Philippine-Singapore ties to grow stronger under new president
Narendra Aggarwal
WITH the election of Ferdinand “Bongbong” Marcos Jr as the new president of the Philippines and the new government taking over the helm soon, bilateral ties between Singapore and the Philippines are projected to grow further, says the Philippines’ envoy in Singapore.
“We foresee that our bilateral relations should continue to grow and expand. We foresee that the new administration will continue the programmes of the Duterte administration, especially in the sectors of infrastructure, renewable energy and the digital economy, which should continue to attract foreign investors, especially from Singapore which remains a top source of FDI for the Philippines,” says Ambassador Joseph del Mar Yap in an interview with The Business Times (BT) on the occasion of the Philippine Independence Day on Jun 12.
“At the same time, on a personal note, the new president is very familiar with Singapore, having been a regular visitor to the country prior to his election,” he adds.
The incoming president is expected to be a continuity president, picking up from where the current administration will leave off. But the details of these economic policies would be known once his team of economic managers start their work.
“It is, however, very likely that he will continue and expand the infrastructure programme of the Duterte administration, to make up for the delays caused by the pandemic, and continue to focus on post-pandemic recovery. It is also likely that the infrastructure programme will be opened to more participation by the private sector in order to fast track its implementation,” says the envoy.
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Ambassador Yap says that the new president has picked experienced and well-regarded senior technocrats for his economic team which will be tasked to steer the post-pandemic recovery.
“The current central bank chief Benjamin Diokno will lead the Department of Finance. He has already announced that as finance secretary, he will carefully balance the need to support economic growth on the one hand and to maintain fiscal discipline on the other. Part of his government track record is serving as the budget secretary under both the Estrada and Duterte administrations,” says the envoy.
Felipe Medalla, a member of the monetary board, has been chosen to be the new central bank governor to replace Diokno.
Philippine Competition Commission chief Arsenio Balisacan will head the National Economic and Development Authority (Neda). He previously served in the same role under the Aquino administration. He said he looks forward to working with the economic team and the private sector to bring back the country to its pre-pandemic high growth trajectory, deliver rapid poverty reduction, and reduce socioeconomic inequality.
The incoming secretary for the Department of Trade and Industry is development banker and former University of the Philippines president Alfredo Pascual, who is also the current president of the Management Association of the Philippines.
“So far, the feedback from the business community on these appointments has been positive as all have noted that the nominated cabinet members have excellent public service track record and are all highly qualified in their fields of expertise. This A-team of business and public service leaders, as some have started calling it, will definitely continue steering our economy in the right direction,” says the Philippines ambassador.
Asked to identify some of the key areas that Singapore businessmen could possibly look at to explore in the Philippines as it experiences new energy under a new administration, Yap says beyond infrastructure and renewal energy, there are also significant opportunities in other areas.
The Philippines’ manufacturing sector is booming. Following the greater mobility and effective implementation of health and safety protocols with lesser and lesser Covid cases, the economic recovery is in full swing. Manufacturing output as measured by the Purchasing Managers’ Index (PMI) climbed to 53.2 in March, which is its highest point in 3 years.
The manufacturing sector’s growth has been significantly supported by the surge in the country’s foreign direct investment (FDI) net inflows last year, which reached an all-time high of US$10.52 billion. This was 54.2 per cent higher than US$6.82 billion FDI in 2020, according to the latest data from the central bank. The previous record level was US$10.3 billion in 2017. The 2021 net FDI also surpassed the earlier government projection of US$8.5 billion.
Ambassador Yap says hyperscalers can avail of incentives under the country’s Investment Priorities Plan. President Rodrigo Roa Duterte had announced that the Philippines is inviting more investments to expand e-commerce and facilitate new modes of interaction and exchange as the country becomes an active participant in the global digital economy.
The Philippines’ digital landscape makes it an ideal place for hyperscalers. According to the 2021 Digital Report, the Philippines remained the top country in social media and Internet usage worldwide. E-commerce adoption in the Philippines grew from 70 per cent in 2019 to 76 per cent in 2020, and further to 80.2 per cent in 2021.
“Our digital enterprises filled the void left by bricks-and-mortar businesses affected by the community lockdowns. Online retail, delivery services, online entertainment, digital services, telehealth, work from home arrangements, digital payments - all of these helped us in the past year and continue to do so until now.”
The Philippines is currently the social media capital of the world with 89 million active social media users. As of January this year, it ranked 6th in Facebook usage, 10th in YouTube, 11th in Twitter and 18th in Instagram, according to the Global Social Media Use Ranking.
Yap says that fintech is very promising as the country has been identified as one of the fastest-growing fintech destinations. Fintech and low-cost payment systems resulted in an increase in the number of adult Filipinos owning prepaid debit cards, from 12.7 million in 2013 to 21 million in 2018. Fintech companies and QR code enabled payments resulted in an increase in the number of active mobile money accounts by 5 million. The growth of digital payments in the Philippines is estimated to be 27 to 30 per cent, higher than the 25 per cent in emerging Asian neighbours.
“The current administration championed and saw to completion many game-changing policy reforms and accelerated programme interventions in the past 5 years that helped position the country towards a stronger post-pandemic recovery, leading to a more vibrant trade, investment, and industry sectors,” says the envoy.
“These new laws are very significant and are designed to open the economy to more foreign investors, including Singapore businesses.” He gives some examples:
The Ease of Doing Business (EODB) Act has considerably increased the efficiency of business processes, making it easier for potential investors to conduct businesses in the Philippines.
The Corporate Recovery and Tax Incentives for Enterprises, more popularly known as the CREATE Act, rationalises, modernises, and offers more relevant incentives to investors. The Strategic Investment Priorities Plan (SIPP) under CREATE identifies industries and projects that will be eligible for fiscal incentives to attract high-value, sustainable, high technology projects that will strengthen the country’s participation in the global value chain, create more jobs, and further increase its competitiveness in the global market.
The amended Retail Trade Liberalization Act lowered the capital requirement for foreign investors in retail trade - from a previous investment requirement of US$2.5 million, down to just US$500,000 or around 25 million Philippine pesos.
The most recently signed law - the Public Service Act, likewise eased foreign equity restrictions in key sectors from the previous maximum 40 per cent to 100 per cent foreign equity. This is a major reform as these sectors, which have been protected for over 85 years, include telecommunications, shipping, air carriers, railways and subways, airports, and toll roads.
Moving to bilateral Singapore-Philippines relations, Ambassador Yap says that they are stronger than ever. “During my tenure as Philippine ambassador to Singapore, we celebrated the golden jubilee of the establishment of our diplomatic relations. We celebrated this anniversary with a series of 27 commemorative events during the year, capped by the state visit of Her Excellency President Halimah Yacob to the Philippines. Our bilateral relations have continued to grow from strength to strength in all areas: economic and trade, defense cooperation, cultural, and people-to-people exchanges, among others,” he tells BT.
“Singapore was our top source of foreign direct investment in 2019 and 2021, with a total investment value of US$1.6 billion in 2021. We are also pleased to reaffirm our commitment to strengthen our trade partnership and work on our various initiatives to further enhance our economic ties. Singapore was our top 6th major trading partner (out of 223) in 2021, despite the pandemic.”
Looking ahead, Yap says that his country and Singapore could strengthen their partnership in digitalising micro, small-and-medium enterprises (MSMEs). Both countries recognised the surge in e-commerce during the Covid pandemic and its significant impact on the economy; and as such, agreed to explore joint initiatives on digitalisation development for MSMEs.
There are also possible joint ventures and areas for investments in the Philippines such as on smart cities, interconnectivity, digital technologies and startups, renewable energy, and infrastructure - namely the national government’s “Build Build Build” project, he adds.
Reflecting the vibrant and close ties, an estimated 200,000 Filipinos live and work in Singapore and actively contribute to the local economy. Ambassador Yap says the demographics of the Philippine community here has changed significantly over time. About 60 per cent of Filipinos in Singapore are now professionals and skilled workers, while the rest are household service workers.
Yap tells BT that as the impact of Covid on the Singapore economy has been significant, this has affected the Filipino community here as well. Sectors that have been the most severely affected are those that rely on international travel - including air transport, accommodation and other tourism related sectors. Consumer facing sectors such as retail and food services were also affected by the cutback in domestic consumption amid the “circuit breaker” and other health protocol measures.
Meanwhile, with the ban on foreign travellers lifted, the tourism sector in the Philippines is experiencing a promising recovery. Data from the Philippines Bureau of Immigration show that there was a 40 per cent increase in the number of visitors from 150,740 in January this year to 211,899 in February 2022, while mid-March numbers also show subsequent steady growth as 100,000 travellers were recorded. However, tourism revenues are not expected to reach pre-pandemic levels until 2023.
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