PhilippinesCountry Facts
Bureau of East Asian and Pacific
Affairs
October
2007
Background Note: PhilippinesCountry
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.
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 Ni?o-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 Attach? Office--Colonel Bruce A.
West
Joint U.S. Military Assistance Group--Colonel Mathias R.
Velasco
Regional Security Officer--Jacob M.
Wohlman
Legal Attach?--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 citizenstraveling 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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PhilippinesCountry Facts
