hardwood logs have been gradually phased out as
the government hopes to encourage local processing industries to increase
exports in processed products as well.
Fishery
The Philippines has extensive fishing
resources, both marine and inland, with the largest area of developed
estuarine fish ponds in South-east Asia. Production in the fishing sector
has risen strongly in recent decades and the sector now accounts for 5
percent of GDP and employs 1.8 million of the working population. Annual
fisheries production is about 2.5 million tonnes, and includes tuna, scad,
anchovies, sardines, mollusc and crustaceans. The major export from this
sector are shrimps and prawns.
Manufacturing
The manufacturing sector is the largest
contributor to the Philippines' economy, accounting for almost 26 percent
of the GDP. Manufacturing is based mainly on processing primary or
agricultural products, with some assembly of electronics products for
foreign companies.
Consumer goods have accounted for more than 50
percent of the total value-added manufacturing output over the last few
years. At the same time, the food processing industry has been growing as
a result of an increasing exports of processed food products. Food
manufacturing, including food and beverage processing remains the
Philippines' most dominant primary industry accounting for 40.1 percent of
total output in manufacturing. Food processing includes sugar, meat, fruit
and vegetable processing. Other significant industries in this sector
include fish and shrimp, soft drinks, alcoholic beverages and cigarettes
production.
The other important industries of the
manufacturing sector in the Philippines include textiles and clothing,
leather, petroleum and coal products, basic metals and electrical
machinery production. The Philippines also has a strong handicraft and
furniture industry, producing high quality goods mostly for its export
markets.
The main light industrial products, which are
often produced from imported materials or components, are cotton and
textiles, vehicles, chemicals, machine tools and electrical and consumer
goods such as refrigerators, radios, televisions, freezers,
air-conditioning equipment, sewing machines and watches. The electronics
assembly industry, which is experiencing a rapid growth, is heavily
dependent on imported components.
Some major development projects in the
manufacturing sector include a petrochemical complex, a pulp and paper
plant, an integrated iron and steel mill, a copper smelter, a phosphate
fertiliser plant, an integrated coconut products project, cement industry
expansion and diesel engine manufacturing.
Mining
The Philippines is Asia's leading producer of
copper, with copper reserves estimated at 3.6 billion tonnes. The country
is also a leading Asian producer of gold. Silver, nickel, chromium,
manganese, zinc, mercury, sand, gravel and rock asphalt are also mined.
Other significant metal and mineral resources include iron, molybdenum,
lead, platinum, palladium, cadmium, cobalt, uranium, phosphate, sulphur,
pyrites, limestone, gypsum, kaolin, feldspar and silica sand.
Oil
The Philippines obtains about 10 percent of its
energy requirements from indigenous petroleum production. The outlook for
the oil sector remains good, with the privatisation of Petron impending.
The ongoing deregulation of the oil industry would further encourage
foreign investment in refining and distribution.
The Philippines government is expected to
increase the incentives for oil exploration in order to boost deep-water
drilling. Cost recovery incentives are now available to oil exploration
projects with at least 15 per cent Philippine equity. The American
company, Occidental Petroleum, and its local partner, Basic Petroleum
& Minerals Incorporation, are expected to be the first to take
advantage of this scheme for their Palawan explorations.
Energy
Geothermal power is being developed and
currently contributes 19 percent of the country's energy requirements. The
government's energy development programme is aimed at greater exploitation
of coal and non-conventional fuels.
The Philippines has approved a 330-MW gas-fired
power plant for Cavite, south of Manila. The Philippines firm, Cavite
Energy is the project owner but has hired an engineering firm, Merz
Australia to build the base plant. The US$275 million plant is expected to
start operating in mid-1994.
Construction
The Philippines government has launched a
programme for repairing and restructuring public infrastructure. This
would lead to a growth in construction activities. Currently, most of the
projects in the construction sector would focus on the construction and
rehabilitation of infrastructures damaged by major disasters caused by
earthquake, typhoon and volcanic eruption in the country.
The top priority projects include the
construction of power generation plant, ports and airports and
transportation facilities. The government has also set aside 12.9 billion
pesos for construction of roads and bridges while the government
corporations are expected to spend 13.1 billion pesos on housing
projects.
Tourism
Tourism remains an important service sector of
the economy. In 1992, the Philippines attracted a record 1.2 million
visitors, the highest numbers of arrivals since 1989. The Philippine
Tourism Department forecast a 1.4 to 1.5 million tourist arrivals in
1993.
The Philippines is expecting to boost tourism
with a new 20-year tourism master plan. The master plan includes the
development of infrastructure and major resorts. The plan also includes
measures to increase tourist arrivals and draw more foreign investments in
the tourism sector. Some of the measures focus on tourism development in
five different parts of the country using public and private financing
partnerships.
The Philippines is planning to develop the
Heritage Village in Vigan on Luzon's west coast. The site will feature a
major concentration of historic Spanish colonial homes in a project partly
underwritten by the American Express Foundation. Plans are also drawn up
for an Artists Village near Manila where packaged tours would bring
visitors to the homes of painters. Further away in the city of Cagayan de
Oro would be an eco-village with nature trails, floral gardens, an aviary
and tribal architecture.
Recently, the Philippines tourism industry is
also targeting the adventure travel or eco-tourism sector, which
constitutes about 10 percent of the worldwide tourism market. The
Philippines government has identified several areas which would be
developed as eco-tourism sites. Development would be in the form of
upgrading existing facilities.
The Philippines Department of Tourism is
expecting an estimated one billion peso (US$39.2 million) in investment
between 1992 and 1996 to implement the Philippines tourism masterplan.
Tourism investment projects for the Philippines over the next few years
would include:
- Doubling the capacity of Manila's
international airport;
- Constructing a new jet airport on the
island of Panglao;
- Developing two major resorts, one on Samal
island while the other is on the island of Panglao, in Bohol
province;
- Manufacturing an additional 10,950 hotel
and resort beds;
- Developing two major resorts, one on Samal
island while the other is on the island of Panglao, in Bohol
province;
- Manufacturing an additional 10,950 hotel
and resort beds;
Copyright 1997 by ABISNET (S) Pte Ltd.
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