Philippines Country Facts

 

Bureau of East Asian and Pacific Affairs                                      
October 2007                                                                  
                                                                       
  Background Note: Philippines Country Facts                                                
                                             
  Beach in Cebu Province, Philippines,                                        
  April 23, 2006. [© AP Images]                                               
                                                                       
  Flag of Philippines is two equal horizontal bands of blue (top) and red with
  a white equilateral triangle based on the hoist side; in the center of the  
  triangle is a yellow sun with eight primary rays (each containing three     
  individual rays) and in each corner of the triangle is a small yellow       
  five-pointed star.                                                          
                                                                       
  PROFILE                                                                     
                                                                       
  OFFICIAL NAME:                                                              
  Republic of the Philippines                                                 
                                                                       
  Geography                                                                   
  Area: 300,000 sq. km. (117,187 sq. mi.).                                    
  Major cities (2005 estimate): Capital--Manila (pop. 11.29 million in        
  metropolitan area); other cities--Davao City (1.33 million); Cebu City (0.82
  million).                                                                   
  Terrain: Islands, 65% mountainous, with narrow coastal lowlands.            
  Climate: Tropical, astride typhoon belt.                                    
                                                                       
  People                                                                      
  Nationality: Noun--Filipino(s). Adjective--Philippine.                      
  Population (2007 estimate): 88.71 million; estimate for 2006: 86.97 million.
  Annual growth rate: 1.993%.                                                 
  Ethnic groups: Malay, Chinese.                                              
  Religions: Catholic 85%, Protestant 9%, Muslim 5%, Buddhist and other 1%.   
  Languages: Pilipino (based on Tagalog), national language; English, language
  of government and instruction in education.                                 
  Education: Years compulsory--6 (note: 6 years of primary education free and 
  compulsory; 4 years of secondary education free but not compulsory).        
  Attendance--94% in elementary grades, 64% in secondary grades.              
  Literacy--93.4%.                                                            
  Health: Infant mortality rate (2003)--29 per 1,000. Life expectancy (2005)  
  --64.10 yrs. for males; 70.10 yrs. for females.                             
  Work force (2006): 35.84 million. Services (including commerce and          
  government, 2006)--49%; agriculture--36%; industry--15%.                    
                                                                       
  Government                                                                  
  Type: Republic.                                                             
  Independence: 1946.                                                         
  Constitution: February 11, 1987.                                            
  Branches: Executive--president and vice president. Legislative--bicameral   
  legislature. Judicial--independent.                                         
  Administrative subdivisions: 15 regions and Metro Manila (National Capital  
  Region), 79 provinces, 115 cities.                                          
  Political parties: Lakas-Christian Muslim Democrats, Nationalist People's   
  Coalition, Laban ng Demokratikong Pilipino, Liberal Party, Aksiyon          
  Demokratiko, Partido Demokratikong Pilipino-Lakas ng Bayan, and other small 
  parties.                                                                    
  Suffrage: Universal, but not compulsory, at age 18.                         
                                                                       
  Economy                                                                     
  GDP (2006): $117.6 billion.                                                 
  Annual GDP growth rate (2006): 5.4% at constant prices.                     
  GDP per capita (2006): $1,352.                                              
  Natural resources: Copper, nickel, iron, cobalt, silver, gold.              
  Agriculture: Products--rice, coconut products, sugar, corn, pork, bananas,  
  pineapple products, aquaculture, mangoes, eggs.                             
  Industry: Types--textiles and garments, pharmaceuticals, chemicals, wood    
  products, food processing, electronics assembly, petroleum refining, fishing.
  Trade (2006): Exports--$47.4 billion. Imports--$51.8 billion.               
                                                                       
  PEOPLE                                                                      
  The majority of Philippine people are descendants of Indonesians and Malays 
  who migrated to the islands in successive waves over many centuries and     
  largely displaced the aboriginal inhabitants. The largest ethnic minority now
  is the mainland Asians (called Chinese), who have played an important role in
  commerce for many centuries since they first came to the islands to trade.  
  Arabs and Indians also traveled and traded in the Philippines in the first  
  and early second millennium. As a result of intermarriage, many Filipinos   
  have some Asian mainland, Spanish, American, Arab, or Indian ancestry. After
  the mainland Asians, Americans and Spaniards constitute the next largest    
  minorities in the country.                                                  
                                                                       
  More than 90% of the people are Christian as a result of the nearly 400 years
  of Spanish and American rule. The major non-Hispanicized groups are the     
  Muslim population, concentrated in the Sulu Archipelago and in central and  
  western Mindanao, and the mountain aboriginal groups of northern Luzon. Small
  forest tribes still live in the more remote areas of Mindanao.              
                                                                       
  About 87 languages and dialects are spoken, most belonging to the           
  Malay-Polynesian linguistic family. Of these, eight are the first languages 
  of more than 85% of the population. The three principal indigenous languages
  are Cebuano, spoken in the Visayas; Tagalog, predominant in the area around 
  Manila; and Ilocano, spoken in northern Luzon. Since 1939, in an effort to  
  develop national unity, the government has promoted the use of the national 
  language, Pilipino, which is based on Tagalog. Pilipino is taught in all    
  schools and is gaining widespread acceptance across the archipelago. Many use
  English, Fukienese, or Mandarin as second languages. Nearly all             
  professionals, academics, and government workers speak some English. In     
  January 2003, President Gloria Macapagal-Arroyo ordered the Department of   
  Education to restore English as the medium of instruction in all schools and
  universities. Only a few Filipino families use Spanish as a second language.
                                                                       
  The Philippines has one of the highest literacy rates in the developing     
  world. About 92% of the population 10 years of age and older are literate.  
                                                                       
  HISTORY                                                                     
  The history of the Philippines can be divided into four distinct phases: the
  pre-Spanish period (before 1521); the Spanish period (1521-1898); the       
  American period (1898-1946); and the post-independence period (1946-present).
                                                                       
  Pre-Spanish Period                                                          
  The first people in the Philippines, the Negritos, are believed to have come
  to the islands 30,000 years ago from Borneo and Sumatra, making their way   
  across then-existing land bridges. Subsequently, Malays came from the south 
  in successive waves, the earliest by land bridges and later in boats by sea.
  The Malays settled in scattered communities, named barangays after the large
  outrigger boats in which they arrived, and ruled by chieftains known as     
  datus. Chinese merchants and traders arrived and settled in the ninth       
  century, sometimes traveling on the ships of Arab traders, introducing Islam
  in the south and extending some influence even into Luzon. The Malays,      
  however, remained the dominant group until the Spanish arrived in the 16th  
  century.                                                                    
                                                                       
  Spanish Period                                                              
  Ferdinand Magellan reached the Philippines and claimed the archipelago for  
  Spain in 1521, but stayed for only a few days. Christianity was established 
  in the Philippines only after the arrival of the succeeding Spanish         
  expeditionary forces (the first led by Legazpi in the 16th century) and the 
  Spanish Jesuits, and in the 17th and 18th centuries by the conquistadores.  
                                                                       
  Until Mexico proclaimed independence from Spain in 1810 the islands were    
  under the administrative control of Spanish North America, and there was    
  significant migration between North America and the Philippines. This period
  was the era of conversion to Roman Catholicism. A Spanish colonial social   
  system was developed with a local government centered in Manila and with    
  considerable clerical influence. Spanish influence was strongest in Luzon and
  the central Philippines but less so in Mindanao, save for certain coastal   
  cities.                                                                     
                                                                       
  The long period of Spanish rule was marked by numerous uprisings. Towards the
  latter half of the 19th century, European-educated Filipinos or ilustrados  
  (such as the Chinese Filipino national hero Jose Rizal) began to criticize  
  the excesses of Spanish rule and instilled a new sense of national identity.
  This movement gave inspiration to the final revolt against Spain that began 
  in 1896 under the leadership of Emilio Aguinaldo (another Chinese Filipino) 
  and continued until the Americans defeated the Spanish fleet in Manila Bay on
  May 1, 1898, during the Spanish-American War. Aguinaldo declared independence
  from Spain on June 12, 1898.                                                
                                                                       
  American Period                                                             
  Following Admiral George Dewey's defeat of the Spanish fleet in Manila Bay, 
  the U.S. occupied the Philippines. Spain ceded the islands to the United    
  States under the terms of the Treaty of Paris (December 10, 1898) that ended
  the war.                                                                    
                                                                       
  A war of resistance against U.S. rule, led by revolutionary General         
  Aguinaldo, broke out in 1899. This conflict claimed the lives of tens of    
  thousands of Filipinos and thousands of Americans. Filipinos and an         
  increasing number of American historians refer to these hostilities as the  
  Philippine-American War (1899-1902), and in 1999, the U.S. Library of       
  Congress reclassified its references to use this term. In 1901, Aguinaldo was
  captured and swore allegiance to the U.S., and resistance gradually died out
  until the conflict ended with a Peace Proclamation on July 4, 1902. However,
  armed resistance continued sporadically until 1913, especially among the    
  Muslims in Mindanao and Sulu, with heavy casualties on both sides.          
                                                                       
  U.S. administration of the Philippines was always declared to be temporary  
  and aimed to develop institutions that would permit and encourage the       
  eventual establishment of a free and democratic government. Therefore, U.S. 
  officials concentrated on the creation of such practical supports for       
  democratic government as public education, public infrastructure, and a sound
  legal system.                                                               
                                                                       
  The first legislative assembly was elected in 1907, and a bicameral         
  legislature, largely under Filipino control, was established. A civil service
  was formed and was gradually taken over by the Filipinos, who had effectively
  gained control by the end of World War I. The Catholic Church was           
  disestablished, and a considerable amount of church land was purchased and  
  redistributed.                                                              
                                                                       
  In 1935, under the terms of the Tydings-McDuffie Act, the Philippines became
  a self-governing commonwealth. Manuel Quezon was elected president of the new
  government, which was designed to prepare the country for independence after
  a 10-year transition period. World War II intervened, however, and in May   
  1942, Corregidor, the last American/Filipino stronghold, fell. U.S. forces in
  the Philippines surrendered to the Japanese, placing the islands under      
  Japanese control. During the occupation, thousands of Filipinos fought a    
  running guerilla campaign against Japanese forces.                          
                                                                       
  The full-scale war to regain the Philippines began when General Douglas     
  MacArthur landed on Leyte on October 20, 1944. Filipinos and Americans fought
  together until the Japanese surrendered in September 1945. Much of Manila was
  destroyed during the final months of the fighting, making it the second most
  devastated city in World War II after Warsaw. In total, an estimated one    
  million Filipinos lost their lives in the war.                              
                                                                       
  Due to the Japanese occupation, the guerrilla warfare that followed, and the
  battles leading to liberation, the country suffered great damage and a      
  complete organizational breakdown. Despite the shaken state of the country, 
  the U.S. and the Philippines decided to move forward with plans for         
  independence. On July 4, 1946, the Philippine Islands became the independent
  Republic of the Philippines, in accordance with the terms of the            
  Tydings-McDuffie Act. In 1962, the official Philippine Independence Day was 
  changed from July 4 to June 12, commemorating the date independence from    
  Spain was declared by Emilio Aguinaldo in 1898.                             
                                                                       
  Post-Independence Period                                                    
  The early years of independence were dominated by U.S.-assisted postwar     
  reconstruction. The communist-inspired Huk Rebellion (1945-53) complicated  
  recovery efforts before its successful suppression under the leadership of  
  President Ramon Magsaysay. The succeeding administrations of Presidents     
  Carlos P. Garcia (1957-61) and Diosdado Macapagal (1961-65) sought to expand
  Philippine ties to its Asian neighbors, implement domestic reform programs, 
  and develop and diversify the economy.                                      
                                                                       
  In 1972, President Ferdinand E. Marcos (1965-86) declared martial law, citing
  growing lawlessness and open rebellion by the communist rebels as his       
  justification. Marcos governed from 1973 until mid-1981 in accordance with  
  the transitory provisions of a new constitution that replaced the           
  commonwealth constitution of 1935. He suppressed democratic institutions and
  restricted civil liberties during the martial law period, ruling largely by 
  decree and popular referenda. The government began a process of political   
  normalization during 1978-81, culminating in the reelection of President    
  Marcos to a six-year term that would have ended in 1987. The Marcos         
  government's respect for human rights remained low despite the end of martial
  law on January 17, 1981. His government retained its wide arrest and        
  detention powers, and corruption and cronyism contributed to a serious      
  decline in economic growth and development.                                 
                                                                       
  The assassination of opposition leader Benigno (Ninoy) Aquino upon his return
  to the Philippines in 1983 after a long period of exile coalesced popular   
  dissatisfaction with Marcos and set in motion a succession of events that   
  culminated in a snap presidential election in February 1986. The opposition 
  united under Aquino's widow, Corazon Aquino, and Salvador Laurel, head of the
  United Nationalist Democratic Organization (UNIDO). The election was marred 
  by widespread electoral fraud on the part of Marcos and his supporters.     
  International observers, including a U.S. delegation led by Senator Richard 
  Lugar (R-Indiana), denounced the official results. Marcos was forced to flee
  the Philippines in the face of a peaceful civilian-military uprising that   
  ousted him and installed Corazon Aquino as president on February 25, 1986.  
                                                                       
  Under Aquino's presidency, progress was made in revitalizing democratic     
  institutions and civil liberties. However, the administration was also viewed
  by many as weak and fractious, and a return to full political stability and 
  economic development was hampered by several attempted coups staged by      
  disaffected members of the Philippine military.                             
                                                                       
  Fidel Ramos was elected president in 1992. Early in his administration, Ramos
  declared "national reconciliation" his highest priority. He legalized the   
  Communist Party and created the National Unification Commission (NUC) to lay
  the groundwork for talks with communist insurgents, Muslim separatists, and 
  military rebels. In June 1994, President Ramos signed into law a general    
  conditional amnesty covering all rebel groups, as well as Philippine military
  and police personnel accused of crimes committed while fighting the         
  insurgents. In October 1995, the government signed an agreement bringing the
  military insurgency to an end. A peace agreement with one major Muslim      
  insurgent group, the Moro National Liberation Front (MNLF), was signed in   
  1996, using the existing Autonomous Region in Muslim Mindanao (ARMM) as a   
  vehicle for self-government.                                                
                                                                       
  Popular movie actor Joseph Ejercito Estrada's election as president in May  
  1998 marked the Philippines' third democratic succession since the ouster of
  Marcos. Estrada was elected with overwhelming mass support on a platform    
  promising poverty alleviation and an anti-crime crackdown.                  
                                                                       
  Gloria Macapagal-Arroyo, elected vice president in 1998, assumed the        
  presidency in January 2001 after widespread demonstrations that followed the
  breakdown of Estrada's impeachment trial on corruption charges. The         
  Philippine Supreme Court subsequently endorsed unanimously the              
  constitutionality of the transfer of power. National and local elections took
  place in May 2004. Under the constitution, Arroyo was eligible for another  
  six-year term as president, and she won a hard-fought campaign against her  
  primary challenger, movie actor Fernando Poe, Jr., in elections held May 10,
  2004. Noli De Castro was elected vice president.                            
                                                                       
  Impeachment charges were brought against Arroyo in June 2005 for allegedly  
  tampering with the results of the elections after purported tapes of her    
  speaking with an electoral official during the vote count surfaced, but     
  Congress rejected the charges in September 2005. Similar charges were       
  discussed and dismissed by Congress in the summer of 2006.                  
                                                                       
  GOVERNMENT AND POLITICAL CONDITIONS                                         
  The Philippines has a representative democracy modeled on the U.S. system.  
  The 1987 constitution, adopted during the Aquino administration,            
  reestablished a presidential system of government with a bicameral          
  legislature and an independent judiciary. The president is limited to one   
  six-year term. Provision also was made in the constitution for autonomous   
  regions in Muslim areas of Mindanao and in the Cordillera region of northern
  Luzon, where many aboriginal tribes still live.                             
                                                                       
  The 24-member Philippine Senate is elected at large, and all senators serve 
  six-year terms. Half are elected every three years. Of a maximum of 250     
  members in the House of Representatives, 212 are elected from single-member 
  districts to serve three-year terms. The remainder of the House seats are   
  designated for sectoral party representatives elected at large, called party
  list representatives. All representatives serve three-year terms, with a    
  maximum of three consecutive terms. On May 14, 2007, legislative and local  
  elections were held. President Arroyo's coalition won 195 of 220 seats in the
  House of Representatives, 72 of 81 gubernatorial seats, and 102 of 118 city 
  mayoral seats. However, the President's coalition won only two out of 12    
  vacant seats in the Philippine Senate. Although the election was marred by  
  some violence and irregularities, civil society monitoring groups played a  
  welcome and active role in ensuring a relatively fair and democratic process.
                                                                       
  The government continues to face threats from terrorist groups, including the
  Communist New People's Army and Muslim groups. The terrorist Abu Sayyaf Group
  (ASG), which gained international notoriety with its kidnappings of foreign 
  tourists in the southern islands, remains a major problem for the government,
  along with members of the Indonesian-based Jemaah Islamiyah (JI). Efforts to
  track down and destroy the ASG and JI have met with some success, especially
  in Basilan and Jolo, where U.S. troops advised, assisted, and trained       
  Philippine soldiers in counterterrorism. In August 2006, the Armed Forces of
  the Philippines began a major offensive against ASG and JI on the island of 
  Jolo. This offensive was remarkably successful and resulted in the deaths of
  Abu Sayyaf leader Khadafy Janjalani and his deputy, Abu Solaiman. The U.S.  
  Government provided rewards to Philippine citizens whose information led to 
  these deaths in the military operations, as well as to many other operations
  against terrorist leaders.                                                  
                                                                       
  An international monitoring team continues to watch over a four-year-old    
  cease-fire agreement between the government and the separatist Moro Islamic 
  Liberation Front (MILF). In June 2003, the MILF issued a formal renunciation
  of terrorism. Talks on a peace accord between the two sides continue, with  
  the Government of Malaysia acting as principal mediator.                    
                                                                       
  Principal Government Officials                                              
  President--Gloria Macapagal-Arroyo                                          
  Vice President--Noli De Castro                                              
  Foreign Secretary--Alberto Romulo                                           
  Ambassador to the United States--Ambassador Willie Gaa                      
  Permanent Representative to the UN--Hilario G. Davide                       
                                                                       
  The Republic of the Philippines maintains an embassy in the United States at
  1600 Massachusetts Avenue NW, Washington, DC 20036 (tel. 202-467-9300).     
  Consulates general are in New York, Chicago, San Francisco, Los Angeles,    
  Honolulu, and Agana (Guam).                                                 
                                                                       
  ECONOMY                                                                     
  Since the end of World War II, the Philippine economy has had a mixed history
  of growth and development. Over the years, the Philippines has gone from    
  being one of the richest countries in Asia (following Japan) to being one of
  the poorest. Growth immediately after the war was rapid, but slowed over    
  time. Years of economic mismanagement and political instability under the   
  Marcos regime eventually harmed economic growth and grossly adversely       
  affected macroeconomic instability. A severe recession in 1984-85 saw the   
  economy shrink by more than 10%, and perceptions of political instability   
  during the Aquino administration further dampened economic activity. During 
  his administration, President Ramos introduced a broad range of economic    
  reforms and initiatives designed to spur business growth and foreign        
  investment. As a result, the Philippines saw a period of higher growth, but 
  the Asian financial crisis triggered in 1997 slowed economic development in 
  the Philippines once again. President Estrada managed to continue some of the
  reforms begun by the Ramos administration. Important laws to strengthen     
  regulation and supervision of the banking system (General Banking Act) and  
  securities markets (Securities Regulation Code), to liberalize foreign      
  participation in the retail trade sector, and to promote and regulate       
  electronic commerce were enacted during his abbreviated term. Efforts to    
  reform the constitution to encourage foreign investment, particularly foreign
  ownership of land, were abandoned amidst nationalist opposition. Initial    
  optimism about prospects for economic reform also had dimmed amid concerns of
  governmental corruption. Scandals involving the Philippine Stock Exchange,  
  and the President's close ties to certain businessmen, shook the confidence 
  of investors and the business community and ultimately led to successful    
  efforts to impeach and remove President Estrada.                            
                                                                       
  Despite occasional challenges to her presidency and resistance to           
  pro-liberalization reforms by vested interests, President Arroyo has made   
  considerable progress in restoring macroeconomic stability with the help of a
  well-regarded economic team. Nonetheless, long-term economic growth remains 
  threatened by widespread poverty, crumbling infrastructure and education    
  systems, and trade and investment barriers.                                 
                                                                       
  Important sectors of the Philippine economy include agriculture and industry,
  particularly food processing; textiles and garments; and electronics and    
  automobile parts. Most industries are concentrated in the urban areas around
  metropolitan Manila. Mining also has great potential in the Philippines,    
  which possesses significant reserves of chromate, nickel, and copper.       
  Significant natural gas finds off the islands of Palawan have added to the  
  country's substantial geothermal, hydro, and coal energy reserves.          
                                                                       
  Today's Economy                                                             
  GDP grew by 5.4% in 2006, marking the first time since the 1970s with three 
  consecutive years of growth over 5%. Historically, the Philippines has had  
  difficulty sustaining growth at over 5%. GDP increased by 6% in 2004, a     
  15-year high, and by 5% in 2005. Growth in 2006 was fueled by increased     
  electronics exports, growth in the outsourcing industry, and a 20% increase 
  in remittances from overseas workers to $12.8 billion and about 11% of GDP. 
  GDP growth is expected to finish 2007 closer to the upper end of the        
  government's targeted 6.1%-6.7% growth range. Still, it will take a higher, 
  sustained economic growth path to make more appreciable progress in poverty 
  alleviation given the Philippines' annual population growth rate of nearly  
  2%--one of the highest in Asia.                                             
                                                                       
  At $3.8 billion, the overall balance of payments ended 2006 with its largest
  surplus in nearly a decade. Exports totaled $47.4 billion in 2006, relying  
  heavily on electronics shipments for about two-thirds of export revenues.   
  Although there has been some improvement over the years, local value added of
  electronics exports remains relatively low at about 30%. Net foreign direct 
  investment (FDI) inflow rose to $2.35 billion in 2006, nearly double the 2005
  level. The U.S. remains the Philippines' largest trading partner with over  
  $17 billion in two-way trade, and the largest investor with more than $6.5  
  billion in total FDI. Increased export revenue, investment inflows, and     
  foreign remittances helped produce a current account surplus of $5 billion in
  2006 (equivalent to 4.3% of GDP).                                           
                                                                       
  Increased foreign capital inflows made the Philippine stock market among the
  top performers in East Asia during 2006. Similarly, the Philippine peso     
  appreciated about 7.5% to the U.S. dollar, making it among East Asia's best 
  performing currencies in 2005-2006. The Philippines maintained reserves of  
  foreign exchange and gold of $22.97 billion, adequate for 4.3 months of goods
  and services imports and equivalent to 2.5 times foreign debts maturing over
  the next 12 months.                                                         
                                                                       
  Determined efforts to avert a fiscal and debt crisis through a combination of
  expenditure control and, more recently, new revenue measures have contributed
  significantly to positive financial sector indicators and the current air of
  cautious optimism. December 2004 legislation provided for biennial          
  adjustments to the excise tax rates for tobacco and liquor products until   
  2011, while a law signed in January 2005 seeks to institute a               
  performance-based rewards and penalty system in the government's revenue    
  collection agencies. Despite public resistance and initial legal challenges,
  the government began implementing an expanded Value Added Tax law in November
  2005, which added an estimated 75 billion pesos ($1.5 billion) to national  
  government revenues during 2006 (equivalent to 1.2% of GDP).                
                                                                       
  Although still below the 17% peak of 1997 and the performance of most other 
  countries in the region, the tax-to-GDP ratio--which had slipped to 12.5% by
  2004 before improving to 13.0% in 2005--inched up for a second consecutive  
  year to 14.3%. From a record $4.1 billion (5.3% of GDP) in 2002, the national
  government has recorded declining fiscal deficits for four consecutive years
  (to 0.6% of GDP in 2006) and targets balancing the budget by 2008.          
  Consolidated public sector debt (which also includes the Central Bank,      
  government-owned and controlled corporations, state-run social security     
  agencies, and local government units) has declined from 2003's peak         
  118%-of-GDP ratio to under 90% of GDP. Major credit rating agencies raised  
  their rating outlook for Philippine sovereign debt from "negative" to       
  "stable" in recognition of fiscal progress. Interest rates on local         
  government borrowings have come down, and spreads on foreign bonds have     
  tightened significantly. Looking forward, further reforms are needed to ease
  fiscal pressures from large losses being sustained by a number of           
  government-owned firms. Although steps have been taken to improve their     
  financial health, challenges still remain to ensuring the long-term viability
  of state-run pension funds.                                                 
                                                                       
  The Philippines was less severely affected by the Asian financial crisis of 
  the late 1990s than its neighbors, aided in part by its high level of annual
  remittances from overseas workers, no sustained run-up in asset prices, and 
  more moderate debt prior to the crises. Nonetheless, the Philippines' banking
  sector was not spared from high interest rates and non-performing asset (NPA)
  levels during the Asian financial crisis and its aftermath. Increases in    
  minimum capitalization requirements, increasing loan-loss provisions, and   
  generally healthy capital-adequacy ratios have helped temper systemic risk. 
  The Central Bank has been working with the banking sector for the adoption of
  international risk assessment and capital adequacy standards, as well as    
  international accounting standards. The Special Purpose Vehicle (SPV) Act of
  January 2003, which provides time-bound fiscal and regulatory incentives to 
  encourage the sale to private asset management companies, has helped to     
  reduce banks' portfolios of non-performing assets. Under the SPV, commercial
  banks were able to reduce their NPAs by 14% in 2006. The ratio of           
  non-performing assets to total commercial banking system assets--which peaked
  at 18.3% in October 2001--has reverted to single-digit levels since mid-2005
  and had declined to 6.5% of assets by end-2006. Nevertheless, circumstances 
  surrounding bank closures continue to highlight remaining impediments to more
  effective bank supervision and timely intervention--including stringent bank
  secrecy laws, obstacles preventing bank regulators from examining banks at  
  will, and inadequate legal protection for Central Bank officials and        
  examiners.                                                                  
                                                                       
  The Central Bank's adoption since January 2002 of an inflation-targeting    
  framework has enhanced transparency in the conduct of monetary policy. The  
  inflation rate averaged 6.2% in 2006, down from 7.6% in 2005, and is expected
  to fall further to under 3% in 2007, comfortably below the Central Bank's   
  target of 4-5%.                                                             
                                                                       
  The Arroyo administration enacted an anti-money laundering law in September 
  2001 and followed through with amendments in March 2003 to address remaining
  legal concerns posed by the OECD Financial Action Task Force (FATF). The FATF
  removed the Philippines from its list of Non-Cooperating Countries and      
  Territories in February 2005, noting the significant progress made to remedy
  concerns and deficiencies identified by the FATF to improve implementation. 
  The Egmont Group, the international network of financial intelligence units,
  admitted the Philippines to its membership in June 2005.                    
                                                                       
  Although encountering implementation hitches, the Arroyo administration also
  enacted legislation in 2001 to rationalize the electric power sector and    
  privatize the government's debt-saddled National Power Corporation (NPC). The
  government has achieved some success in establishing an independent         
  regulatory system for electricity pricing that will benefit NPC finances. In
  addition to the Special Purpose Vehicle law, President Arroyo also signed   
  into law in 2003 a priority initiative to reform the government procurement 
  system (the Government Procurement Reform Act). During the first quarter of 
  2004, she signed into law legislation to rationalize and plug leakages in the
  Philippines' convoluted documentary stamp tax system and encourage secondary
  trading of financial instruments, as well as legislation (the Securitization
  Act) towards establishing the necessary infrastructure and market environment
  for a wide range of asset-backed securities. She also signed legislation to 
  institutionalize Alternative Dispute Resolution for civil cases to help     
  address the problem of overburdened court dockets.                          
                                                                       
  The U.S. Trade Representative removed the Philippines from its Special 301  
  Priority Watchlist in 2006, reflecting improvement in its enforcement of    
  intellectual property rights (IPR) protection. However, sustained effort and
  continuing progress on key IPR issues will be essential to maintain this    
  status.                                                                     
                                                                       
  Despite a number of policy reforms and recent good news, the Philippines    
  continues to face important challenges and must sustain the reform momentum 
  to catch up with its regional neighbors and to translate the current cautious
  optimism into the long-term confidence required to spur investments, achieve
  higher growth, generate employment, and alleviate poverty for a rapidly     
  expanding population. Absent new revenue measures, sustained fiscal stability
  will require more aggressive tax collection efficiency to address the severe
  under-spending in infrastructure and social services in recent years of tight
  budgets. Addressing delays in power sector privatization remains critical to
  the long-term stability of public sector finances, ensuring reliable        
  electricity supply, and to bringing down the high cost of power.            
                                                                       
  Potential foreign investors, as well as tourists, continue to be concerned  
  about law and order, inadequate infrastructure, policy and regulatory       
  instability, and governance issues. While trade liberalization presents     
  significant opportunities, intensifying global competition and the emergence
  of low-wage export economies also pose challenges. Competition from other   
  Southeast Asian countries and from China for investment underlines the need 
  for sustained progress on structural reforms to remove bottlenecks to growth,
  to lower costs of doing business, and to promote good public and private    
  sector governance. The government has been working to reinvigorate its      
  anti-corruption drive, and the Office of the Ombudsman has reported improved
  conviction rates. Nevertheless, the Philippines will need to do more to     
  improve international perception of its anti-corruption campaign--an effort 
  that will require strong political will and significantly greater financial 
  and human resources.                                                        
                                                                       
  Agriculture and Forestry                                                    
  Arable farmland comprises more than 40% of the total land area. Although the
  Philippines is rich in agricultural potential, inadequate infrastructure,   
  lack of financing, and government policies have limited productivity gains. 
  Philippine farms produce food crops for domestic consumption and cash crops 
  for export. The agricultural sector employs more than one-third of the work 
  force but provides less than one-fifth of GDP.                              
                                                                       
  Decades of uncontrolled logging and slash-and-burn agriculture in marginal  
  upland areas have stripped forests, with critical implications for the      
  ecological balance. The government has instituted conservation programs, but
  deforestation remains a severe problem.                                     
                                                                       
  With its 7,107 islands, the Philippines has a very diverse range of fishing 
  areas. Notwithstanding good prospects for the agriculture subsector, the    
  marine fishing industry continues to face a bleak future due to destructive 
  fishing methods, a lack of funds, and inadequate government support.        
                                                                       
  Agriculture generally suffers from low productivity, low economies of scale,
  and inadequate infrastructure support. Agricultural output fell in 1997 and 
  1998 due to an El Niño-related drought but increased by 6.0% in 1999 (over  
  1998's low base). Growth reverted to more normal rates in 2000 (4.0%) and   
  2001 (3.7%). Agricultural output (affected by another, albeit milder, dry   
  spell) expanded by 3.9% year-on-year in 2002 and 3.2% in 2003. Agricultural 
  output increased by 5.1% in real terms during 2004 but stagnated to 2.24% in
  2005 due to drought and intermittent weather disturbances. Despite the      
  adverse effects of successive and very strong typhoons in the last four     
  months of 2006, the overall annual farm output expanded by 3.8%.            
                                                                       
  Industry                                                                    
  Industrial production is centered on the processing and assembly operations 
  of the following: food, beverages, tobacco, rubber products, textiles,      
  clothing and footwear, pharmaceuticals, paints, plywood and veneer, paper and
  paper products, small appliances, and electronics. Heavier industries are   
  dominated by the production of cement, glass, industrial chemicals,         
  fertilizers, iron and steel, and refined petroleum products.                
                                                                       
  The industrial sector is concentrated in urban areas, especially in the     
  metropolitan Manila region, and has only weak linkages to the rural economy.
  Inadequate infrastructure, transportation, and communication have so far    
  inhibited faster industrial growth, although significant strides have been  
  made in addressing the last of these elements.                              
                                                                       
  Mining                                                                      
  The Philippines is one of the world's most highly mineralized countries, with
  untapped mineral wealth estimated at more than $840 billion. Philippine     
  copper, gold, and chromate deposits are among the largest in the world. Other
  important minerals include nickel, silver, coal, gypsum, and sulfur. The    
  Philippines also has significant deposits of clay, limestone, marble, silica,
  and phosphate. The discovery of natural gas reserves off Palawan has been   
  brought on-line to generate electricity.                                    
                                                                       
  Despite its rich mineral deposits, the Philippine mining industry is just a 
  fraction of what it was in the 1970s and 1980s when the country ranked among
  the ten leading gold and copper producers worldwide. Low metal prices, high 
  production costs, and lack of investment in infrastructure have contributed 
  to the industry's overall decline. A December 2004 Supreme Court decision   
  upheld the constitutionality of the 1995 Mining Act, thereby allowing up to 
  100% foreign-owned companies to invest in large-scale exploration,          
  development, and utilization of minerals, oil, and gas.                     
                                                                       
  FOREIGN RELATIONS                                                           
  In its foreign policy, the Philippines cultivates constructive relations with
  its Asian neighbors, with whom it is linked through membership in the       
  Association of Southeast Asian Nations (ASEAN), the ASEAN Regional Forum    
  (ARF), and the Asia-Pacific Economic Cooperation (APEC) forum. The          
  Philippines is a member of the UN and some of its specialized agencies, and 
  served a two-year term as a member of the UN Security Council from January  
  2004-2006, acting as UNSC President in September 2005. Since 1992, the      
  Philippines has been a member of the Non-Aligned Movement. The government is
  seeking observer status in the Organization of the Islamic Conference (OIC).
  The Philippines has played a key role in ASEAN in recent years and also     
  values its relations with the countries of the Middle East, in no small part
  because hundreds of thousands of Filipinos are employed in that region. The 
  welfare of the some four to five million overseas Filipino contract workers 
  is considered to be a pillar of Philippine foreign policy. Foreign exchange 
  remittances from these workers exceed 11% of the country's gross domestic   
  product.                                                                    
                                                                       
  The fundamental Philippine attachment to democracy and human rights is also 
  reflected in its foreign policy. Philippine soldiers and police have        
  participated in a number of multilateral civilian police and peacekeeping   
  operations, and a Philippine Army general served as the first commander of  
  the UN Peacekeeping Operation in East Timor. The Philippines presently has  
  peacekeepers in Haiti and Liberia. The Philippines also participated in     
  Operation Iraqi Freedom, deploying some 50 troops to Iraq in 2003. (These   
  troops were subsequently withdrawn in 2004 after a Filipino overseas worker 
  was kidnapped.) The Philippine Government also has been active in efforts to
  reduce tensions among rival claimants to the territories and waters of the  
  resource-rich South China Sea.                                              
                                                                       
  U.S.-PHILIPPINE RELATIONS                                                   
  U.S.-Philippine relations are based on shared history and commitment to     
  democratic principles, as well as on economic ties. The historical and      
  cultural links between the Philippines and the U.S. remain strong. The      
  Philippines modeled its governmental institutions on those of the U.S. and  
  continues to share a commitment to democracy and human rights. At the most  
  fundamental level of bilateral relations, human links continue to form a    
  strong bridge between the two countries. There are an estimated four million
  Americans of Philippine ancestry in the United States, and more than 250,000
  American citizens in the Philippines.                                       
                                                                       
  Until November 1992, pursuant to the 1947 Military Bases Agreement, the     
  United States maintained and operated major facilities at Clark Air Base,   
  Subic Bay Naval Complex, and several small subsidiary installations in the  
  Philippines. In August 1991, negotiators from the two countries reached     
  agreement on a draft treaty providing for use of Subic Bay Naval Base by U.S.
  forces for 10 years. The draft treaty did not include use of Clark Air Base,
  which had been so heavily damaged by the 1991 eruption of Mount Pinatubo that
  the U.S. decided to abandon it.                                             
                                                                       
  In September 1991, the Philippine Senate rejected the bases treaty, and     
  despite further efforts to salvage the situation, the two sides could not   
  reach an agreement. As a result, the Philippine Government informed the U.S.
  on December 6, 1991, that it would have one year to complete withdrawal. That
  withdrawal went smoothly and was completed ahead of schedule, with the last 
  U.S. forces departing on November 24, 1992. On departure, the U.S. Government
  turned over assets worth more than $1.3 billion to the Philippines, including
  an airport and ship-repair facility. Agencies formed by the Philippine      
  Government have converted the former military bases for civilian commercial 
  use, with Subic Bay serving as a flagship for that effort.                  
                                                                       
  The post-U.S. bases era has seen U.S.-Philippine relations improved and     
  broadened, with a prominent focus on economic and commercial ties while     
  maintaining the importance of the security dimension. U.S. investment       
  continues to play an important role in the Philippine economy, while a strong
  security relationship rests on the 1952 U.S.-Philippines Mutual Defense     
  Treaty (MDT). In February 1998, U.S. and Philippine negotiators concluded the
  Visiting Forces Agreement (VFA), paving the way for increased military      
  cooperation under the MDT. The agreement was approved by the Philippine     
  Senate in May 1999 and entered into force on June 1, 1999. Under the VFA, the
  U.S. has conducted ship visits to Philippine ports and has resumed large    
  combined military exercises with Philippine forces. Key events in the       
  bilateral relationship include the July 4, 1996 declaration by President    
  Ramos of Philippine-American Friendship Day in commemoration of the 50th    
  anniversary of Philippine independence. Ramos visited the U.S. in April 1998,
  and then-President Estrada visited in July 2000. President Arroyo met with  
  President Bush in an official working visit in November 2001 and made a state
  visit in Washington on May 19, 2003. President Bush made a state visit to the
  Philippines on October 18, 2003, during which he addressed a joint session of
  the Philippine Congress--the first American President to do so since Dwight 
  D. Eisenhower. There are regular U.S. cabinet-level and congressional visits
  to the Philippines as well.                                                 
                                                                       
  President Arroyo has repeatedly stressed the close friendship between the   
  Philippines and the U.S. and her desire to expand bilateral ties further.   
  Both governments seek to revitalize and strengthen their partnership by     
  working toward greater security, prosperity, and service to Filipinos and   
  Americans alike. Inaugurated into office on the same day as President Bush, 
  President Arroyo lent strong support to the global war on terrorism. In     
  October 2003, the U.S. designated the Philippines as a Major Non-NATO Ally. 
  That same month, the Philippines joined the select group of countries to have
  ratified all 12 UN counterterrorism conventions.                            
                                                                       
  The annual Balikatan (Shoulder-to-Shoulder) bilateral military exercises    
  contribute directly to the Philippine armed forces' efforts to root out Abu 
  Sayyaf and Jemaah Islamiyah terrorists and bring development to formerly    
  terrorist-plagued areas, notably Basilan and Jolo. They include not only    
  combined military training but also civil-military affairs and humanitarian 
  projects. The International Military Education and Training (IMET) program is
  the largest in the Pacific and the third-largest in the world, and a Mutual 
  Logistics Support Agreement (MLSA) was signed in November 2002. Similarly,  
  law enforcement cooperation has reached new levels: U.S. and Philippine     
  agencies have cooperated to bring charges against numerous terrorists, to   
  implement the countries' extradition treaty, and to train thousands of      
  Filipino law enforcement officers. There is a Senior Law Enforcement Advisor
  helping the Philippine National Police with its Transformation Program.     
                                                                       
  The U.S. is also working closely with the Philippines to reduce poverty and 
  increase prosperity. The U.S. fully supports Philippine efforts to root out 
  corruption, to open economic opportunity, and to invest in health and       
  education. USAID programs support the 'Philippines' war on poverty as well as
  the government's reform agenda in critical areas, including anti-money      
  laundering, rule of law, tax collection, and trade and investment. Other    
  USAID programs have bolstered the government's efforts to heal divisions in 
  Philippine society through a focus on conflict resolution, livelihood       
  enhancement for former combatants, and economic development in Mindanao and 
  the Autonomous Region in Muslim Mindanao, among the poorest areas in the    
  country. Meanwhile, important programs continue in modern family planning,  
  infectious disease control, environmental protection, rural electrification,
  and provision of basic services--as well as PL 480 food aid programs and    
  others, which together totaled $211.3 million. In 2006, the Millennium      
  Challenge Corporation granted $21 million to the Philippines for a threshold
  program addressing corruption in revenue administration.                    
                                                                       
  Nearly 400,000 Americans visit the Philippines each year. Providing         
  government services to U.S. and other 'citizens, therefore, constitutes an  
  important aspect of the bilateral relationship. Those services include      
  veterans' affairs, social security, and consular operations. Benefits to    
  Filipinos from the U.S. Department of Veterans Affairs and the Social       
  Security Administration totaled $297,389,415 in 2006. Many people-to-people 
  programs exist between the U.S. and the Philippines, including Fulbright,   
  International Visitors, and Aquino Fellowship exchange programs, as well as 
  the U.S. Peace Corps.                                                       
                                                                       
  Trade and Investment                                                        
  Two-way U.S. merchandise trade with the Philippines amounted to $17.3 billion
  in 2006 (U.S. Department of Commerce data). According to Philippine         
  Government data, 16% of the Philippines' imports in 2006 came from the U.S.,
  and about 18% of its exports were bound for America. The Philippines ranks as
  our 26th-largest export market and our 30th-largest supplier. Key exports to
  the U.S. are semiconductor devices and computer peripherals, automobile     
  parts, electric machinery, textiles and garments, wheat and animal feeds, and
  coconut oil. In addition to other goods, the Philippines imports raw and    
  semi-processed materials for the manufacture of semiconductors, electronics 
  and electrical machinery, transport equipment, and cereals and cereal       
  preparations.                                                               
                                                                       
  The U.S. traditionally has been the Philippines' largest foreign investor,  
  with about $6.6 billion in estimated investment as of end-2005 (U.S.        
  Department of Commerce data). Since the late 1980s, the Philippines has     
  committed itself to reforms that encourage foreign investment as a basis for
  economic development, subject to certain guidelines and restrictions in     
  specified areas. Under President Ramos, the Philippines expanded reforms,   
  opening the power generation and telecommunications sectors to foreign      
  investment, as well as securing ratification of the Uruguay Round agreement 
  and membership in the World Trade Organization. As noted earlier, President 
  Arroyo's administration has generally continued such reforms despite        
  opposition from vested interests and "nationalist" blocs. A major obstacle  
  has been and will continue to be constitutional restrictions on, among      
  others, foreign ownership of land and public utilities, which limits maximum
  ownership to 40%.                                                           
                                                                       
  Over the last two decades, the relatively closed Philippine economy has been
  opened significantly by foreign exchange deregulation, foreign investment and
  banking liberalization, tariff and market barrier reduction, and foreign    
  entry into the retail trade sector. The Electric Power Industry Reform Act of
  2001 opened opportunities for U.S. firms to participate in the power industry
  in the Philippines. Information and communications technologies, backroom   
  operations such as call centers, and regional facilities or shared-service  
  centers are likewise leading investment opportunities.                      
                                                                       
  Principal U.S. Embassy Officials                                            
  Ambassador--Kristie A. Kenney                                               
  Deputy Chief of Mission--Paul W. Jones                                      
  Political Counselor--Tom Gibbons                                            
  Economic Counselor--Larry L. Memmott                                        
  Public Affairs Counselor--Lee M. McClenny                                   
  Consul General--Richard D. Haynes                                           
  Management Counselor--Catherine I. Ebert-Gray                               
  Commercial Counselor--Judy Reinke                                           
  USAID Mission Director--Jon Lindborg                                        
  Agricultural Counselor--Emiko Purdy                                         
  Transportation and Safety Administration--Bert Williams                     
  Defense Attaché Office--Colonel Bruce A. West                               
  Joint U.S. Military Assistance Group--Colonel Mathias R. Velasco            
  Regional Security Officer--Jacob M. Wohlman                                 
  Legal Attaché--Stephen P. Cutler                                            
  U.S. Drug Enforcement Administration--Timothy C. Teal                       
  Veterans Affairs--Jonathan Skelly                                           
  Social Security Administration--Thomas H. Ashley, Jr.                       
  American Battle Monuments Commission--Larry A. Adkison                      
  U.S. Peace Corps--Karl S. Beck                                              
                                                                       
  The U.S. Embassy is located at 1201 Roxas Boulevard, Manila; tel. (63)(2)   
  528-6300; fax 522-4361; website: http://manila.usembassy.gov/. The American 
  Business Center is located at 25/F, Ayala Life - FGU Center, 6811 Ayala     
  Avenue, Makati City. It houses the Foreign Commercial Service: tel. (63)(2) 
  888-4088; fax 888-6606; website: http://manila.usembassy.gov/wwwh3012.html; 
  and the Foreign Agricultural Service: tel. (63)(2) 887-1137; fax 887-1268;  
  website: http://manila.usembassy.gov/wwwh3011.html.                         
                                                                       
  TRAVEL AND BUSINESS INFORMATION                                             
  The U.S. Department of State's Consular Information Program advises Americans
  traveling and residing abroad through Consular Information Sheets, Public   
  Announcements, and Travel Warnings. Consular Information Sheets exist for all
  countries and include information on entry and exit requirements, currency  
  regulations, health conditions, safety and security, crime, political       
  disturbances, and the addresses of the U.S. embassies and consulates abroad.
  Public Announcements are issued to disseminate information quickly about    
  terrorist threats and other relatively short-term conditions overseas that  
  pose significant risks to the security of American travelers. Travel Warnings
  are issued when the State Department recommends that Americans avoid travel 
  to a certain country because the situation is dangerous or unstable.        
                                                                       
  For the latest security information, Americans living and traveling abroad  
  should regularly monitor the Department's Bureau of Consular Affairs Internet
  web site at http://www.travel.state.gov, where the current Worldwide Caution,
  Public Announcements, and Travel Warnings can be found. Consular Affairs    
  Publications, which contain information on obtaining passports and planning a
  safe trip abroad, are also available at http://www.travel.state.gov. For    
  additional information on international travel, see http://www.usa.gov/     
  Citizen/Topics/Travel/International.shtml.                                  
                                                                       
  The Department of State encourages all U.S citizens traveling or residing   
  abroad to register via the State Department's travel registration website or
  at the nearest U.S. embassy or consulate abroad. Registration will make your
  presence and whereabouts known in case it is necessary to contact you in an 
  emergency and will enable you to receive up-to-date information on security 
  conditions.                                                                 
                                                                       
  Emergency information concerning Americans traveling abroad may be obtained 
  by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular   
  toll line 1-202-501-4444 for callers outside the U.S. and Canada.           
                                                                       
  The National Passport Information Center (NPIC) is the U.S. Department of   
  State's single, centralized public contact center for U.S. passport         
  information. Telephone: 1-877-4USA-PPT (1-877-487-2778). Customer service   
  representatives and operators for TDD/TTY are available Monday-Friday, 7:00 
  a.m. to 12:00 midnight, Eastern Time, excluding federal holidays.           
                                                                       
  Travelers can check the latest health information with the U.S. Centers for 
  Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP
  (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the
  most recent health advisories, immunization recommendations or requirements,
  and advice on food and drinking water safety for regions and countries. A   
  booklet entitled "Health Information for International Travel" (HHS         
  publication number CDC-95-8280) is available from the U.S. Government       
  Printing Office, Washington, DC 20402, tel. (202) 512-1800.                 
                                                                       
  Further Electronic Information                                              
  Department of State Web Site. Available on the Internet at http://          
  www.state.gov, the Department of State web site provides timely, global     
  access to official U.S. foreign policy information, including Background    
  Notes and daily press briefings along with the directory of key officers of 
  Foreign Service posts and more. The Overseas Security Advisory Council (OSAC)
  provides security information and regional news that impact U.S. companies  
  working abroad through its website http://www.osac.gov                      
                                                                       
  Export.gov provides a portal to all export-related assistance and market    
  information offered by the federal government and provides trade leads, free
  export counseling, help with the export process, and more.                  
  STAT-USA/Internet, a service of the U.S. Department of Commerce, provides   
  authoritative economic, business, and international trade information from  
  the Federal government. The site includes current and historical            
  trade-related releases, international market research, trade opportunities, 
  and country analysis and provides access to the National Trade Data Bank.   

 

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