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The Government of the Republic of the Philippines The Philippines: The Philippines: Rising to the Challenge of Improving the Rising to the Challenge of Improving the Investment Climate Investment Climate 2008 Philippines Development Forum Clark, Pampanga 26 March 2008 Secretary Peter B. Favila Department of Trade and Industry

The Government of the Republic of the Philippines Outline of Presentation Outline of Presentation What do the numbers say? I. Reality Check: FDI attractiveness and Philippine II. competitiveness Beyond survey results: What investors have to say III. Improving the Philippine Investment Climate IV. DTI Key Investment Thrusts and S trategies V. National Competitiveness Council Focus Areas VI. VII. The PDF Working Group on Growth and Investment Climate (WG-GIC) S trategic Thrusts

The Government of the Republic of the Philippines I. Key economic numbers paint a picture of a stronger economy I. Key economic numbers paint a picture of a stronger economy Real GDP and GNP Growth (in % ) Inflation and Interest Rates 2001 – 2007 2001 - 2007 9 12 7.8% 8 GDP GNP Inflation Interest Rate 10 7 6 8 5 3.4 % 7.3% 6 4 3 4 2 2 2.8 % 1 0 0 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 BOI – PEZA Approved Investments Merchandise Exports (US$ B) 2001 - 2007 2001 - 2007 400 P349 B 6.1% BOI PEZA 29% 45 350 40 300 35 250 30 25 47.0 200 47.4 41.3 20 39.7 150 36.2 35.2 32.2 15 100 10 50 5 0 0 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007

The Government of the Republic of the Philippines II. Reality Check: The Philippines is not attracting II. Reality Check: The Philippines is not attracting comparable FDIs among Southeast Asian countries comparable FDIs among Southeast Asian countries FDI Inflows (in US$ Billions) 2001 – 2007* Indonesia Malaysia 12 Philippines Thailand 10 Vietnam 8 6 4 2 0 -2 -4 2001 2002 2003 2004 2005 2006 2007* * Preliminary data Source: UNCTAD

The Government of the Republic of the Philippines III. Beyond the numbers and survey results: III. Beyond the numbers and survey results: What investors have to say What investors have to say “ RP is well-placed to ride “ Increased in savings rate has been out the global storm.” – more pronounced in recent years .” Frederick Neumann, Economist, – Thomas Byrne, S enior VP, Moody’ s Investors Asia-Pacific, HS BC ( cit ing fiscal S ervice (w/ c has recent ly upgraded RP’ s credit consolidat ion, low inflat ion rat e, rat ing from posit ive t o st able) st able exchange rat e, result ing in a st able macroecon environment ) “ Well-educated, English- “ Large balance of payment & high speaking labor force is still level of GIR; overall a positive a competitive advantage.” – current account position.” S ameer Goel, Director, Global – Reza Baqir, Country Resident Rep, IMF Markets Research, Deutsche Bank Nestle: talent availability and cost efficiency Texas Instruments: strong government support, commitment to further improve business environment

The Government of the Republic of the Philippines Beyond the numbers and survey results: Beyond the numbers and survey results: Attracted “ “ beyond the usual beyond the usual” ” kind of investments kind of investments Attracted High value investments (billion US dollar investments) e.g., Texas Instruments, Hanj in Heavy Industries High end, highly specialized investments e.g., Knowledge Process Outsourcing (KPO), highly specialized vehicles, high end electronic products High employment generating investments e.g., IT and IT-enabled services companies (>10,000 employees per company) High impact investments e.g., energy, mining, infrastructure

The Government of the Republic of the Philippines IV. Improving the Philippine investment climate IV. Improving the Philippine investment climate Strengthening Macroeconomic Environment Strengthening Macroeconomic Environment S tabilizing the economy and 2008 Targets promoting growth thru 6.3 – 7 % GDP fiscal and financial strength growth rate Job generation & global 3 – 5 % inflation rate competitiveness Balanced budget by S ocial development and 2008 direct anti-poverty 12% BOI-PEZA measures investment growth Decentralizing development 8% export growth Good governance & national harmony Source: Updated MTPDP 2008 – 2010

The Government of the Republic of the Philippines Improving the Philippine investment climate Improving the Philippine investment climate Updated CIIP 2007 – 2010 Infrastructure Infrastructure (in PhP Billion) NG 1,090.00 Comprehensive & GOCCs 641.83 Integrated Infrastructure LGUs 115.40 Program (CIIP) 2007-2010 GFIs 26.95 amounting to PhP2.03 trillion in support of the Total 1,874.18 Government Super Regions Private Sector 641.83 Framework Others 128.18 TOTAL 2,025.12

The Government of the Republic of the Philippines Improving the Philippine investment climate Improving the Philippine investment climate Good Governance Good Governance Curbing Corruption 169% Increase in t he number of convict ions in ant i-graft court from 2006 t o 2007 PhP 3 B ant i-corrupt ion fund Procurement Transparency Group Ant i-Red Tape Task Force

The Government of the Republic of the Philippines V. DTI Key Investment Thrusts and Strategies V. DTI Key Investment Thrusts and Strategies 1. Pursue higher quality investments (growth boosting, employment creating) 2. Investments will be sector-focused and company-directed 3. Continue policy reforms to improve investment climate and reduce cost of doing business 4. Promote investments in infrastructure under the Super Regions Framework 5. Strategic Investment Aftercare Program (SIAP)

The Government of the Republic of the Philippines DTI Key Investment Thrusts and Strategies DTI Key Investment Thrusts and Strategies Priority Sectors Offshoring and Outsourcing (O&O) Infrastructure Tourism, including Health & Wellness Mining Agribusiness

The Government of the Republic of the Philippines National Competitiveness Council National Competitiveness Council Focus Areas Focus Areas Compet it ive Human Resources Efficient public and privat e sect or management Effect ive access t o financing Improved t ransact ion cost s and flows S eamless infrast ruct ure net work Energy cost -compet it iveness and self –sufficiency

The Government of the Republic of the Philippines PDF Working Group on Growth and Investment PDF Working Group on Growth and Investment Climate Strategic Thrusts Climate Strategic Thrusts 1. Accelerate and widen investments 2. Expand trade 3. Strengthen institutions and governance 4. Provide adequate financing support 5. Raise quality and productivity through innovation and technology 6. Address infrastructure bottlenecks

The Government of the Republic of the Philippines The Philippines: The Philippines: Rising to the Challenge of Improving the Rising to the Challenge of Improving the Investment Climate Investment Climate 2008 Philippines Development Forum Clark, Pampanga 26 March 2008 Secretary Peter B. Favila Department of Trade and Industry