2017

PHILIPPINES AS AN
EMERGING MARKET

MENTOR - DR. SHALINI TIWARI

SUBMITTED BY - TARUN KUMAR JAIN

COURSE - PGDM-PT-15-18

ROLL NO- 150401044

 Philippines:- An Emerging Market

In Earlier days Philippines was considered as the sick man of Asia. In recent
past the countrys economy is slowly dominating the rest of the world. It is now
emerging as the fastest growing economies in the world and infact investors are
confident about the fututre of the country. They gained advantage in terms of
Human Resources and high-skilled labour, good governance and countrys full
of Natural Resources. According to Emerging market Economics (EME),
country topped the list with a value indicator of 0.74.
DEMOGRAPHICS
The Phillipines annualised population growth rate between 2010-2015 was
1.72%. According to the 2015 cencus, the population of the philippines is
100,981,437. It is a positive Indicator for the emerging market as it means more
workers, increased consumption, increased national savings, increased
economics od scale and hence improving productivity.
In the year 1960, the age dependency ratio was approximately 100.441%
whereas in the year 2016 it has decreased to just 50%, which is again a positive
indicator for the country to grow. Their are young minds who are working hard
to earn more in order to support the non working or old people. Overall, it
means lower the burden on government finances.
According to the businessmirror, the Manila (Capital) is expected over 6 million
more Fillipinos are expected to flock to the capital in next 10 years due to
Urban migration. Middle class households are expected to be quadruple, rising
from 38 million in 2015 to 161 million in next 10 years.This would also help in
better distribution of wealth and narrow income gaps. Their would be rapid
urbanisation and more people coming to bigger cities take advantage of new
economic opportunities. The average age or the median age is 23.4 years, which
is again a good sign for a country to be a emerging market. In 2010, the school
age population (5 to 24 years) comprises of 41.8 percent of the population.
Approximately more than 40% of the popuation are of young minds and
everyone is trying to get a education which is a very good sign for the country
to rise and grow. Philippines, unemployment rate has fallen upto 5.7% in the
year 2017 in comparison to 10% in the year 1996. This means, people are
getting jobs and opportunities are being created.

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 Philippines:- An Emerging Market

ECONOMIC
Gross Domestic Product per capita in Philippines was last recorded at 2753.30
US dollars in 2016. GDP per capita in year 1960 was 1605 USD untill 2016,
reaching all time high. The GDP Per capita PPP in the year 2016 was 7236.50
US dollar which is also all time high. The lowest was reorded in the year 1993
which was 3796.40 USD. It states that countrys purchasing power has
increased in comparison to rest of the world.

The Philippine economy has performed remarkable well on number of fronts.

Despite headwinds bouts of fiscal underspreading and a series of natural
calamities, the country has consistently grown in last six years.(Above figure).
The countrys real GDP has grew with a average of 6.2%. GDP took a dip in
2011 as exports declined due to global economic shutdown and administrtion of
then President plugged fiscal leakages and more spending . The economy
bounced back in 2012 external trading picked up and government spending
normalized.From then on the economy remained as robust on back of domestic
demand.
Generally, Government debt as a percetage of GDP isused by investors to
measure countrys ability to make fututre payments o its debt, thus effecting the
country borrowing costs and government bond yields.The higher the ratio,
geater the risk of default and associated chaos in financial markets. By the end

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 Philippines:- An Emerging Market

of year 2016, it was recorded as 42.1 of countrys GDP which hass been
obeserved as the lowest in last 16 years, where countrys averaged 56.78 percent
from 1990 to 2016.This is the alarming ratio for the investors which cant be
igonored.
FINANCIAL
5 YR CDS ratio, the CDS stands for cedit default swap. CDS is a instrument
that is served as a insurance against the default. CDS spread for five years bond
stood at 88.9 basic points as of 2016 ends. According to National Treasurer,
Rosalia De Leon,country had starting getting benifit frim taing upgrades
through lower cost of financing compared with those charges on other countries
in the region.
Despite the bad in terms of Non-performing loan the country CDS ration have
been doing ok. Credit rating Fitch ratings had kept the countrys investemtn
credit rating with a postitive outlook, amid indications of continued economic
growth and manageable debt levels. Fitch ratings affirmed the Phillppines, Long
term Foreign and local currency Issuer Default Ratings(IDSs) at-BBB-.
The Phillippines ratings reflects its continued strong and consistent growth
performce, a robust net external creditor position and government debt levels
that are lower than the median of peers in the BBB ratings category. The
Philippines average real GDP growth for the 5 years to end 2016 was 6.6%.
well above the BBB median of 3.2%. Fitch ratings forecasts inflation to
increase to 3.3% in 3017 up from 1.8% at end 2016 but remain within the
central banks target of 2%-4%.
Fitch rated 114 sovereigns ratings , with 6 positive outlook and while rest on the
stable outlook. Although the ratio of public debt to GDP in among the highest
of BBB-rated countries. The Economist intelligence Unit experts this ratio to
remain stable,averaging 45% in 2016-17. Most of the debt is denominated in
local currency.

TRADE
Trade is important to the Philippines economy, the vaue of exports and imports
taken together equals 61 percent of GDP. the average iariff rate is 4.3 percent.
many agricultural imports face addditional barriers. investment in several
econmic sectors is restricted. the financial sectoe remains relatively stable and
sound, In 2016, the central bank announced that it would end a 17 year
moratorium on the granting of new banking licences.

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 Philippines:- An Emerging Market

The Philippines a trade deficit narrowed ti USD 1.65 Billion in early 2017 from
USD 2.3 Billion in 2016. It was the smallest trade gap since February 2016, as
ecports rose sharply and imports fell for the second consecutive month. Balance
of Trade in Philippines avergaed -301090.55 USD thousand from 1957 until
2017, reaching all thime high of 1144700 USD thousand in September of 1999
and a record low of -2736810.16 USD thousand in May 2017.
Their have been Trade barriers in different sectors in the country, for example
agriculture tariffs and quotas. The Philippines maintain a two-tired tariff policy
for sensitive agricultural products including rice, corn, pork, chciken meat,
suagar and coffee. These prodcuts are subject to a tariff rate quota (TRQ) and
importd outside of the minimum access volime are taxed at a higher out of
quota rate. In-quota and out-of-quota tariff rates averaged 36.5 percent and 41.5
percent, respectively and have not changed since 2005.
The philippines raised excise taxes on alcohol and tobacco products in 2005,
extending perferntial treatment for distilled spirits product from indigenous raw
materials and imposing significantly higer excise taxes on spirits made from
non-indigenous raw materials.
Regarless of all these policies the biggest trade barrrier is the corruption in the
Philippines, including in the judiciary as per a report of US trade representative.
Their has been a lack of transparency in judicial and regulatory processes

The reserve to import ratio is defined as total reserves divided by total imports.
The more reserve has relative to its imports beteer. Once reserves are exhausted
a country has to borow to pay for imports, which would put it in a precarious
financial position.
Foreign Reserves, Goods in Philippines was reported at 0.9989 in 2016,
according to the world bank collection of development indicators. In past 10
years, 2012 it was best upto 1.3 since then it has been able to just stay above the
mark of 1. Till date the country has not pay borrow anything from outside. In
this scenario the poistion of the country is strong as it mostly export oriented
country.

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 Philippines:- An Emerging Market

POLITICAL STABILITY AND GOVERNANCE

The Declaration of martial law in Mindano risks to political stablility, especially
if the president, Rodrigo Durterte, Decides to extend this decision nationwide.
Nevertheless, Mr president is at risk of expending his political capital quickely.
It is expected that real GDP to grow by 6.1% a year average in 2017-21,
supported by healthy private consumtion. However, Investors are confident in
the way Mr. President is working for a country thinking about the future of
Philippions.
Impementation of laws protecting property right is weak. Judicial independence
is strong, but the rule of law is generally ineffectual. Courts are hampered by
inefficiency procedures. Corruption and cronyis, are pervasive. A few dozens
leading families hold a dispropotionate share of land, corporate wealth and
political power. A culture od impunity is reinforced by the strong -arm tactics of
the new President. From a Scale of 1- 100, government integrity is just 38.7.
The countries Regulaory freedom in a scale 0-100, comes around 77, which
helps in rising the score of GDP growth rate and per capita GDP also rises.
If we talk about governance ranking in a scale of 0 to 100, the country had a
ranking of abut 85, where it represents good freedom and as this rises the GDP
Growth and GDP per capita also rises.

BUSINESS CONDITION
Gradual improvement of the business regulatory enviroment includes reduction
of the time and cost involved in fulfilling licensing requirements. The labor
market remains structurally rigid, but existing regulations are not particularly
burdensome. In 2016, the government used its authority to grant special
agricultural subsidies in responce to EL Nino Drought conditions. There are
price controls on pharmaceuticals and some food and household fuel items.
On a scale of 0-100, business of freedom is ranked at 62.6, which is remarkbly
quite good. Whereas, on schale of 0-100, labour freedom is 57.2 which is also
not bad in comparison to the other emerging countries.
Philippines is ranked 99 among 190 economics in the ease of doing business,
according to world bank annual ratings. The rank of the country remain
unchanged at 99 in 2015 & 2016. Doing Business in Philippines averaged
121.22 from 2008 until 2016, reaching an all time high 144 in 2009 and record
low as 97 in 2014. (Below Figrue) .This index ranks the countries each other

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 Philippines:- An Emerging Market

based on how regulatory environment is conductive to business operation

stronger for business.

Starting a business in this cuntry is not easy for even the philippions. Thier is a
scale which rank the country in scale of 0-183, where average of ranking is
done in accordance to following three criteria ; procedures, time and cost.
Philippine is ranked at 171, in 2017. The country has dopped down to 7 ranks
below as it was listed at 164 in 2016.

TECHNOLOGY INNOVATION AND INFRASTRUCTURE FACTORS

In Global Innovation Index (GII), In year 2017,Philippines is ranked at 73(out
of 126). The overall GII score is the simple average of the input and output sub
Index scores. From a scale of 0-100 it scores 32.5. This innovation efficiency
ratio from 0-1.0, it has score 0.6 and rank out of 126country is 55. In Innovation
Input Sub-Index it scores 39.4 while in Innovatin Output Sub-Index scores 25.6
and it ranked at 83 and 65 repectively.
The internet penitration in the country was the lowest in all asian countries. It is
as low as 29% of the total Population by the end of year 2011. But by the end of
year 2016, the percentage increased immensely to 43.5%. The penetration in
increasing remarkbly, infact the App market is still huge in the country. Their
has been a digital shift in the Phillipians. Infact now according to Reports from
Hootsuite and We are Social Ltd. tells that Phillipnos spent an average of 4
hours and 17 minutes oer day on social media such as Facebook, Snapchat and

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 Philippines:- An Emerging Market

Twitter, which was the highest in the world. It has beeen also forcasted that by
the end of 2017 their would be around 30 million smartphone users, whereas it
was just 21.7 in 2015. These all paramets would give boost to GDP and per
capita GDP of the country.
Transportation in the Philippines is relatively underdeveloped, mailnly due to its
mountain area and the scattered islands. The other reasons for underdeveloped
is due to the government persistent underinvestment in the nations
infrastucture. Though in recent past government is trying to improve the
transport infrastructure through government projects. The country has 12
international airports, and has 20 major and minor airports serving the country.
In terms of Ports and harbour their are around 30 major ports for shippments,
where the main is the port of Manila.
As far as in ease of doing business is considered everything centered around
Manila and cities are well connected and as a investor countrys Techonolgy and
Infrastructure are consider they all are boosting the GDP and per capita GDP
which are on postive side for the investors to invest in the country.
HUMAN DEVELOPMENT
Overall in Education, country rank on 113 (out of 127), where in a scale of 0-
100 it has 26.9. Expenditure on education, country rank 106, where its score is
just 18 which is way too much low and it is a alarming situation for the country.
Government expenditure on education per pupil, secondary rank is 99, where its
score is just 6 out of 100, which is one of the worst and lowest in Asia.
Phillipines have not given anything in terms of research as such their is no
patents on their name. The government gross expenditure on R&D, the score is
2.9 out of 100 and country rank on 120 out of 127 and they are far behind few
african countries too.
SOCIAL RANKING
The social ranking is a part of the total ESG( environment, social and strategic
governance) ranking. The ranking provides data on key performance indicators
(KPI) that has been identified to undertand long-term sustainability prospects of
a country. The table below shows different KPIs that have been taken into
account to arrive at final social ranking of Phillipians.

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 Philippines:- An Emerging Market

Category Key Performance indicator (KPI) Ranking Good/Bad

Discrimination Seats held by Women in national 27.20% Bad
parliament
Employment Ages 15 to 24 employment-to- 30% Bad
population ratio
Employment Vulnerable employment 38.40% Good
Employment Share of women employed 50% Good
Health Life expectancy at birth 68.41 Good
Health Infant morality rate 35 Good
Health Prevalence of HIV 0.01% Good
Health Prevalence of undernourishment 13.5% Good
Human Rights Net migration per capita -60.10% Good
Human Welfare Public spending on education 2.7% Bad
Human Welfare Literacy ratio 95.6% Good
Human Welfare Poverty ratio 26.3% Bad
Human Welfare GINI income inequality. The GINI 43.6% Bad
coefficient is a measure of
statistical dispersion intended to
represent the income distribution
of a nations residents
Human Welfare Net ODA received (current US$) 5% Good
per capita. ODA stands for
Official Development Assistance
received in the form of grants or
loans from developed countries
Defense Military Expenditure (% GDP) 1.27% Good

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 Philippines:- An Emerging Market

ENVIRONMENT
The carbon footprints, rising sea levels and global warning are major concern
and solutions will need to be devised by the nations with competing interests.
This might result in a whole new set of businesses revolved around alternative
energy, increasing forested areas, biodiversity and water quality. Many
emerging nations are taking the lead in this. For envioronment factors again
their are set of KPIs by which countries can be measured. The KPIs focused
upon here are shown in the table below
Category Key Performance Indicator (KPI) Ranking Good/
Bad
Emissions Carbon intensity of Growth (five year) 100-150 Good
Emissions Carbon dioxide per capita from fossil fuel use 1.06 Good
Energy Energy imports (% of energy use) 45.7% Bad
Energy Coal Consumption per GDP 13.25 Good
Electricity Electricity consumption per GDP 699 Good
Water Freshwater withrawls per GDP 82.23 Bad
Electricity Renewable (non-hydro) per total electricity 14.9 Bad

Conclusion
Phillipians is the one of the best emerging countries. As a investor if you are
looking to invest in Asia, Phillipian is one of the best country to invest as they
have been trying to improve their economy and the results are also showing
that. Infrastructure is improving like anything, government is trying to create
transparency in government policies though they need to work on that more.
But as an Emerging country, the country is doing really good and as an investor
we should not even think once before investing.

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