Transcript Phillipines Presentation

Philippine Business
Opportunities -
GMA’S State of the Nation Address,2001:
 “We will enhance the competitiveness of the “superregions - North Luzon Triangle, Metro Luzon Beltway,
the Central Philippines, and the Cyber Corridor.”
• “. . .so, we have undertaken 5 strategies to attain
competitiveness:
•
•
•
•
•
Food affordability/availability
Power cost reduction
Modernize infrastructures
Mobilize, upgrade knowledge/technologies
Reduction of government red tape
RP’s FDI agenda beyond 2007
 Increase FDI by USD 9 billion annually & create 1 million
jobs in 6 major sectors:






ENERGY, POWER & BIOFUELS
INFRASTRUCTURE –SUBIC, BATANGGAS CORRIDORS
HEALTHCARE, RETIREMENT & TOURISM
IT/ITES
MANUFACTURING
MINING
End result - for global business to
appreciate RP business potentials Services is major driver-component;
a priority of the GMA Administration
Fiscal reforms are kicking in;
We now have the funds to spend on
infrastructure, education, and programs to
enhance our competitiveness
 RP is still LOW-COST
Market analysts and institutional investors
response: - “from cautiously bullish to very
bullish”
Domestic Stabilization- Macro Indicators
Gross National
Product
Gross Domestic
Product
Fiscal Balance
(% of GDP)
Inflation Rate
Unemployment
Rate
Poverty Incidence
(families) %
2004
2005
2006
2007
2008
2009
2010
5.2-6.0
5.56.4
6.57.5
6.97.8
7.08.0
7.28.2
7.28.2
4.9-5.8
5.36.3
6.37.3
6.57.5
6.87.8
7.08.0
7.08.0
-4.2
-3.6
-2.9
-2.0
-1.1
-0.2
0.0
4.0-5.0
4.05.0
4.05.0
3.04.0
3.04.0
3.04.0
3.04.0
12.1
11.0
11.6
11.1
10.4
9.7
8.9
25.6926.04
24.35- 22.93- 21.61- 20.31- 19.04- 17.8825.04 23.95 22.89 21.84 20.78 19.81
Other Indicators
GDP 1st quarter: 5.5% (target for 2006:
5.5-6.2%)
Services:
Industry:
Agriculture:
6.2
5.5
3.8
Population growth rate: 2.36%
-5
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
GDP GROWTH TREND
At Constant 1990 Prices
20
15
10
5
0
-10
-15
China
Source: United Nations Statistics Division
Philippines
Thailand
Vietnam
Fiscal and Macroeconomic stability
 Fiscal targets and achievements:
 balanced budget by 2008; P974.1B total revenue target for
06
 Reduction of fiscal deficit: 2004: -4.2%; 2006: -2.1%
 7-mo. deficit for 2006: P48.5; (in 2005: P82.6B):
 Jan-Jul 06 revenues:
 Jan-Jul 06 expenses:
P544.7B
P593.2B
 Budget deficit P31.6B for 1st semester 2006




Overshot target deficit for 1st quarter by P58.9B
Government revenues increased 25% for first 6 months of 2006
Income tax take up 14% in first 6 months
On target to meet year-end deficit of P125B or 2% of GDP (from
3.5%)
Fiscal reforms are In
Gov’t expenditure management:
 Passage of Government Procurement Law (2004)
 Government rationalization programme (2005present)
 Implementation of Organizational Performance
Indicator Framework for all government agencies and
instrumentalities (2005-present)
 Compensation reform (ongoing)
BALANCED BUDGET BY 2008
P Billion
NG fiscal balance
accelerates to
2008 as revenue
collection improves
on account of the
RVAT and tax
administration
measures
50
0.0
12.1
17.0
2009
2010
0
2005
2006
-63.0
-50
-100
-150
-200
2007
-124.9
-180.0
2008
REDUCTION OF NGOVT DEBT
to 46% of GDP in 2010
% of GDP
90
80
72.3
68
60.2
70
60
55.4
50.7
50
40
46.3
30
20
10
0
2005
2006
2007
2008
2009
2010
LOW INTEREST RATES
91-Day T-bill Rate falls to 4.86%
Arroyo Legacy
FISCAL-DRIVEN EXCHANGE RATE
Deficit hits 5.3%
Fiscal Reforms
Deficit worsens 1.9 to 4.1%
NET FOREIGN BUYING
grew by 72% in the first seven months of 2006
“More and more foreign investors are entrusting their money to us (RP
stock market). . . a clear vote of confidence in the country’s future.” Philippine Stock Exchange
30
In Billion Pesos
25
27.5
72%
20
15
16
10
5
0
Jan-Jul 05
Jan-Jul 06
Overall In, Prod and Global
competitiveness
 Trade balance:
(US$1.28)
 Total imports:
US$19.97B (Jan-May 2006)
 Total exports:
US$18.69B (Jan-May 2006)
 Overseas Filipino remittances:
US$10.3B (2005)
 Portfolio investments: US$106.3M (June 2006)
 72% increase in foreign purchases
 Current account surplus:
US$1.2B in 1st Q 2006
 Revenues from Outsourcing (est 2006):
$1.2B
Boosting In, Prod and global
competitiveness
 Generated financial support from US, Millennium
Challenge Account, APEC for anti-corruption and
governance reforms
 Positive global market perception on reform process:
 UBS Warburg study: fiscal reforms attract renewed interest;
bullish on RP
 S&P: RP to outperform its fiscal projection for 2006
 FDI Q1 2006:
P63.5B (P31.5 Q105)
 P59.6B in manufacturing: (94% of total approved FDIs)
 SBMA:
P51.4B (81%)
 No. 1 investor: Korea at P51.7B (81%); USA: P 6.4B (10%)
 Projected employment: 32,434 (98% increase)
Boost investments, productivity and
global competitiveness
Core inflation:
7.1%
Rise in petroleum and energy costs…
… but cheaper imports, sound wage
regulation, and restrained public
expenditures
But RP is still LOW-COST
Manila cheapest place to live; but low
income (wages) -Union Bank of Switzerland
Manila Among Top Ten Cheapest Cities
Methodology:
Cost of weighted
shopping basket
containing 122
goods and
Services
(left column:
gross; right
column: net;
New York=100)
Source: Prices and Earnings: A comparison of purchasing power around the globe (UBS
2006)
Manila Among Top Ten Lowest Wages
Methodology:
Effective hourly
wages for 14
professions,
weighted
according
to distribution,
net taxes and
social security
(left column:
gross; right
column: net;
New York=100)
Source: Prices and Earnings: A comparison of purchasing power around the globe (UBS
2006)
Philippine Stock Exchange Index, 1989-Present
Other perks-- strategic location
Located in the fastest growing outpost of
high-tech economy
Gateway of international shipping and airlines
Critical entry point to the $500M ASEAN
market
Accessible by air within 4 hours from every
Asian capital
From 7-15 hrs time zone difference from
major markets allow for optimal operating
turnaround; max 12-14 hours
Other perks-- business efficiency
 Big numbers of leading high-tech electronic and
semiconductor export-- 67% of manufacturing
exports
 Big numbers of leading MNCs engaged in motor
vehicle, distribution and logistics, telecoms, banking,
professional services, outsourcing activities
 Philippines - 4th most attractive relocation for
production of semiconductors and electronics
Other perks-- investment incentives
 4-8 years Income Tax Holiday
 Special 5% tax rate after lapse of ITH for IT park
locators
 Tax and duty exemption on imported capital
equipment for IT park locators
 Unrestricted use of consigned equipment
 Deduction for labor expenses up to 150%
 Deduction for training expenses up to 150%
 Exemption from wharf duties
Advantages of Philippine
human capital:
 Skilled labor force of 29 million; low attrition rate
 400,000 fresh college graduates every year in
business, engineering, and medicine – with
English proficiency and at 94 % literacy rates
 Competent senior managers
 Western-patterned educational system
 Strong work ethic, customer-oriented mindset,
easily trainable with a natural inclination for
innovative and creative thinking
 Superior, competitive educational infrastructure
 Adherence to global standards
Services - BPO/KPO
 Employment, revenues, investments in RP services
sector to rise 42% in 2006
 Outsourcing jobs to rise 44%
 Outsourcing Investments to rise 42%
 Outsourcing revenues to rise 52%
 Close to 120 outsourcing companies in RP
 No. of Service Providers:
62
 Total full time employees:
225,000
Services (Accountancy)
 No of service providers:
60++
 Total employees:
22,500
 Filipino Registered CPAS:
113,300 (2005)
 Projected growth for 2006:
42%
 Key players:
AIG, JP Morgan, Citibank, Accenture,
Thomson Financial, Shell, HSBC, HP,
Alitalia, Chevron Texaco
RP is LOW-COST
RP is still LOW-COST and increases
are moderate:
 core inflation at 7.1%
 wage inflation at 8%
 Low attrition pegged at 35%
 Average prime interest rates 2005: 8.5%
Reliable Infrastructure Support
REAL-ESTATE
Low rates with liberal lease agreement terms
Mostly administered by international property
management companies
• POWER
Stable with excess capacity over current
demand
• TELECOMS
Deregulated telecoms industry
•
International Connectivity
North America
Pacific
Asia
Europe
ACeS
South and
SE Asia
South East Asia
Middle East
North America
Pacific
North Asia
Europe
Agila II
Philippines,
Asia Pacific
and Hawaii
North America
Pacific
North Asia
Europe
G-P
5 Gbps
North
Asia
North Asia
Malaysia
Singapore
Pacific
Asia
Europe
North America
Pacific
North Asia
Europe
Business opportunities are enhanced
by ICT infrastructure
President’s priority initiative is to strengthen
the “Cyber Services Corridor”
Clark Special Economic Zone to be
transformed into a U$2B wifi
hot-spot zone
SM Group to complete P1.5B OneEcom
Center by July 2007 to address the ICT
needs of BPO companies
Verdict on RP business potentials:
Very bullish
 AT Kearney survey: 4th best outsourcing location
 UBS Warburg research survey: Fiscal reforms make RP attractive;
bullish on RP
 McKinsey & Co survey: RP among top 5 Outsourcing destinations
 S&P:
RP to outperform its fiscal projection for 2006
 META Survey:
Filipino workers consistently one of the world’s
most competent
 GAAP Survey:
Filipino accountants best in the world
 Phil Services Coalition study: RP poised to be more aggressive in
services market
 BPAP:
Outsourcing to grow 42% in 2006
INVESTORS ARE UPBEAT ON THE
PHILIPPINES
Goldman Sachs
Our bullish Philippines view is centered on the belief that the economy is still
in the early stages of a cyclical asset price reflation cycle.
Adam Le Mesuriar
Merrill Lynch
With the strong macroeconomic story continuing to unfold throughout this
year, we think that there is more upside for the Philippine debt.
Fitch Ratings
Raised RP country rating from BB to BB+. Bullish
investor sentiment should provide the backdrop that
would signal a possible upgrade in the country’s
sovereign ratings.
S&P
RP may beat its revenue and budget deficit-reduction
targets this year after raising and expanding its valueadded tax. . . . at this stage the expanded value- added
tax is delivering the goods together with tightening up of
administrative and enforcement measures…The
government's revenue and deficit targets are realistic. . .
. . .there's probably some upside as well.
ING Bank
RP likely to get another upgrade of its credit rating
outlook this year as a result of its improving fiscal
condition.
Moody’s will raise its outlook on the Philippines to
stable before the year ends… and might also raise their
credit outlook to positive if the government continues
its trend of outperforming its targets. . . . investors will
continue to be buying Philippine assets.
We expect strong fundamentals and a stable external
environment to support Philippine financial markets.
Paul Joseph Garcia
QUALITY LOCATION AND
PRESENCE OF MAJOR GLOBAL PLAYERS
A.T. Kearney says…
The Swiss Int’l Institute for
Management Dev’t says…
In 2004, among 60 countries in the Asia
Pacific, the Philippines ranks:
 No 1 - Availability of skilled workers
 No 3 - Availability of senior managers
 No 4 - Availability of IT professionals
 No 10 - Availability of accounting and financial
skills
 No 10 - Availability of expatriate middle
management
 No 12 - Availability of qualified engineers
What others say about RP …
Robin Martin
GM, Intel Phils.
• “… we’ve been here for 27 years. In spite of the ups and
downs, our Philippine operations continue to be very
competitive. We take pride in being the country’s top export
performer in the last five years, mainly because of a resilient,
dedicated, multi-skilled, and English-speaking workforce…”
• … supportive Government… the President is pushing for
Information and Communication Technology (ICT) as a primary
growth engine of the economy…”
. . .and still others say …
John Sykes,
CEO Sykes Corp.
 “The people of the Philippines are a unique people,
which is why they fit into the SYKES Global Team so
well. They are not only professional, dedicated, and
team-oriented but also communicative and
responsive – qualities essential to the success of a
global company. They are civic-minded, fun-spirited,
talented and highly educated – 99.9% of our SYKES
Manila employees hold bachelor degrees or higher.
. . . still others say about RP
…
LUIGI BENEDETTI
Director
Alitalia Far East
“… conveniently located in the middle of the
Asian area, politically stable, with good
communication facilities, and the English
language being widely spoken…
…low cost of manpower, and a good attitude
of the people to be trained and to produce a
good output….”
. . . and still others say that RP
…
Catherine Weir
Country Corporate Officer
Citibank NA
“... recent international studies reveal that
Filipino employees are rated very highly in terms
of skill, flexibility, adaptability, cost and ability to
speak English compared to other countries in
Asia. Ten years ago, there were no centralized
services in the Philippines. Today, some 14
companies have moved critical services into
centralized operations in the Philippines. The
pace can only accelerate…an ideal business
location.”
And what else …
Kirsten Powers
Corporate Communication
AOL.com
“…we opened the Philippine center to ensure
that our members everywhere continue to
receive the highest level of customer service
…
…we have seen outstanding results,
achieving and surpassing expectations
through an incredible workforce and
facilities…”
others say about
RP …
Glen Westerman
President and CEO
Lexmark Int’l
 “Lexmark International (Philippines) Inc. has been successful
because of the talent and extra effort of the highly educated,
English-speaking Filipino employees. The Philippine Team won the
Lexmark “Triple Crown Award” for bringing the new plant on-line
ahead of schedule, within budget and exceeding the product
shipment plan by 300% in 1999.
 In 2000, the Philippine plant delivered the best Lexmark CPD plant
performance in areas of cost, productivity, quality and safety. This
outstanding performance is the driving reason for Lexmark’s
consideration of the Philippines for future expansion.”
Here’s what others say about
Terry J Emrick
RP …
President
Ford Group Phils.
 “The strength of the Philippines is the Filipinos - - Our
expat requirements are much lower than we
anticipated during our investment planning.
 We have already sent several Filipinos to other
locations around the world to provide expertise from
what they learned during our launch here. ”
Assessing RP business
potential:
MACRO INDICATORS
DOMESTIC STABILIZATION
REFORMS
COMPETITIVENESS
PROFITABLE
PHIL PARTNERSHIP
SERVICES/ICT
INFRASTRUCTURE
BUSINESS PERKS
“Partnership with the
Philippines now - is Profitable”
 Fiscal reforms
+Sound macro-management = gov’t spending in public
investment and infrastructure
 Increased gov’t spending
+ political commitment – political risk = investor confidence
 Investor confidence
+ remittances = private investment (FDI+portfolio)
 Increased gov’t spending in infrastructure
and ICT - corruption - red tape = business efficiency
 Business efficiency
+ labor productivity = competitiveness
End of Presentation