The Philippines
The Philippines at a glance
Capital: Manila
Population: 97.976 million
Government Type: Republic
GDP: $320.6 billion
Imports: $58 billion f.o.b.
Exports: $49 billion f.o.b.
The majority of Philippine people are descendants of Indonesians and Malaysians. The largest ethnic minority now is mainland Asian (called Chinese). After the mainland Asians, Americans and Spaniards constitute the next largest minorities in the country.
More than 90% of the people are Christian as a result of the nearly 400 years of Spanish and American rule. The major non-Hispanicized groups are the Muslim population, concentrated in the Sulu Archipelago and in central and western Mindanao, and the mountain aboriginal groups of northern Luzon. Small forest tribes still live in the more remote areas of Mindanao.
About 87 languages and dialects are spoken, most belonging to the Malay-Polynesian linguistic family. Of these, eight are the first languages of more than 85% of the population. The four principal indigenous languages are Cebuano, spoken in the Visayas; Tagalog, predominant in the area around Manila; Ilocano, spoken in northern Luzon; and Maranao and related languages, spoken in Mindanao. Since 1939, in an effort to develop national unity, the government has promoted the use of the national language, Pilipino, which is based on Tagalog. Pilipino is taught in all schools and is gaining widespread acceptance across the archipelago. Nearly all professionals, academics, and government workers speak some English. The Philippines has one of the highest literacy rates in the developing world; about 93% of the population 10 years of age and older are literate.
The Philippines has a representative democracy modeled on the U.S. system. The 1987 constitution, adopted during the Aquino administration, reestablished a presidential system of government with a bicameral legislature and an independent judiciary. The president is limited to one six-year term. Provision also was made in the constitution for autonomous regions in Muslim areas of Mindanao and in the Cordillera region of northern Luzon, where many aboriginal tribes still live.
U.S.-Philippine Relations
U.S.-Philippine relations are based on shared history and commitment to democratic principles, as well as on economic ties. The Philippines modeled its governmental institutions on those of the United States and continues to share a commitment to democracy and human rights. There are an estimated four million Americans of Philippine ancestry in the United States, and more than 250,000 American citizens in the Philippines.
Until November 1992, pursuant to the 1947 Military Bases Agreement, the United States maintained and operated military bases in the Philippines. In 1991, the Philippine Senate rejected the bases treaty, and the last U.S. forces departed in 1992. The subsequent era has seen U.S.-Philippine relations improved and broadened, with a prominent focus on economic and commercial ties while maintaining the importance of the security dimension. U.S. investment continues to play an important role in the Philippine economy, and a strong security relationship rests on the 1952 U.S.-Philippines Mutual Defense Treaty (MDT).
President Arroyo has repeatedly stressed the close friendship between the Philippines 
and the United States and her desire to expand bilateral ties further, and she has lent strong support to the war on terrorism. In October 2003, the United States designated the Philippines as a Major Non-NATO Ally. U.S. and Philippine agencies have cooperated to bring charges against numerous terrorists, to implement the countries’ extradition treaty, and to train thousands of Filipino law enforcement officers.
In FY 2008, the U.S. Government — working closely with the Philippine Government, civil society, the private sector, and other donors — provided $132 million in grant funds to support a more peaceful and prosperous Philippines. About 60% of economic assistance resources are targeted for Mindanao, for programs that promote economic growth, mitigate conflict, and promote peace and security. The United States supports programs that promote good governance at the national and local levels, improve electoral systems, promote rule of law, help address constraints to trade and investment, improve revenue collection/administration and fiscal transparency, and enhance the ability of military and civilian law enforcement agencies to maintain peace and security.
In 2006, the Millennium Challenge Corporation (MCC) granted $21 million to the Philippines for a 2-year Threshold Program targeted at addressing corruption in revenue administration and improving the capabilities of the Office of the Ombudsman. Performance under this Threshold Program contributed to the MCC’s awarding the Philippines Compact eligibility status in March 2008 and retention of such status in December 2008.
Nearly 400,000 Americans visit the Philippines each year. Providing government services to U.S. and other citizens constitutes an important aspect of the bilateral relationship. Those services include veterans’ affairs, social security, and consular operations. Many people-to-people programs exist between the United States and the Philippines, including Fulbright, International Visitors, and Aquino Fellowship exchange programs, as well as the U.S. Peace Corps.
The Philippines ranks as the United States’ 31st-largest export market and its 37th-largest supplier. Key exports to the United States are semiconductor devices and computer peripherals, automobile parts, electric machinery, textiles and garments, wheat and animal feeds, and coconut oil. In addition to other goods, the Philippines imports raw and semi-processed materials for the manufacture of semiconductors, electronics and electrical machinery, transport equipment, and cereals and cereal preparations.
The U.S. Trade Representative removed the Philippines from its Special 301 Priority Watch List in 2006, reflecting improvement in its enforcement of intellectual property rights (IPR) protection. It has maintained the Philippines on the Special 301 Watch List through 2009. However, sustained effort and continuing progress on key IPR issues will be essential to maintain this status.
Foreign Relations
The Philippines is a member of the Association of Southeast Asian Nations (ASEAN), the ASEAN Regional Forum (ARF), and the Asia-Pacific Economic Cooperation (APEC) forum. The country is also a member of the United Nations and some of its specialized agencies.
The fundamental Philippine attachment to democracy and human rights is also reflected in its foreign policy. Philippine soldiers and police have participated in a number of multilateral civilian police and peacekeeping operations, and a Philippine Army general served as the first commander of the UN peacekeeping operation in East Timor. The Philippines currently has peacekeepers deployed in eight UN peacekeeping operations worldwide. The Philippines also participated in Operation Iraqi Freedom, deploying some 50 troops to Iraq in 2003. The Philippine Government also has been active in efforts to reduce tensions among rival claimants to the territories and waters of the resource-rich South China Sea.
Economy
Since the end of World War II, the Philippine economy has been on an unfortunate trajectory, going from one of the richest 
countries in Asia (following Japan) to one of the poorest. Years of economic mismanagement and political volatility during the Marcos regime contributed to economic stagnation and resulted in macroeconomic instability. During the 1990s, the Philippine Government introduced a broad range of economic reforms designed to spur business growth and foreign investment. As a result, the Philippines saw a period of higher growth, although the Asian financial crisis in 1997 slowed Philippine economic development once again. Long-term economic growth remains threatened by crumbling infrastructure and education systems, as well as trade and investment barriers. International competitiveness rankings have slipped.
The service sector contributes more than half of overall Philippine economic output, followed by industry (about a third), and agriculture (less 
than 20%). Important industries include food processing, textiles and apparel, electronics, automobile parts, and business process outsourcing. Most industries are concentrated in the urban areas around metropolitan Manila. Mining also has great potential in the Philippines, which possesses reserves of chromate, nickel, and copper. Significant natural gas finds off the islands of Palawan have added to the country’s substantial geothermal, hydro, and coal energy reserves.
The Philippine economy seems comparatively well-equipped to weather the global financial crisis in the short term, partly as a result of the efforts over the past few years to control the deficit, bring down debt ratios, and adopt internationally accepted banking sector capital adequacy standards. The Philippine banking sector — which comprises 80% of total financial system resources — has limited direct exposure to distressed financial institutions overseas. Conservative regulatory policies, including the prohibition of investments in structured products, shielded the insurance sector from exposure to distressed financial firms. The impact of external shocks to economic growth, poverty alleviation, employment, remittances, credit availability, and overall investment prospects is a concern.
Best Export Opportunities
Opportunities exist for U.S. exporters in the Philippines. Although the building sector has slowed, there is still a demand for green building products and supplies for infrastructure projects such as airports and roads. The Philippine government has committed US$43 million for a potable water supply system, which will increase the demand for treatment facilities and water supply systems. The government is also investing in the upgrade of power facilities in the country.
New sales opportunities are being created by an ongoing expansion of modern large-scale supermarket chains, continued interest in U.S. food trends, and growing demand for convenience. Also, about 15% of the population currently has sufficient income to regularly purchase imported food items, which suggests major long-term import growth potential as income distribution improves. More details on prospects in the Philippine market can be found in the Best Export Opportunities section of the Philippines country profile.
Investment and Regulatory Conditions
The United States traditionally has been the Philippines’ largest foreign investor, with close to $6.7 billion in total foreign direct investment as of the end of 2007. Since the late 1980s, the Philippines has committed itself to reforms that encourage foreign investment as a basis for economic development, subject to certain guidelines and restrictions in specified areas. Under President Ramos, the Philippines expanded reforms, opening the power generation and telecommunications sectors to foreign investment, as well as securing ratification of the Uruguay Round agreement and membership in the World Trade Organization. President Arroyo’s administration has generally continued such reforms despite opposition from vested interests and “nationalist” blocs. A major obstacle has been and will continue to be constitutional restrictions on, among others, foreign ownership of land and public utilities, which limits maximum ownership to 40%.
Potential foreign investors remain concerned about law and 
order, inadequate infrastructure, policy and regulatory instability, and governance issues. While trade liberalization presents significant opportunities, intensifying global competition and the emergence of low-wage export economies also pose challenges. Competition from other Southeast Asian countries and from China for investment underlines the need for sustained progress on structural reforms to remove bottlenecks to growth, to lower costs of doing business, and to promote good public and private sector governance. Many U.S. investors find business registration, customs, immigration, and visa procedures burdensome and a source of frustration. The government has been working to reinvigorate its anti-corruption drive, and the Office of the Ombudsman has reported improved conviction rates. Nevertheless, its slipping anti-corruption ranking indicates that the Philippines’ efforts are lagging and that more needs to be done to improve international perception of its anti-corruption campaign — an effort that will require strong political will and significantly greater financial and human resources.
More detailed information on intellectual property protection and the transparency of the regulatory system can be found in the Trade Data section of the Official Export Guide’s Philippine country profile.
New E-Customs Project
The Philippine Bureau of Customs (BOC) 2005 Customs Project will streamline imports and exports processing and improve trade facilitation with e2m (electronic to mobile) application modules. To be eligible to transact in the e2m Customs environment, importers/brokers must have valid and active Client Customs Number (CCN) from the CPRS, bank account information and bank reference numbers of their Authorized Agent Banks (AABs) for electronic payment of customs duties and taxes (no cash, no checks), appropriate licenses/clearance/permits from concerned issuing agencies for their importation, applicable non-cash payment instruments (TDM, TEC and IED) and supporting documents in hardcopies.
The following items feature e2m application modules that are currently being implemented at the Philippine Customs Bureau through the BOC Customs Project: Client Profiles Registration System (CPRS); Payment Application System (PASS5); Imports and Assessment System (IAS). IAS is now in effect at the Port of Batangas, the Port of Limay, and the sub-port of Mariveles. On August 17, 2009, the IAS was launched at the Manila International Container Port. The Manila Port is scheduled to implement the IAS on September 1 of this year. A notice on implementation of BOC e-customs contains specifics regarding the program.
Transportation
The Philippines has about 85 airports, but only a few meet U.S. or international aviation standards. The country’s major airport, the Ninoy Aquino International Airport (NAIA), currently operates two terminals in Manila, one of which is being used exclusively by flag carrier Philippine Airlines for its domestic and international routes.
In 2007, the U.S. Federal Aviation Administration (FAA) downgraded the Philippines’ aviation safety oversight category from Category 1 to Category 2. According to the FAA, “Category 2 indicates that the FAA has assessed the Government of the Philippines’ Civil Aviation Authority as not being in compliance with International Civil Aviation Organization (ICAO) safety standards for the oversight of Philippine air carrier operations. While in Category 2, Philippine air carriers will be permitted to continue current operations to the United States, but will be under heightened FAA surveillance.”
Many major international airlines fly between Manila and the United States on a regular basis, but typically they have layovers or stopovers before the final destination.
Maritime transport is a major conduit for moving goods and people. Inter-island vessels or ferries serve major island routes. Being an archipelago, the Philippines has more than 1,000 ports, about a dozen of which serve as cargo and/or passenger terminals. Travel by boat or ferry tends to take longer and is less convenient than air travel, but there are areas in the Philippines that can only be reached through this mode of transport. Roll-on, roll-off vessels (RO-RO) carrying passengers and cargo are also available to serve inter-island travel and commerce.
Contact information for airports and seaports of the Philippines can be found on the Official Export Guide Web site.
For land travel, the road network varies tremendously. Distances that might be covered quickly in the United States typically take much longer in the Philippines, due to poor road quality and congestion.
Buses, elevated rail transport such as the Light Railway Transit (LRT) and the Metro Rail Transit (MRT) and “jeepneys” ply the major and minor routes within Metro Manila and serve the general commuting public. Shuttle services (locally known as FX taxis) that bring passengers to and from work are also available. In most provinces and major cities outside Manila, buses, jeepneys and tricycles are the more typical modes of land transport. Overcrowding is not uncommon.
