On 22 April 2015, Commercial Counsellor Christine dela Cruz shared important updates concerning the Philippine economy to members of China Light Industry Council.

Post highlighted two areas: one is about the ever-growing domestic market, and second is on new preferential market access granted by major importing economies.

Philippines-China Bilateral Trade In 2013, China ranked as the Philippines 3rd major trading partner, 3rd export market, and 2nd import supplier. Philippine statistics show that exports to China in December last year hit 746 million US dollars up on year by 79%. With this amount, China landed as the third-biggest export market for Philippine-made goods. Goods imported by the Philippines from China reached 671 million US dollars in November 2013 which is 14.6% higher in 2012 making China the Philippines’ biggest source of imports in the same period.

Meanwhile, Philippine imports from China grew in 2013. Top commodity imports of the Philippines include telecommunications apparatus, computer data storage units, liquefied petroleum gases, parts and accessories of computers, ceramic mosaic cubes among others. Top imports of China from the Philippines include electrical and electronic machinery, equipment and parts manufactured storage units, portable digital automatic data processing machines, nickel ores and concentrates, and semiconductor devices.

These fundamentals made the Philippines the second largest and fastest growing trading partner of China, amongst ASEAN in 2014.

Consumption-driven economy, ever-growing domestic market The Philippine growth story is evidenced by favourable economic numbers. Driven by consumption and investment, the country’s GDP growth has ranged from 6% to 7% for the past two years.

The Philippine economy is consumption-driven. The consumer spending strength means the nation is relatively more resilient to external shocks, as compared to other export-driven economies, which may be affected by the global economic outlook.

Population of 100 million (will continue to grow to almost 107 million by 2018) and purchasing power strengthened by remittances of more than US$20 billion from about 8 million Filipinos working abroad will spur consumer spending in the Philippines. Currently, the Philippines has 61% of population in the working age bracket between 15 and 64. It is one of the youngest countries in the world with a median age of 23 years old.

Consumption expenditure as a percentage of GDP (74%) in the Philippines is one of the highest in ASEAN. In 2012, household consumption expenditure (US$186 billion) was ranked third in ASEAN, just behind Indonesia (US$479 billion) and Thailand (US$209 billion). Experts project that the total consumer expenditure in the Philippines will grow at 5.4% annually until 2030.

Philippines as the only ASEAN country in the EU GSP+ scheme Last December 18, 2014 the European Parliament confirmed the European Commission’s Decision to grant the Philippines GSP+ status. This is very good news not only for the Philippines as it will bring tariffs down to 0% for around two thirds of tariff lines including strategic products that the Philippines is already exporting to the EU but also for Chinese manufacturers facing challenges in the European market.

In addition, the EU unilateral concession significantly improves the attractiveness of the Philippines as a destination for new investments. It is in this regard that we encourage Chinese companies to put more resources in the Philippines, in facilities that produce the goods benefiting from 0% tariffs. Chinese companies should capitalize and take advantage of this new development as the Philippines gained a new competitive edge.

PTIC Beijing invited member companies of the industry association to include the Philippines in their “Going Out” strategy – the Philippines as “China plus” to de-risk China and/or ASEAN operations from the many challenges it is facing.

Competitive Investment Incentives 3

Opportunities for partnership Post presented areas for cooperation between Philippines and Chinese companies. According to dela Cruz, Chinese firms can work with Philippine companies through joint agreements and ventures, to improve on and leverage on existing capabilities of Philippine manufacturing sector, and in strict compliance to EU’s Rules of Origin. We bring in to the table the following: • expand business activities in foreign markets, successfully implementing the Chinese government’s “Going Out” policy by partnering with Philippine companies through joint ventures. Chinese firms can leverage on local market knowledge of Philippine companies thus expanding foothold in the highly consumption-driven Philippine market. • improve consumer perception about “Made in China” products by ensuring that products assembled or exported to the Philippines meet international standards. Joint venture with local Philippine firms will ensure that after sales is part of the product lifecycle. • maintain EU as an important export destination of light industries-manufactured goods through joint venture with Philippine companies.

PH IPA-Approved Investments from China by Industry (Value in PhP Million, Growth Rate in Percent) 4

Commercial Counsellor Christine dela Cruz shared that as the only ASEAN member covered by the EU GSP plus scheme, the Philippines has regained its competitiveness as an outsourcing-manufacturing destination for many export products. dela Cruz encouraged the Council and its members not to miss this opportunity, to partner with Philippine enterprises in order to maintain a strong foothold in the EU market and tap the ever-growing Philippine market.

About The Philippine Trade and Investment Centre in Beijing Working with abroad spectrum of government and private sector groups to articulate, develop, promote Philippine trade and investment interests overseas, the Philippine Trade and Investment Centre in Beijing (PTIC Beijing)/the Commercial Section ofthe Embassy of the Philippines serves as the international trade policy negotiation, trade & investment promotions arm of the Republic of the Philippines in China.

For more information on GSP+ and list of eligible products, favourable investment policies: fiscal and non-fiscal incentives, please get in touch with the Philippine Trade and Investment Center/Commercial Section of the Philippine Embassy in China through:

Telephone Number: +86.10.85865817 Fax Number: +86.10.85865975 Email Address: Beijing@dti.gov.ph