In April 1993, President Clinton directed U.S. Government agencies to assess the competitiveness of the country's environmental technology and provide its environmental industry with the technical and financial assistance to increase exports. An interagency group subsequently issued an industry assessment that found U.S. environmental technology to be extremely competitive worldwide and recommended:
• Implementing a comprehensive export assistance plan for environmental technology to effect the maximum utilization of existing U.S. Government resources and programs;
• Fostering industry-government cooperation to promote U.S. technology; and
• Providing dynamic information to U.S. business to maximize market opportunities as they arise and to identify evolving growth markets.
With these recommendations in mind, this report examines the Philippines' environmental market and provides recommendations on how to operate effectively in it.
Country Background
After the recession of the early 1990s, 1995 marked the beginning of sustained economic recovery for the Philippines. Annual growth of gross domestic product (GDP) rose from -0.3 percent to 5.5 percent between 1991 and 1996. Inflation, which peaked at 18.7 percent during 1991, has declined steadily to under 10 percent in the past few years. Additionally, per capita GDP passed the $1,000 mark during 1995, and manufactured goods surpassed commodities as the chief export earner (see figure 1).
The Philippines' sustained economic growth over the past few years indicates the success of the structural reforms undertaken by the Ramos Administration in its bid to achieve "newly industrializing country" status by 2000. These reforms include a financial restructuring of the Bangko Sentral ng Pilipinas (the Central Bank of the Philippines), tariff rationalization, liberalization of foreign exchange and investment restrictions, and privatization of state-owned industries. Key sectors such as banking, insurance, aviation, ports, telecommunications, and petrochemicals are now open to foreign investors. Likewise, the administration has attracted private investors to large infrastructure projects (power, water, and toll roads) with an aggressive build-operate-transfer (BOT) marketing program.
On the fiscal side, expenditure cuts and new revenue raising measures have turned the national government from two decades of deficit to fiscal surplus during 1994-96. A major revenue raising measure, the expanded value-added tax (EVAT),was introduced in January 1996. It is expected to result in 15 billion pesos (P)-$577 million-per year in additional revenues. As privatization receipts decline while the remaining parastatals are sold to the private sector, improvements in tax administration will be critical to sustain the fiscal surplus.
Despite the gains in GDP growth, unemployment remains high: slightly over 9 percent for 1996. The present minimum wage for workers in the National Capital Region (NCR), encompassing Metro Manila, is P165, or $6.25 per day. Wage boards outside the NCR typically set lower minimum wage requirements.
The Philippines is a member of both the World Trade Organization and the ASEAN (Association of Southeast Asian Nations) Free Trade Area. The national Tariff Reform Program aims to reduce import duties across the board, with the exception of agricultural products. Under this program, the Philippines is moving towards a 3 percent duty rate on raw materials and intermediate goods and 10 percent on finished products by 2003, and a uniform 5 percent rate on all imports by 2004.
Prospects for growth remain bright through the year 2000 and beyond. Some business analysts fear that the upcoming May 1998 presidential election will produce an administration that might reverse some of the aggressive market liberalization policies of the
Ramos Administration. To date, however, all the potential candidates have expressed their willingness to continue reforms.
Philippines: Facts in Brief Land:The Philippines is an archipelago of 7,107 islands, with an aggregate coastline of 17,500 kilometers and a total land area of 30 million hectares, 15.8 million of which are forested. The largest islands of the group include Luzon in the north, Palawan in the west, and Mindanao in the south. The islands comprising the central part of the country are collectively referred to as Visayas. Situated in the circum-Pacific belt and the Pacific ring of fire, the Philippines is regularly hit by natural calamities such as earthquakes, typhoons, and volcanic eruptions. Population: 70 million (1996). Average annual population growth rate: 2.3 percent (1996). GDP per capita: US$1,184 (1996). Economic growth rate: 4.4 percent (1994), 4.8 percent (1995), and 5.4 percent (1996). Gross domestic investment:22.3 percent of GDP (1995). Exchange rate: Philippine peso (PHP or P) 26.28 = US$1.00 (1996). Languages: Tagalog (Pilipino), English, Visaya, Ilocano, Cebuano and 50 other dialects. Religions: Roman Catholicism (majority) and Islam. Labor force: 29 million (1996). Contribution to GDP by sector: Services, 46 percent; agriculture, 22 percent; manufacturing, 22 percent; and government, 10 percent. Unemployment: 9.1 percent. Administrative divisions: The country is divided into 15 administrative regions, including the National Capital Region encompassing Metro Manila. Each region encompasses several provinces, each composed of several municipalities. Municipalities are comprised of barangays (or "neighborhoods"), which are the smallest level of administrative division. Form of state: Mirrors the U.S. system: executive branch headed by the President, elected for a single six-year term; bicameral legislature comprising the Senate and House of Representatives; judicial branch headed by Supreme Court (no jury system).
Sources of economic statistics: U.S. Department of Commerce, Philippines: 1996 Country Report on Eco-nomic Policy and Trade Practices, January 1997, and Asian Development Bank, Asian Development Outlook: 1996 and 1997.
