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Economic growth Philippines posts record 7.

3% economic growth MANILA, Philippines (UPDATE) - The Philippine economy expanded by 7.3% last year, the highest since democracy was restored to the country more than 2 decades ago, the government said on Monday. Growth domestic product (GDP) growth in the last 3 months of 2010 also surpassed market expectations to reach 7.1%, the National Statistical Coordination Board (NSCB) said.

The recovery of the global economy played a big part in the strong performance by helping boost exports and revive key industries, while better weather towards the end of the year helped the struggling farming sector, it said. "The global economic recovery which resulted in record growth rates of foreign trade... contributed to an economic performance in 2010 that well surpassed the government's target of 5% to 6%," the NSCB said. The 7.3% full-year GDP expansion was the highest since at least 1986, when dictator Ferdinand Marcos was toppled in a peaceful revolution. The strong growth came during a period of peaceful political transition for the Philippines, as Benigno Aquino easily won presidential elections in May last year and succeeded Gloria Arroyo as the nation's leader the next month. The economy grew by just 0.9% in 2009, the lowest in 11 years, as the country struggled amid the global financial crisis.

Rebound in exports, agriculture sectors Renewed global demand for the country's exports allowed industrial growth to accelerate to 8.3% in the final quarter of 2010, up from 3.8% during the same period the previous year, according to the NSCB. The agriculture sector also rebounded to grow by 5.4% in the 3 months to December after storms and drought led to negative growth in the previous 4 consecutive quarters. The government agency said businesses were investing more in durable equipment, which boded well for future economic growth prospects, although it did not give an official GDP forecast for this year. Last week, the government said it expected the local economy had grown 7% to 7.4% in 2010, while growth in 2011 was seen to be "more modest" due to the absence of election spending. Socioeconomic planning chief Cayetano Paderanga said they assumed a conservative 5% 2011 GDP growth target in the preparation for the national budget. However, they are hopeful a growth of 7% to 8% would still be achievable. Interest rates The Philippines and Indonesia remain the only countries in the region that have not raised interest rates since the end of the global financial crisis. The overnight borrowing rate has been at a record low of 4% since July 2009. Bangko Sentral ng Pilipinas Governor Amando Tetangco said on Friday there was no pressure on the central bank to raise interest rates despite market worries over rising food, oil and transport costs. Growth Competitiveness Ranking Selected Asian Economies Philippines Singapore Hong Kong Taiwan 2000 2001 36 2 7 10 48 4 13 7

Malaysia South Korea Thailand Indonesia Vietnam

24 28 30 43 52

30 23 33 64 60

Source: World Economic Forum

The Global Competitiveness Report 2001 of the World Economic Forum has placed the Philippines at 48th rank from 36th place in 2000. The ranking is n terms of prospects for growth in GDP per capita within five years. As can be gleaned from the table above, almost all our neighbors in the region with the exception of Taiwan and Korea fared poorly among 75 countries surveyed. In terms of sub-component indices, the Philippines ranked 40th in technology index just ahead of Indonesia and Vietnam; 64th in public institutions index beaten by Vietnam and slightly in front of Indonesia but places 28th in macroeconomic index besting Vietnam and Indonesia. The table below showed the comparative performance of regional economies by competitiveness sub-indices. Economy Ranking by Sub-Indices Public MacroTechnolo Instituti econom gy ons y 4 9 18 22 33 39 40 61 65 24 44 6 39 10 42 64 66 63 15 8 1 20 4 16 28 41 37

Economy Taiwan South Korea Singapore Malaysia Hong Kong Thailand Philippines Indonesia Vietnam

Source: World Economic Forum

World Competitiveness Yearbook Another survey on competitiveness was also conducted by the Switzerland-based Institute for Management Development (IMD) in partnership with the Asian Institute of Management (AIM)Policy Center. Based on the survey results, the Philippines was ranked 40th overall out of 49

countries covered. The survey was based on criteria on economic performance, employment growth, government efficiency, business efficiency, productivity, and infrastructure. Though we maintain our ranking from last year, our ASEAN neighbors Thailand and Malaysia performed better than the Philippines as their overall competitiveness rankings improved at 26 and 34 from 29 and 38, respectively. Notable improvements in economic performance and government efficiency have contributed a lot in maintaining our competitiveness ranking. From 40th place last year, the country improved seven rungs higher at 33rd position by economic performance. In terms of government efficiency, from a high of 22nd in 1997, it plunged to 37th last year but was maintained this year. World's 38th Freest Economy A survey conducted by Canada-based Fraser Institute (FI) has tagged the Philippines, along with six other countries, as the world's 38th "freest economy", a term referring to the country's practice of free trade. The 2002 "Economic Freedom of the World" (EFW) survey gauged 123 countries' level of economic freedom or liberties enjoyed by foreigners and citizens to engage in trade or business. Among the factors measured were each country's observance of free trade, rule of law, property rights, freedom to trade and access to sound money. The Philippines was ranked at 38th along with France, South Korea, Botswana and two other countries. On top of the list were Hong Kong, Singapore and the United States in that order. (Source: Businessworld) 40th Most Competitive Economy In its 2002 World Competitiveness Year Book, Swiss agency Institute for Management Development (IMD) ranked the Philippines as the 40th most competitive economy in the world. The Philippines was ranked ahead of Indonesia but behind other East Asian countries such as Singapore, Hong Kong, Taiwan, Malaysia, South Korea, Japan, China and Thailand. In a separate report also in 2002, the Philippines was ranked as 61st among 80 countries in the global growth competitiveness ranking of the World Economic Forum (WEF), which is a project of the US-based Harvard Business School. The local partner of WEF is the Makati Business Club (MBC) while the local partner of IMD is the Makati-based Asian Institute of Management (AIM). These two organizations supplied most of the data used in the country's ranking based on the results of surveys conducted among businessmen and investors. 77th in Standard of Living The United Nations Development Program (UNDP) has ranked the Philippines 77th among 173 countries in terms of human development index (HDI), a gauge of standard of living. The Philippines got a score of 0.754 in 2002, slightly up from 0.749 that it received in 2001. Norway topped the list with an HDI of 0.942 and was followed by Sweden, with 0.941 and Canada, 0.940. Singapore bested all East Asian countries with an HDI of 0.885. Full employment Based on statistical data, the Philippines ranked number one in terms of unit labor costs in manufacturing and number 4 in remuneration in services professions, number 1 in terms of

availability of skilled labor, number 3 for competent managers and number 4 in terms of skills in finance. We are ranked number 14 in terms of IT skills and number 14 in terms of flexibility of people. But these strengths were wiped out by the country's seemingly stagnant productivity. Philippines Population 15 years and over (in '000) Labor Force Participation Rate (%) Employment Rate (%) Unemployment Rate (%) 201 0 60,718 59,237 64.1 92.7 7.3 64.0 92.5 7.5 19.1 2009

Underemployment Rate (%) 18.7

The annual employment rate or the percentage of the labor force who were employed in 2010 was 92.7 percent. This rate was calculated using the average estimates of employed persons and persons in the labor force from the four rounds of the quarterly Labor Force Survey (LFS) conducted in 2010. Last years employment rate was 92.5 percent. Among regions, Cagayan Valley, Zamboanga Peninsula and Autonomous Region in Muslim Mindanao (ARMM) posted employment rates of more than 96 percent. The National Capital Region (NCR) registered the lowest employment rate of 88.5 percent. Of the estimated 36.0 million employed persons in 2010, more than half (51.8%) were engaged in services and about one-third (33.2%) were in agriculture. Most of those who worked in the services sector were into wholesale and retail trade, repair of motor vehicles, motorcycles and personal and household goods (19.5% of the total employed). Of the total employed persons, the laborers and unskilled workers comprised the largest group (32.3%). This was followed by farmers, forestry workers and fishermen (16.0%); officials of government and special interest organizations, corporate executives, managers, managing proprietors and supervisors (13.8%); and service workers, shop and market sales workers (10.6%). The rest of the major occupation groups each comprised less than 10 percent ranging from 0.4 percent to 7.7 percent. The majority (54.4%) of the employed were wage and salary workers, most of whom were in private establishments (40.4% of the total employed). Thirty percent were self-employed without any paid employee, four percent were employer in own family-operated business or farm while nearly 12 percent worked without pay in own family-operated farm or business. More than half (63.5%) of the total employed were full time workers or have worked for at least 40 hours per week. On the average, employed persons worked 41.7 hours a week in 2010. The number of underemployed workers in 2010 was 6.8 million, representing an annual underemployment rate of 18.7 percent. Underemployed workers are persons who express the

desire to have additional hours of work in the present job, or to have an additional job, or to have a new job with longer working hours. The lowest underemployment rate was observed in Central Luzon (9.1%) while the highest was noted in Bicol Region (36.8%). About 2.9 million Filipinos were unemployed in 2010 representing an unemployment rate of 7.3 percent for the year. The unemployed persons who have attained high school accounted for 45.2 percent of all unemployed. The proportion of unemployed males was greater than that of their female counterparts (63.3% compared to 36.7%). The labor force population or those who are either employed or unemployed reached 38.9 million resulting to an annual labor force participation rate (LFPR) of 64.1 percent. Among regions, Northern Mindanao had the highest annual LFPR of 69.8 percent.

Economic sufficiency RAW MATERIALS AND INTERMEDIATE GOODS ACCOUNT FOR 39.5 PERCENT OF THE TOTAL IMPORTS Accounting for 39.5 percent of the total imports, payments in September 2011 for Raw Materials and Intermediate Goods amounted to $2.028 billion or an 11.2 percent increase over last year's figure of about $1.824 billion. Compared to the previous months level, purchases increased by 11.2 percent from $1.824 billion. Semi-Processed Raw Materials had the biggest share at 33.3 percent and valued at $1.712 billion or an annual increase of 11.4 percent from $1.536 billion registered last year. Expenditures for Capital Goods comprising 29.1 percent of the total imports, was higher by 5.2 percent to $1.493 billion from $1.419 billion in September 2010. Mineral Fuels, Lubricants and Related Materials with 18.3 percent share, expanded by 27.0 percent to $941.17 million from $740.83 million in September 2010. Purchases of Consumer Goods grew by 9.3 percent to $597.86 million from $546.78 million in September 2010. Similarly, Special Transactions was up by 11.9 percent to $74.86 million from $66.88 million in September 2010.

IMPORTS FROM JAPAN ACCOUNTS FOR 12.2 PERCENT Comprising 12.2 percent share of the total import bill, Japan, including Okinawa was reported as the countrys biggest source of imports for September 2011 with $627.43 million, an increase of 12.8 percent from $556.04 million in September 2010. Exports to Japan amounted to $685.16 million, yielding a two-way trade value of $1.313 billion and a trade surplus for PH of $57.73 million. United States of America (USA) including Alaska and Hawaii, was the second biggest source of imports with 10.7 percent share and recorded payments worth $547.68 million. This number represents an 11.5 percent increment from $491.06 million registered in September 2010. Revenue from PHs exports to USA, on the other hand, reached $518.73 million, generating a total trade value of $1.066 billion and $28.95 million trade deficit for the Philippines. Peoples Republic of China with a 9.7 percent share to total imports followed as the third biggest source of imports at $498.72 million, higher by 25.8 percent from $396.32 million

during the same month in 2010. Exports to Peoples Republic of China, amounted to $547.64 million resulting to a total trade value of $1.046 billion and a trade surplus of $48.92 million. Singapore settled fourth, accounting for 7.5 percent share of the total import bill in September 2011 at $383.14 million or an annual negative growth of 7.7 percent from $415.12 Price level stability In 2007, the BSP registered notable achievements that brought the inflation rate down to a record low of 2.8%; interest rates sank to 3.36%, and the Philippine peso showed unusual strength against the dollar. This was largely attributed to the BSPs emphasis on price-stability policy. At the height of the oil and rice crisis in August 2008, inflation peaked to 12.5%, but it eventually level off at 9.9% in November 2008 amidst the global financial crisis. Since price volatility resulting from external shocks continues to pose threats, the BSP will maintain its focus on price-stabilization policies. The countrys foreign-exchange rate policy is anchored in market demand. The currency growth between 2007 and 2008, when the Philippine peso peaked at 40.671 to the dollar, was reversed when the currency retreated to the area of PHP 47 to the dollar. The BSP has gradually instituted foreign-exchange liberalization policies. Foreign debt and debt servicing are impediments to development in the Philippines. Out of the proposed PHP 1.46 trillion national budget, PHP 700 billion would be allocated to interest payments and principal amortization. This figure is more than the combined amount that was given to social and economic programs. The outstanding debt of the federal government amount to PHP 121 trillion in December 2008. The countrys development agenda is greatly impeded by the vicious cycle of debt and debt servicing, which gives the government little room to focus on socioeconomic programs. Economic freedom The country allows freedom of participation in the economy, and the emphasis is on investments, competition and business development. Although a market economy is encouraged, it has historically been the exclusive arena of the privileged. While market competition rules are in place, there is still a very high concentration of ownership in the country; over the past 25 years, only 160 families have controlled political and socioeconomic power. Equitable distribution of income
From the following data and discussion we may be able to form conclusions on whether the distribution of income has become more equitable/equal over the past five (5) decades. With percentile data, I will present different ways of grouping families according to income obtained from the Family Income and Expenditures (FIES) surveys, the latest of which is for 2009. I will divide the distribution at the median; look at the top one (1) percent families; examine the coefficients of variation (CVs) at the percentiles; compare Gini coefficients; and, even though lacking in statistical rigor, impose the socio-economic classification of classes A, B, C, D and E on the percentile distribution.

A. Median incomes 1. The median income from 1961 to 2009, nearly half a century, splits the upper 50 percent with an 80 percent share of income and the lower half, with 20 percent. As of 2009, the distribution appears to be the same at the end of Martial Law days. Table 1. Median Income and Income Distribution, 1961 2009 Family Income 1961 1985 2000 2003 2006 2009 Median income (x P1,000) 1 20 89 95 111 135 % Income Share of upper 50% families 82 80 82 81 81 80 % Income Share of lower 50 % families 18 20 18 19 19 20 Source: National Statistics Office. Website: http://www.census.gov.ph; Family Income and Expenditures publications; Unpublished percentile data on incomes. B. Incomes of Top 1% families 2. In 1985, right before EDSA 1, the families in the top 1 percent (numbering about 100 thousand) of the income distribution earned an aggregate income of PhP 31.4 billion. This is nearly what the combined 3.15 million families (or 32 percent) in the lower brackets of the distribution earned, which amounted to PhP 31.3 billion. 3. In 2000, right before EDSA 2, the top 1 percent families (numbering about 150 thousand) in the income distribution earned an aggregate income of PhP 251.2 billion. This is nearly what the combined 5.8 million families (or 38 percent) in the lower brackets of the distribution earned, which amounted to PhP 249.6 billion. 4. In 2003, before the end of the first term of Mrs. Arroyo, the top 1 percent families (numbering about 165 thousand) in the income distribution earned an aggregate income of PhP 235.0 billion (hard to imagine that this declined by 6.4 percent from 2000 but this is the official figure). This is nearly what the combined 5.3 million families (or 32 percent) in the lower brackets of the distribution earned, which amounted to PhP 227.1 billion. 5. In 2006, before the national elections, the top 1 percent families (numbering about 174 thousand) in the income distribution earned an aggregate income of PhP 256.3 billion. This is nearly what the combined 5.2 million families (or 30 percent) in the lower brackets of the distribution earned, which amounted to PhP 257.9 billion. 6. In 2009, before the last national elections, some 185 thousand top 1 percent families earned the equivalent of what 5.5 million bottom 30-percent families collectively earned. 7. The 1:30 ratio in 2009 remained, or stabilized, at the same ratio in 2006. Table 2. Top 1% Families and Bottom % Families Income Comparison 1985 2000 2003 2006 2009 Number of Top 1% Families (x1000) 100 150 165 174 185 with Aggregate Income (PhP billion) 31.4 251.2 235 256.3 342.7 Equivalent to

Number of Families (in millions) 3.15 5.8 5.3 5.2 % of Total 32% 38% 32% 30% with Aggregate Income (PhP billion) 31.3 249.6 227.1 257.9 Source: National Statistics Office. Unpublished percentile data on incomes.

5.5 30% 343

These results raise even more concern when one looks at the top individual taxpayers of 2009 released by the Bureau of Internal Revenue (BIR) in accordance with Section 71 of the National Internal Revenue Code of 1997. These individuals may not have been covered by the survey as their transactions would be categorized in statistical parlance as rare events and thus would have little chance or probability of being selected as samples. Table 3. BIR Top Individual Taxpayers 2009 Rank Taxpayer Tax Due 1 Elaine B. Gardiola P59.54 million 2 Wilfredo B. Revillame P57.25-million 3 Ronaldo R. Soliman P36.70 million 4 Ramon S. Ang P26.44 million 5 Oscar M. Lopez P25.70 million 66 Henry Sy, Sr P25.18 million 7 Carlos D.C. Ejercito P25.02 million 8 Bonifacio D. Gumboc, Jr P24.74 million 9 Ma. Teresa Caridad P. Gallego P24.45 million 10 Felipe L. Gozon P22.20 million 500 Hitoshi Goto P 3.57 million Thus this is evidence that the families in the top 1 percent in the income distribution would be under-represented in the survey. And these should have a higher income share, than is reflected in the FIES, and would further skew the distribution.

Economic security Although there are welfare mechanisms, the regime still fails to address broad issues of health care, poverty and other social concerns. The Social Security System (SSS) and the Government Service Insurance System (GSIS) provide social insurance and security services for private- and public-sector employees. The Philippine Health Insurance Corporation (PhilHealth) provides medical insurance services and medical subsidies to the general public. Although these welfare regimes have been operating for years, there are problems of implementation (e.g., the processing of benefits) that have been subject to bureaucratic red tape. Moreover, the coverage of benefits is often inadequate, as can be seen, for example, by the fact that PhilHealth only subsidizes a small percentage of personal medical expenditures. There have also been accusations of internal corruption. For example, the ombudsman has charged GSIS President Winston Garcia with corruption. Equality of opportunity is extended to women as well as to ethnic and religious groups. In terms of gender equality, the Philippines ranked sixth out of 130 countries in the 2008 Gender Gap Index of the World Economic Forum; it had the same ranking in 2007. This shows that the Philippines has placed importance on gender rights, for example, by giving women equal

access to public office and business opportunities. Nevertheless, indigenous groups have experienced marginalization, such as when their protected lands have become a source of property disputes. The country also places important on freedoms of religion and equal access to religious groups.

Balance of trade

Philippines reported a trade deficit equivalent to 1213 Million USD in September of 2011. Philippines is a major exporter of electronic products like processors, chips and hard drives (more than 50% of total exports revenues). Other major exports include apparel and clothing accessories, coconut oil, woodcrafts and furniture. Philippines major exports partners are United States, Singapore, Japan, China and Hong Kong. Philippines imports mostly: electronic products, mineral fuels, lubricants, transport equipment, industrial machinery and equipment, iron and steel. Main imports partners are Japan, United States, China, South Korea and Singapore. This page includes a chart with historical data for Philippines' Balance of Trade.