Strong Indicators of a GrowingPhilippine Economy

Philippines = 4.07% YTD

Strongest performing stock market in Asia in 2011

Source: Presentation of Dr. Bernardo Villegas, Trade and Investments Talks, BOI, February 2012

GDP (Q1 2012) 6.4% GDP (Q1 2012) 6.4%

GNP (Q1 2012) 5.8% GNP (Q1 2012) 5.8%

Headline inflation (May 2012) 2.9% Headline inflation (May 2012) 2.9%

Stable and resilient economic growth

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GDP GNP

Headline Inflation Rates in the Philippines, All Items(2006 = 100)

• 2011 OFW remittances crossed the US$20 Billion barrier with full year record of US$20.1 Billion

• Jan-Feb 2012: US$3.1 Billion, 5.60% higher relative to last year’s US$3 Billion

• No expected decrease despite global slowdown due to geographically diversed sources

Continuous inflow of OFW remittances

Service Exports:• 2011 Service Exports hit an all-time high of US$11 Billion

o Anchored on the BPO sector that directly employs 640,000 people

Merchandise Exports:• 2010: 34% Merchandise exports growth at US$51.4 Billion• 2011: Electronics exports decreased by 23.7%, but overall decrease was only 6.9% at

US$47.8 Billion• Q1 2012: Electronics exports was at US$6.75 Billion, an increase of 5.55% from previous

year’s US$6.40 Billiono Q1 2012 also saw the growth of other top earners:

o woodcraft & furniture (31.18%, US$506M); o apparel & clothing accessories (1.08%, US$470M); o ignition wiring sets (9.51%, $324M); o metal components (12.02%, $232M);

15.3% surge in Gross International Reserves to US$76.13 Billion by March 2012 (US$10.15 billion higher than March 2011)

Steady export growth despite global economic slowdown

6

22% Increase in BOI Investment Approvals in Y2011 (P369 Billion)

Steady investment flows

• Outstanding loans of universal and commercial banks amounted to P2.79 Trillion by end of 2011, up by 19.3% from last year

• As of end February 2012, non-performing loans ratio of universal and commercial banks improved to 2.34%, lower by 0.59 percentage points from past year’s 2.93% ratio

Robust domestic financial sector coupled with credit growth

• P197.8 Billion national government deficit in 2011 was 37.1% lower than last year

• 2012 budget puts the government on track for a reduced deficit at 2.0% of GDP by 2013

Efficient revenue collection effort

9

Improving global competitiveness rankings

Improvement in Rank

World Economic Forum Global Competitiveness Index(2010 – 2012)

+20(from #85 to 75 in 2011from #75 to 65 in 2012out of 142 countries)

Fraser InstituteEconomic Freedom (2012)

World Bank (2010)Government Effectiveness Indicator

+16(from #77 to 61, 141 countries)

+1 (from #51 to 52, 207 countries)

Transparency International (2011)Corruption Perceptions Index

+5 (from #139 to 134, 178 countries)

Set to become the world’s 16th largest economy, up 27 places from today

One of the new emerging countries due to favorable demographics and strong economic fundamentals

~ HSBC’s “The World in 2050” Report

12th largest population in the world

Asia’s friendliest country

8th World’s friendliest country~ HSBC World Explorer Survey 2011 ~

Other Notable Information

http://www.businessweek.com/videos/2012-08-08/philippines-strongest-economy-in-asia

The Philippine Advantage

Rich Talent Pool

Robust Infrastructure

Strategic Business Location

First-Class Lifestyle

Attractive Investment Incentives

INCENTIVEBOI

(Executive Order No. 226, as amended)

PEZA

(Republic Act No. 7916, as amended)

CDC / SBMA

(Republic Act No. 7227 – Bases Conversion Devt Authority

Income Tax Holiday

(ITH)4 – 6 years (max of 8 years) Exempted from all local and

national taxes - value-added taxes, franchise taxes, excise and ad valorem taxes)ITH Bonus 3 years provided the firm meets certain conditions

Special Tax Rate of 5% on Gross Income

Special Tax Rate of 5% on Gross Income

Importation of Capital Equipment, Spare Parts and Supplies

0% duty-free Tax and Duty-Free

Wharfage Dues and Export Tax, Duty, Impost and Fees

Exempted None

Simplication of Customs Procedures

Available

Employment of Foreign Nationals

Foreign nationals may be employed in supervisory, technical or advisory positions within 5 years from a project’s registration, extendible for limited periods. The positions of president, general manager, and treasurer or their equivalents, of foreign-owned registered firms may be retained by foreign nationals for a longer period.

All foreign employees may bring with them their spouses and unmarried children under 21 years

of age.

Attractive Investment Incentives

I. Preferred ActivitiesRegular List:

Agriculture/ Agri-business and Fishery Creative Industries/Knowledge-Based

Services Shipbuilding Mass Housing Iron and Steel Energy Infrastructure Research and Development Green Projects Motor Vehicles Tourism Strategic Projects Hospital /Medical Services Disaster Prevention, Mitigation and Recovery

Projects

II. Export Activities

III. Mandatory List

Production and manufacture of export products Services exports Activities in support of exporters

IV. ARMM List

Investment Priorities Plan 2012

Sectoral Opportunities

ENERGY - Gross Generation and Installed Capacity, 2011ENERGY - Gross Generation and Installed Capacity, 2011(Per Type of Fuel/Energy Source)

68,279 GWh

Note: •Preliminary gross generation as of January 2012•Excluding off-grid generation•Installed capacity as of June 2011

16,233 MW

Generation Installed Capacity

LUZON - 10,450 MW

VISAYAS - 2,200 MW

MINDANAO - 1,950 MW

Philippines: 14,400 MW

Source: DOE PDP 2011-2030

Total Required Additional Capacity (2011-2030)

Renewable Energy - Capacity Installation Targets (and FIT)Renewable Energy - Capacity Installation Targets (and FIT)

Source: Department of Energy

SectorInstalled Capacity

(MW)

Total Required Additional Capacity

(2011-2030)

Feed-In-Tariff(EUR / KWH)

Geothermal 1,966.0 1,495.0 -

Hydro 3,400.0 5,394.1 0.1092

Biomass 39.0 276.7 0.1228

Wind 33.0 2,345.0 0.1580

Solar 1.0 284.0 0.1792

Ocean 0.0 70.5 -

TOTAL 5,438.0 9,865.3

Innate Advantage in Renewable EnergyInnate Advantage in Renewable Energy

one of the largest producers (second to the US) of geothermal energy

in the world

one of the largest producers (second to the US) of geothermal energy

in the world

a big ocean energy resource due to the

country’s archipelagic nature

a big ocean energy resource due to the

country’s archipelagic nature

abundant water resources that can be tapped for

power generation

abundant water resources that can be tapped for

power generation

the top wind power producer in Southeast Asia

the top wind power producer in Southeast Asia

high amount of solar radiation that can be converted into useful

energy

high amount of solar radiation that can be converted into useful

energy

abundant supply of biomass

abundant supply of biomass

RA 9513 Incentives – For RE Developers:RA 9513 Incentives – For RE Developers:1. Income Tax Holiday (7 years)2. Duty-free Importation of RE M/E & Materials3. Special Realty Tax Rates on M/E4. Net Operating Loss Carry-Over (NOLCO) 5. Corporate Tax Rate of 10% after the ITH 6. Accelerated Depreciation7. Zero Percent Value – Added Tax Rate 8. Tax Exemption on Carbon Credits9. Tax Credit on Domestic CE and Service

Government Support

major producer of tropical fruits such as banana, pineapple and mango

major producer of tropical fruits such as banana, pineapple and mango

Agriculture/Agribusiness and FisheryAgriculture/Agribusiness and Fishery

leading producer and exporter of seaweedsleading producer and exporter of seaweeds

world’s eight largest fish producer

world’s eight largest fish producer

market leader in canned pineapple and juice

market

market leader in canned pineapple and juice

market

Palm Oil (one of five countries in Asia with palm oil plantations)

Palm Oil (one of five countries in Asia with palm oil plantations)

1st in global share of coconut production

1st in global share of coconut production

abundant supply of mango fruit seed (mango seed oil - ingredients for

cosmetics)

abundant supply of mango fruit seed (mango seed oil - ingredients for

cosmetics)

viable location for rubber plantation & processing

viable location for rubber plantation & processing

Agriculture/AgribusinessAgriculture/Agribusiness

TourismTourism

2010 visitor arrivals reach all time high at 3.52 M 2010 visitor arrivals reach all time high at 3.52 M Top 3 MarketsTop 3 Markets

Korea

USA

Japan

Korea

USA

Japan

Top 5 DestinationsTop 5 Destinations

Jan-Apr 2011 growth rate: 13%Jan-Apr 2011 growth rate: 13%

CEBUCEBU CAMSURCAMSUR BORACAYBORACAY DAVAODAVAO CAGAYAN VALLEYCAGAYAN VALLEY

• Retirement villagesRetirement villages

• Medical tourismMedical tourism

• Healthcare & wellness products & servicesHealthcare & wellness products & services

• Tourist accommodation facilitiesTourist accommodation facilities

Areas for investments:Areas for investments:

• Located in the “Ring of Fire”Located in the “Ring of Fire”

• 5th most mineralized country in 5th most mineralized country in the worldthe world

2nd in Gold 4th in Copper 5th in Nickel 6th in Chromite

• 9 million hectares of mineralized 9 million hectares of mineralized landland

Only 1.4% with mining permits so far

2.2 million sq. km. offshore mineral potential

• 7 billion tons of ore reserves7 billion tons of ore reserves

• Large pool of professional Large pool of professional geologists and mining engineersgeologists and mining engineers

• Presence of highly organized Presence of highly organized institutions and professional institutions and professional organizationsorganizations

MiningMining

Most prolific copper and gold producers Most prolific copper and gold producers are found in the Baguio and are found in the Baguio and Mankayan districtsMankayan districts

• The Surigao-Davao districts also The Surigao-Davao districts also contribute much to Philippine gold contribute much to Philippine gold productionproduction

• Nickel major producers are in Palawan Nickel major producers are in Palawan and Surigao and Surigao

• Potential areas and deposits Potential areas and deposits identified by the Mines and identified by the Mines and Geosciences Bureau:Geosciences Bureau:- Zambales – Cr, Ni, Co, Pt, Cu, AuZambales – Cr, Ni, Co, Pt, Cu, Au- Samar-Eastern Mindanao – Au, Cu, Fe, Samar-Eastern Mindanao – Au, Cu, Fe,

Cr, Ni, Pt, MnCr, Ni, Pt, Mn- Palawan – Cr, Ni, Co, Pt, AuPalawan – Cr, Ni, Co, Pt, Au

Ideal LocationsIdeal Locations

Back-office and KPO: Best-kept secret

Animation & Game Development

Engineering Design

Contact Center

Software Development

Industry Industry SnapshotSnapshot

• Contact Centers in PH: 220+ • Full time employees as of 2011: 416,000• Contact Centers in PH: 220+ • Full time employees as of 2011: 416,000

• Revenues in 2011:US$7.4B • Revenue Growth Y-o-Y: 21%• Revenues in 2011:US$7.4B • Revenue Growth Y-o-Y: 21%

IT & BPOIT & BPO

• No. of service providers: 100+• Full time employees as of 2011: 128,650• Revenue in 2011: US$2.05B• Revenue growth Y-o-Y: 24%

• No. of service providers: 100+• Full time employees as of 2011: 128,650• Revenue in 2011: US$2.05B• Revenue growth Y-o-Y: 24%

• No. of development companies: 135 (export only)• Total professionals employed: 49,908• Revenue in 2011: US$993M, 37% growth Y-o-Y

• No. of development companies: 135 (export only)• Total professionals employed: 49,908• Revenue in 2011: US$993M, 37% growth Y-o-Y

• 20yr wealth of experience in the field of Animation• Capabilities in 2D, 3D, Maya, 3DMax, Medical/Educ. Graphics & Animation• Revenue in 2011: Animation at US$128M, Game Dev’t at US$8M

• 20yr wealth of experience in the field of Animation• Capabilities in 2D, 3D, Maya, 3DMax, Medical/Educ. Graphics & Animation• Revenue in 2011: Animation at US$128M, Game Dev’t at US$8M

• Over 75,000 licensed professionals • 40,000 graduate of engineering courses annually (CAD-enabled)• Over 75,000 licensed professionals • 40,000 graduate of engineering courses annually (CAD-enabled)

• Revenue in 2011:US$172M • Revenue in 2011:US$172M

Why the Philippines is a Top Offshore BPO LocationWhy the Philippines is a Top Offshore BPO Location

29

• Driver for export growthDriver for export growth

• Home to seven of the world’s top 30 Home to seven of the world’s top 30 chipmakers and three of the largest HDD chipmakers and three of the largest HDD producersproducers

• Supplies the world with 2.5 million HDDs Supplies the world with 2.5 million HDDs per monthper month

• Accounts for 10% of the SMS world supplyAccounts for 10% of the SMS world supply

ElectronicsElectronics

• Integrated Industry-Government Strategy for Integrated Industry-Government Strategy for Market GrowthMarket Growth

Shift from its present electronics products Shift from its present electronics products portfolio to Electronics Manufacturing portfolio to Electronics Manufacturing Services (EMS) and later to other segments Services (EMS) and later to other segments of the electronics value chain which offers of the electronics value chain which offers spillover/linkages opportunitiesspillover/linkages opportunities

Investment promotion for Solar Power, Investment promotion for Solar Power, Aerospace, Automotive, Medical and Military Aerospace, Automotive, Medical and Military companiescompanies

• Supply Chain Development Supply Chain Development

Supplier Development/Matching (for robust Supplier Development/Matching (for robust supplier base) supplier base)

Market OpportunitiesMarket Opportunities

Infrastructure Infrastructure

• The country only spent less than 2% of GDP on The country only spent less than 2% of GDP on infrastructure in recent years; target 5% of GDPinfrastructure in recent years; target 5% of GDP

• Building infrastructure consequently a Building infrastructure consequently a cornerstone of the Aquino administrationcornerstone of the Aquino administration

• Given the large financial requirements, the Given the large financial requirements, the government pushes government pushes PUBLIC PRIVATE PUBLIC PRIVATE PARTNERSHIPPARTNERSHIP

• Since 2011, 2 infrastructure projects bidded outSince 2011, 2 infrastructure projects bidded out• 8 in the pipeline. More to follow8 in the pipeline. More to follow

Infrastructure Infrastructure

• The PPP ‘product’ is still being perfectedThe PPP ‘product’ is still being perfected• Projects are in transport (rail and road), power Projects are in transport (rail and road), power

(LNG, coal, natural gas and renewable energy), (LNG, coal, natural gas and renewable energy), airports, seaports, water...airports, seaports, water...

• Our contact at the PPP Center:Our contact at the PPP Center:

Ferdinand D. TolentinoFerdinand D. Tolentino

Deputy Executive DirectorDeputy Executive Director

fdtolentino@ppp.gov.ph www.ppp.gov.ph