The Philippines WT/TPR/S/261/Rev.2 
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  I. ECONOMIC ENVIRONMENT 
(1) MAJOR FEATURES OF THE ECONOMY  
1. The Philippines has a GDP per capita estimated  at US$1,372 for 2010 (US$1,189 in 2005), 
and about a quarter of its 94 million people living below the poverty line (less than US$1 a day).1  
The Philippines ranks 112th (out of 187 countries) on the UNDP Human Development Index.2  
Remittances from the 8.6 million Filipinos overseas3, are a prominent feature of the economy, 
representing about 10% of GDP, making the Philippines one of the largest recipients worldwide.4 
2. Services constitute the most important sector in terms of contribution to real Gross National 
Income (GNI) (42% in 2010), and employment (48% of the labour force).5  Manufacturing accounts 
for about 17% of real GNI and some 85% of the total value of merchandise exports (section (3)(i) 
below).  Agriculture and related activities remains an important sector of the economy, despite the 
decline in its share in real GNI to 8.8% in 2010, while mining and quarrying (0.9% of GNI) is gradually being developed. 
3. The Philippines has a floating exchange rate regi me with the peso's value set by the market.
6  
The Bangko Sentral ng Pilipinas (BSP) intervenes in the exchange rate market, according to the 
authorities, only to smooth out excessive exchange rate volatility.  Nonetheless, it monitors the 
foreign exchange market to assess the likely impact  of currency movements on inflation.  According 
to the IMF, the real exchange rate is br oadly in line with its equilibrium level.7  The exchange rate 
system is free of restrictions on payments and transfers for current international transactions. 
(2) RECENT ECONOMIC PERFORMANCE  
4. At the time of the third TPR of the Philippines in 2005, its economic growth had resumed 
following the 1997 Asian financial crisis, with av erage GDP growth of over 4% annually during 
1999-04.  Nevertheless, the economy remained vulnerable to external shocks, compounded by 
declining international competitiven ess.  Domestic factors hampering economic growth identified at 
that time included the persistent budget deficit r esulting in burgeoning public debt and associated 
large external financing requirements, and the long-standing institutional and governance weaknesses 
inhibiting private sector development.8 
5. Since then, the key elements of the Phili ppines economic reform programme include:  
maintaining the floating exchange ra te regime and inflation targeting9;  implementing fiscal discipline 
                                                      
1 World Bank online information.  Viewed at:  http://data.worldbank.org/country/Philippines. 
2 UNDP (2011). 
3 Commission on Filipinos Overseas online informa tion.  Viewed at: http://www.cfo.gov.ph/pdf/ 
statistics/Stock%202009.pdf. 
4 Remittances reached a record US$1 8.8 billion in 2010, mostly from Filipinos working in the Middle 
East (particularly the Kingdom of Saudi Arabia and the United Arab Emirates), and North Africa.  The 
significance of remittances underscores the importance to the Philippines of overseas economies opening their 
service markets to foreign personnel (GATS mode 4). 
5 Based on the National Statistics Office 2010 Labour Force Survey. 
6 The Philippines maintains a de jure  free floating exchange rate arrangement, while the de facto  rate is 
classified as floa ting (IMF, 2011a). 
7 IMF (2011a). 
8 WTO (2005). 
9 In 2002, the BSP adopted annual targets for "head line inflation", which measures average prices of a 
standard basket of goods and services. WT/TPR/S/261/Rev.2 Trade Policy Review 
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  and reforms;  and improving the business climate to attract larger foreign direct investment (FDI) 
inflows and increase productivity.  The reform programme resulted in pos itive economic performance 
during the period under review.  Real GDP grew at an annual average rate of 4.9% in 2005-11 (against 3.6% over 1993-2002), peaking at 7.6% in 2010 (Table I.1) its highest growth rate since 
1976.  Growth has been broad-based across private consumption, investment, and exports, and helped 
by fiscal stimulus implemented in 2008 in response to the global economic crisis.  These factors offset 
the adverse impact of the typhoons in the latter part  of 2009 and the drought in the first half of 2010.
10  
Nonetheless, GDP growth has been insuffici ent to further reduce the unemployment and 
underemployment11 rates, which remained high at 7.4% and 18.8% in 2010, respectively.  Some of the 
key constraints on overall growth identified in the Philippine Development Plan 2011-2016 are low 
investment12, slow technological progress because of inadequate infrastructure13, and weak 
institutions and governance. 
Table I.1 
Selected economic indicators, 2005-11 
 2005 2006 2007 2008 2009 2010 2011a 
Miscellaneous        
GNI at current prices (US$ million) 129, 804 153,624 187,095 219,8 15 223,617 265,931 .. 
GDP at current prices (US$ million) 103, 072 122,211 149,360 173,6 03 168,485 199,591 .. 
Real GDP (percentage change) 4.8 5.2 6.6 4.2 1.1 7.6 3.7 
Unemployment rate (%) 8.7 8.0 7.3 7.4 7.5 7.3 .. 
Under-employment rate (%) 21.0 22.6 20.1 19.3 19.1 18.8 .. 
Consumer price index (average;  percentage 
change) 7.8 5.6 3.0 8.2 4.2  
3.8  
4.8 
Monetary sector        
Broad money (M3;  percentage change, end of 
period)  
10.3  
22.7 10.6 15.6 8.3  
10.6  
.. 
Interest rate (%)b 6.4 5.2 4.2 5.8 4.3 1.3 .. 
Credit to the private sector -0.3 6.7 8.5 16.8 8.2 8.7 .. 
Public finances (percentage of GDP)        
National government balance (authorities 
definition) -1.8 0.2 0.3 0.4 -3.0  
-4.0  
.. 
National government balance (IMF definition)c .. .. -1.7 -1.5 -4.0 .. .. 
Total revenue and grants .. .. 15.8 15.8 14.6 .. .. 
Total expenditure .. .. 17.4 17.3 18.6 .. .. 
Table I.1 (cont'd) 
                                                      
10 Drought, brought about by El Niño, led to an overall decline in agricultural production by 2.6% in 
the first half of 2010, and it is estimated to have reduce d real GDP growth by 0.9 percentage points of GDP in 
2010 (World Bank, 2010c). 
11 Employed persons who express the desire to have additional work in their present job, to have an 
additional job, or to have a new job with longer working hours. 
12 As a share of GDP, gross domestic investment was 15.6% in 2010 (down from 24.8% peak in 1997). 
13 An inefficient transport network and unreliable power supply are among the most significant 
constraints on overall growth, while the percentage of paved roads to total roads remains one of the lowest in the 
region.  Similarly, the quality of the port, air, and railroad infrastructure needs to be improved. The Philippines WT/TPR/S/261/Rev.2 
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   2005 2006 2007 2008 2009 2010 2011a 
Share of real GNI        
Agriculture, fishery and forestry 10.6 10.5 10.3 10.1 9.5 8.8 .. 
Mining and quarrying 0.8 0.7 0.8 0.8 0.8 0.9 .. 
Manufacturing 18.9 18.7 18.3 18.1 16.3 16.7 .. 
Construction 3.5 3.7 4.0 4.0 4.1 4.3 .. 
Electricity, gas and water 2.9 2.8 2.8 2.8 2.6 2.7 .. 
Services 43.0 43.4 44.0 43.5 42.5 42.0 .. 
National accounts (percentage of GNI)        
Personal consumption 58.6 58.2 57.3 56.6 54.6 52.2 .. 
Government consumption 7.4 7.8 7.9 7.5 7.8 7.5 .. 
Gross fixed capital formation 15.7 15.7 15.6 15.3 14.2 15.6 .. 
Exports of goods and services 39.3 42.1 42.4 39.3 34.1 38.2 .. 
Less:  Imports of goods and services 42.5 41.9 40.2 38.9 33.7 38.1 .. 
External sector        
Real effective exchange rate (12/1980 = 100)d 61.98 69-99 76.21 80.17 77.32 84.40 .. 
Pesos per U.S. dollar (average) 55.09 51.31 46.15 44.47 47.64 45.11 .. 
Current account (% of GDP) 1.9 4.4 4.8 2.1 5.6 4.5 2.7 
Total external debt (% of GDP) 52.7 44.1 37.1 31.3 32.6 30.1 .. 
Gross international reserves (US$ million) 18,494 22,967 33,751 37,551 44,243 62,373 .. 
Import cover (equivalent in m onths of imports) 3.82 5.17 6.99 7.37 11.42 12.26 .. 
.. Not available. 
a Estimated. 
b 91-day Treasury Bill, end of pe riod, secondary market rate. 
c Excludes privatization receipts and include s deficit from restructuring of the B SP (Central Bank-Board of Liquidators). 
d Average, major trading partners. 
 
Source:  IMF, International Financial Statistics, various  issues;  and information provided by the BSP. 
6. The annual average inflation rate in the Philippi nes, as measured by the consumer price index 
(CPI), was 5.3% over 2005-11 (6.3% during 1994-2003).14  The main goal of the BSP's monetary 
policy is price stability.15  According to the IMF, monetary policy responded well to the global 
economic crisis and helped foster the recovery thro ugh liquidity measures and interest rate stimulus.  
The BSP started to unwind its liquidity support m easures in early 2010, and in July 2010 it extended 
through 2014 the 3-5% inflation target for 2011.16  However, on 24 March 2011, the BSP raised key 
interest rates by a quarter of a percentage point for the first time since July 2009 in a pre-emptive 
move to curb rising inflation expectations;  another increase of 0.25 points followed on 5 May 2011.17  
7. Persistent fiscal deficits and resulting large pub lic debt continue to pose the greatest risk to 
macro-stability in the Philippines.   The associated large external financing requirement of 
government-owned and -controlled corporations ( GOCC), including the National Power Corporation 
(NPC) and the National Food Authority (NFA)18, is a drag on the economy and makes it vulnerable to 
                                                      
14 IMF (2012). 
15 Monetary policy is conducted through open market operations, reserve requirements, and 
transactions under rediscounting facilities, wh ich use a market-based pricing mechanism. 
16 IMF Public Information Notice No. 11/28, 1 March 2011. 
17 The BSP online information.  Viewed at:  http://www.bsp.gov.ph/monetary/monetary.asp. 
18 The NFA, a state-tradin g enterprise, operates on a "buy-high-sell-low" policy.  Its mandate to 
maintain floors for farm gate prices while keeping retail prices at reasonable levels virtually prevents the NFA 
from recovering its cost (NEDA, 2011). WT/TPR/S/261/Rev.2 Trade Policy Review 
Page 4 
  
  external shocks, such as swings in confidence, ri sing oil prices, and international recession.  The 
national government deficit, as a percentage of GDP (Filipino authorities' definition), rose from 1.8% 
in 2005 to 4% in 2010, with surpluses during 2006- 08 (Table I.1).  The authorities aim to reduce the 
fiscal deficit to 2% from 2013 and lower the public  debt burden (nearly 60% of GDP), since this 
reduces the private sector's acces s to finance and crowds out public investment in essential 
infrastructure. 
8. A key fiscal weakness and contributor to persiste nt budget deficits is low tax revenues, partly 
due to revenue forgone (equivalent to some 2% of GDP) through the pervasive use of potentially 
distorting tax incentives, such as for export-oriented  enterprises (Chapter III(2)(vii) and (viii)), and 
increased tax avoidance, if not evasion.  The Government also relies on tariffs and other 
customs-related collections for a substantial share of tax revenue;  these acc ounted for 23.7% of total 
tax revenue in 2010 (21.9% in 2005).19 
9. The main elements of the authorities' fiscal strategy are to:  improve tax administration 
without raising taxes, at least until 2012;  ratio nalize fiscal incentives (Chapter III(3)(i));  address 
inefficiencies in the VAT;  limit rice and transport su bsidies by public enterprises and move instead to 
more targeted conditional cash transfer programmes;  and adopt a public debt management strategy to 
reduce the share of external debt and lengthen the maturity structure.20  Excise duties for alcohol and 
tobacco products were increased in 2011 (Chapt er III(1)(iii)(g)).  A more coherent and open 
government procurement system (Chapter III(1)(vii)),  based on international competition to ensure 
value for money, rather than using it as an instrume nt of industrial policy, would also contribute to 
fiscal consolidation and efficiency. 
(3) TRADE PERFORMANCE AND INVESTMENT  
(i) Trade in goods and services 
10. During the last few years, the Philippines has improved its external position significantly, in 
part due to remittance inflows, which increased  from US$10.7 billion in 2005 to US$18.8 billion in 
2010 and offset the trade deficit which went fro m US$7.8 billion to US$11 billion during the period 
(Table I.2).  As a result, gross international reser ves reached a record high  of US$62.4 billion in 2010 
(equivalent to 12.26 months of imports, compared  with US$18.5 billion in 2005 or 3.82 months of 
imports).  With gross national saving exceeding gross domestic investment, the current account 
balance has recorded surpluses since 2003, peaking at  5.6% of GDP in 2009 and estimated at 4.2% for 
2010 and 2.7% for 2011 (Table I.1). 
11. The ratio of merchandise trade (exports a nd imports) to GDP averaged 67.8% during 
2008-10.  In 2010, the Philippines ranked 37th among world merchandise exporters and 29th among 
importers (considering the countries of the EU toge ther and excluding intra-EU trade).  In services 
trade, the Philippines ranked 27th among exporters and 36th among importers.21 
 
                                                      
19 Information provided by the National Economic and Development Authority (NEDA). 
20 IMF (2011b). 
21 WTO Statistics database, "Trade Profiles:  Phili ppines".  Viewed at: http://stat.wto.org/Country 
Profile/PH_e.htm. The Philippines WT/TPR/S/261/Rev.2 
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  Table I.2 
Balance of payments, 2005-10 
(US$ million) 
    2005 2006 2007 2008 2009 2010 
Current account 1,980 5,341 7,112 3,627 9,358 8,924 
Goods and services balance -9,113 -6,595 -6,142 -11,725 -6,728 -8,027 
    Trade balancea -7,773 -6,732 -8,391 -12,885 -8,842 -10,966 
       Exports 40,263 46,526 49,512 48,253 37,610 50,748 
       Imports 48,036 53,258 57,903 61,138 46,452 61,714 
    Services balance -1,340 137 2,249 1,160 2,114 2,939 
       Receipts 4,525 6,444 9,766 9,717 11,014 14,358 
       Payments 5,865 6,307 7,517 8,557 8,900 11,419 
Income balance -298 -1,261 -899 105 -193 347 
       Credit 3,937 4,388 5,351 5,973 5,712 6,093 
       Debit 4,235 5,649 6,250 5,868 5,905 5,746 
Current transfers  11,391 13,197 14,153 15,247 16,279 16,604 
       Credit 11,711 13,511 14,573 15,780 16,910 17,434 
       Debit 320 314 420 533 631 830 
Capital and financial account 2,229 20 3,527 -1,649 -1,627 7,344 
Capital account 40 138 24 53 104 98 
Financial account 2,189 -118 3,503 -1,702 -1,731 7,246 
Direct investment 1,665 2,818 -620 1,285 1,604 1,226 
    Direct investment in the Philippines 1,854 2,921 2,916 1,544 1,963 1,713 
    Philippines' direct investment abro ad -189 -103 -3,536 -259 -359 -487 
Portfolio investment 3,475 3,043 4,623 -3,627 -625 4,100 
   Assets -146 -1,567 834 789 -2,715 -3,460 
   Liabilities 3,621 4,610 3,789 -4,416 2,090 7,560 
Financial derivatives -43 -138 -288 -113 32 -191 
   Assets 98 159 170 541 403 429 
   Liabilities -141 -297 -458 -654 -371 -620 
Other investment -2,908 -5,841 -212 753 -2,742 2,111 
   Assets -4,791 -3,512 -4,840 4,305 -1,967 -2,979 
   Liabilities 1,883 -2,329 4,628 -3,552 -775 5,090 
Net unclassified items -1,799 -1,592 -2,082 -1,889 -1,310 -1,960 
Overall balance of payments 2,410 3,769 8,557 89 6,421 14,308 
a Adjustments in the general merchandise exports/imports  data under the fifth edition of the Balance-of-Payments 
 Manual (BPM5) include valuation adjustments to the National Statistics Office's raw material imports for electronics and 
 garments, as well as conceptual and coverage adjustments. 
Source : Information provided by the BSP (figures are based on the BPM5). 
12. The Philippines continues to rely heavily on manuf actured exports (Table AI.1 and Chart I.1), 
which accounted for 85.1% of total merchandise expor ts in 2010.  They mainly comprise machinery 
and transport equipment (70.1% of the total), e.g.  electronic integrated circuits, other electrical 
machines, and automotive products.  Textiles and clothing exports represented 3.8% of total 
merchandise exports in 2010.  The share of agricultural exports rose to 8%, while the share of mining 
exports, led by non-ferrous meta ls, rose to 6.2%.  Manufactured products accounted for 66.8% of 
merchandise imports in 2010, including office ma chines and telecommunications equipment, and WT/TPR/S/261/Rev.2 Trade Policy Review 
Page 6 
  
  chemicals.  The share of agricultural imports increase d to 11.7% over the period, while that of mining, 
mainly fuels, rose to 20.7% (Table AI.2).   
13. The United States and the EU are the Philippi nes' main export markets of merchandise 
exports (Table AI.3 and Chart I.2).  Nonetheless,  in both cases their shares dropped during the review 
period, while that of Asia, led by Japan and Singa pore, increased.  The share of exports to ASEAN 
markets rose between 205 and 2010.  In 2010, the Phili ppines' main sources of imports continued to 
be Japan, the United States, and Singapore (Table AI.4 ).  The EU's share fell during the period, while 
the share of ASEAN members rose. 
14. Balance of payments data indicate that the Philippines became a net exporter of services in 
2006 with a surplus averaging US$1,210 million dur ing 2005-10 (Table I.3).  "Other business 
services" (e.g. professional and technical services,  and other miscellaneous business) accounted for 
more than half of total services exported in 2010, fo llowed by travel, computer and information, and 
transportation.  The main services imports in 2010 were transportation, travel, and "other business 
services". 
Table I.3 
Trade in services, 2005-10 
(US$ million and %) 
    2005 2006 2007 2008 2009 2010 
Services balance (US$ million) -1 ,340 137 2, 249 1,160 2, 114 2,939 
   Exports of services 4,525 6,444 9,766 9,717 11,014 14,358 
of which:  
Other business services 11.6 13.9 25.0 43.0 47.1 57.7 
Travel 50.1 54.3 50.5 25.7 21.2 18.3 
Computer & information 2.0 1.5 3.1 11.8 15.9 10.5 
Transportation 21.3 17.9 13.5 13.3 10.5 9.4 
Communication 11.5 8.9 5.3 4.2 3.2 2.1 
Construction 1.5 1.1 1.2 0.9 0.7 0.8 
Insurance 0.4 0.3 0.2 0.2 0.5 0.5 
Financial 1.2 1.6 0.9 0.6 0.6 0.3 
Personal, cultural & recreational 0.4 0.4 0.2 0.2 0.3 0.3 
Royalties and license fees 0.1 0.1 0.1 0.0 0.0 0.0 
Government 0.0 0.0 0.0 0.0 0.0 0.0 
   Imports of services 5,865 6,307 7,517 8,557 8,900 11,297 
of which: (% of total imports) 
Transportation 53.3 54.7 51.1 49.2 41.1 43.5 
Travel 21.8 19.5 22.1 24.0 30.3 30.4 
Other business services 10.9 10.1 11.1 12.5 14.2 13.8 
Royalties and license fees 4.5 5.5 5.1 4.5 4.7 3.9 
Insurance 3.5 3.6 3.3 3.1 2.6 2.7 
Government 1.2 1.5 1.7 2.4 2.5 2.0 
Communication 2.0 1.6 1.3 1.7 1.4 1.3 
Computer & information 1.1 1.1 0.8 0.9 1.0 1.0 
Financial 1.6 2.0 2.8 1.0 1.4 0.6 
Personal, cultural & recreational 0.2 0.1 0.3 0.3 0.5 0.5 
Construction 0.1 0.2 0.3 0.4 0.2 0.2 
Source:  Information provided by the BSP. The Philippines WT/TPR/S/261/Rev.2 
 Page 7 
 
 
  Chart I.1
Composition of merchandise trade, 2005 and 2010
2005 2010
(a)    Exports (f.o.b.)
Textiles & clothing
6.2
Manufactures
89.1
Total:   US$41.3 billion Total:  US$51.5 billion  
(b)    Imports (c.i.f.)
Chemicals
7.3Transport 
equipment  
4.0
Manufactures
76.4
Office machines & 
telecommunication 
equipment
44.4Other electrical 
machines
5.0
Other mining
2.3Fuels
13.2
Non-electrical
machinery
5.2Other
0.8
Office machines & 
telecommunication 
equipment
31.3Agriculture
7.8
Other semi-
manufactures
5.8Transport equipment  
6.7
Chemicals
9.6Manufactures
66.8
Total:   US$49.5 billion Total:   US$58.5 billion Per cent
Manufactures
85.1Other electrical 
machines
9.5Electronic 
integrated 
circuits & 
microassemblies
18.5
Other 
manufactures
4.4Other
0.3Textiles & clothing
3.8Mining
4.1
Office machines & other 
telecommunication equipment
39.2
Other electrical 
machines
3.9Semi-
manufactures
7.2Mining
6.2Agriculture
8.0
Non-electrical 
machinery
4.4
Source :  UNSD, Comtrade database (SITC Rev.3).Other 
manufactures
5.6
Mining
20.7Other 
manufactures
5.3
Semi-manufactures
3.9
Other semi-
manufactures
5.7Transport equipment
5.2Other 
manufactures
6.0
Mining
15.6Agriculture
11.7Other
0.2Other
0.7
Other mining
3.8Fuels
16.9Transport equipment
5.0
Other electrical 
machines
10.1Agriculture
6.6
Electronic 
integrated 
circuits & 
microassemblies
25.3
Office machines & other 
telecommunication equipment
29.1
 WT/TPR/S/261/Rev.2 Trade Policy Review 
Page 8 
  
  Chart I.2
Direction of merchandise trade, 2005 and 2010
2005 2010
(a)    Exports (f.o.b.)
Singapore
6.6Hong Kong,
China
8.1
Total:   US$41.3 billion Total:  US$51.5 billion
(b)    Imports (c.i.f.)
Hong Kong,
China
4.1EU27
7.9
China
8.5Indonesia
4.2United States
10.8
Total:   US$49.5 billion Total:   US$58.5 billionPer cent
China
11.1
Japan
15.2Japan
17.5
China
6.3United States
18.0
Saudi Arabia
4.2United States
14.7
Source :  UNSD, Comtrade database.Thailand
7.0EU27
14.4
Korea, Rep. of
6.9Korea, Rep. of
4.8Thailand
3.4EU27
17.0Hong Kong,
China
8.4
Singapore 
7.8China
9.9Korea, Rep. of
4.4
Chinese Taipei
7.4Other 
15.1
Chinese Taipei
6.6Saudi Arabia
4.5Malaysia
3.7Other   
10.7Other 
9.0
Thailand
3.5
Other
14.1United States
18.9Malaysia
6.0
Korea, Rep. of
3.4Chinese Taipei
4.6
Singapore
14.2Chinese Taipei
3.4
Malaysia
4.5
Singapore 
9.3Japan
17.1Japan
12.5EU27
7.3Viet Nam
3.0
 The Philippines WT/TPR/S/261/Rev.2 
 Page 9 
 
 
  (ii) Foreign direct investment 
15. The Philippines' annual inflow of FDI increased  from an annual average of US$1.3 billion 
during 1995-2005 to US$2,211 million in 2006-10 (Table  I.4).  This was largely the result of positive 
developments in the economy over the period.  The Philippines has also become an increasing 
investor in the rest of the world, with a nnual FDI outflows averagi ng US$949 million during 2006-10 
(compared with US$166 million in 1995-2005), although these are still well below levels in other 
countries in the region. 
Table I.4 
Foreign direct investment, 2006-10 
(US$ million) 
 2006 2007 2008 2009 2010 
FDI inflows 2,921 2,916 1,544 1,963 1,713 
FDI inward stock 16,914 20,463 21,746 23,180 24,893 
FDI inward stock (% of GDP) 13.8 13.7 12.5 13.8 12.5 
FDI outflows 103 3,536 259 359 487 
FDI outward stock 2,131 5,667 5,736 6,095 6,582 
FDI outward stock (% of GDP) 1.7 3.8 3.3 3.6 3.3 
Source:  UNCTAD (2011), World Investment Report , Geneva;  and information provided by the BSP. 
16. Success in attracting significant FDI inflows has b een hampered by factors such as lack of 
good infrastructure22;  FDI restrictions (Chapter II(3));  and, increased competition for FDI from 
neighbouring economies.  In addition, external s ources indicate that while positive steps have been 
taken, there remains considerable scope of the Philippines to improve the business climate.23  As a 
result, the Philippines is ranked as performing "below  potential" in attracting inward FDI (i.e. has high 
FDI potential but low FDI performance).24  On the basis of UNCTAD's latest Inward FDI 
Performance Index, the Philippines ranked 116th out of 141 economies in 2010 (108th in 2009 and 
122nd in 2008)25, while its position in UNCTAD's In ward FDI Potential Index was 82nd in 2009 
(81st in 2008).26  Various measures are being taken by the Government to tackle these problems.  
However, there are no concrete plans to reduce the very extensive FDI restrictions contained in law 
(Chapter II(3)). 
                                                      
22 Infrastructural shortcomings highlighted by external sources include ports, airports, roads, electricity 
generation and telephone lines.  IMF (2011b);  World Economic Forum (2011);  and, ASEAN (2010). 
23 The Philippines ranks significantly higher in the World Economic Forum's 2011-12 Competitiveness 
Index than in the previous report (from 85th to 75th place).  It scores well for its macroeconomic environment 
and business sophistication, but poorly for its public institutions.  The Philippines ranks 136th (out of 183 
economies in the World Bank's Ease of Doing Business 2012 Index), from 148th place in 2011.  It scores well 
for getting electricity and trading across borders and po orly for starting a business and resolving insolvency. 
World Economic Forum (2011);  World Bank (2010a);  and, World Bank Group online information.  Viewed at: http://www.doingbusiness.org/data/exploreeconomies/philippines/. 
24 The ranking is based on the Inward FDI Performance Index and the Inward FDI Potential Index of 
UNCTAD. 
25 UNCTAD's Inward FDI Performance Index measures  the extent to which host countries receive 
inward FDI, and ranks countries by the amount of FDI they receive relative to th eir economic size.  It is 
calculated as the ratio of a country's share in global FDI inflows to its share in global GDP. 
26 UNCTAD's Inward FDI Potential Index measures the extent to which host countries receive inward 
FDI, and ranks countries by the amount of FDI they receive relative to their potential.  It is calculated on the 
basis of structural variable s, such as country risk, and trade-related measures. WT/TPR/S/261/Rev.2 Trade Policy Review 
Page 10 
  
  17. In terms of total approved local and forei gn investment, manufacturing and electricity 
accounted for more than half of the total during 2005-10, followed by finance and real estate, and 
private services (Table I.5).  By country of origin , Japan and the United States have traditionally been 
the top two sources of FDI in the Philippines, a lthough in recent years FDI from the Netherlands, 
the United Kingdom, and Korea (R ep. of) has also increased. 
Table I.5 
Total approved local and foreign  investment by activity a nd country of origin, 2005-10 
(PHP million) 
 2005 2006 2007 2008 2009 2010 
Activity       
Agriculture 770 4,734 1,856 2,498 2,873 2,272 
Communication 2,079 47,042 14,222 2,186 6 .. 
Construction 83 3,857 14,090 216 179 1,080 
Electricity 21,659 45,403 139,078 131,923 32,296 189,920 
Finance and real estate 10,019 28,833 54,927 114,088 89,111 72,108 
Gas 269 .. 561 .. 17 .. 
Manufacturing 150,161 151,984 94,677 75,518 106,300 215,153 
Mining 8,294 16,147 13,776 48,269 2,019 8,108 
Private services 15,344 29,105 37,631 71,417 29,353 40,255 
Storage 26 35 1,340 1,059 .. .. 
Trade 357 26,332 780 531 2,155 1,461 
Transportation 22,172 3,530 10,329 16,516 3,830 12,248 
Water .. .. 2,537 .. 45,975 .. 
Total 231,233 357,002 385,804 464,221 314,114 542,605 
Country of origin       
China (P.R. of) 195 7,935 1,822 2,307 2,392 5,657 
Japan 27,539 20,066 38,587 16,116 70,737 58,333 
Korea (Rep. of) 10,828 4,327 12,076 39,954 9,624 31,182 
Netherlands 19,208 188 14,401 45,354 2,070 36,784 
Singapore 889 396 44,246 6,565 3,468 7,283 
United Kingdom 195 5,887 10,182 25,272 3,439 1,065 
United States 14,913 8,199 36,089 19,721 12,947 13,159 
Others 22,040 18,882 56,680 27,392 17,139 55,752 
Total 95,807 65,880 214,083 182,681 121,816 196,069 
.. Not available. 
Source : NEDA (2011), Philippine Development Plan 2011-2016, Manila. 
(4) OUTLOOK  
18. Under the Philippines Development Plan 2011-16,  the authorities are targeting annual average 
real GDP growth of 7-8%, with about 1 million j obs to be created on average per year (i.e. an 
unemployment rate of around 7% during the period).  On the demand side, growth is expected to be 
increasingly based on private-sector activity, while  government consumpti on and investment are 
expected to be subdued due to some realignments in the Budget.  Inflation is anticipated by the 
authorities to range between 3-5% over the next few years, and the external payments position to remain in surplus with strong impetus from rem ittances, exports, and continued capital inflows.  The Philippines WT/TPR/S/261/Rev.2 
 Page 11 
 
 
  For 2012, the IMF predicts a real GDP growth rate of  4.2%, an inflation rate of 3.4%, and a surplus in 
the external current account balance of 0.9% of GDP%.27 
19. The authorities recognize the downside risks facing the Philippine economy, particularly the 
uneven pace of global growth, persistent high wo rld oil prices, and remaining domestic structural 
weaknesses.  In this regard, the authorities ar e committed to pursuing additional domestic policy 
reforms to improve productivity and compete wi th low-cost neighbouring economies, including 
reducing the high overall public debt and large exte rnal financing requirements;  further trade and 
investment liberalization;  address vulnerabilities th at hinder the attainment of sustainable medium-
term growth (e.g. governance issues);  promoting more competition in services and in other markets, 
and improving human capital and ins titutional quality.  Moreover, given the limited fiscal space and 
the need to deliver the required investments for eco nomic development, the Government is promoting 
public-private partnership programmes, inter alia , to improve infrastructure facilities throughout the 
economy28;  provide incentives to stimulate private resources;  and protect public interest. 
 
                                                      
27 IMF (2012). 
28 Some infrastructure projects, including constructio n of expressways and the privatization of light 
railway operations in Manila, are expected to be put up for tender under public-private partnership 
arrangements.