Outlook for 2015: Exports as Lynchpin of Sustainable and Inclusive Growth

Outlook for 2015: Exports as Lynchpin of Sustainable and Inclusive Growth EMMANUEL F. ESGUERRA Deputy Director-General NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY Philippine Exports Confederation 4 th Quarter General Membership Meeting October 21, 2014

Outline of Presentation I. Recent Economic Developments II. Export Data Targets vs. Actual III. Opportunities/Outlook for the Export Sector IV. Strategies to Increase Exports V. Philippine Export Development Plan 2014-2016

RECENT ECONOMIC DEVELOPMENTS The Philippine economy is on a high trajectory at the beginning of the current decade... 8,000,000 Philippine Real GDP at 2000 Prices (Millions Php) (1960 to 2013) 7,000,000 6,000,000 5,000,000 Real GDP growth 3.7% (2011) 6.8% (2012) 7.2% (2013) 4,000,000 3,000,000 2,000,000 1,000,000 0 Source: Philippine Statistics Authority (PSA)

RECENT ECONOMIC DEVELOPMENTS The acceleration in Q2 2014 brought the GDP growth in the 1 st Semester back on the higher trajectory path. 1 st Sem 2013 1 st Sem 2014 GDP Growth 7.8% 6.0% By Industrial Origin Share to Growth Share to Growth GDP Rate GDP Rate Agri, Fishery, Forestry and Hunting 10.2 1.6 9.9 2.2 Industry 33.1 10.9 33.3 6.6 Of which: Manufacturing 22.6 9.9 23.2 8.8 Services 56.7 7.2 56.9 6.4 By Expenditure Household Final Consumption 57.0 5.3 67.3 5.6 Gov t Final Consumption 10.3 11.1 11.6 0.9 Capital Formation 16.6 41.7 19.3 3.9 Of which: Fixed Capital 18.0 15.5 21.6 7.6 of which: Public Construction 1.8 30.0 1.9-2.6 Private Construction 5.6 22.5 6.5 3.5 Durable Equipment 8.9 11.7 11.3 13.6 Changes in Inventory -1.4 64.6-2.3-53.0 Exports 38.2-9.1 47.7 11.8 Imports 38.2-1.1 45.0 5.7 Source: PSA

RECENT ECONOMIC DEVELOPMENTS While household spending continued to have the largest contribution to GDP on the demand side, investment is increasingly becoming a major driver of growth. 12.0 10.0 8.0 6.0 Average Contribution to Growth (ppt) 4.6% 5.0% 5.9% 7.2% 6.0% 2.7 ppts cont n to GDP growth of NX 4.0 2.0 2.2% 3.6% 0.0-2.0-4.0 1991-1995 1996-2000 2001-2005 2006-2010 2011-2013 FY 2013 SEM I 2014 Household Consumption Government Consumption Capital Formation Net Exports Source: PSA

RECENT ECONOMIC DEVELOPMENTS Merchandise Exports Growth (3-Month Moving Average, in %) Comodity Group Aug 2014 (M-o-M Growth) August (Y-o-Y Growth) Jan-Aug (Y-o-Y Growth) 2013 2014 2013 2014 Total Exports 0.2 30.1 10.5 5.8 9.2 Total Agro-Based Products 13.0 87.0 41.0 23.5 18.2 Forest Products -1.0 135.8-29.3 89.9-5.4 Mineral Products -2.8 184.0 30.9 60.1 29.2 Petroleum Products -51.6 115,296.2-83.6 198.8-60.7 Manufactures -0.7 19.3 8.4 1.4 8.2 of w/c: Electronic Products 8.9 15.6 10.0-1.4 5.2 Garments -9.9 17.5 86.0-9.7 20.9 Wood Manuf. -11.0 78.3-36.1 67.9 2.8 Chemicals 2.9 91.0 36.8 49.5-22.3 Source: PSA Machinery & Transport Equip. -39.2-50.9 61.4-35.1 42.5 Source: PSA

EXPORT DATA: TARGETS AND ACTUAL Barring any significant external shock, the Government is optimistic that 2014 merchandise export targets can be met amid failure to reach targets over the past few years 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0-52.1 60.0 56.7 69.0 40.7 79.0 91.0 2012 (Baseline) 2013 2014* 2015 2016 Target Actual Actual figures are from Philippine Statistics Authority (PSA) Targets are based on Philippine Development Plan Midterm Update using PSA data * January to August 2014 actual merchandise exports performance

EXPORT DATA: TARGETS AND ACTUAL as well as meeting the services export target for the year... 35.0 30.0 25.0 20.0 20.4 18.6 21.0 22.6 23.0 26.0 29.0 US$ bn 15.0 10.0 10.8 5.0-2012 (Baseline) 2013 2014* 2015 2016 Target Actual Actual figures are from Bangko Sentral ng Pilipinas (BSP) Balance of Payments (BOP) Statistics Targets are based on Philippine Development Plan Midterm Update using BOP data * January to June 2014 actual services exports performance

OPPORTUNITIES/OUTLOOK FOR THE EXPORT SECTOR ASEAN integration brings to the table opportunities that can help the country in achieving inclusive growth... ASEAN Economic Community in 2015 GDP of US$2.3 trillion, nearly 620 million people EU Generalized Scheme of Preferences Plus (GSP+) European Commission favourably endorsed PH application Discussions on possible FTAs European Free Trade Association, Regional Comprehensive Economic Partnership, Trans-Pacific Partnership New markets Russia, Brazil, Middle East

KEY STRATEGIES TO INCREASE EXPORTS IMPROVED BUSINESS CLIMATE Streamline bureaucratic procedures Standardized fees/costs and processes in 27 out of the targeted 96 1 st class municipalities with the Regulatory Simplification for Local Government Reduced processing time and steps to register businesses From 10 to 5 steps from 1-3 months to 1-3 days in 1,202 (73.6%) of 1,634 LGUs under the streamlined Business Permit and Licensing System From 4 to 5 days to 30 min under the Philippine Business Registry From 4-8 hours to 15 minutes under the Enhanced Business Name Registration System

KEY STRATEGIES TO INCREASE EXPORTS IMPROVED BUSINESS CLIMATE Institutionalize Regulatory Impact Assessment across all government agencies Facilitate trade with National Single Window Accelerate infrastructure development

KEY STRATEGIES TO INCREASE EXPORTS ACCELERATE TRADE PROMOTIONS As of September 2014, PHL has participated in fourteen (14) trade missions abroad during the year to promote exports and tourism. Upcoming trade missions in India, France, South Korea, Indonesia, and Dubai

Committed and indicative projects to address power shortage... COMMITTED AND INDICATIVE POWER PROJECTS (2014-2017) Number of Projects Committed Total Rated Capacity (MW) Number of Projects Indicative Total Rated Capacity (MW) Luzon 24 2,491.9 (50.1%) 34 9,840.8 (79.7%) Visayas 13 587.6 (11.8%) 20 776.2 (6.3%) Mindanao 16 1,891.7 (38.1%) 17 1,726.6 (14.0%) Total 53 4,971.2 (100%) 71 12,343.6 (100%) Source: Department of Energy as of May 31, 2014

KEY STRATEGIES TO INCREASE EXPORTS PRODUCTIVITY AND INNOVATIVE CAPACITY INCREASED Growth drivers Manufacturing Agro-industry Tourism IT-BPM Logistics Construction Examples of strategic plans, roadmaps Comprehensive National Industrial Strategy (based on the industry roadmaps) Manufacturing Revival Program (focus on increasing linkages) Integrated Coconut Industry and Poverty Reduction Roadmap Tourism Development Program Tourism cluster destinations: Central Visayas, MM & CALABARZON, Central Luzon, Western Visayas, etc. Next Wave Cities National Logistics Plan Core Infrastructure Investment Program

KEY STRATEGIES TO INCREASE EXPORTS PRODUCTIVITY AND INNOVATIVE CAPACITY INCREASED Strengthening MSMEs provision of technical assistance and continued implementation of MSME programs Small Enterprise Technology Upgrading Program (SETUP) Go Negosyo Act SME Roving Academy Shared Services Facilities

KEY STRATEGIES TO INCREASE EXPORTS PRODUCTIVITY AND INNOVATIVE CAPACITY INCREASED Enhancing competencies of labor force Pursue market-driven education and training Harness science, technology and innovation Strengthen the industry-academe collaboration

KEY STRATEGIES TO INCREASE EXPORTS MARKET ACCESS EXPANDED Maximize opportunities in regional and global integration Harmonize the National Quality Infrastructure (NQI) with internationally accepted QI Strengthen national brand awareness

Exchange Rate Performance, 2009-2014 50.0 48.0 46.0 44.0 42.0 40.0 38.0 36.0 2009 2010 2011 2012 2013 2014 2015 (f) High Low Actual Source: BESF 2010-2015, BSP

COMMENTS ON THE DRAFT PEDP Philippine Export Development Plan 2014-2016 Seven Point Agenda Remove all unnecessary regulatory impediments to movement of goods Enhance domestic capacity to upgrade the quality and standards of export (Improve National Quality Infrastructure) Improve exporters access to trade finance using Aid-for Trade Set up an Export Promotion Fund (EPF) to assist exporters Strengthen the resource base of EMB as an Export Promotion Agency (EPA) Improve the efficiency of the producer services through regulatory reforms Design and implement comprehensive packages of export support and promotion programs for select industries

COMMENTS ON THE DRAFT PEDP The Updated PDP commits higher exports target than the draft PEDP 2016 EXPORTS TARGET, in US$ billion Updated PDP Draft PEDP Difference Merchandise 91 67-71 20-24 Services 29 31 2 Total 120 101 104 16-19 Source of data: PDP 2011-2016 Midterm Update, Draft Philippine Export Development Plan

COMMENTS ON THE DRAFT PEDP Comparative Advantage Areas o Pool of skilled workers. Move up the value chain by greater us of high quality services o Current Revealed Comparative Advantage: IT-BPM, business services o Potential Comparative Advantage on: Creative/knowledge-based services; medical tourism; tourism and travel related; Educational hub, recreational, cultural and sporting; aircraft maintenance, repair & overhaul; ship repair; construction and engineering Source: Asec. Aldaba, RTD on Services, 18 Sept. 2014

COMMENTS ON THE DRAFT PEDP Philippine Export Development Plan 2014-2016 Diversify export products and adapt to global demands Finalize Comprehensive National Industrial Strategy Remove investment restrictions cited in the Foreign Investment Negative List Address supply chain gaps and power costs Increase value-added of exports Make education/skills more industry-appropriate Strengthen manufacturing-related services Promote Philippines as a preferred tourist and IT-BPM destination (esp. for high-value services)