| Background
Note: Philippines
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 (2005 estimate): 85.24
million; estimate for 2004: 83.9 million.
Annual growth rate: 2.05%.
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 (2005): 32.3 million. Services (including commerce
and government, 2005)--48%; agriculture--20%; industry--36%. 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 (2005): $87.63 billion.
Annual GDP growth rate (2005): 5.5% at
constant prices
GDP per capita (2005): $1024.
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 (2005):
Exports--$41.3 billion. Imports--$47.4 billion. PEOPLE
The
majority of Philippine people are of Malay stock, descendants of Indonesians and
Malays who migrated to the islands long before the Christian era. The most significant
ethnic minority group is the Chinese, who have played an important role in commerce
since the ninth century, when they first came to the islands to trade. As a result
of intermarriage, many Filipinos have some Chinese and Spanish ancestry. Americans
and Spaniards constitute the next largest alien minorities in the country. More
than 90% of the people are Christian; most were converted and became Westernized
to varying degrees during 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 groups of northern Luzon.
Small forest tribes still live in the more remote areas of Mindanao. About
87 native languages and dialects are spoken, all 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 acceptance, particularly as a
second language. Many use English, the most important nonnative language, as a
second language, including nearly all professionals, academics, and government
workers. 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 first language. The
Philippines has one of the highest literacy rates in the East Asian and Pacific
area. 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 years since independence (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, people of Malay stock came
from the south in successive waves, the earliest by land bridges and later in
boats called barangays. The Malays settled in scattered communities, which were
named barangays after the boats, and which were ruled by chieftains known as datus.
Chinese merchants and traders arrived and settled in the ninth century A.D. In
the 14th century, Arabs arrived, 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 it for Spain
in 1521, and for the next 377 years, the islands were under Spanish rule. This
period was the era of conversion to Roman Catholicism. A Spanish colonial social
system was developed with a government centered on Manila and with considerable
clerical influence. Spanish influence was strongest in Luzon and the Central Philippines.
It was less strong 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, western-educated Filipinos or "ilustrados" such as 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 which began in 1896 under the leadership of Emilio Aguinaldo
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 Dewey's defeat of the Spanish fleet in Manila
Bay, the United States 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 President Aguinaldo, broke out in 1899. This conflict
claimed the lives of tens of thousands of Filipinos and thousands of Americans.
Although Americans have historically used the term "the Philippine Insurrection,"
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 United States, and resistance gradually died out.
The conflict ended with a Peace Proclamation on July 4, 1902. However, armed resistance
continued sporadically, with heavy casualties on both sides, until 1913, especially
in Mindanao and Sulu. 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 and a sound legal system.
The first legislative assembly was elected
in 1907. A bicameral legislature, largely under Philippine 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 Gen. Douglas MacArthur landed
on Leyte on October 20, 1944. Filipinos and Americans fought together until the
Japanese surrender 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. As a result of 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 United States 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 Independence Day was changed
from July 4 to June 12, commemorating the date independence from Spain was declared
by General 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 6-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. Corruption and favoritism
contributed to a serious decline in economic growth and development under Marcos.
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 Sen. 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 respect for 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 of 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. The Congress
rejected the charges in September 2005. Similar charges were discussed and dismissed
by the Philippine 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 6-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 indigenous tribes still live. The
24-member Philippine Senate is elected at large. There are currently 23 senators,
however. The May 2004 national election produced 12 new senators, although, because
current Senator Noli De Castro was elected Vice President, he will leave his seat
empty until the next Senate elections in 2007. Of a maximum 250 members of the
House of Representatives, 212 are elected from single-member districts. The remainder
of the House seats are designated for sectoral party representatives elected at
large, called party list representatives; currently there are 24 such representatives
in the House. When Arroyo assumed the Presidency,
her "People Power Coalition," led by the Lakas-CMD party, became the dominant
group in Congress. The 75-member Lakas party leads the "Sunshine Coalition," which
also includes the 61-member Nationalist People’s Coalition, some members of the
now-divided Liberal Party, and several other major and minor parties. The LDP
party leads the 20-member opposition bloc. Members of the Philippine Congress
tend to have weak party loyalties and change party affiliation easily. There is
no clear majority in the Senate, which changed its President in 2006.
The
government continues to face threats from both terrorist groups and communist
insurgents, and rising crime and concerns about the security situation have had
a negative impact on tourism and foreign investment. The Department of State in
August 2002 added the Communist Party of the Philippines/New People’s Army (CPP/NPA)
to the U.S. Foreign Terrorist Organization list. The terrorist Abu Sayyaf Group
(ASG), which gained international notoriety with its kidnappings of foreign tourists
in the southern islands, and which is also on the U.S. FTO list, remains is a
major problem for the government. In May 2001, the ASG kidnapped several Americans,
beheading one of them in June 2001. In a June 2002 rescue attempt, another American
hostage was killed. Efforts to track down and destroy the ASG have met with some
success, especially on Basilan and Jolo, where U.S. troops advised, assisted and
trained Philippine soldiers in counterterrorism. The ASG also has links to the
terrorist Jemaah Islamiyah group, which has provided training in explosives. In
August 2001, the government reached a cease-fire agreement with the separatist
Moro Islamic Liberation Front (MILF). During President Arroyo's May 2003 State
Visit to Washington, President Bush pledged diplomatic and financial support for
the peace process, a move that both sides embraced. In June 2003, the MILF issued
a formal renunciation of terrorism. An ensuing cessation of hostilities continues
to hold, aided by an International Monitoring Team led by Malaysia. Talks 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--Lauro Baja 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 the Second World War, 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. 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. 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. However, despite recent progress, fiscal problems remain one of
the economy's weakest points and its biggest vulnerability. 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 chromite, 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
The Philippines was less severely affected by the Asian financial
crisis than its neighbors, aided in part by annual remittances from overseas Filipino
workers that exceeded $10 billion in 2005. Except for 1998--when drought and weather-related
disturbances pulled down agricultural harvests, combining with the contraction
in industrial sector production--real Gross Domestic Product (GDP) has recorded
positive growth year-on-year. From a 0.6% decline in 1998, GDP expansion picked
up in 1999 (3.4%) and 2000 (4.4%) but slowed to under 2% in 2001 in the context
of a global economic slowdown, export slump, and domestic as well as global political
and security concerns. Year-on-year GDP growth accelerated to 4.5% in 2002, reflecting
the continued resilience of the service sector, gains in industrial sector output,
and recovering exports. The economy exhibited resilience during 2003 with 4.5%
GDP growth, notwithstanding serious external and domestic shocks. (including the
Iraq War, SARS, uncertainties over global economic prospects, sovereign credit-rating
downgrades, and resurgent law-and-order worries). GDP increased by 6% in 2004,
a fifteen-year high, but is expected to expand by under 5% in 2005 on weaker export
growth, drought-affected agricultural harvests, and high oil prices. Historically,
the Philippines has had difficulty sustaining growth at over 5%. It will take
a higher, sustained economic-growth path to make more appreciable progress in
poverty alleviation given the Philippines' high annual population growth rate
of 2.36%--one of the highest in Asia. 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. The Philippines relies
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%. Overall export receipts grew minimally
at 4.0% in 2005 due to a lethargic 2.2% increase in foreign exchange receipts
from electronics shipments. Year-on-year export growth however, accelerated to
16.8% during the first half of 2005, with receipts from electronics shipments
up by 29.8% Although less severely affected
than its neighbors, 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 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 (NPAs). As of July 2005, the ratio of the commercial banking
system’s NPAs to total assets had declined to under 9.5% (from 12.3% as of July
2004). Banks had until April 2005 to conclude notarized agreements to sell their
NPAs to qualify for incentives under the law. A bill supported by the Philippine
Central Bank and the banking sector seeks to extend the deadline towards further
reducing the NPA ratio to pre-crisis levels of under 5%. 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 government faces another
important challenge in addressing threats to the long-term viability of state-run
pension funds. The monetary authority’s adoption since January 2002 of an inflation-targeting
framework has enhanced transparency in the conduct of monetary policy. The government--which
has targeted lower fiscal deficits since 2003 toward balancing the budget before
the end of President Arroyo’s term--contained the full-year 2004 budget deficit
to 3.9% of GDP (down from 2002’s 5.3% record high) and is on track thus far to
containing the 2005 deficit to 3.4% of GDP in 2005, reflecting spending restrain
and more vigorous efforts by tax collection agencies to improve administration,
enforcement, and governance. However, the current 13% tax-to-GDP ratio remains
well below the 17% peak ratio achieved in 1997. The
Aquino and Ramos administrations opened up the relatively closed Philippine economy
and provided a firmer base for sustainable economic growth. After a slow start,
President Estrada and his cabinet continued with, and expanded, liberalization
and market-based policies and reforms. 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 confidence
of investors and the business community and ultimately led to successful efforts
to impeach and remove President Estrada. 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 Financial Action Task
Force (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. The Arroyo government is pushing
for congressional approval of an anti-terrorism law to strengthen its campaign
against terrorism and terrorist financing. 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
which 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. Notwithstanding
a number of favorable policy developments, the Philippine economy continues to
juggle extremely limited financial resources while attempting to meet the needs
of a rapidly expanding population and address intensifying demands for the current
administration to deliver on its anti-poverty promises. Over 80% of the government
budget is devoted to non-discretionary expenses (i.e., debt service, government
salaries and benefits, and legally-mandated revenue transfers to local government
units). The current high level of government debt, the substantial share of foreign
obligations, the emerging risks posed by contingent liabilities (particularly
those of the government’s debt-saddled NPC), and the worrisome deterioration in
the tax collection performance from the 1997 peak (still low by regional standards)
have increased the country’s vulnerability to severe external and domestic shocks.
More recent reforms include laws increasing excise taxes on tobacco and liquor
products and establishing a system of rewards and penalties in revenue collection
agencies. An amended Value Added Tax law (which would reduce VAT exemptions and
increase the VAT rate from 10% to 12% in 2006 represents the most significant
measure thus far in the Arroyo Administration’s efforts to raise revenues from
legislative measures to balance the budget two years ahead of schedule (2008 vs.
2010) while expanding investments in infrastructure and improving the delivery
of essential social services. As of end-September 2005, the amended VAT law--originally
scheduled for implementation in July 2005 but challenged by opposition lawmakers
and other groups before the Supreme Court--was on hold pending a final ruling
by the Court. 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 protection. Potential
foreign investors, as well as tourists, continue to be concerned about law and
order, inadequate infrastructure, 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, lower costs of
doing business, and 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 nearly 37% 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. Industry
Industrial
production is centered on 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 the 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 chromite 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 Island 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 ASEAN, of which
it will serve as Chair until summer 2007, 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 2-year term as a
member of the UN Security Council from January 2004 to 2006, serving 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 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
fundamental Philippine attachment to democracy and human rights is 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. The welfare of the some eight million overseas
Filipino workers is considered to be a pillar of Philippine foreign policy. Foreign
exchange remittances from these workers exceed 12% of the country’s gross domestic
product. 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 three million Americans of Philippine ancestry in the United
States and more than 130,000 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 Mt. 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 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 United States in April 1998, and then-President Estrada visited in
July 2000. President Arroyo (PGMA) met with President Bush in an official working
visit in November 2001 and made a state visit in Washington on May 19, 2003. Numerous
U.S. Cabinet-level visits to the Philippines punctuated this period, culminating
in a visit by Secretary of State Colin Powell in August 2002. 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. President
Arroyo has repeatedly stressed the close friendship between the Philippines and
the United States and her desire to strengthen bilateral ties further. Our governments
seek to revitalize and strengthen our 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. Balikatan (Shoulder-to-Shoulder)
02-1 in 2002 contributed directly to the Philippines armed forces efforts to root
out Abu Sayyaf terrorists and bring development to one formerly terrorist-plagued
island. The U.S. and the Philippines have intensified their annual cycle of combined
military training around the country as well as the military’s civil affairs and
humanitarian projects, funded by $70 million in U.S. Foreign Military Financing
projected between 2004-06. Moreover, the International Military Education and
Training (IMET) program, $2.7 million in FY 2004, is the largest in Asia and the
second largest in the world. At $148 million the Philippines is the number one
recipient in Asia of Excess Defense Articles. The Mutual Logistics Support Agreement
(MLSA) was signed in November 2002 after a year-long negotiation process. Similarly,
law enforcement cooperation has reached new levels. U.S. and Philippines agencies
have cooperated to bring charges against 15 Abu Sayyaf terrorists, implement our
extradition treaty, and train some 700 Filipino law enforcement officers in 2002.
In October 2003, the United States designated the Philippines as a Major Non-NATO
Ally. The same month, the Philippines joined the select group of countries to
have ratified all 12 UN Counterterrorism Conventions. The
United States is also working closely with the Philippines to reduce poverty and
increase prosperity. The U.S. fully supports President Arroyo's "Strong Republic"
reform agenda for rooting out corruption, opening economic opportunity, and investing
in health and education. USAID programs, worth $16 million in FY 2005, support
the Arroyo Administration’s war on poverty as well as the GRP reform agenda in
critical areas, including anti-money laundering, rule of law, tax collection,
and trade and investment. Other USAID programs worth $23.2 million 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, which together
totaled $70 million in FY 2005. In November 2004, the Philippines became eligible
for the Millennium Challenge Account (MCA) Threshold Program and in 2006, MCC
granted $21 million for this threshold program, addressing corruption in revenue
administration. Nearly 400,000 Americans visit the Philippines each year. Providing
government services to U.S. and other party’s 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 Veterans Affairs and Social Security administrations totaled, $143.9 million
and $246.7 million, respectively. 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 $16.1 billion in 2005 (U.S. Department of Commerce data). According to Philippine
Government data, some 18% of the Philippines' imports in 2005 came from the U.S.,
and about 18% of its exports were bound for America. The Philippines ranks as
our 25th largest export market and our 28th 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
United States traditionally has been the Philippines’ largest foreign investor,
with about $6.6 billion in estimated investment as of end-2005 according to official
U.S. statistics (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 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--Scott Douglas
Bellard
Economic Counselor--Larry L. Memmott
Consul General--Richard D.
Haynes
Management Counselor--Catherine I. Ebert-Gray
Commercial Counselor--Judy
R. Reinke
USAID Mission Director--Jon Lindborg
Agricultural Counselor--Jude
Akhidenor
Transportation and Safety Administration--Bert Williams
Defense
Attaché Office--Colonel Bruce 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--Jon Skelly
Social Security Administration--Jill Baker
American
Battle Monuments Communication--Larry Atkinson
U.S. Peace Corps--Karl 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 provides Consular Information
Sheets, Travel Warnings, and Public Announcements. Consular Information Sheets
exist for all countries and include information on entry requirements, currency
regulations, health conditions, areas of instability, crime and security, political
disturbances, and the addresses of the U.S. posts in the country. Travel Warnings
are issued when the State Department recommends that Americans avoid travel to
a certain country. Public Announcements are issued as a means to disseminate
information quickly about terrorist threats and other relatively short-term conditions
overseas that pose significant risks to the security of American travelers. Free
copies of this information are available by calling the Bureau of Consular Affairs
at 202-647-5225 or via the fax-on-demand system: 202-647-3000. Consular Information
Sheets and Travel Warnings also are available on the Consular Affairs Internet
home page: http://travel.state.gov/. Consular
Affairs Tips for Travelers publication series, which contain information on obtaining
passports and planning a safe trip abroad, are available on the Internet and hard
copies can be purchased from the Superintendent of Documents, U.S. Government
Printing Office, telephone: 202-512-1800; fax 202-512-2250. Emergency
information concerning Americans traveling abroad may be obtained from the Office
of Overseas Citizens Services at (202) 647-5225. For after-hours emergencies,
Sundays and holidays, call 202-647-4000. 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, 8:00 a.m. to 8:00 p.m., 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. Information on travel
conditions, visa requirements, currency and customs regulations, legal holidays,
and other items of interest to travelers also may be obtained before your departure
from a country's embassy and/or consulates in the U.S. (for this country, see
"Principal Government Officials" listing in this publication). U.S.
citizens who are long-term visitors or traveling in dangerous areas are encouraged
to register
their travel via the State Department's travel registration web site at https://travelregistration.state.gov/
or at the Consular section of the U.S. embassy upon arrival in a country by filling
out a short form and sending in a copy of their passports. This may help family
members contact you in case of an emergency. 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. 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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