Republic of the Philippines

Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

Disclaimer: If you are not the intended recipient, any unauthorized disclosure, copying, dissemination or use of any of the information is strictly prohibited. This presentation contains data sourced from various Philippine government, multilateral/bilateral and private sector websites/reports as of 27 November 2020, unless otherwise indicated. These sources have been cited where possible. Table of Contents

I. Socio-Economic Response Package Against COVID-19 3

II. Sound Credit Profile 15 III. Long Track Record of Strong Macroeconomic Performance 19 IV. Demonstrated External Resiliency 37

V. Sound and Stable Financial System 42

VI. Strong Government Finances 48

VII. Infrastructure Development for Economic Recovery 62

VIII. Firm Institutional Foundations Through Structural Reforms 76

IX. Outlook 87

X. Environmental, Social and Governance 89

XI. The Investor Relations Office 103

2 Socio-Economic

REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Response Package Against Covid-19

I Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

3 Rapid, Comprehensive and Fiscally Responsible Response to COVID -19

Phased and Adaptive Strategy to Address the Pandemic

Emergency Stage Recovery Stage Resiliency Stage March - May 2020 June - December 2020 2021 Onwards

Bayanihan to Heal as One Act (Bayanihan 1) or Bayanihan to Recover as One Act (Bayanihan 2) 2021-2022 General Appropriations Act Republic Act No. 11496 or Republic Act No. 11494, and recovery bills: and other reform laws GUIDE, FIST, CREATE*

Pillar 1 Pillar 2 Pillar 3 Emergency Support to Marshalling Monetary Actions and other financing support Rebuilding The Economy: Building Back vulnerable groups and resources to fight Better individuals COVID 19 Pillar 4 Economic recovery plan to create jobs and sustain growth

Key features: Key features: Key features: . Budget and procurement flexibility . Budget and procurement flexibility . Reprioritization of the 2021 and 2022 . Subsidy to poor and low income . Reprioritization of 2020 budget budget . Small business support . Resumption of priority Build Build Build . Structural reforms to turn crisis into . Support to key sectors projects opportunity to prepare for the new . Health system, capacity and insurance . Demand side to raise income and create normal . Support for frontliners jobs: better targeted and implemented . Support Balik Probinsya, Bagong Bayanihan 1 programs Pag-asa Program . Supply side to support firms: liquidity and equity infusion, and guarantee thru the financial sector . Target tax incentives

*Government Financial Institutions Unified Initiative to Distressed Enterprises for Economic Recovery (GUIDE) Act, Financial Institutions Strategic Transfer (FIST) Act, Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act 4 Source: National Economic and Development Authority (NEDA) Swift Enactment of Key Legislations to Support Pandemic Response

Congress passed fiscally responsible measures that the government can implement within its means BAYANIHAN 1 Act BAYANIHAN 2 Act enacted on 24 March 2020 enacted on 11 September 2020 EnactedPHP386.1 on 24 March bn PHP140.0 bn 2020(US$7.6 bn) (US$2.7 bn) Total Allotment Releases Regular Appropriation plus standby fund worth PHP25.5 bn (US$501.0 mn)

To better respond to the COVID-19 crisis, Congress initially, through Republic Act No. 11469 also known as the “Bayanihan to Heal as One Act” granted the President the power to adopt emergency measures and to reallocate and realign from regular appropriations and savings on other items in the 2020 National Budget. Subsequently, the special powers of the President was extended through Republic Act No. 11494 also known as the “Bayanihan to Recover as One Act”

. As of 20 November 2020, released allotments for Bayanihan 1 and Bayanihan 2, including post-Bayanihan 1 amounted to PHP486.1bn. Funding sources as follows: Funding Source (amounts in PHP bn) Bayanihan 1 Post-Bayanihan 1 Bayanihan 2 Total Discontinued Programs and Projects (FY 2019 and FY 266.84 -- 34.77 301.61 2020 GAA)

Regular Agency Budget (FY 2019 and FY 2020 GAA) 20.90 0.09 0.03 21.01 Special Purpose Funds (FY 2020) a/ 98.41 7.50 2.90 108.81 BTr Certification b/ -- -- 54.64 54.64 Total 386.14 7.58 92.35 486.07 *Figures may not add up due to rounding a/ includes National Disaster Risk Reduction Management Fund, Contingent Fund, Miscellaneous Personnel Benefits Fund, Unprogrammed Appropriations b/ includes Excess Revenue Collection, Unutilized Automatic Appropriations

Note: Exchange rate used is the midpoint of DBCC Macroeconomic Assumptions for FY2020 of PHP/US$ 50-52 as of 28 July 2020 5 Source: Philippine Congress, Department of Budget and Management, Department of Finance Rapid, Comprehensive and Fiscally Responsible Response to COVID -19

Financing secured from development partners and commercial markets to support Covid-19 response efforts

Korea Eximbank US$100.0mn Grant Assistance Project Loan Financing US$26.36mn US$615.0mn Agence Française de Développement US$275.7mn

Asian Infrastructure Investment Bank US$750.0mn

Japan International Cooperation Agency Asian Development Bank US$917.9mn US$10.6 US$3.8bn Billion*

World Bank US$1.78bn

*Budgetary support, grant assistance, and ROP USD Bond Issuance project loan financing as of 23 November 2020 US$2.35bn 6 Source: DOF “Bayanihan” Filipino Spirit of Cooperation and Unity

Fortifying pandemic response through “Bayanihan to Recover as One”/Bayanihan 2 or RA No. 11494 Provides for COVID-19 response and recovery interventions and for mechanisms to accelerate the recovery and bolster the resiliency of the Philippine economy

Key features of Bayanihan 2 Signed by the President on 11 September 2020; Valid until 31 December 2020 PHP140bn regular appropriation PHP13.0bn PHP25.5bn standby fund Cash-for-work programs, and unemployment Health Related or involuntary separation assistance for Education displaced workers, freelancers, the self- 7% Programs 18% employed, and overseas Filipino workers (OFWs) affected by the government’s deployment ban. Households, PHP PHP13.5bn Vulnerable sectors and Health-related items: hiring of emergency Businesses, Public 140bn households “human resources for health,” augmentation Transport and Tourism 17% 58% for operations of hospitals, monthly special risk allowance, “actual hazard pay,” life insurance, accommodation, transportation, and meals for health workers

PHP39.5bn Capital infusions to government financial institutions (Development Bank of the Philippines and Land Bank of the Philippines); for the COVID-19 Assistance to Restart Enterprises (CARES) program of Department of Trade and Industry’s Small Business Corporation

PHP24.0bn Direct cash or loan interest rate subsidies to farmers, fisherfolk, agri-fishery enterprises and cooperatives, to finance the Department of Agriculture’s Plant, Plant, Plant program

PHP9.5bn For Department of Transportation’s assistance to transport industry; for temporary livelihood for displaced public utility vehicle drivers; to set up sidewalks and bicycle lanes, and to procure bicycles and other equipment for sharing and lending programs

PHP4.0bn Finance Department of Tourism’s program for road tourism infrastructure and assist critically impacted tourism related businesses and Department of Labor and Employment’s cash for work program

7 Source: Official Gazette “Bayanihan” Filipino Spirit of Cooperation and Unity

Fortifying pandemic response through “Bayanihan to Recover as One”/Bayanihan 2 or RA No. 11494 Provides for COVID-19 response and recovery interventions and for mechanisms to accelerate the recovery and bolster the resiliency of the Philippine economy Key features of Bayanihan 2

Assistance for the Department of Education’s digital and alternative PHP4.0bn learning modalities, including the printing and delivery of self-learning modules. PHP3.0bn Assistance to state universities and colleges in developing smart campuses through investments in their information and communication technology (ICT) capabilities PHP1.0bn Technical Education and Skills Development Authority’s programs for displaced workers

Other salient features . 60-day grace period for payment of all existing, current and outstanding loans falling due on or before 31 December 2020, without interests, penalties and charges

. 30-day grace period for the payment of utilities, falling due within the period of community quarantine without incurring interests, penalties and other charges

. Maximum of 30-day grace period on residential and commercial rents of lessees not permitted to work during the quarantine

8 Source: Official Gazette Rebuilding the Economy by Building Back Better

Building confidence in the safety of public life and stimulating domestic demand Five priority measures to stimulate domestic consumption as the economy reopens

Restart and accelerate Scale up food Support and promote Mass hiring of contact Push for urgent passage of the implementation production and the manufacture of tracers to boost the Corporate Recovery and of the Build, Build, logistics chain products that have government’s efforts Tax Incentives for Build infrastructure strong and inelastic to stop the local Enterprises Act (CREATE), Support the whole previously CITIRA, to attract modernization value chain of food demand by food transmission of COVID- foreign investors in search program subject to production, including production and logistics 19 while helping offset of resilient, high growth minimum health the establishment of businesses to the impact of the potential economies like standards food markets for reinvigorate consumer estimated 1.2mn- the Philippines and provide spending 1.5mn job losses assistance to MSMEs efficient distribution affected by the pandemic * from farm to table

* Passed by both houses of Congress. 9 Source: DOF, NEDA Measures Implemented Proved Effective in Containing Pandemic

Reproduction Number

September November Philippines reproduction number is lower than global R July 27 August 31 average t 28 9

Based on the data from the DOH on reproduction number or

Rt (the average number of new infections generated by each Philippines 1.044 0.977 0.93 0.85 Covid-19 case), the Philippines fared better compared to the

rest of the world. Lowering the value of Rt is made possible through efforts such as physical distancing, wearing of Global 2-3 2-3 2-3 - personal protective equipment, and other means to stop the spread of the virus.

Case Fatality Rate

September November The country’s case fatality rate (CFR) is also lower CFR July 27 August 31 compared to global average 28 24

CFR is the proportion of people who die from COVID-19 among all individuals diagnosed with the disease over a certain period. Philippines 2.37 1.61 1.75 1.94 There has been a marked decline in the Philippines’ CFR since the government embarked on strengthening the healthcare system by complementing it with building isolation facilities; establishing referral hospitals; increasing accredited testing Global 3.91 3.31 2.99 - laboratories; imposing quarantine measures; among others.

Source: DOH 10 Measures Implemented Proved Effective in Containing the Pandemic Team of experts show evidence of flattening the COVID-19 curve

UP OCTA: Philippines Reproduction Number or R0 Stays Below 1 WHO: Philippine Situation (7-Day Rolling Average of Confirmed Cases) 5000

1.16 1.18 1.05 4000 1.02 0.96 0.96 0.87 0.82 3000

2000 1,569

1000 as of 24 Nov 0 Aug 3-9 Aug 10-16 Aug 17-23 Aug 24-30 Aug 31-Sep 6 Sep 7-13 Sep 29 - Oct 5 Nov 8-14 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Evidence of Flattening the Covid-19 Curve Experts from the University of the Philippines (UP) OCTA Research Team confirmed that the country started flattening the COVID-19 curve, with the

continuous downward trend in the number of reported cases and the decrease in r-naught (R0)—an indicator of how fast a single case can infect others.

Pre-Enhanced Community Quarantine (ECQ) Before the ECQ (from March 16 to May 15), COVID-19 positive cases doubled daily. The same is true with the deaths from the disease

Post-ECQ Stringent quarantine measures successfully improved the Case Doubling Time (CDT or the number of days it takes for the number of cases to double) beginning June which shows that it took almost a week to double COVID-19 positive cases compared to the situation in March where cases doubled daily. CDT improved further to 12.35 days, as well as, deaths taking 17.47 days for cases to double as of 19 October 2020

New Normal

According to the latest estimate of the UP OCTA, the Philippines R0 further decreased to 0.82 showing that Covid-19 transmission continued to slow down. Based on WHO data, the number of new confirmed cases (on a 7-day rolling average) has also fallen from an August peak of 5,317 to 1,569 as of 24 November 2020. This trend is expected to carry on as people conduct usual affairs with careful vigilance on health and safety, the paradigm of the “New Normal”

Source: WHO, DOH, University of the Philippines (UP) OCTA Research Team Reproductive number (R0)/(R naught) indicates how contagious a particular infectious disease is. Higher than 1 indicates more number of infections. Less than 1 means less number of infections and epidemic is now 11 declining. Retrieved from https://www.up.edu.ph/public-health-data-analysis-and-recommendations-for-covid-19-in-western-visayas-as-of-30-april-2020/ Third Party Recognition of PH Government Pandemic Response

Government’s COVID-19 response affirmed

World Bank

“The government has taken quick and decisive action in the fight against the COVID-19 pandemic and the World Bank is proud to support its efforts. Right now, no other investment offers greater return.” - Achim Fock, World Bank Acting Country Director for Brunei, Malaysia, Philippines and Thailand (April 2020)

World Health Organization

“(The) Philippines is a country that introduced lockdown in the very early stage of this pandemic. I’m sure it prevented a significant number of infections, and, hence the number of people dying from there, and it prevented the health care (facilities) from being overwhelmed…The Philippine government has been putting a lot of effort in continuously improving their capacity. I have seen also they're upgrading their health services, increasing the number of health care facilities, beds, and also establishing intermediate facilities. So far, we haven’t really seen (if) the number (of cases) overwhelm health care facilities” - Western Pacific Regional Director Takeshi Kasai (August 2020)

Tourism Congress of the Philippines

“The Tourism Congress of the Philippines (TCP) would like to express its deepest gratitude to the bicameral conference committee for approving the Bayanihan to Recover as One Act also known as the Bayanihan 2 bill and allocating PHP10bn for tourism…We look forward to the time when we can again showcase the beauty of our country to the world. It is through the enactment of the Bayanihan 2 that can start on that path.” - (August 2020)

12 Source: World Bank, WHO, Tourism Congress of the Philippines Third Party Recognition of PH Government Pandemic Response

Government’s COVID-19 response earns wide support

Innovations for Poverty Action (IPA) 89% . 89% of surveyed Filipino households have received support from the government in response to COVID-19. . Of which, 97% received food while 45% received cash. . Innovation for Policy Action (IPA) Research for Effective COVID-19 Response (RECOVR) survey was conducted from 18 June to 1 July 2020 and covered Filipino households with TNT prepaid mobile phones. According to the survey, government assistance has widely reached Filipino families coping with the effects of the COVID-19 health crisis.

Gallup International Association 80% . Based on an independent survey of Gallup International Association conducted on 6-8 April 2020, Filipinos believed that the government is handling the crisis “well” . 80% of Filipinos have expressed satisfaction with the Duterte administration’s response to the coronavirus disease 2019 COVID-19 pandemic

Blackbox Research and Toluna 8th . The index is based on a survey conducted from 3-19 April 2020 wherein 12,500 individuals across 23 countries were asked to rate their respective government’s response to COVID-19 using four key indicators, i.e., national political leadership, corporate leadership, community, and media. . The Philippines ranked 8th out of 23 nations with an index score of 49 signifying that Filipinos are highly satisfied with the government’s COVID-19 crisis handling and performance. . 45% of Filipinos rated “highly” the Duterte administration’s efforts to combat COVID-19.

13 Source: Blackbox Research and Toluna, May 2020; PNA, DSWD, IPA Strong Support as Seen from Local Third Party Public Opinion Poll Results

Government’s COVID-19 response earns wide support Pulse Asia Research Survey on the National Administration and the President’s Handling of the COVID-19 Pandemic

84% 92% 91% 97%

National Administration President Class E Almost All

8 out of every 10 Filipinos have 92% of Filipinos believe that the 91% of the lowest socioeconomic Almost all Filipinos are worried positive opinion about the efforts President has done well in terms class approve the performance of about getting infected with Covid- exerted by the Duterte of preventing the national administration in 19 and everybody does something Administration to arrest the terms of helping those who lost to prevent its spread. With this spread of Covid-19 and support livelihoods and jobs. Approval is very high vigilance, the those who lost livelihood and jobs also high in Class D (84%) proving government’s efforts would not be due to the pandemic that government assistance wasted as it is coupled with the reached its target nation’s cooperation

Approval is the prevailing opinion among Filipinos toward the efforts of the national administration and President Rodrigo R. Duterte to deal with the continuing COVID-19 pandemic - Pulse Asia

14 Source: Pulse Asia Research REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Sound Credit Profile

II Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

15 Recent Ratings Affirmations and Upgrades: A Big Vote of Confidence on the Philippine Economy The potential impact of COVID 19 and the government’s policy responses are key considerations of credit rating agencies Agency Current Rating Latest Rating Update JCR A-/Stable Upgraded to A-/Stable – Jun 2020 R&I BBB+/Stable Upgraded to BBB+/Stable – Feb 2020 S&P BBB+/Stable Affirmed at BBB+/Stable – May 2020 Fitch BBB/Stable Affirmed at BBB/ Outlook revised to Stable from Positive May 2020 Moody’s Baa2/Stable Affirmed at Baa2/Stable – Jul 2020

The Philippines’ Rating History

A- JCR The Philippines’ Rating History R&I BBB+ S&P

BBB Moody’s Fitch

Investment Grade BBB-

BB+

BB

BB-

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

16 Strong Credit Profile Going into the Pandemic

Metric 2013 2014 2015 2016 2017 2018 2019 2020 Credit Rating • Moody’s Baa3/positive Baa2/stable Baa2/stable Baa2/stable Baa2/stable Baa2/stable Baa2/stable Baa2/stable • S&P BBB-/stable BBB/stable BBB/stable BBB/stable BBB/stable BBB/positive BBB+/stable BBB+/stable • Fitch BBB-/stable BBB-/stable BBB-/positive BBB-/positive BBB/stable BBB/stable BBB/stable BBB/stable

Real GDP Growth Rate (%), 2018 prices 6.8 6.3 6.3 7.1 6.9 6.3 6.0 -10.0 (Q1-Q3)

GDP Per Capita1/ (US$), 2018 prices 2,903 2,995 3,039 3,108 3,153 3,280 3,512 3,3132/ (Jan-Sep) GNI Per Capita1/ (US$), 2018 prices 3,245 3,341 3,386 3,453 3,501 3,629 3,861 3,6252/ (Jan-Sep) Inflation Rate (2012 = 100) (%) 2.6 3.6 0.7 1.3 2.9 5.2 2.5 2.5 (Jan-Oct) Fiscal Balance/GDP (%) -1.4 -0.6 -0.9 -2.3 -2.1 -3.1 -3.4 -6.9 (Jan-Sep) Tax Revenue/ GDP (%) 12.7 13.0 13.0 13.1 13.6 14.0 14.5 14.5 (Jan-Sep) National Government Interest 18.8 16.8 14.7 13.9 12.6 12.3 11.5 14.1 (Jan-Oct) Payments/ Revenues (%) General Government Debt/GDP (%) 37.6 34.8 34.6 33.2 34.9 34.4 34.1 NA Gross International Reserves (US$ bn) 83.2 79.5 80.7 80.7 81.6 79.2 87.8 103.8 (end-Oct)p/ Import Cover (months) 3/ 11.6 9.9 9.9 8.8 7.8 6.9 7.6 10.3 Overseas Filipinos’ Cash Remittances 23.0 24.6 25.6 26.9 28.1 28.9 30.1 p/ 21.9 (Jan-Sep)p/ (US$ bn) Foreign Direct Investments (US$ bn) 3.7 5.7 5.6 8.3 10.3 9.9 7.7 r/ 4.4 (Jan-Aug) p/ Current Account/GDP (%) 4.0 3.6 2.4 -0.4 -0.7 -2.6 -0.9 2.6 (Jan-Jun) p/ External Debt/GDP (%) 27.6 26.1 25.3 23.5 22.3 22.8 22.2 23.7 (end-Jun) p/

1/ at current prices 2/ annualized 3/ Number of months of average imports of goods and payment of services and primary income that can be financed by reserves. Starting 2005, data are based on IMF’s Balance of Payments and International Investment Position Manual, 6thEdition concept. p/ preliminary NA Not Available 17 Note: Fiscal data uses rebased GDP data at 2018 prices Source: BSP’s Selected Economic and Financial Indicators, Department of Finance (DOF), Bureau of Treasury (BTR) Investors Recognize the Philippines’ Sound Credit Quality

5-year Sovereign CDS spreads (in basis points)

350

300

250

200

150 88.4

89.6 100

61.9

40.2 50 39.4 37.8

0 2014 2015 2016 2017 2018 2019 2020

Philippines (Baa2/BBB+/BBB) Peru (A3/BBB+/BBB+) Thailand (Baa1/BBB+/BBB+) Mexico (Baa1/BBB/BBB-) Malaysia (A3/A-/A-) Indonesia (Baa2/BBB/BBB)

Rating: Moody’s/S&P/Fitch ratings as of Oct 2020 18 Source: Bloomberg (Data as of 25 November 2020, 4:00pm) Long Track Record Of

REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Strong Macroeconomic Performance

III Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

19 Past Structural Reforms Led to 21 Years of Uninterrupted Growth Prior to the Pandemic

The Philippines’ economic trajectory has been improving, with sustained growth in the past two decades Real GDP growth (%)

6.4 6.4 2010-2016 2017-2019 8.0 4.5 2.8 2000-2009 6.0 2.0 1990-1999 1980-1989 4.0

2.0

0.0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -2.0

-4.0 Average GDP growth rate (%) GDP y-o-y growth rate (%) 6.3 6.0 FULL YEAR 2018 FULL YEAR -6.0 GDP GROWTH 2019 GDP GROWTH

-8.0

Source: Philippine Statistics Authority(PSA), NEDA Note: GDP figures from 1980-2000 use 2000 as base year while 2001-2019 use 2018 as base year 20 Past Structural Reforms Led to 21 Years of Uninterrupted Growth Prior to the Pandemic

Consumption and services are major drivers of growth GDP breakdown by component Contribution to growth: demand side (%, 2018 prices) Contribution to growth: supply side (%, 2018 prices) 6.3 6.5 6.9 6.9 2.9 6.5 6.3 6.0 2.6 2.7 6.0 0.7 1.5 1.2 0.7 0.7 4.4 4.1 4.0 4.7 4.4 4.4 4.2 4.3

-0.1 2.1 -1.2 -0.9 2.0 2.2 -2.3 1.5 0.3 0.4 0.1 0.1 2010-2017 2017 2018 2019 2010-2017 2017 2018 2019 Consumption Government Investment Net Exports Agriculture Industry Services

Note: Numbers may not add up due to rounding off

Capital formation has accelerated in recent years … and has become a key driver of growth Gross capital formation (PHP bn, 2018 prices) GDP breakdown by expenditure (%, 2018 prices)

5,084 4,959 2019 -11.1 72.4 12.4 26.2 4,456 4,018 492 461 3,327 510 2018 -11.7 72.5 12.0 27.2 445 1,421 2,933 1,527 2,709 1,388 400 1,220 2,287 378 2017 -10.2 72.9 11.3 25.9 354 884 211 688 728 600 3,202 2,558 2,940 2016 -10.0 73.6 11.3 25.0 2,043 2,353 1,476 1,667 1,828 2015 -6.9 73.6 11.1 22.2 2012 2013 2014 2015 2016 2017 2018 2019

Construction Durable Equipment Others Household Expenditure Government Spending Capital Formation Net Exports

Source: PSA National Accounts; Note: Numbers may not add up due to rounding 21 PSA Adopted Supply and Use Tables (SUT) in the compilation process to attain zero SD for the annual estimates and 1% or less for the quarterly estimates Shocks Weighed Down Economic Performance in 2020 The implementation of enhanced community quarantine (ECQ) to combat the COVID-19 pandemic and a natural disaster at the start of the year weighed down economic activity GDP breakdown by component Contribution to growth: demand side (%, 2018 prices) Contribution to growth: supply side (%, 2018 prices) 5.8 -10.0 5.8 0.7 0.9 3.7 4.2 4.4 -10.0 -0.2 1.6 1.3 0.1 -5.9 0.1 -4.3

-10.0 -5.8

Q1-Q3 2019 Q1-Q3 2020 Q1-Q3 2019 Q1-Q3 2020 Consumption Government Investment Net Exports Agriculture Industry Services

Capital formation softened as construction activity slowed down with the implementation of the enhanced community quarantine (ECQ) Gross capital formation (PHP bn, 2018 prices) GDP breakdown by expenditure (%, 2018 prices)

Q1-Q3 -11.7 73.0 16.0 17.9 3,684 2020 339 2,272 1,058 704 2,287 1,645 Q1-Q3 -10.2 71.5 12.8 26.1 -77 2019 Q1-Q3 2019 Q1-Q3 2020

Construction Durable Equipment Others Capital Formation Household Expenditure Government Spending Capital Formation Net Exports . Shocks dragged down Q1-Q3 growth: Taal volcano eruption in January; decline in tourism and trade due to the global pandemic starting February; the implementation of the strictest form of community lockdown in Luzon, Cebu and Davao from March to May to contain the virus; and a return to strict lockdown in Metro Manila and nearby areas for two weeks in August . GDP growth is expected to recover strongly as more economic activities resume with the effective containment of the pandemic and as fiscal and monetary stimulus gain further traction. The passage and implementation of Bayanihan 2, alongside the remaining pending recovery bills are expected to accelerate recovery and bolster the resilience of the economy 22 Source: PSA National Accounts; Note: Numbers may not add up due to rounding PSA Adopted Supply and Use Tables (SUT) in the compilation process to attain zero SD for the annual estimates and 1% or less for the quarterly estimates Growth Streak Interrupted Due to the Pandemic GDP growth of select Asian economies Real GDP growth (%)

8.8 8.2 7.4 7.8 7.1 6.7 6.8 7.3 7.0 6.1 6.3 6.1 6.0 6.1 5.2 5.0 4.8 5.0 5.2 4.2 4.3 4.2 4.0 4.0 3.4 3.5 2.4 2.2 2.11.6* 1.9* 2.2 0.7 0.7 0.8 0.3

-0.3 -2.0-1.5*

-6.4-6.0 -6.0 -6.8-7.1 -6.9 -8.3 -9.0 -9.4 -10.0* -10.3** -9.5 -10.4 -10.6

-13.9 -14.4

Vietnam China Philippines India Indonesia Malaysia Thailand Peru Singapore Mexico Italy (Ba3/BB/BB) (A1/A+/A+) (Baa2/BBB+/BBB) (Baa3/BBB-/BBB-) (Baa2/BBB/BBB) (A3/A-/A-) (Baa1/BBB+/BBB+) (A3/BBB+/BBB+) (Aaa/AAA/AAA) (Baa1/BBB/BBB-) (Baa3/BBB/BBB-)

2018 2019 Q1-Q3 2020 2020F 2021F

Rating: Moody’s/S&P/Fitch as of Oct 2020 *Q1-Q3 2020 GDP growth for Vietnam, China, the Philippines and Indonesia are sourced from country statistics office while the rest are computed based on average GDP growth for the 3 quarters **India’s GDP growth for Q1-Q2 2020 23 Source: IMF WEO October 2020, Philippine Statistics Authority (PSA) National Accounts (note: rebased Philippines’ GDP at 2018 prices), Bloomberg, CEIC Expanded Productive Capacity to Support Economic Recovery

The Philippines has the highest total factor productivity (TFP) among Incremental Capital-Output Ratio Asian Countries by Oxford Economics

Youngest labor force in Southeast Asia

Median age of the total population (years) 53.4 49.7 46.0 47.6 42.2 41.0 38.4 40.5 40.1 36.2 37.4 34.7 30.9 29.7 30.3 25.7

World High-income China Indonesia Malaysia Philippines Singapore Thailand countries 2020 2030 2040 2050 . Filipinos are the youngest compared to neighbors and the rest of the world even up to 2050 . The Philippines has a deep manpower pool of 49mn young, well-educated and hard-working workforce. Prior to the pandemic, the workforce has been enjoying the benefits of the enhanced work environment owing to the passage of the Telecommuting Act (RA No. 11165) in 2019. . Dependency ratio trends downward beginning this year. It is projected to hit its lowest (49.7) in 2050 and will continue to be the lowest until 2090 compared to economies above as well as the world average 24 Source: BSP, Oxford Economics/Haver Analytics, United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019 Benign Inflation Outlook Help Mitigate Downside Risks to Growth and Boost Market Confidence

Benign inflation environment Headline CPI (yoy, %), 2012=100 Latest: 2.5 (Oct 2020) 8.0 2.5 (Jan-Oct 2020) 7.0 6.0 Peak: 5.0 6.7 (Sep 2018) 4.0 3.0 2.0 1.0 0.0 -1.0 July July July July July July May May May May May May March March March March March March January January January January January January November November November November November September September September September September September 2015 2016 2017 2018 2019 2020 Headline Low-end target Upper-end target

. Latest headline inflation settled at 2.5% in October from 2.3% in September, bringing year-to-date inflation to 2.5%, which is still well within the inflation target range of 3.0 percent ± 1.0 percentage point. . The BSP has delivered a total rate cut of 200bps to date. . In its November 2020 meeting, the BSP decided to cut rates as inflation outlook remains benign and there remains a critical need for continuing policy support measures to bolster economic activity and boost market confidence in order to nurture the country’s economic recovery amid increasing downside risk to growth. . The BSP stands ready to deploy its full arsenal of instruments as needed in fulfillment of its mandate to maintain price and financial stability conducive to sustainable economic growth.

25 Source: BSP Favorable Prospects for Sustained Investment Flows Business sentiment more positive compared to during the Global Financial Net FDI posts growth for four consecutive months Crisis; turns upbeat in next quarter and next 12 months

900.0 60.0 50 2009 2020 2009 2020 2020 46.9 800.0 37.5 40.0 40 700.0 30 13.2 20.0 600.0 20 16.8 0.0 500.0 10 400.0 -20.0 0 300.0 -10 -40.0 -5.3 -6.5 200.0 -20 -60.0 100.0 -30 -23.9 670.4 637.4 Current Quarter Next Quarter Next 12 Months 0.0 -80.0 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Q1 2009 survey Q3 2020 survey net FDI, in US$ mn (LHS) Year-on-Year Growth Rate, % (RHS) Consumer outlook more upbeat for the next 12 months due to expectations of Growth in total approved investments* (PHP bn) in 1H 2020 despite uncertainty return to normal and anticipation of economic recovery

60 25.5 40 19.9 20 9.2 4.1 919.0 0 1.3 900.8 -20 441.7 466.9 803.0 -40 559.9 -60 -54.5 390.1 285.6 245.2 219.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q3 105.7 183.3 95.6 15.5 2015 2016 2017 2018 2019 H1 2019 H1 2020 2016 2017 2018 2019 2020 Foreign Filipino Next 12 Months Next 3 Months Current Quarter Note: * Investment approved by the Philippines’ Investment Promotion Agencies – Board of Investments (BOI), Clark * The Business Expectations Survey (BES) is a quarterly survey of firms drawn at random from the list of Top 7,000 Corporations ranked based on total Development Corporation (CDC), Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority assets in 2016 from the Bureau van Dijk database. Meanwhile, the Consumer Expectations Survey (CES) is a quarterly survey of a random sample (SBMA), Authority of the Freeport Area of Bataan (AFAB), BOI-Autonomous Region of Muslim Mindanao (BOI- of about 5,000 households in the Philippines. *Due to the implementation of the Community Quarantine nationwide from 16 March to 31 May 2020, the conduct of the Q2 2020 BES and CES was 26 ARMM), and Cagayan Economic Zone Authority (CEZA) cancelled. Source: BSP, PSA *Next 12 months outlook was only included in BES Q3 survey of 2019 Improved Business Operating Environment Through Strategic Policy Reforms

More investment activities opened to 100% foreign ownership 100% Foreign Ownership for Large-Scale Geothermal Exploration, EO No. 65 (s. 2018) or 11th Regular Foreign Investment Negative List (RFINL) Development, and Utilization Projects . Internet businesses, excluded from mass media; The Department of Energy announced the guidelines on the third Open . Teaching at higher education levels provided the subject being taught is not a professional and Competitive Selection Process in the awarding of Renewable Energy subject (i.e., included in a government board or bar examination); (RE) Service Contracts which allows 100% foreign ownership on large-scale . Training centers that are engaged in short-term high-level skills development that do not form geothermal projects (initial investment of about US$50mn capitalization). part of the formal education system; This is expected to lead to more opportunities for RE to figure prominently . Adjustment companies, lending companies, financing companies and investment houses; and in the Philippines’ energy future. . Wellness centers Select legislations and policies to improve government efficiency

Revised Corporate Code of the Philippines Act (RA No. 11232) of 2019

Improves ease of doing business (EODB) by instituting significant changes to the legal framework for the registration and operation of private corporations, aligning the corporate setting with international best practices

Energy Virtual One-Stop Shop Act (RA No. 11234) of 2019

Streamlines the permitting process of power generation, transmission, and distribution projects to reduce the cost of doing business in the country, and encourage investors

Seal of Good Local Governance Act (RA No. 11292) of 2019

Institutionalized the incentive program for local government units to improve service delivery and help create a business climate conducive to investments and growth

National Identification System Act (RA No. 11055) of 2018

Provides a valid proof of identity for all citizens and resident aliens as a means of simplifying public and private transactions in line with the government’s drive to curtail bureaucratic red tape 27 Source: DTI, PNA, PIA, DOE Improved Business Operating Environment Through Strategic Policy Reforms

Select salient features of the Ease of Doing Business (EODB) Act (RA No. 11032)

1. Prescribed process time for government-owned-and-controlled corporations, government instrumentalities located in the Philippines or abroad:

3 days 7 days 20 days Simple Transactions Complex Transactions Highly Technical Transactions 2. Streamlined procedures for the issuance of local business licenses, clearances, permits or authorizations

Automation of Establishment of Barangay clearances and Unified Business Business Permits Business One Stop permits are now issued at Application Form and Licenses (LGUs) Shop (BOSS) the city or municipality 3. Created the Anti-Red Tape Authority (ARTA) mandated to administer and implement the law. Major initiatives include:

National Effort for the Harmonization of Efficient Streamlining of Common Towers Permitting Process Measures of Inter-related Agencies (NEHEMIA)

. Launched on 4 March 2020, NEHEMIA reduces the time, cost, . ARTA led the first digital signing of the Joint Memorandum requirements, and procedures in sectors of economic and Circular (JMC) titled “Streamlined Guidelines for the Issuance social significance by 52% within 52 weeks of Permits, Licenses and Certificates for the Construction of . Aligns with Administrative Order (AO) 23: Eliminating Shared Passive Telecommunications Tower Infrastructures Overregulation to Promote Efficiency of Government (PTTIs)” which cuts processing time from 9 months to 16 Processes days. This is a significant step towards greater connectivity in the country as roll out of projects by Mobile Network Operators and Independent Tower Companies can now be National Business One Stop Shop (NBOSS) expedited as the permitting process was shortened . First NBOSS launched on 28 February 2020; additional NBOSS across the country will be launched in November 2020 ARTA mandates DOF’s TradeNet System for all trade . A single common site or location designated for the Business regulating agencies Permit and Licensing System (BPLS) for processing applications, receiving payments, and issuance of approved licenses, . The DOF’s TradeNet System facilitates online processing of clearances, permits, or authorizations. NBOSS houses the permits, licenses and other clearances for the export and Central Business Portal (CBP) which serves as a central system import of goods by linking 76 trade regulatory government to receive applications and capture application data involving agencies under 18 government departments and simplifies business-related transactions. import and export documentary processes covering an initial . NBOSS and CBP reduces processing time from 3-4 months to 7,400 regulated products 28 Source: DTI, PNA, PIA just an hour Improved Business Operating Environment to Help Boost Investment Flows Post Pandemic Reforms bearing fruit: improved competitiveness Competitiveness rankings World Bank Ease of Doing Business Ranking IMD World Competitiveness Ranking

2020 9595thth 2020 4545thth

2019 124124thth 2019 4646thth

2018 113113thth 2018 5050thth

2017 9999thth . According to IMD World Competitiveness Yearbook 2020, the top five key factors that make the Philippine economy attractive to investors are skilled 2016 103103rd workforce, economic dynamism, open and positive attitude of management, high educational level of the workers, and cost competitiveness.

CEO Magazine Global Innovation Index (GII) The World’s best countries to invest in or do business in for 2020 in Post-COVID 2020 5050thth . The Philippines ranked 7th 1. Singapore in the CEO Magazine’s 10 2019 5454thth 2. UK Best Countries to Invest in Post-COVID based on the 3. Poland 2018 7373rdrd report which analyzed 80 4. Indonesia . The Philippines ranks 50th overall, but ranks higher in the pillars Business sophistication (29th) and countries. Knowledge and Technology outputs (26th) . The country scored high 5. India . GII stated that “Filipinnovation” or the whole-of-government approach to inclusive innovation, which in terms of constitutional 6. Australia will ensure policy coherence, alignment of priorities, and effective coordination in service delivery, has framework, education 7. Philippines been proven effective to optimize impact of government funding and research, market potential and trade 8. US “The Philippines achieves its best rank ever…in 2014, it still ranked 100th...The Philippines is currently openness. 9. Malaysia implementing a new innovation act in an effort to foster innovation in the country and to define it as a vital component of national development and sustainable economic growth. The act places innovation at the center 10. Czech Republic of its development policies and it proposes the GII as a measurement rod.” – GII 2020 29 Source: World Bank, IMD, CEO Magazine (29 April 2020), INSEAD, World Intellectual Property Organization, Cornell University Improved Business Operating Environment to Help Boost Investment Flows Post Pandemic Reforms bearing fruit Competitiveness rankings

Digital Riser Report 2020 Investment Climate Statements 2020

Philippines is the top digital riser worldwide with competitiveness The United States Department of State recognized the efforts of score of +190 followed by Saudi Arabia (+149) and France (+95). the Duterte Administration to establish reforms that improve According to the report of the Berlin-based European Center for business climate and address constraints. Digital Competitiveness by ESCP Business School: In its 2020 Investment Climate Statements, it mentioned that the Ease of Doing Business and Efficient Government Service Delivery “In East Asia and the Pacific, the Philippines was the top Digital law of 2018 has significantly improved delivery of services by Riser over the last three years, while New Zealand fell significantly automation and streamlining of processes. It also cited the behind” updating of the Foreign Investment Negative List (FINL) in 2018 and the creation of the Anti-Red Tape Authority. “The Philippines’ outperformance can mainly be explained by its Innovate Start-up Act lighthouse initiative, which was passed in “Touted as one of the Duterte administration’s landmark laws, it 2019 to strengthen, promote and develop an innovative and created an Anti-Red Tape Authority under the Office of the entrepreneurial ecosystem and culture” President that oversees national policy on anti-red tape issues and implements reforms to improve competitiveness rankings.” Global Start-up Ecosystem Report 2020

The Philippine startup ecosystem, in its inaugural ranking, placed 36th (out of 100) globally. The report of California-based New Dimensions of Change: Building Trust in a Digital Startup Genome marked the country’s following strengths: Consumer Landscape The Economist Intelligence Unit (EIU), sponsored by TransUnion, Top 20 for Bang for the Buck (global market reach) and Top 30 released a report on top global trends in the security and fraud for Affordable Talent (access to talent and experience) space. The result of the analysis show that the Philippines’ digital adoption is generally perceived as rising faster at 64% which is Sub-sector Strengths include Fintech and e-Commerce–15% of better than the global average of 54%. Manila’s startups are Fintech companies with a transaction value reaching US$10bn in 2019 and is expected to grow by 24% in 2020, while taking into account the expected impact of Covid- Super-apps and digital wallets are among the trends seen to 19. On the other hand, the e-commerce industry is growing at a benefit consumers in the next five years. CAGR (Compound Annual Growth Rate) of 26.4%, which is one of the fastest rates in Southeast Asia. Philippine executives are more optimistic about the speedy digital transformation compared to global executives. Digital wallets are expected to have a very positive impact on revenues. 30 Source: ESCP Business School, United States Department of State and Startup Genome Improved Business Operating Environment to Help Boost Investment Flows Post Pandemic Reforms bearing fruit Competitiveness rankings EU-ASEAN Business Sentiment 2020 Plans for ASEAN Operations in Response Location (in %)

The EU-ASEAN Business Council conducted a survey which shows that ASEAN 56 10 34 there is continued optimism from European businesses towards ASEAN, Indonesia 74 6 20 particularly the Philippines which emerged 4th among countries being Vietnam 72 5 23 eyed as potential business location in the region. Thailand 65 6 29 Philippines 56 10 34 Among survey respondents, 56% have plans to expand operations in the country Malaysia 54 13 33 Singapore 54 15 31 Note: The Philippines is currently in negotiation for a Foreign Trade Agreement Myanmar 46 5 49 (FTA) with the EU to: (1) secure additional and on a permanent basis duty-free Cambodia 43 market access beyond those covered by the GSP+ scheme under the existing 15 43 European Free Trade Association (EFTA) FTA; and (2) for greater inbound Laos 36 9 55 investments from the EU Brunei 23 19 58 Expand Contract Not Sure/Remain the Same M&A Investment Index 2020

The Euromonitor International identified the Top 10 Markets expected to set faster economic recovery and projects good opportunities for expansion. The Philippines landed Top 3 following Singapore and Ireland as well as surpassing its peers Vietnam, Malaysia, India, Hungary, Spain and Brazil

Philippines joins the Top 10 countries globally, landing on the 9th spot for 2020 and 2021 which reflects robust expected level of investment, and strong market attractiveness amid macroeconomic and financial shocks

The Sustainable Trade Index 2020

The Economist Intelligence Unit (EIU), in its The Hinrich Foundation Sustainable Trade Index, noted that Philippines is one of the biggest movers under the economic pillar, contrasting it with many developing countries that are tossing up and down along the bottom. The Philippines outranked most emerging markets in Asia, claiming the 8th spot in this index Further, the Philippines is one of the few economies that made gains in the social pillar of the index. The report highlighted the country’s leap to the 6th spot from 19th rank in 2016 and 10th in 2018, to read: “It benefited from the refined labour standards indicator, with one notable exception. On the constituent sub- indicators covering goods produced by forced labour, gender non-discrimination in hiring and the right to association, the Philippines does well – the volume of goods produced by forced labour is relatively low, there is little gender discrimination in hiring and the right to association is high.”

31 Source: EU-ASEAN Business Council, Euromonitor International, EIU Improved Business Operating Environment to Help Boost Investment Flows Post Pandemic Reforms bearing fruit: foreign investors upbeat on Philippines growth prospects

BOI approved investments from domestic and foreign sources rebounded to US$12.4bn or 112% increase in H1 2020

. Construction or infrastructure sector led the industries with investment surge along with transportation and storage, real estate, renewable energy, manufacturing and tourism (accommodation). . France remains the top foreign investor followed by Netherlands, Japan, Malaysia and India. . A total of 96 projects were approved and once fully operational, these will translate to 27,082 jobs

PEZA approved a total of 50 new projects amounting US$432.7mn as of July 2020

. These new projects will generate 8,917 employment once fully operational. . The President also approved the proclamation of twelve (12) new economic zones in H1 2020 comprised of nine (9) IT Centers, two (2) manufacturing ecozones, and one (1) IT Park. . These new ecozones are estimated to bring in US$123.1mn worth of investments

Japan’s Taiheiyo Cement Corp. FedEx The cement company is FedEx announced its return to the expanding its business Philippines from China, investing US$30mn investing US$288mn to ramp for a 17,000 sqm. gateway facility in Clark up cement production which will start operations in April 2021

Michael Page Nokia's Worldwide IoT Network The international recruiting firm Partnered with local company PLDT to provide a opened its office in Manila in next-generation internet of things (IoT) service August optimistic about the enabling enterprise customers to deploy fifth- potential of Filipino talent generation 5G solutions. 32 Source: Various news sources Improved Business Operating Environment to Help Boost Investment Flows Post Pandemic Reforms bearing fruit: foreign investors upbeat on Philippines growth prospects

Australia’s TMA Group of Companies Limited Thermal coding company, TMA Group of Companies Limited, invested AU$100mn to set up thermal coding America’s Agribusiness Giant Cargill facility in the Philippines. Anthony Karam, the company’s executive chairman, said that “From a long time, the Cargill is investing US$230.8mn in the next five Philippines is a long well-kept secret and it’s time to tell people, so I highly recommend that investors locate in the years to expand operations in the country in view Philippines. We found the Philippines the most favorable of the Philippines’ bright economic prospects. and continue to provide value as export hub for the rest Part of its strategic plan is to boost its supply for the world. The Philippines continued to become a true chain in copra business, animal feeds and aqua global player and we expect to continue in the coming feeds businesses. This expansion is toward the years”. Visayas and Mindanao regions New Sumitomo Factory Sumi North-Philippines Wiring Systems Corp. broke ground at North Luzon Aero Industrial Park in Swedish furniture company IKEA September 2020 for its new factory that will manufacture wiring harness and related materials IKEA, a global leader in furniture and home for exports to Japan and North America. When fully accessories retail company, is opening its world’s operational, it will generate 10,000 jobs largest store in the Philippines in 2021 Mindanao Integrated Steel Mill The first integrated steel mill in Misamis Oriental worth US$4bn broke ground in January 2020. The Alibaba Cloud mega project includes three Chinese companies, Huili Fund, China Baowu, and CISDI Group Co Ltd. Alibaba Cloud, the digital technology and The project is expected to initially generate 10,000 intelligence backbone of Alibaba Group, forms jobs Alibaba Cloud Philippines Ecosystem Alliance with the vision to speed up the digital transformation Kohlberg Kravis Roberts (KKR) of businesses in the country. Expansion plan include training 50,000 IT workers, certifying at The American private equity giant invests least 10,000 IT professionals and helping 5,000 US$193mn to acquire 11.9% stake in First Gen Corporation, one of the leading providers of clean businesses in the country on digital migration. 33 Source: PNA and other news sources and renewable power in the Philippines. Setting the Stage for Innovative and Globally Competitive Industries

Inclusive Innovation Industrial Strategy (i3S)

3 Philippine Inclusive Innovation Industrial Strategy (i3S) The i S prioritizes the growth and . The Philippines is implementing an industrial policy known as development of 12 major industries 1. Auto & auto parts Inclusive Innovation Industrial Strategy (i3S) which aims to grow innovative and globally competitive manufacturing, 2. Electronic manufacturing service agriculture, and services while strengthening their linkages 3. Aerospace parts and aircraft into domestic and global value chains. maintenance, repair & overhaul . i3S is aimed at pursuing strategic actions in coordination with 4. Chemicals other government agencies, industry, and academe. 5. Shipbuilding & ship-repair . It is expected to create more and better jobs in order to make 6. Furniture, garments, creative industries growth more inclusive and achieve shared prosperity for all 7. Tool & Die, Iron & Steel Filipinos. 8. Construction 9. IT-BPM & E-Commerce 10. Transport & Logistics 3 11. Tourism i S 12. Agribusiness

Six strategic actions aimed at pursuing coordination with other government agencies, industry, and academe: Overall Goal - Create globally competitive and innovative industries through: Integrate Production Innovative SMEs and System Startups 1. Building an innovation and entrepreneurship ecosystem that will help in forming new industry clusters; 2. Removing obstacles to growth that will allow the Ease of doing Upskill/Reskill Philippines to attract more investments; business Workforce 3. Strengthening domestic supply chain to encourage inclusivity and promote self-sufficiency; Innovation Embrace Industry 4. Deepening the participation of the industries in global Entrepreneurship 4.0 and regional value chains to maximize economic benefits. Ecosystem 34 Source: DTI Setting the Stage for Innovative and Globally Competitive Industries Select Strategies that Expand Industry 4.0 Ready MSMEs and Startups Philippine Innovation Act (RA No. 11293) and Innovative Startup Act (RA No. 11337)

Building of enabling environment for startups through the creation of a One Stop Shop for regulatory processes Facilitating coordination between startups, startup enablers and government in processing registration and other regulatory processes

Matching the grant program or the Startup Venture Fund of the National Development Company (PHP250mn in 2021) to qualified startups

Developing strategies to attract investment, promote growth and development under the Startup Investment Development Plan

Capacity building, exchange programs, expert training courses and establishing startup ecozones with PEZA Industry 4.0 more known as a disruptive technology, accelerates changes in business models around the globe. The demand for innovation and speed of technological migration have never been this urgent and rapid. With the pandemic, industry players are forced to adapt immediately to gain resilience & sustainability. The Philippines, on the other hand, have been preparing for this disruption by enacting laws and implementing various measures that would develop the so-called disruption into an advantage. The government has been helping industries build strong competitiveness and the following are instrumental building blocks in innovation and digital transformation:

Philippine Innovation Act (RA No. 11293) Innovative Startup Act” (RA 11337) This law is created to help the poor and marginalized and supports MSMEs to be This law recognizes the importance of Startups in creating new jobs and part of the domestic and global supply chain. Salient features of the IRR include: opportunities, enhancing production processes and fostering innovation . Promote a culture of strategies planning to encourage creative thinking and and trade. Salient features of the law are as follows: monitoring economic competitiveness . Creation of Philippine Startup Development Program which promotes . Ensure effective coordination of innovation policies and programs research and development . Strengthen the position of MSMEs in the innovation ecosystem . Designated the Department of Science and Technology, Department of . Suppressing bureaucratic hurdles Information and Communications Technology, and Department of . Encourage entrepreneurial attitude Trade and Industry to spearhead the program . Strengthen partnerships between the public and private sectors, academe, . Provision of incentives and an online platform which can be utilized by MSMEs and research and development institutes Startups and its enablers 35 Source: DTI Setting the Stage for Innovative and Globally Competitive Industries Investment Priorities Plan (IPP) 2020 Investment areas eligible for fiscal and non-fiscal incentives under Executive Order No. 226, e.g., 4-6 years income tax holiday

Preferred Activities for Investment

. All qualified activities relating to the Fight against CCOVID-19 . Infrastructure and logistics including LGU-PPPs Pandemic . Innovation drivers . Investments generating employment outside congested urban areas . Inclusive business models . All qualified manufacturing activities including agro-processing . Environment or climate change-related projects . Agriculture, Fishery and Forestry (e.g. Industrial tree plantation) . Energy (e.g. renewable energy, energy efficiency and conservation) . Strategic services (integrated circuits design; creative . Export activities industries/knowledge-based services; maintenance, repair and . Mining overhaul of aircraft; charging/refueling stations for alternative . Publication/printing of books/textbooks energy vehicles; industrial waste treatment; telecommunications; . Refining, storage, marketing and distribution of petroleum products state- of the-art engineering, procurement and construction) . Rehabilitation, self-development, self-reliance of persons with . Healthcare and disaster risk reduction management services disability . Mass housing . Tourism

Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) List

. Export activities . Logistics . Agriculture, agribusiness, aquaculture and Fishery . BIMP-EAGA* related investment enterprises . Basic industries (e.g. pharmaceuticals, traditional craft, . Tourism textiles/garments, water supply and treatment, ship repair, cement . Health and education services and facilities production) . Halal industry . Infrastructure and services . Islamic Banking . Industrial service facilities . Energy . Engineering industries

36 Source: Official Gazette; *Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area Demonstrated External REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Resiliency

IV Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

37 Manageable Balance of Payments Position Balance of Payments Balance of Payments Components – Quarterly (US$ bn) Q2 2020 Q2 2019 2019 2018

Capital and Financial Account -0.1 0.3 7.3 9.4 11.0 9.0 Current Account 4.4 -0.9 -3.4 -8.9 7.0 Balance of Payments 4.2 1.0 7.8 -2.3 5.0 3.0 1.0 -1.0 -3.0 -5.0 -7.0 Capital and Financial Account Current Account Balance of Payments

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Current Account Current account components - Quarterly (US$ bn)

Q2 2020 Q2 2019 2019 2018

Current Account /GDP (%) 5.3 -1.0 -0.9 -2.6 5.0 40.0 30.0 3.0 20.0 1.0 10.0 -1.0 0.0 -10.0 -3.0 -20.0 -5.0 -30.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q2 2020

Goods exports (RHS) Goods imports (RHS) BPO receipts (RHS) OF cash remittances (RHS) Travel receipts (RHS) Current account balance (LHS) 38 Source: BSP Structural Current Account Inflows Support the Balance of Payments Overseas Filipinos’ remittances flows remain steady as major economies reopen Overseas Filipinos' cash remittances (US$ bn) Overseas Filipinos' cash remittances by source 2012- 2019 average (% share to total) Africa, 0.3% 35.0 15.0 30.1 10.0 Asia, 17.9% 30.0 26.9 9.3 Middle East, 6.6 5.0 23.3% 25.0 5.0 4.1 0.0 20.0 Europe, -5.0 15.2% Americas, 15.0 40.7% -10.0 10.0 -15.0 Oceania, 2.5% 5.0 2.6 2.6 -20.0 0.0 -25.0 Note: Remittances through correspondent banks mostly located in the U.S. On the other hand, remittances coursed through money couriers cannot be disaggregated into their actual country source 2016 2017 2018 2019 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 and are lodged under the country where the main offices are located, which, in many cases is in the U.S. Cash Remittances, US$ bn (LHS) Year-on-Year Growth Rates, % (RHS) BPO is a strong driver of employment and export revenues Tourism industry expected to post strong recovery in 2021 BPO employment (‘000s) and export revenues (US$ bn) International visitor receipts (US$ bn) and arrivals (mn)

5.7% YOY growth in employment 20.8% YOY growth in in 2019 1,300 receipts in 2019 4.7% YOY growth in revenues 15.2% YOY growth in in 2019 arrivals in 2019 14.3

9.3

236 4.1 2.5 2.3 22.4 10.0 9.9 3.5 8.3 5.5 1.3 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1H 1H 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Jan-Aug Jan-Aug 2019 2020 2019 2020 Arrivals Receipts Export revenues Employment Note: Jan-Aug 2020 tourism data is based on news reports and IRO computations. Jan-Aug 2020 Note: BPO revenues are lodged under technical, trade-related, and other business services and computer services Visitor Receipts converted into US$ using the average of January to Aug 2020 BSP reference exchange (BOP concept); BPO employment data is from IT and Business Process Association of the Philippines (IBPAP) rate 39 Sources: BSP, Department of Tourism, IBPAP Adequate Buffers Against External Headwinds

Hefty level of reserves Low external debt/GDP ratio underscores the health of external finances International reserves (US$ bn) and months of import cover External debt (US$ bn) and external debt/GDP (%)

10.3 87.5

103.8 57.3

4.6 23.7

18.5 61.6

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Oct-20 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 end-Jun 2020 International reserves Import cover External Debt External Debt/GDP

Favorable external debt profile

External debt by maturity External debt by borrower External debt by interest type (as of end-Jun 2020) (as of end-Jun 2020) (as of end-Jun 2020) Short Term, US$10.7bn Private Sector, Non-interest Variable rate, 12.3% US$36.4bn, bearing, US$31.4bn, 41.7% US$1.9bn, 2.5% 41.0%

Medium & Public Sector, Long-term, US$50.9bn, Fixed rate, US$76.7bn 58.3% US$43.4bn, 56.6% 87.7%

40 Source: BSP Opportunities for Regional Trade and Investment to Support External Resilience

Philippines: A strategic point of access to key markets Philippines’ Foreign Trade Agreements (FTA) . Critical entry point to over 600mn people in the . US: 70% of Philippines export enter US duty free under ASEAN Market the US’ Generalized System of Preferences (GSP) . EU: duty-free access for 6,274 tariff lines under GSP+ . Natural gateway to the East-Asian economies Program; the Philippines is the only ASEAN country with . Placed at the crossroads of international shipping GSP+ and airlines . ASEAN Free Trade Area comprised of Brunei Darussalam, . Reachable within 3-4 hours by plane within Asia Indonesia, Malaysia, Philippines, Singapore and Thailand has lower intra-regional tariffs of 0-5% . ASEAN Partners: China, South Korea, Japan, India, Australia-New Zealand, and Hong Kong . European Free Trade Association (EFTA): Switzerland, Norway, Iceland and Liechtenstein

Regional Comprehensive Economic RCEP and Philippines Expected Benefits of RCEP to Philippines Among Others Partnership (RCEP) . RCEP is an FTA between the ASEAN . RCEP member countries comprise 50% Improves export competitiveness of the Philippines’ key member states (i.e., Brunei Darussalam, of Philippine export market, 61% of products of interests, such as agricultural products, Cambodia, Indonesia, Lao PDR, Malaysia, imports and 11.4% of FDIs entering the automotive parts, and garments Myanmar, Philippines, Thailand, Philippines in 2019 Singapore, and Vietnam) and its FTA . Would open markets for 92% of Provides a platform to encourage more investments and partners (i.e., Australia, China, Japan, Philippine produced products service providers in vital sectors such as manufacturing, New Zealand, and South Korea). . Based on Philippine Institute for creative sectors, financial services, research and . RCEP member countries constitute, as of Development Studies (PIDS) study, RCEP development, IT-BPO, and energy, among others 2019, 28.2% of the world’s GDP; 23.6% of will result in improving the Philippines global inward FDI; and 29.7% of the GDP by 3% and welfare by US$2 bn Improves levels of market access; provides a specific world’s population chapter for MSMEs; includes simplified and business friendly customs procedure for trade; enhanced cooperation on e-commerce 41 Source: DTI, BSP Sound and Stable REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Financial System

V Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

42 Strong Banking System Effectively Funds Productive Sectors

Solid asset growth Satisfactory quality of loan portfolio Total asset and deposit levels (PHP bn) of U/KBs Total loans outstanding (PHP bn) and NPL ratio (%) of U/KBs 17,381 12,000 5 4.4 10,000 4 13,312 9,736 8,000 3.0 3 6,000 4,488 2 4,000

2,000 1 2,195 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sep 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sep 2020 2020 Total Assets (in PHP bn) Deposits (in PHP bn) Total Loans Outstanding (in PHP bn) NPL, Gross ratio (in %) Strong capitalization well above international norms Credit is channeled towards productive sectors Capital adequacy ratio (%) of U/KBs Outstanding loans for production and household consumption of U/KBs Sep 2020 Share to Total Sectors (PHP bn) (Net of RRPs, %) Loans to Productive Sector 7,852.5 87.1 Real Estate Activities 1,701.3 18.9 17.6 Wholesale and Retail Trade, Repair of Motor 12.2 15.9 Vehicles, Motorcycles 1,101.9 16.7 Manufacturing 1,004.2 11.1 Electricity, Gas, Steam and Air-Conditioning Supply 1,011.2 11.2 15.3 Financial and Insurance Activities 862.7 9.6 Construction 346.0 3.8 BSP Regulatory Requirement: 10% Information and Communication 365.8 4.1 Transportation and Storage 296.7 3.3 International Standard: 8% Agriculture, Forestry and Fishing 215.3 2.4 Others 947.3 10.5 Loans to Household Consumption 869.0 9.6 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Mar Loans to Residents, net of RRP Agreements 8,721.5 96.8 2020 Loans to Non-Residents 291.4 3.2 Solo basis Consolidated basis Total Loans to Residents and Non-Residents, net of RRP 9,012.8 Agreements 100.0 Source: BSP Note: Loans Outstanding of U/KBs Data as of 16 Nov 2020. The​ Loans Outstanding of U/KBs data are preliminary when43 Note: U/KBs – Universal and Commercial Bank first released. These will be revised one month and one week from reference month to reflect updates on reports submitted by all universal and commercial banks.​ Regulatory Relief Measures to Ensure Stability of the Financial System BSP extended relief to financial institutions to ensure liquidity in the financial system and boost market confidence

. Counting of loans to micro, small and medium enterprises (MSMEs) as part of compliance to reserve requirements and reducing the credit risk weights of . Temporary relaxation of BSP regulations on MSME loans compliance reporting by banks . Relaxing the terms for financing facilities . Encouraged online banking. BSFIs were encouraged to temporarily suspend all fees and . Reduced maximum penalty for reserve charges imposed on the use of online banking platforms or electronic money, including deficiencies those imposed on the use of Instapay or PesoNet electronic fund transfer  Bank’s reserve requirement as follows:

. BSP relaxed Know Your Customer (KYC) requirements for customer on boarding and 12% 3% 2% transactions to facilitate delivery of welfare funds to identified beneficiaries who have no available IDs or accounts with financial institutions UKBs Thrift Rural banks banks . Relief measures to encourage BSP’s supervised financial institutions (BSFIs) to grant a . Grant of regulatory relief for Pawnshops temporary grace period for loan payments or restructure loan accounts of customers: through relaxation of their maximum  Exclusion from the past due loan ratio of loans to affected borrowers for 1 year; and  borrowing limit by increasing the allowed Staggered booking of provision for probable losses over a period of 5 years, subject to prior approval of the BSP percentage of their total borrowings to pledge loans to provide financial services to unbanked Filipinos . Allowed reclassification of debt securities to reduce the impact of mark-to-market (MTM) losses on the financial condition of BSFIs. This strengthens the ability of BSFIs to continue to operate and service the financing requirements of the general public 50% 70%  Eased the Expanded Foreign Currency Deposit Unit/Foreign Currency Deposit Unit (E/FCDU) asset cover requirement wherein it allows banks to add back its net unrealized losses arising from the change in fair value of E/FCDU securities; and  Allowed the reclassification of debt securities that are booked at fair value to the amortized cost category, even without a change in the business model for managing these securities

44 Source: Bangko Sentral ng Pilipinas, Official Gazette Regulatory Relief Measures to Ensure Stability of the Financial System

Regulatory measures under Bayanihan 2

. PHP1bn each for Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) to subsidize the payment of interest on new and existing loans secured by LGUs from government financial institutions (GFIs)

. 60-day grace period for payment of all existing, current and outstanding loans falling due on or before 31 December 2020

. Ensuring the availability of credit to productive sectors of the economy especially the countryside through lowering the effective lending rates of interest and reserve requirements of lending institutions

Digital innovation boosts prospects for remote access to credit

. The BSP is jointly working with Japan International Cooperation Agency (JICA) to develop a credit risk database (CRD) that will generate statistically credit scoring models for banks to assess the paying capacity of MSMEs. It aims to improve MSMEs access to finance and support their post-pandemic recovery . Credit Information Corp introduced CIBIApp, a mobile application allowing individual borrowers to access online their credit information including credit scores to size up their prospects of obtaining credit during restricted times

45 Digital Transformation Towards a New Economy Digital Payments Transformation Roadmap 2020-2023 to shift from cash-heavy to a cash-lite economy Goals, objectives and policy initiatives: . Making available more innovative digital financial products and . At least 70% of Filipino adults to have financial accounts by services designed to be responsive to the needs of consumers, 2023 from 34.5% in 2017 enabled by a digital ID (Philippine Identification System or . At least 50% of financial transactions done digitally by PhilSys), and supported by the availability of a next generation 2023 from 10% in 2018 payment and settlement system to facilitate real-time processing of financial transactions The BSP approved on 26 November 2020, the creation and licensing of digital banks to promote market efficiency and expand a broad range financial services, bringing it closer to achieve its goals. Digital banks are expected to have the same prudential requirements applicable to other banks Roadmap anchored on 3 Pillars for the development of the Next Generation Payment Settlement System Digital Payments Digital Finance Digital Governance Streams Infrastructure Standards . Catalyze broader adoption of digital . Enhance key infrastructure that . Promote responsible digital payments among consumers and support the expansion of an innovations through digitization businesses inclusive, digital, payments policies and standards . P2P P2B P2G B2G B2B G2G G2B ecosystem . Open Banking and Application G2P . National ID System – PhilSys, Programming Interfaces (API) PhilPaSS, Open banking Standards, Adoption of ISO 20022 Standards, Cybersecurity Policies and Measures, Use of Data Policy Regulatory approach . Registration and licensing framework with the establishment of digital banks and virtual asset service providers . Adoption of Payment System Oversight Framework (PSOF) as the second leg of the National Payment Systems Act (NPSA) . Consumer protection and digital literacy

46 Source: BSP Digital Transformation as a Strategic Enabler of Financial Inclusion

Landmark legislations of payment systems

. National Payment Systems Act (NPSA) or Republic Act (RA) No. 11127signed into law in Policy objectives for safe, efficient and reliable October 2018 to provides a clear and holistic legal and regulatory framework that would systems support the BSP in fulfilling its enhanced mandate of ensuring that payment systems Achieve stability and Promote function safely, efficiently and reliably. effectiveness of monetary Manage sustainable  Implementing rules and regulations of RA No. 11127 was released in April 2019 to and financial system systemic risk economic support the maintenance of a safe, efficient and reliable payment system growth . Amendments to the New Central Bank Act RA No. 11211 empowers the BSP to oversee payment and settlement systems in the Philippines, including critical financial market infrastructure

National Retail Payment System (NRPS) for a cash-lite economy . NRPS is a policy and regulatory framework that defines high-level policies, standards and governance principles covering retail payment operations and infrastructure. It aims to fast-track the establishment of an effective electronic retail payment system thereby promote a “cash-lite” economy . Localized community quarantines during the COVID pandemic resulted in huge increase in the volume and value of electronic fund transfers via PESONet and Instapay . BSP launched the New Order of Payment System or NOPS in September 2020, a web-based system that provides accessible payment facilities for clients to pay their obligations to BSP Transactions (Apr 2018-Oct 2020) Transactions (Apr 2018-Oct 2020) Value in PHP billion, Volume in PHP thousands Value in PHP billion, Volume in PHP thousands 160 35000 528% (y-o-y) growth in 315% (y-o-y) growth in 29,812 140 volume in October 2020 30000 350 volume in October 2020 6000 120 4,943 25000 300 5000 100 250 20000 4000 80 200 292.5 142.6 15000 3000 60 150 10000 2000 40 100 5000 20 50 1000 0 0 0 0 Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20 Aug-20 Apr-18 Aug-18 Dec-18 Apr-19 Aug-19 Dec-19 Apr-20 Aug-20 47 Value (LHS) Volume (RHS) Source: BSP Value (LHS) Volume (RHS) Strong Government REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Finances

VI Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

48 Facing the Global Health Crisis from a Position of Fiscal Strength Long history of prudent fiscal management strengthened government’s financial position National Government (NG) Expenditure, Revenue, Tax Revenue and Deficit (% of GDP)

23.6 23.0 19.5 16.1 16.7 16.3 13.8 14.5 14.5 13.0 11.9

3.0

-3.4 -7.0 -2.5 -6.9 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1-Q3 Total Revenues/GDP Tax Revenue/GDP Expenditures/GDP Deficit/GDP 2020 Manageable debt position Government debt (% of GDP)

65.7 56.8 51.2

39.6 34.1

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 end-Sep 2020 National Government Debt General Government Debt 49 Sources: DOF, Bureau of the Treasury Ample Fiscal Space to Fund Emergency Initiatives and Support Economic Recovery

Enhanced tax collection efficiency due to tax administration reforms and TRAIN lend support to funding critical initiatives to combat the pandemic Actual Emerging Program Actual Projection 2019 2020 Jan-Sep 2020 2021 2022 Particulars PHP bn Revenues 3,137.5 2,519.8 2,143.4 2,717.4 3,034.8 % of GDP 16.1 13.4 16.7 13.2 13.3 Tax Revenues* 2,827.8 2,205.2 1,854.8 2,541.6 2,860.4 % of GDP 14.5 11.7 14.5 12.3 12.5 Non-tax Revenues 308.8 314.1 288.4 175.4 173.9 % of GDP 1.6 1.7 2.3 0.8 0.8 Expenditures 3,797.7 4,335.2 3,022.7 4,467.0 4,676.8 % of GDP 19.5 23.0 23.6 21.6 20.5 Surplus/(-Deficit) (660.2) (1,815.4) (879.2) (1,749.6) (1,642.1) % of GDP (3.4) (9.6) (6.9) (8.5) (7.2)

. The emerging fiscal program takes into account lower revenue collections and the releases for COVID-19 initiatives charged to savings coming from austerity measures, among others. . The widening of the fiscal deficit is expected to be temporary as the government implements anti-COVID 19 measures. . Philippines to return to fiscal consolidation when the adverse impact of the pandemic abates and the economy gets back on its growth path, given its strong track record of revenue improvement and prudent expenditure management

Source: DBM Budget of Expenditures and Sources of Financing (BESF) 2021, BTr Cash Operations Report (COR) TRAIN refers to Tax Reform for Acceleration and Inclusion Act * Includes revenues from approved Comprehensive Tax Reform Program (CTRP) measures and projected impact of proposed remaining packages 50 The Government’s Budgetary Response to the Pandemic

Focusing on containing the spread and mitigating the effects of the Covid-19 while reopening the economy

2021 Proposed Budget . The 2021 proposed national budget of PHP4.506tn is 9.9% higher than the PHP4.100tn 2020 budget. The proposed budget Is equivalent to 21.8% of GDP . Status: Approved on third and final reading in the House of Representatives on 16 October 2020; approved on third and final reading in the Senate on 26 November 2020. For Bicameral Conference Committee deliberation. Expected to be signed before end-December.

Expenditure Directions . As laid out in NEDA Report “We Recover as One”, the proposed budget will focus on strengthening the country’s capacity to address the Covid-19 pandemic –ensuring food security, fueling economic recovery, enabling a digital government and economy, and helping communities to adjust to the new normal after the pandemic Proposed 2021 Budget Priorities

Industry and Livelihood Health Infrastructure . Expand Shared Service Facilities and . Improve healthcare system by . Prioritize crucial and shovel- Regional Inclusive Innovation Centers establishing more heath facilities ready projects under the Build, . Assist micro, small and medium and purchasing hospital equipment Build, Build Projects to focus on . enterprises (MSMEs) thru the MSME Sustain funding for regular health health related-facilities and Resiliency Program and other capacity programs . Ensure sufficient and efficient digital infrastructure building projects . Construct and enhance logistics . Promote the Balik Probinsya program deployment of human resources for health and . Sustain budget for PhilHealth . Road infrastructure indigent members

Food Security Governance . Fast-track implementation of the Philippine . Ensure unhampered movement of Identification System agricultural goods and services thru . Invest in ICT for online and remote efficient transport and logistics government operations and continue system support for DICT programs . Intensify provision of support services . Conduct capacity building and continuous and farm machineries and equipment learning Programs, including use of e- to farmers and agri-based enterprises learning platforms and digital upskilling

51 Source: DBM 2021 Proposed National Budget: Spending Priorities Reset, Rebound, Recover: Investing for Resiliency and Recovery Selected programs and projects, in PHP bn

RESET: Responding to the Pandemic REBOUND: Reviving Infrastructure REBOUND: Reviving Infrastructure Development Development

National Health Insurance 71.4 Program (Philhealth) DPWH Programs Adapting to the Post- 7.6 Covid 19 Life Assistance to Indigent 17.3 Network Development 157.5 Patients Telecommunication 4.7 Human Resources for Health 16.6 Infrastructure Flood Management 125.9 Program Education 2.0

Health Facilities Enhancement 4.8 Asset Preservation 59.0 Defense and Justice 0.56 Program Labor 0.11 Procurement of Personal 2.7 DoTr Programs Protective Equipment Industry 0.090 Rail Transport (DoTr) 106.3 Provision for COVID-19 2.5 Social Protection 0.039 Vaccine Land Public 16.2 Transportation 0.035 Purchase of GeneXpert 1.0 Transportation Cartridges Health 0.022 Provision for COVID-19 0.5 Maritime Transportation 0.2 Surveillance PHP 203.1bn Universal Health Care PHP 1.1tn Build, Build, Build PHP 21.4bn Expenditure for MITHI*

52 Source: DBM *Medium-Term Information and Communications Technology Harmonization Initiative 2021 Proposed National Budget: Spending Priorities Reset, Rebound, Recover: Investing for Resiliency and Recovery Selected programs and projects, in PHP bn

RECOVER: Adapting to the Post-Pandemic Life

Food Security Social Protection Governance and Crosscutting Concerns Education

Irrigation Services (NIA) 31.5 Pantawid Pamilyang Pilipino 113.8 National Task Force to End 19.1 State Universities and 83.3 DA’s National Commodity 24.0 Program Local Communist Armed Colleges Program Conflict Social Pension for Indigent 23.2 Universal Access to Quality 47.1 Rice Competitiveness 10.0 Senior Citizens Philippine Identification 4.1 Tertiary Education Enhancement Program System Financial Assistance 12.0 Assistance to Farmers 2.1 (Protective Services for Industry and Livelihood Individuals and Families in Education Assistance and 27.9 Difficult Subsidies Tulong Panghanapbuhay sa 9.9 Circumstances) Ating Disadvantaged/Displaced Basic Education Facilities 24.1 Workers and Government Internship Program Emergency Repatriation 6.2 DepEd Computerization 9.0 Program Program Training for Work Scholarship 3.6 Program MSME Development Program 2.3

53 Source: DBM 2021 Proposed National Budget - Investing for Resiliency and Sustainability Reprioritized 2021 budget to fund critical programs marshalling Infrastructure, education and health agencies are among with highest economic recovery under the “new normal” budget allocations to address impact of the pandemic 2020 National Budget vs 2021 Proposed by Sector, PHP bn and % share 2021 Share to Share to 2020 2020 GAA Increase/ Growth Department 1/ Proposed 2/ 2/ Total (%) Total (%) GAA Adjusted (Decrease) Rate 1,663.8 Budget 36.9 Social Services 36.5 1,495.0 Economic Services (PHP bn) (%) 29.9 1,347.2 29.3 1,200.0 Defense Education 692.6 650.2 754.4 104.3 16.0 4.8 197.4 4.7 210.6 General Public Services 746.7 16.1 724.2 Public Works and 18.2 581.7 431.2 667.3 Highways 236.2 54.8 11.2 461.0 12.4 560.2 Debt Burden 2020 GAA 2021 NEP Interior and Local 241.6 235.9 246.1 10.2 4.3 GAA - General Appropriations Act ; NEP – National Expenditure Program Government

2021 Proposed budget by Expense Class, PHP bn, % Share and y-o-y growth Defense 192.1 179.7 209.1 29.4 16.4

Support to GOCCs + Health 175.9 177.7 203.1 Tax Expenditures 25.3 14.3 PHP172.0 bn; Maintenance and Other Social Welfare -20.3% g.r. Operational Expenditures 200.5 366.5 171.2 (195.3) (53.3) Allotment to LGUs 4% Transportation 100.6 84.2 143.6 PHP837.8bn; 7.0% g.r. 16% PHP699.4.5bn; 8.5% g.r. 59.4 70.6 19% Agriculture 101.0 106.1 97.8 (8.2) (7.8) Expense Debt Burden Items Judiciary 41.2 41.2 43.5 2.3 5.6 PHP560.2bn; 21.5% g.r. 12% . 29% Labor and 17.9 23.5 27.5 Employment 4.0 17.2 Personal Services 20% PHP1,316.0bn; Capital Outlays 11.1% g.r. PHP920.5bn; 20.4% 1/ Adjustments made per Bayanihan to Heal as One Act to redirect funds for Covid-19 response. g.r. Note: g.r. growth rate 2/ Difference between 2020 GAA Adjusted and 2021 Proposed Budget 54 Source: DBM Consistently Strong Investor Appetite for ROP’s Issuances Highlights of Transaction1

Feb 2016 Jan 2017 Jan 2018 Mar 2018 Aug 2018 Jan 2019 . 1st trade coming out . 1st US$ . Benchmark issue of 10- . 1st ASEAN sovereign to . 1st time after almost 20 . 1st emerging of EM Asia in 2016 Transaction under year debt concurrent issue Panda with an years that ROP issued market sovereign the Duterte with 1-day accelerated “Exceptional tight Samurai bonds on a US$ bond issuance . Concurrent execution Presidency switch tender offer debut”, according to standalone basis in 2019 of one-day International Financing accelerated switch . Coupon of 3.7%; . All time low coupon for . ROP sold JPY154.2bn . US$1.5bn of 10- Review tender offer priced at a tight ROP at 3.0% for 10- Japanese samurai bonds year dollar- 66.7 bps spread year debt; at a very . RMB1.46bn with 3-yr in 3 tenors denominated global . Lowest-coupon by over U.S. tight 37.8 bps spread tenor bonds ROP at 3.7% for a 25- . JPY107.2bn priced at Treasuries – the over U.S. Treasuries year debt . Priced at 5.0% with a 0.38% for 3Y with 25bps, . Coupon of 3.75% at lowest ever spread of 35bps above JPY6.2bn at 0.54% for 5Y 110bps over US achieved by the benchmark with 35bps, JPY40.8bn at Treasury ROP for 25 years 0.99% for 10Y with 60bps May 2019 May 2019 Aug 2019 Jan 2020 Apr 2020 . ROP’s return to European . ROP’s 2nd Panda bond . ROP’s successful return . Issued first-ever zero-coupon . ROP as the first sovereign globally capital market after 13 issuance amounting to to the Samurai bond euro bonds, and lowest coupon to price syndicated benchmark years with offering of RMB2.5bn with 3-yr market with a record euro-denominated bonds tranche with zero new issue EUR750mn of 8-yr global tenor JPY92bn transaction on premium during the COVID-19 . Sold a dual tranche EUR1.2bn bonds its 4-tranche bond crisis . Priced at 3.58% with a bond which consists of a offering . Priced at EUR Midswaps spread of 32bps above EUR600mn 3Y zero coupon . ROP’s lowest yielding USD +70bps vs. +294bps in benchmark . Priced at 0.18% for 3Y, bond at a re-offer yield of offerings; Largest offshore offering 2006 0.28% for 5Y, 0.43% for 0.133% and EUR600mn 0.70% since 2010 7Y, and 0.59% for 10Y, 9Y bond at a re-offer yield of . Sold a dual tranche US$2.35bn with a spread of 23bps, 0.752% bond which consist of US$1.0bn 33bps, 44bps and 2.457% 10Y bond and US$1.35bn 53bps, respectively 2.95% 25Y bond with spread of 180bps and 169bps, respectively

1At time of issuance Source: Bureau of the Treasury; Bloomberg L.P. 55 Sustainable Debt Profile Supported by Diversified Sources of Financing Ample domestic liquidity allows ROP to rely on domestic market to fund Improved capacity to service debt majority of its requirements while minimizing FX risks Interest payments / NG revenue (%) and Interest payments / NG expenditure (%) Total debt breakdown (%)

36.7 31.1 34 31 44

66 69 14.1 56 11.5 10.1 9.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Oct-20 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sep- 20 Interest Payments/Revenue Interest Payments/Expenditure External Domestic

Long-dated debt profile reduces refinancing risk Domestic debt breakdown (%) External debt breakdown (%)

29 56 66

41 96 95.9 93.6

30 25 30 14 10 4 4.1 6.4 2005 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sep-20 2005 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sep-20

Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr Long-term: >10yrs Medium-term: 1yr to 10yr

Unless otherwise indicated, graphs pertain to National Government (NG) Outstanding debt 56 Source: Bureau of the Treasury Strong Bias for Domestic Sources of Financing to Minimize FX Risks

Strategic Financing Program 2020 2021 Particulars 2015 2016 2017 2018 2019 Program Projection (PHP bn) Gross Borrowing 609.6 507.0 901.7 897.6 1,015.8 3,003.8 3,025.2 External 189.5 149.5 168.1 303.1 321.9 785.6 442.4 Program Loans 72.0 35.6 35.1 80.4 78.2 466.8 94.9 Project Loans 28.2 18.8 33.4 34.0 58.0 29.1a/ 61.4a/ Bonds and other inflows 89.4 95.1 99.6 188.7 185.7 289.7 286.0b/ Domestic 420.1 357.5 733.5 594.5 693.8 2,218.2c/ 2,582.8c/ Treasury Bills -17.3 23.5 26.4 179.9 -8.1 48.0 50.0 Fixed Rate T-bonds 437.4 334.0 707.1 414.5 702.0 1,670.2d/ 1,532.8d/ Financing Mix 69:31 71:29 81:19 66:34 68:32 74:26 85:15 (Domestic: External)

. In its array of recovery measures from the COVID-19 crisis, the government continues to enjoy funding commitments from multilateral creditors and strong domestic demand for government securities, minimizing external financing risks.  As of 23 November 2020, total of US$10.6bn in budgetary support financing has been raised from development partners which include Asian Development Bank (ADB), World Bank (WB) and Asian Infrastructure Investment Bank (AIIB), Japan International Cooperation Agency (JICA) and Agence Française de Dévelopment (AFD),Korea Eximbank, from grant and loan financing, and through USD-denominated global bond issuance.  Gross domestic borrowings from January to October reached PHP2.649tn supporting government’s budgetary requirement. . Even at the current levels of foreign loans and domestic borrowings, the Philippines’ debt position will remain manageable. National government’s borrowing strategy will remain conservative - getting the lowest interest rates and with longer maturities.

Note: Figures may not add up due to rounding; N/A - not available a/ Based on BTr estimates of disbursements b/ Based on actual peso proceeds of issued bonds and BTr estimate of remaining issuance for 2020 c/ Includes net proceeds from short-term (ST) repo facility and advances from BSP d/ Includes A/R bonds 57 Source: Bureau of the Treasury, DOF, DBM BESF 2021 Major Tax Reforms Support Expansionary Fiscal Policy

Package 1A: RA No. 10963 Tax Reform for Acceleration and Inclusion (TRAIN) Lowered personal income tax (PIT) - PIT exemptions for the first PHP250,000 taxable income and significant PIT cuts for other tax brackets . TRAIN was first implemented on 01 January 2018

. Seeks to correct structural weaknesses in the Increased excise tax on automobiles, current tax system to make it simpler, fairer, and petroleum products and tobacco products more efficient and to generate stable revenue stream to upgrade infrastructure and reduce poverty. It includes mitigating measures designed to redistribute some of the gains to the poor Expanded the value-added tax base

99% of population is expected to benefit from income tax cuts and tax exemption Introduced excise tax on sugar- of revenues earmarked for social protection sweetened beverages and cosmetic 30% programs, e.g., cash transfers for the poorest excise tax of 5% 10mn households and social welfare card

70% of the incremental revenues to develop Simplified estate and donor’s tax to 6% flat the country’s infrastructure rate . Revenue collection reached PHP130.65bn in 2019 and PHP69.0bn in Jan-Sep 2020*

*preliminary estimate as of November 58 Source: DOF, House of Representatives, Senate Major Tax Reforms Support Expansionary Fiscal Policy

Package 1B: Republic Act No. 11213 or “Tax Amnesty Act” . Involves granting an amnesty on all unpaid estate tax, other internal revenue taxes and tax on delinquencies imposed by the national government for 2017 and prior years. Signed by the President into law on 14 February 2019. The government collected a total of PHP4.03bn from this measure in 2019. Salient Features of Tax Amnesty Act Tax amnesty on Estate tax amnesty delinquencies Covers estate of decedents who died before 31 Dec 2017 Covers all national internal revenue taxes collectible by the BIR and the BOC for year 2017 and prior years with tax amnesty rate falling under the delinquencies below: Tax rate based on decedent’s total net 6% estate 40% of tax assessed on final delinquencies

Minimum tax amnesty rate is PHP5,000 if the value of tax assessed on tax cases subject to of the allowable deductions exceeds the value of 50% final judgements of court the gross estate

of tax assessed on pending criminal cases Republic Act No. 11346 or “Increasing Excise Tax on Tobacco 60% Products, Heated Tobacco Products and Vapor Products” of basic tax assessed for withholding tax agents 100% who withheld taxes but failed to remit to BIR ▪ An act increasing excise taxes on tobacco products, imposing excise tax on heated tobacco and vapor products and increasing penalties for violations of provisions on excise tax. Tax collections from RA No. 11346 are earmarked for 2020 2021 2022 2023 Universal Health Care. Signed by the President on 25 July 2019 PHP45 PHP50/ PHP55/ PHP60/ /pack pack pack pack

59 *Source: DOF, House of Representatives, Senate Major Tax Reforms Support Expansionary Fiscal Policy

Package 2+: Republic Act No. 11467 or “Increasing sin taxes (i.e., excise tax on alcohol, heated tobacco products and e- cigarettes) for Universal Health Care (UHC)”

. An act increasing the excise taxes on alcohol, heated tobacco, and vapor products to generate funds for the government’s universal health care program. It was signed into law on 22 January 2020. Revenue collection from sin taxes law amounted to PHP20.2bn from January to September 2020*.

Imposes a 22-percent ad Specific Tax valorem tax on top of the 2020 2021 2022 2023 2024 2025 specific tax per proof liter 6% PHP42 PHP47 PHP50 PHP59 PHP66 Increase every year effective of distilled spirits 2025

Excise tax on beer and 2020 2021 2022 2023 2024 2025 fermented products with PHP35 PHP37 PHP39 PHP41 PHP43 6% a PHP 2 increase every Increase every year effective year until 2024 2025 New excise tax 2021 2022 2023 2024 2025 schedule for heated tobacco products per 5% PHP25 PHP27.50 PHP30 PHP32.50 Increase every year effective pack: 2025

Vapor products classified 2021 2022 2023 2024 2025 as nicotine salt will have PHP37 PHP42 PHP47 PHP52 5% an excise tax Increase every year effective 2025 2025 Tax on 2021 2022 2023 2024 Puts specific tax of PHP50 per liter on all freebase or PHP45 PHP50 PHP55 PHP60 5% wines starting 2020 and increases by 6% classic nicotine Increase every year every year starting 2021. vape will be effective 2025 increased to: 60 *preliminary estimates as of November Source: DOF, House of Representatives, Senate Major Tax Reforms Support Expansionary Fiscal Policy

Remaining Reforms in the Pipeline

. Redesigned Package 2: Corporate Income Tax and Incentives Rationalization Act (CITIRA) aims to provide Corporate Recovery targeted incentives and an outright 10ppts reduction of corporate income tax (CIT) rate, from 30% to 20%, and Tax Incentives starting 1 July 2020, for domestic corporations with taxable income equivalent to PHP5mn (US$104,000) and for Enterprise below. Those earning above it will be provided with 5ppts reduction. Foreign corporations would have a fixed (CREATE) Act reduced tax rate at 25%. The measure will provide immediate relief for business affected by Covid-19 crisis.

. Passed on third and final reading in the House of Representatives and in the Senate. For Bicameral Conference Committee deliberation to reconcile provisions of respective bill passed by the lower and upper chambers.

Package 3: Real . Involves reforms in property valuation to make the system more equitable, efficient and transparent. Property Valuation Approved on 3rd and final reading in the Lower House. Transmitted to the Senate. Designed to be revenue Reform neutral for the National Government but revenue positive for local government units.

Package 4: Passive . Aims to make passive income and financial intermediary taxes simpler, fairer, more efficient, regionally more Income and Financial competitive. Approved on 3rd and final reading in the Lower House. Ongoing committee deliberations in the Intermediary Taxation Senate. Designed to be revenue neutral but is initially projected to bring in additional PHP1.7bn in revenue in Reform (PIFITA) 2020 and PHP0.2bn in 2021 based on a 70 percent tax efficiency rate*. Revenue collections will start to taper off in the latter years as the unified and lower tax rates are expected to be fully in place.

*Preliminary as of September 2020 61 Source: DOF, House of Representatives, Senate Infrastructure

REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Development for Economic Recovery

VII Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

62 Build Build Build Program to Close Infrastructure Gap

Build, Build, Build (BBB) Program to improve mobility of goods and people and create jobs

. Launched in April 2017, the Build Build Build (BBB) Program is the Duterte Administration’s centerpiece program anchored on the government’s commitment to a responsive regional development. The program aims to diffuse economic activities from urban centers toward the countryside . 5,586 infrastructure programs/activities/ projects (PAPs) were identified and included in the 2017-2022 Public Investment Program* (PIP), with cumulative total project cost (TPC) of PHP6.7tn from 2017 to 2022  In 2017, the government also identified the list of infrastructure flagship projects (IFP) or priority projects derived from the PIP to fast-track implementation, sustain rapid economic growth, improve global competitiveness and to ensure continuity in project implementation even during changes in political Administration o As of August 2020, 104 identified infrastructure flagship projects** worth PHP4.1tn

5,586 Infrastructure PHP 6.7 trillion programs/activities/projects (PAPs) Total project cost of the 5,586 Infrastructure under Chapter 19 of the 2017-2022 PAPs Public Investment Program (PIP)

104 PHP 4.1 trillion Year 2022 Infrastructure Flagship Total cost of the 104 Projects projects under the More than half of the IFPs Infrastructure flagship are either completed or program on going

Source: NEDA as of May 2020, BBB Presentation by BCDA as of August 2020

* Under Chapter 19; updated as of 20 December 2019 ** In view of the pandemic, the list of IFPs underwent review to prioritize projects based on available fiscal space, project readiness and implementation capacity of line agencies and based on the impact to economics growth and job generation. The reprioritization was based on the following primary criteria: 1) Available fiscal space for infrastructure projects in 2020 to 2022; 2) Project readiness and implementation capacity of line agencies; and 3) Economic growth and jobs impact of projects. Consequently, some were shelved from the 100 projects listed prior to the pandemic in February 2020. At the same time, new projects that are shovel ready and are responsive to the 63 needs post- COVID pandemic were added. Timely Implementation of Infrastructure Flagship Projects to Cement Progress IFPs to help bring down the costs of production, improve rural incomes and encourage countryside investments

. 42 out of 104 identified projects under the IFP are ongoing construction, while 4 projects have already been completed . The flagship projects are categorized into the following: Transport and Mobility, Power, Water, Health, Information and Communication Technology, and Urban Development and Renewal . Some of the flagship projects will be implemented through PPPs such as the Bulacan International Airport (or New Manila Airport) and rehabilitation of the Ninoy Aquino International Airport (NAIA).

Select infrastructure flagship projects by category

Transport and Mobility 104 Projects Power and Energy 70 projects 2 projects PHP3.8tn PHP4.1tn PHP20.0bn 1. New Manila International 1. Agus-Pulangi Rehabilitation Airport Project 2. North South Commuter Railway 2. Agus 3 Hydroelectric Power Extension [PNR North 2, PNR Project (225 MW) South Commuter] 3. Metro Manila Subway Project Phase 1

Information and Communication Water Urban Development and Renewal Health Technology 12 projects 9 projects 1 project 10 projects PHP96.3bn PHP123.1bn PHP500mn PHP111.8bn 1. Wawa Bulk Water Supply 1. Ambal Simuay River and Rio Grande 1. Virology Science and Technology 1. ICT Capability Development and Project de Mindanao River Flood Control Institute of the Philippines Management Program 2. Jalaur River Multipurpose Projects 2. Philippine Identification System Project - Stage II, Iloilo 2. Pasig-Marikina River Channel 3. Safe Philippines Project Phase 1 3. Balog-Balog Multipurpose Improvement Phase IV Project Phase II, Tarlac 3. New Clark City Phase 1

64 Source: NEDA Timely Implementation of Infrastructure Flagship Projects to Cement Progress

Infrastructure Flagship Projects by Funding. By Status and by Island Group 25 out of 53 projects in Luzon are in the National Capital Region worth PHP 1.0tn 4 projects, PHP120.8bn Mixed 48 projects, PHP 2.2tn 53 projects ODA PHP 3.2tn 24 projects, PHP 179.3bn Luzon 12 projects GAA PHP 119.4bn 16 projects Nationwide PHP 339.0bn Visayas

28 projects, PHP 1.7tn

PPP Infrastructure Flagship Projects by Status

42 Projects 23 projects Ongoing PHP 498.9bn construction Mindanao Completed

Being processed for government approval

4 Pre-construction stage

24 Ongoing construction 34 42 65 Source: Revised IFP by NEDA as of Aug 2020 Delivering Results to Close the Infrastructure Gap

Tangible results show the Administration’s commitment to upgrade the country’s infrastructure network

No. of completed projects under the Duterte Administration as of August 2020

121 4,959 Airport Projects* Bridges Completed Completed 369 23,657 Commercial, Social, and Tourism Ports Kilometers of Roads Completed Completed

. Poverty reduction – BBB supports the goal of reducing poverty incidence to 14% by 2022  The infrastructure program of the government boosts employment. DPWH alone generated 5.0mn jobs 5,000,000 from the road, bridge, flood-control and other infrastructure-related projects nationwide from 2016- jobs 2019.

*includes new airports, capacity expansion, rehabilitation and night rating upgrades of airports, among others. 66 Source: BBB presentation by BCDA as of Aug 2020, DPWH Delivering Results to Close the Infrastructure Gap BBB Program to improve inter-island mobility and connectivity in the country Completed infrastructure projects

Angat Water Transmission Improvement Project 1 Harbor Link Segment 10, C3-R10 4.00 meters tunnel (Tunnel no. 4) by 6.30 kilometers to improve the 2.60 km. 4-lane (initial) elevated ramp extending the NLEX Harbor Link reliability and security of the raw water from Ipo to La Mesa Segment 10 exit to Radial Road 10 (R-10), using C-3 Road as its route PHP 3.3bn (US$ 64.5mn) PHP 5.7bn (US$ 112.2mn) Location: Luzon Location: NCR

New Clark City Phase 1A 1 Luzon Bypass Infrastructure Project (Broadband Project) 1 National Government Administrative Center (NGAC) includes an Two cable landing stations connected by a 250-km long cable network athletics stadium that can seat 20,000 individuals, and an aquatics corridor that will greatly improve the speed, affordability and center with a seating capacity of 2,000 accessibility of broadband Internet throughout the country. PHP 15bn (US$ 294.1mn) PHP 1.0bn (US$ 19.6mn) Location: Luzon Location: Nationwide

1- Projects part of the 104 Infrastructure Flagship Projects. The New Clark City Phase 1a is a portion of the New Clark City Phase 1 project 67 Source: MWSS, PPP, DOTr, DPWH, BBB presentation as of Aug 2020 Note: Amount in US$ is calculated using mid point of 50-52 pesos per US dollar which is based on the FY2020 assumptions and targets adopted by the Development Budget Coordination Committee (DBCC) as of 28 July 2020. Delivering Results to Close the Infrastructure Gap BBB Program to improve inter-island mobility and connectivity in the country Completed infrastructure projects

Cagayan de Oro Port Bohol-Panglao International Airport two-storey building with a total first eco-airport in the Philippines which floor area of 5,597 square meters, replaced the Tagbilaran Airport. It has a the new CDO Port PTB boasts of 2000m runway and is expected to a 1,176-passenger seating accommodate up to 3.4 million capacity on its ground floor, and a passengers. 1,221-passenger seating capacity PHP 8.9bn (US$ 174.8mn) on its second floor. Location: Visayas PHP 301mn (US$ 5.9mn) Location: Mindanao

The Mactan-Cebu International Airport new world-class passenger terminal building in MCIA, with a capacity of about 8 million passengers per year PHP 17.5bn (US$343.5mn) Location: Visayas

Note: Amount in US$ is calculated using mid point of 50-52 pesos per US dollar which is based on the FY2020 assumptions and targets adopted by the Development Budget Coordination Committee (DBCC) as of 28 July 2020. 68 Source: PPP, DPWH, DOTr, JICA Game Changing Infrastructure Projects to Improve Transport and Mobility

Making the movement of goods and people more efficient Completed infrastructure projects

Clark International Metro Manila Airport Terminal Skyway Stage 3 Building PHP 44.9bn PHP 15.0bn (US$879.6mn) (US$293.6mn) Location: NCR Location: Luzon

Select infrastructure flagship projects nearing completion

Cagayan De Oro Bonifacio Global City Coastal Road – Ortigas Interlink PHP 2.8bn Bridge (US$55.7mn) PHP 5.7bn Location: Mindanao (US$112.2mn) Location: NCR

Metro Manila Skyway Stage 3 Elevated expressway from Buendia, Makati City to the North Luzon Expressway in Balintawak, Quezon City with a length of about 18.83 km. 2x3 lanes from PHP44.9bn Buendia to Sgt. Rivera corner A. Bonifacio, Quezon City, 2x2 lanes from Sgt. Rivera corner A. Bonifacio to NLEX Balintawak, Quezon City and 2x3 lanes elevated roadway structure that will connect to the NLEX-SLEX Connector Road Project in the vicinity of PUP. It is expected to reduce travel time from Buendia in Makati City to Balintawak in Quezon City from 2 hours to about 15 to 20 minutes and can accommodate an average of 55,000 vehicles daily.

Clark International Airport Expansion Project Phase 1 The project aims to construct a new passenger terminal building to accommodate 8 million passengers per annum, as well as the construction and installation of PHP15.0bn all required associated facilities - both landside and airside, to support the operations of the Clark International Airport

Cagayan De Oro Coastal Road 17.97 km Cagayan de Oro Coastal Road will serve as a bypass road starting from Brgy. Gusa in the eastern side all the way to the western side in Brgy. Igpit, PHP2.8bn Opol in Misamis Oriental, thus connecting six (6) barangays in the city and two (2) barangays in Opol. It is expected to reduce travel time by 20 minutes.

Bonifacio Global City – Ortigas Interlink Bridge 1.367-km project has the following components: the 440-meter Sta. Monica-Lawton Bridge, the 362-meter rehabilitation and widening of Brixton (corner Reliance PHP5.7bn Street) to Fairlane Street, and the 565-meter Lawton Avenue – Global City Viaduct which will traverse Lawton Avenue to the entrance of BGC. It is expected to reduce travel time from 1 hour to 12 minutes.

Source: DPWH, DOTr, BCDA 69 Note: Amount in US$ using mid-point of July 2020 DBCC PHP/US$ projections for FY 2020 Build Build Build Program to Fuel Economic Recovery Doubling of average infrastructure spending under the current administration

Infrastructure spending1 (average in PHP bn, % of GDP) Infrastructure spending2 actual and program (PHP bn, % of GDP)

5.4 5.4 4.9 4.5 1000 PHP922bn 4.2 4.2 900 5.1% 3.9 800 700 PHP378bn 1,121 600 2.9% 1,050 1,018 500 886 691 786 400 PHP100bn 590 300 1.5% 200 100 2016 2017 2018 2019 2020p/ 2021p/ 2022p/ 0 2001-2010 2011-2016 2017-2019 Infrastructure Spending (PHP bn) % of GDP p/ Program as of 28 July 2020 The Government’s massive infrastructure program is key to economic recovery. In the long-term, the infrastructure development program will help ensure the country’s sustainable, robust and inclusive growth.

. Increased infrastructure investment and efficiency in budget utilization  In 2019, actual infrastructure spending grew by 18.5% to PHP1,050bn from PHP886 in 2018.  High utilization rate of cash allocations by the infrastructure agencies, DPWH and DOTr, at 99% and 88%, respectively, at end December 2019. As of September 2020, utilization rate of cash allocations by DPWH and DOTr is at 99% and 97%, respectively . Due to the pandemic, infrastructure spending in FY2020 was revised* to PHP785.5bn or 4.2% of GDP from PHP1.08tn, equivalent to 5.1% of GDP . Notwithstanding, the government remains firmly committed to accelerating the implementation of the BBB Program while balancing the need to support critical programs and projects to address the COVID-19 pandemic.  Implementation of projects remain on track as work on priority infrastructure projects of both public and private sectors was allowed even during the enhanced community quarantine (ECQ).  Meanwhile, work on other infrastructure projects have resumed under the general community quarantine subject to compliance with the construction safety guidelines prescribed by the IATF.  DPWH estimates 1.5 million jobs to be generated this year from the infrastructure projects, bringing the total jobs provided to around 6.6 million from 2016-2020 1/ Obligation basis 2/ Disbursement basis, the government transitioned to cash-based budgeting starting FY 2019 Source: NEDA as of February 2020, DBCC Projections as of 28 July 2020 * To help fund the operations and response measures related to the COVID-19 situation, DOTr and DPWH reallocated funds from projects that can no longer be used and disbursed within the year as well as funds from less 70 priority local infrastructure projects, non-infrastructure capital expenditures, and maintenance and other operating expenses.in the FY2020 GAA Game Changing Infrastructure Projects to Improve Transport and Mobility Making the movement of goods and people more efficient Select ongoing/pipeline projects

New Manila Metro Manila Subway Project Public Utility Vehicle Modernization International Airport Phase 1 Program (PUVMP)

PHP 735.7 billion PHP 357 billion PHP 30.6 billion

The project involves the construction The project, which broke ground in February The Public Utility Vehicle (PUV) and operation & maintenance of a new 2019, is a 25.3km subway, which will run from Modernization Program is a modern airport in Bulacan (north of Mindanao Avenue in Quezon City to FTI in transformational large-scale initiative that Metro Manila) with a design capacity of Taguig then to NAIA. Project component envisions a restructured, modern, well- 200 million passengers per year, includes: civil works; electromechanical, managed, and environmentally sustainable consisting of 4 runways and all aviation signaling, and telecommunications system; transport sector where drivers and related facilities. The airport is expected station facilities; depot facilities; land operators have stable, sufficient, and to be completed by 2025 acquisition; and procurement of rolling stock. dignified livelihoods while commuters get to It is expected to be partially operational by their destinations quickly, safely, and 2022 comfortably.

Location: National Capital Region Location: National Capital Region Location: Nationwide

71 Source: NEDA, DPWH, DOTr Inclusive Infrastructure Projects to Push Regional Economic Development Linking local economies to mainstream growth Select priority ongoing/pipeline projects

North South Commuter Railway [PNR North South Commuter Railway North 1] Extension (PNR North 2, PNR South Commuter)

NSCR- PNR PHP 149.1 billion North 2 PHP 628.4 billion Involves the construction of a 53-km extension Involves the construction of a 37.6-km from Malolos, Bulacan to Clark, Pampanga and a segment from Tutuban, Manila to Malolos, 56-km extension from Tondo, Manila to Calamba, Bulacan with 10 stations. Laguna.

NSCR-PNR It is expected to be completed and fully North 1 It can accommodate around 340,000 riders daily operable by end of 2021 and this rail line is on its opening year. The project will reduce travel expected to serve 300,000 passengers daily. time from Malolos to Clark from 1.5 hrs via car to 30-35 mins via Commuter Service, and Makati to It will cut travel time from Tutuban to Malolos Clark from 2 hours via car to only 55 minutes to approximately 35 minutes vs 1 hr and 30 NSCR- PNR using Airport Express. mins by car. South Commuter This is expected to not only improve national connectivity but also international connectivity through its direct link to the Clark International Airport and is expected to service the expected 1.2million future population of New Clark City

Location: Luzon Location: Luzon

72 Source: NEDA, DOTr Inclusive Infrastructure Projects to Push Regional Economic Development

Linking local economies to mainstream growth Select priority ongoing/pipeline projects

Mindanao Rail Project Cavite-Laguna Expressway New Cebu International Phase 1 Subic Clark Railway Container Port (NCICP) PHP 81.7 billion PHP 50 billion PHP 35.7 billion PHP 10 billion

. Involves the constructionLocation: of a Luzon Involves the construction of a 45.3 km expressway The new international container 100-km railway line designed to 71.1-km single-track railway connecting CAVITEX in Kawit, port terminal will be built in a connect Tagum in Davao del between the Port of Subic Bay Cavite and SLEX- Mamplasan 25-hectare reclaimed island in Norte, Davao City, and Digos in and Clark International Airport. interchange in Biñan, Laguna. Brgy. Tayud, Consolacion, Cebu, Davao Del Sur Linking Subic Port with Clark and it will handle all foreign International Airport and other It will reduce travel time containerized cargo Location: Luzon . It will reduce travel time from major economic hubs in Central between CAVITEX and SLEX complementing the Cebu Base Tagum City, Davao del Norte to Luzon, especially New Clark from 1 hour and 30 minutes to Port. Digos City, Davao del Sur from City, and forming an integrated 45 minutes Alleviate congestion in the 3.5 hours to 1.3 hours. It will logistics hub for the existing Cebu Base Port. accommodate approximately development of Central Luzon 130,000 passengers by 2022. as a new growth center to Increased operational capacity decongest Metro Manila. with the increase in cargo handling and container stacking capability. Location: Mindanao Location: Central Luzon Location: Southern Luzon Location: Visayas

73 Source: NEDA, DPWH, DOTr Addressing Economic Losses and Traffic Congestion in Key Urban Centers Linking roads and creating expressways to improve mobility and quality of life EDSA Decongestion Masterplan

. Substantial completion of the EDSA Decongestion Masterplan by 2022 . Epifanio de los Santos Avenue (EDSA) is a 23.8km long circumferential highway in Metro Manila passing through 6 cities in the capital region and originally designed to accommodate a maximum of 288,000 vehicles a day. Currently, around 400,000 vehicles traverse EDSA on a daily basis, which is 39% more than what it was designed for

“Soon, every city in Metro Manila will be connected in a 20 to 30-minute time frame”– DPWH Secretary Mark Villar

• PHP 3.5 billionLocation: per day Luzon is lost due to the traffic congestion in the metropolis and is projected to reach PHP 5.4 billion per day by 2035 if no interventions are made based on a 2018 study by the Japan International Cooperation Agency (JICA)

Source: DPWH 74 Strong Support from Development and Private Sector Partners Official Development Assistance (ODA) is a top funding source for infrastructure development Broader private sector participation Top 5 Infrastructure ODA by Fund Source (US$ bn) as of Q2 2020 Status of PPP projects as of 30 April 2020

12.0 PPP Projects under PPP Projects in Implementation the Pipeline Funding Total ODA* % of Infra 10.0 Source ODA to 77 Solicited Projects 26 Solicited Projects Total ODA PHP 273bn PHP 32.3bn Japan 10.1 97.3% 8.0 ADB 7.1 30.9% World Bank 5.0 14.9% 90 Unsolicited 30 Unsolicited Projects Projects China 0.6 88.9% 6.0 PHP 927bn PHP 2.6tn Korea 0.6 59.4% 9.8 4.0

2.0 2.2 223 PPP 0.7 0.5 0.4 0.0 Japan ADB World Bank China Korea Projects PHP 3.8 trillion

Notes: *Refers to total loan amount and grant. 1. This list includes only those projects where the PPP Center is involved in either the Note: Grants are updated on a semestral basis. The data for China and Japan-assisted grants are as of December 2019. development, appraisal, procurement or implementation, and those projects not belonging Loan and grants amounts of non-US$-denominated loans and grants are converted using the Q2 2020 BSP average exchange rate. to the former but which the PPP Center is monitoring. 2. Pipeline refers to projects under development, or for approval, or for procurement. 3. Total amounts do not include projects that are still under development 4. Project Cost does not include projects under implementation with cost in US$

75 Source: NEDA, PPP Center, DOTr and DPWH Firm Institutional REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Foundations Through Structural Reforms

VIII Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

76 Strong Political Will to Implement Difficult Reforms ▪ The President’s performance and trust ratings continued to improve amid the pandemic. His effective leadership in dealing with the crisis gained new support as seen in the decrease of undecided and disapproval rates from the previous survey in December 2019. According to the latest survey of Pulse Asia Research Inc. in September 2020, the President was the most appreciated top official in the country with his performance rating leaping to 91% (from 87% in December 2019) and his trust rating improving by 8 percentage points resulting to a “big majority trust” rating also at 91%. ▪ Top polling agencies validate the general public’s high satisfaction and trust ratings of the President and top national officials Pulse Asia Research Inc.’s Performance Ratings of Top National officials (September 2020*) (in %) President Rodrigo Duterte 91 5 5

Vice President Maria Leonor Robredo 57 21 22

Senate President Vicente Sotto III 84 10 6

House Speaker Alan Peter Cayetano 70 19 10

Approval Undecided Disapproval

Approval Undecided Disapproval Performance Rating (%) Change Change Sep 2020 Dec 2019 Sep 2020 Dec 2019 Change Sep 2020 Dec 2019 (in ppts) (in ppts) President Rodrigo Duterte 91 87 +4 5 8 -3 5 5 0

Vice President Maria Leonor Robredo 57 58 -1 21 21 0 22 20 +2

Senate President Vicente Sotto III 84 84 0 10 11 -1 6 5 +1

House Speaker Alan Peter Cayetano 70 80 -10 19 14 +5 10 6 +4

Note: Font in green means improvement while font in red means drop in ratings Sources: Pulse Asia 77 *Survey conducted from 14-20 Sep 2020 Strong Political Will to Implement Difficult Reforms

• The trust rating of the President remarkably improved in areas where the strictest quarantine protocols were implemented, i.e. Metro Manila with +12 percentage points and the rest of Luzon with +14 percentage points

Pulse Asia Research Inc.’s Performance and Trust Ratings of Top National officials (September 2020*) (in %)

President Rodrigo Duterte 91 6 3

Vice President Maria Leonor Robredo 50 28 22

Senate President Vicente Sotto III 79 16 5

House Speaker Alan Peter Cayetano 67 23 9

Big Trust Undecided Small or No Trust

Big Trust Undecided Small or No Trust Trust Rating (%) Change Change Sep 2020 Dec 2019 Sep 2020 Dec 2019 Change Sep 2020 Dec 2019 (in ppts) (in ppts) President Rodrigo Duterte 91 83 +8 6 10 -4 3 6 -3

Vice President Maria Leonor Robredo 50 53 -3 28 26 +2 22 20 +2

Senate President Vicente Sotto III 79 78 +1 16 17 -1 5 5 0

House Speaker Alan Peter Cayetano 67 76 -9 23 18 +5 9 6 +3

Note: Font in green means improvement while font in red means drop in ratings Sources: Pulse Asia 78 *Survey conducted from 14-20 Sep 2020 Sustaining Transformational Reforms Towards Inclusive Growth The Government is committed to utilizing resources and political capital to make real, lasting reforms that would redound to a comfortable life for every Filipino

Select Reforms in the Pipeline (2020-2022)

Ensuring people-Centered, Clean Supporting Macro-fiscal and Expanding Economic/ Business Ensuring safety and Building and Efficient Governance Financial Stability Opportunities Resilience

. Comprehensive Tax Reform Program . Finalization of Industry Roadmaps by . Budget Reform Act . National Land Use Act  Corporate Recovery and Tax the Department of Trade and Industry . New Salary Standardization Law (to . National Defense Act Incentives for Enterprise (CREATE) . Amendments to the Public Service Act include teachers and nurses) . Creation of a Department of Disaster Act formerly Package 2: Corporate . Amendments to the Retail Trade Act . Creation of Department of Overseas Resilience Income Tax and Incentives . Amendments to the BOT Law Filipino Workers . Modernization of the Bureau of Fire Rationalization Act (CITIRA) . Amendment to the Foreign . Creation of Department of Water Protection  Package 3: Real property valuation Investment Act Resources, Water Regulatory . Creation of the National Disease reform . National Competition Policy Commission Prevention and Management  Package 4: Passive Income and . National Quality Infrastructure . Satellite-based education Authority Financial Intermediary Taxation Act . . (PIFITA) Expedite Processing and Issuance of Amendments to Republic Act No. . Motor vehicle user charge, general tax National and Local Permits, Licenses 10912 or the Continuing Professional amnesty with automatic exchange of and Certifications Development Act of 2016 information and lifting of bank secrecy, . Passage of the Nursing Education Act and mining tax regime and the law instituting the Medical . Financial Institutions Strategic Transfer Reserve Corps (FIST) bill . National Housing Development bill . Government Financial Institutions and Rental Housing Subsidy bill Unified Initiatives to Distressed . Modernization of the Bureau of Enterprises for Economic Recovery Immigration (GUIDE) Act . Law for the Unified System of Separation, Retirement and Pension of the Military and Uniformed Personnel

79 Sources: DOF, DBM, NEDA, BSP, President’s 2019 and 2020 State of the Nation Address (SONA) Long Track Record of Purposeful Structural and Policy Reforms

Selected structural/policy reforms in the Philippine economy

Deregulation of the oil industry (RA An act to further liberalize No. 8479) foreign investments, amending for the purpose Liberalization of foreign bank (RA No. 8179) entry (RA No. 7721) Adoption of consolidated bank supervision

1993 1994 1995 1996 1997 1998

Liberalization of the Privatization of water Creation of the Bangko Sentral ng telecommunications services (MWSS) (RA Pilipinas (RA No. 7653) industry (RA No. 7925) No. 8041)

Macroeconomic Reforms Social and Governance Reforms Infrastructure Reforms Financial Reforms Investment Reforms Fiscal Reforms RA Republic Act EO Executive Order 80 AO Administrative Order Long Track Record of Purposeful Structural and Policy Reforms

Selected structural/policy reforms in the Philippine economy

An act defining the crime of money laundering, providing penalties therefor and for other purposes (R.A No. 9160) Wholesale Electricity (RA No. 9267) Securitization act; Adoption of Liberalization of the power sector Spot Market (WESM) Basel 2; Financial sector forum (FSF) (EPIRA) (RA No. 9136)

2000 2001 2002 2004 2005 2006 2007

Expanded value-added Philippine e-commerce act Inflation targeting tax (E-VAT) (RA No. Risk-based bank (RA No. 8792) framework; Special purpose vehicle act (RA 9337); Fixed income supervision No. 9182); PhilPass exchange

Government procurement reform act (RA No. 9184)

Macroeconomic Reforms Social and Governance Reforms Infrastructure Reforms Financial Reforms Investment Reforms Fiscal Reforms RA Republic Act EO Executive Order 81 AO Administrative Order Long Track Record of Purposeful Structural and Policy Reforms

Selected structural/policy reforms in the Philippine economy

Full entry of foreign banks in the Philippines (RA No. 10641) Privatization of Amendments to the anti-money National Transmission Ladderized education act (RA No. 10647) Corporation (TransCo) laundering law and National Power (RA No. 10365) Corporation’s (NPC) Go negosyo act promotes the development of micro, assets small, and medium enterprises (RA No. 10644) (RA No .9511) Amendments to sin tax law (RA No. 10351) Comprehensive agreement on the Bangsamoro

2008 2009 2011 2012 2013 2014

Adopted phased-immigration Credit information system act to Basel III (RA No. 9510) Act allowing the infusion of foreign equity in the capital of rural banks (RA No. 10574)

Executive Order (EO) No. 29 on open skies policy

Government-owned-and-controlled corporations governance act of 2011 (RA No. 10149) Macroeconomic Reforms Social and Governance Reforms Infrastructure Reforms Financial Reforms Investment Reforms Fiscal Reforms RA Republic Act EO Executive Order 82 AO Administrative Order Long Track Record of Purposeful Structural and Policy Reforms

Selected structural/policy reforms in the Philippine economy

Approving and adopting the 25-year long term vision entitled Ambisyon Natin 2040 as guide for development planning (EO No. 5)

Operationalizing in the executive branch full public disclosure and transparency (EO No. 2)

Customs modernization and tariff act (RA No. 10863)

2015 2016

Philippine competition act (RA No. 10667) Personal Equity Retirement Account (PERA), crafted in 2008 as (RA No. 9505) Act allowing foreign vessels to transport and co-load foreign cargoes for domestic transshipment (RA No. 10668) Amendments to the Philippine Deposit Insurance Corp. (RA No. 10846) Department of Information and Communications Technology Act of 2015 (RA No. 10844) Amendment to investment restrictions for adjustment, lending and foreign companies and investment houses (RA No. 10881) Tax incentives management and transparency act (RA No. 10708)

Macroeconomic Reforms Social and Governance Reforms Infrastructure Reforms Financial Reforms Investment Reforms Fiscal Reforms

RA Republic Act 83 EO Executive Order AO Administrative Order Long Track Record of Purposeful Structural and Policy Reforms

Selected structural/policy reforms in the Philippine economy

Independent Electricity Market Operator of the Philippines (IEMOP) was created to serve as the Independent Market Operator of the Wholesale Electricity Spot Ease of doing business act (RA No. 11032) Market (WESM) Philippine identification system act ( National Payment Systems Act (RA No. 11127); BSP (central RA No. 11055) bank of the Philippines) as overseer of the national payments system) Bangsamoro Organic Law (RA No. 11054)

Personal Property Security Act (RA No. 11057) Removing tariff barriers and streamlining administrative procedures on the importation of 11th regular foreign investment negative list (EO No. 65) agricultural products (A.O. No.13)

2017 2018

Attaining and sustaining “zero unmet need for Directing all government agencies and Act rationalizing and strengthening the policy regarding driver’s modern family planning” through the strict instrumentalities, including local license by extending the validity period of drivers’ licenses (RA implementation of the responsible government units, to implement the No. 10930) parenthood and reproductive health act, Philippine Development Plan And Public providing funds therefor, and for other Investment Program for the Period 2017- purposes (EO No. 12) 2022 (EO No. 27) Universal access to quality tertiary education act (RA No. 10931)

Philippine Development Plan (PDP) 2017-2022 Tax reform for acceleration and inclusion Appropriate initial medical treatment and support in emergency – the first medium-term development plan to (TRAIN) (RA No. 10963) or serious cases (RA No. 10932) be anchored on the national long-term vision “AmBisyon Natin 2040” Amendments to the anti money laundering act (RA No. 10927) Amendments to the 1996 passport law to Reorganizing the cabinet clusters system by extend validity of passport to 10 years (RA Macroeconomic Reforms No. 10928) integrating good governance and anti- An act establishing the free internet access Social and Governance Reforms corruption in the policy frameworks of all program in public places in the country (RA Infrastructure Reforms clusters and creating the infrastructure cluster No. 10929) and participatory governance cluster (EO No. Financial Reforms 24) Investment Reforms An act strengthening the anti-hospital deposit law by Fiscal Reforms increasing the penalties for refusal of hospitals and medical clinic to administer (RA No. 10932) RA Republic Act 84 EO Executive Order AO Administrative Order Long Track Record of Purposeful Structural and Policy Reforms Selected structural/policy reforms in the Philippine economy

An Act providing for Additional Prohibitions to and Increasing Penalties for Violations of RA No. 8484, known as the “Access Devices Regulation Act of 1998”

Energy Virtual One-Stop Shop Act (RA No. 11234) Reducing the rates of duty on capital Institutionalized Malasakit Centers in equipment, spare parts and all hospitals run by the Department accessories imported by board of Passed the universal health investments – registered new and of Health nationwide (RA No. 11463) care act (RA No. 11223) expanding enterprises (EO No. 85)

2019

Amendments to the BSP charter An act increasing the excise tax on tobacco products, imposing An act liberalizing the importation, (RA No. 11211) excise tax on heated tobacco products and vapor products, exportation and trading of rice, lifting for increasing the penalties for violations of provisions on articles the purpose the quantitative import subject to excise tax, and earmarking a portion of the total excise restriction on rice, and for other purposes Act to strengthen the country’s gross tax collection from sugar-sweetened beverages, alcohol, tobacco, (RA No. 11203) international reserves (GIR) (RA No. 11256) heated tobacco and vapor products for universal health care (RA No. 11346) An act enhancing revenue administration and collection by granting an amnesty on Innovative Startup Act (RA No. 11337) An Act Institutionalizing the Pantawid Pamilyang Pilipino Program all unpaid internal revenue taxes imposed provides incentives that foster innovative Act (RA No. 11310) by the national government for taxable entrepreneurial culture year 2017 and prior years with respect to estate tax, other internal revenue taxes and Reorganizing the cabinet clusters An Act Providing for the Revised Corporation Code of the tax on delinquencies or the “Tax Amnesty system by integrating good Philippines (RA No. 11232) Act” (RA No. 11213) governance and anti-corruption in the policy frameworks of all the Macroeconomic Reforms Magna Carta of the Poor (RA No. 11291) clusters and creating the Social and Governance Reforms infrastructure cluster and Philippine Innovation Act (RA 11293) Infrastructure Reforms participatory governance cluster institutionalized the National Innovation Telecommuting Act (RA No. 11165) allows Financial Reforms Council (EO No. 86) workers to work from home as an alternative Investment Reforms work arrangement An Act Providing for the Regulation Fiscal Reforms Social security act of and Organization of Islamic Banks RA Republic Act (RA No. 11199) 2018 (RA No. 11439) EO Executive Order 85 AO Administrative Order Long Track Record of Purposeful Structural and Policy Reforms

Selected structural/policy reforms in the Philippine economy

2020

Created an inter-agency task force on zero hunger Bayanihan to Heal as One Act (RA No. 11469) (EO No. 101) Amending Administrative Order No. 10 (S. 2018), Entitled Modified the rates of import duty on certain imported “Centralizing All Government Efforts for the Reintegration of articles in order to implement the Philippine tariff Former Rebels and Creating For the Purpose an Inter-Agency commitments pursuant to the free trade agreement Task Force” (AO No. 25) between the Association of Southeast Asian Nations (ASEAN) and Hong Kong, China (EO No. 102) “Balik Probinsya, Bagong Pag-asa” (BP2) program (EO No. 114) which aims to ensure balanced regional development and equitable distribution of wealth, resources An Act increasing sin taxes (i.e., excise tax on alcohol, and opportunities through policies and programs that boost heated tobacco products and e-cigarettes) for Universal countryside development and inclusive growth, provide Health Care (UHC) (RA No. 11467) adequate social services, and promote full employment, industrialization and an improved quality of life in rural areas

Social Welfare Attaché Act (RA No. 11299) Establishing a Framework for the Acceptance, Management, Improving access to healthcare through the regulation of Distribution and Delivery of All Medicines, Medical Equipment prices in the retail of drugs and medicines and Supplies, and Other Health Products Donated to the Nation (EO No. 104) (AO No. 27)

Eliminating overregulation to promote efficiency of Institutionalizing the Comprehensive Social Benefits Program government processes (AO No. 23) (EO No. 110)

Macroeconomic Reforms Bayanihan to Recover as One Act (RA No. 11494) Social and Governance Reforms Infrastructure Reforms Temporarily Modifying the Rates of Import Duty on Crude Financial Reforms Petroleum Oil and Refined Petroleum Products Under Section Investment Reforms 1611 of Republic Act No. 10863, otherwise known as the “Customs Modernization and Tariff Act” Fiscal Reforms (EO No. 113) RA Republic Act EO Executive Order 86 AO Administrative Order REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC Outlook

IX Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

87 Sound Fundamentals to Lend Support During the Pandemic and Propel Economic Recovery

Actual Targets/Projections Indicators 2016 2017 2018 2019 2020 2020 2021 2022 GDP Growth (%, 2018=100) 7.1 6.9 6.3 6.0 -10.0 (Q1-Q3) -4.5 – -6.6 1/ 6.5 – 7.5 1/ 6.5 – 7.5 1/ Headline Inflation 2.0 -4.0 (%, 2012=100) 2.5 (target) 1.3 2.9 5.2 2.5 2.0 – 4.0 a/ 2.0 – 4.0 a/ (Jan-Oct) 1.75 – 2.75 (forecast) a/ Fiscal Balance/GDP (%) -2.3 -2.1 -3.1 -3.4 -6.9 (Jan-Sep) -9.6 1/ -8.5 1/ -7.2 1/ Revenue/GDP (%) 14.5 14.9 15.6 16.1 16.7 (Jan-Sep) 13.4 1/ 13.2 1/ 13.3 1/ NG Debt/GDP 42.7 42.7 39.9 39.6 51.2 (end-Sep) 53.88 2/ 58.082/ 59.852/ Goods Exports, per BPM6 concept -13.8 -1.1 21.2 0.3 2.9 -16.0 b/ 5.0 b/ 5.0 a/ (% growth rate) (Jan-Sep) Goods Imports, per BPM6 concept -26.0 17.7 17.6 11.9 -0.2 -20.0 b/ 8.0 b/ 8.0 a/ (% growth rate) (Jan-Sep) OF Cash Remittances 21.9 p/ 26.9 28.1 28.9 30.1 29.5 30.7 Amount (US$ bn) -1.4 NA 5.0 4.3 3.1 4.1 -2.0 b/ 4.0 b/ Growth Rate (%) (Jan-Aug) Overall Balance of Payments Position 6.9 -0.4 -0.9 -2.3 7.8 8.1b/ 3.4 b/ NA (US$ bn) (Jan-Sep) 4.4 Current Account Balance (US$ bn) -1.2 -2.1 -8.8 -3.4 6.0 b/ 3.1 b/ NA (Jan-Jun) 103.8 p/ Gross International Reserves (US$ bn) 80.7 81.6 79.2 87.8 100.0 b/ 102.0 b/ NA (end-Oct)

1/ Adopted by the DBCC on 28 July 2020 via Ad Referendum 2/ BTr estimate as of August 2020 a/ Projections adopted by the DBCC on 16 July 2020 b/ Approved by the MB on 8 October 2020 88 NA – not available; p – preliminary Environmental, Social REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC and Governance

X Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

89 Building a Sustainable and Inclusive Future for Filipinos

ESG considerations are front and center of the targets . The Philippine government aims to lay down solid foundation for more inclusive growth, a under the Development Framework of the Duterte high-trust and resilient society, and a globally competitive knowledge economy Administration Strategic Framework of the Development Agenda forms a solid bedrock that promote increased ESG standards . Philippine economy to be an upper middle Enhancing social fabric; regaining people’s trust in public institutions and income economy by 2022; cultivate trust in fellow Filipinos . Per capita income will increase from US$ . Greater trust in public institutions; people-centered, clean and efficient government 3,550 in 2015 to at least US$ 5,000 in 2022 . Swift and fair administration of justice . Greater awareness and respect for cultural diversity . A high level of human development

Inequality-reducing transformation . Inclusive growth manifested by lower poverty incidence in Rural Areas from 30% in 2015 to . Greater economic opportunities and access to these opportunities, particularly for disadvantaged 20% in 2022; overall poverty rate will decline subsectors and people groups from 21.6% to 14.0% in 2022 . Reduction of vulnerability of Individuals as well as communities which involves building resilience to lower exposure to hazards, mitigating the impact of the risks, and accelerating recovery if and when . More resilient individuals and communities the risk materializes. . Acceleration of human capital development

Increasing growth potential; maintaining macroeconomic stability, putting in place a strategic trade and fiscal policy, and enhancing access to financial services . Decline of unemployment rate from 5.4% in 2016 to 3.0-5.0% by 2022 . Increased adoption of technology for production and greater innovation especially in research and development . Improvement of population management and awareness thus maximizing demographic . Greater trust in government and society dividend . Providing balanced and strategic development of infrastructure, while ensuring ecological integrity and a clean and healthy environment

. Greater drive for innovation among Filipinos 90 Source: NEDA, Philippine Development Plan 2017-2022 Capacitating Institutions and Fortifying Fiscal Position to Ensure Climate and Disaster Resilience The Philippine government is cognizant that inadequate and inefficient infrastructure and weak logistic networks significantly increase the risk for an extreme natural event and risk undermining the country’s potential growth. Therefore, the government has prioritized initiatives to help make communities safer and more resilient to the impacts of climate change and natural disasters.

Responsive policies to address vulnerability to climate change risk

. Implementation of RA No. 9729 or the Climate Change Act of 2009 PDP Strategies to deal with natural hazards . Adoption of National Framework Strategy on Climate Change • Roll out of climate and disaster vulnerability and . Concurrence of Senate of the instrument signifying the Philippines’ accession to the Paris risk assessment nationwide. Agreement • Develop facilities for adaptation in local . Embodied policies on building resiliency in the Philippine Development Plan (PDP) 2017-2022 communities including risk transfer mechanisms. . Green Jobs Act (RA No. 10771) • Provide adequate transition houses and livelihood opportunities for disaster victims. • Provide adequate mental health and psychosocial support services. • Build disaster-resilient communities and infrastructure

Strong institutional capacity elevates climate and disaster resiliency Limiting impact of natural disasters on fiscal accounts . Creation of institutions to provide broader multi-stakeholder . Access to climate financing to help mitigate the impact of climate change on government’s participation and integrate climate change mitigation and adaptation in balance sheet  legislation, policies, strategies, projects and programs ROP accessed a total funding support of US$570.9mn from Global Environment Facility  Cabinet Cluster on Climate Change Adaptation and Mitigation covering 110 projects since 1991.   CCC tasked to coordinate, monitor and evaluate climate change ROP secured approval of its first climate fund proposal of US$10mn from Green Climate programs and action plans Fund under the UN Framework Convention on Climate Change (UNFCCC) in November  National Disaster Risk Reduction and Management Council 2019. .  Program Management Office for earthquake resiliency 2020 budget for disaster resilience  . Priority Legislative Agenda towards safe, adaptive and resilient PHP232.8bn climate change adaptation and mitigation expenditure of which select communities proposes the creation of: programs as follows:  Department of Disaster Resilience Management o PHP16bn for National Disaster Risk Reduction and Management Fund1 (NDRRMF)  Department of Water Resources o PHP6.8bn for Quick Response Fund  Water Regulatory Commission o PHP568mn for Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) operations (e.g., weather and climate, flood forecasting and warning program, research and development)

1NDRRMF is the budget appropriation for (a) disaster risk reduction or mitigation, prevention; (b) preparedness; (c) relief; and (d) recovery and reconstruction *Representative Concentration Pathway –a greenhouse gas concentration trajectory adopted by the International Panel on Climate Change (IPCC) 91 Source: NEDA, CCC, Department of Budget and Management (DBM), Presidential Communications Operations Office (PCOO), Moody’s Proactive Approach to Disaster Risk Reduction and Climate Change Adaptation

The government through its various initiatives is committed to enhance renewable energy capacity

Actual and Target Total Installed Renewable Energy (RE) Capacity (in MW) National Renewable Energy 20000 15,218 15,303 12,750 Program (NREP) 15000 . In accordance with the Renewable Energy Act of 2008 (R.A. No. 7,593 9513), the Department of Energy (DOE) led the formulation of 10000 5,438 the NREP . The NREP provides a foundation for the development of the 5000 country's renewable energy resources through promoting investments in the renewable energy sector, and advancing 0 related technologies. 2010 2015T 2020T 2025T 2030T . In 2010, the country’s renewable energy capacity was 5,438MW Geothermal Hydro Biomass Wind Solar Ocean Total and target is to have around 15,000 MW renewable installed capacity by 2030 T/ - target . DOE has declared a moratorium on endorsement for greenfield Source: National Renewable Energy Program 2011-2030 coal power plants in order to promote sustainable energy Primary Energy Mix (in million tons of oil equivalent) Installed Capacity (in MW) sources (as of December 2019) (as of December 2019)

Solar/Wind, 0.2, Biofuels, 0.6, Renewable Energy 0.3% 0.9% Oil- Biomass, 363,1.4% Wind, 427, 1.7% Geothermal, 9.2, based, Coal, 17.5, Solar, 921, 3.6% 15.3% Natural Gas, 4,262 36% increase in Total Installed RE Capacity since 29.1% 3,453, 16.7% 2010 13.5% Geothermal, 1,928, 7.6% Biomass, 7.7, Renewable Energy, 7,399, 12.9% 29.0% 2010 2019 Coal, 10,417, Hydro, 2.0, 40.8% Hydro, 3,760, 5,438 3.3% 14.7% VS 7,399 Oil-Based, 19.3, Natural Gas, 3.6, 32.1% MW MW 6.0%

of country’s total primary energy supply in 2019 comes from renewable energy which makes the Philippines the country with the highest renewable energy generation mix within the ASEAN region and is currently higher than the aspirational target of 23% of RE in the energy mix by 2025 32.8% for ASEAN (based on ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2020)

92 Source: DOE, PCOO Proactive Approach to Disaster Risk Reduction and Climate Change Adaptation

Enhancing the resilience of the country in the event of a major earthquake

have undergone risk assessment in Metro Manila, Cavite, Laguna, Batangas, Rizal and Quezon (Calabarzon) and 5,980 Central Luzon according to the Department of Public Works and Highways (DPWH) Secretary Mark Villar. Buildings . These are part of measures on disaster resilience based on Joint Memorandum Circular No. 2019-01 (Ensuring Safe, Adoptive and Disaster Resilient Communities, and Enhancing the Country's Readiness against Earthquakes) of the Department of the Interior and Local Government with DPWH and Department of Trade and Industry (DTI).  Section 2.c of the memorandum includes ”ensure resiliency of critical infrastructure by facilitating the conduct of structural assessment and retrofitting of buildings and other structures in close coordination with DPWH” . DPWH is continuouslyLocation: working Luzon on the retrofitting projects in Metro Manila, with 23 projects being implemented currently. . DPWH created the Earthquake Resiliency Program Management Office (ER-PMO) pursuant to Executive Order 52 series of 2018 titled "Creating the Program Management Office for Earthquake Resiliency of the Greater Metro Manila . Program Management Office (PMO) Earthquake Resiliency Group (ERG) was created to help ensure unity of direction within government towards earthquake preparedness which includes massive retrofitting of Public and Private Infrastructure . As of February 2020, DILG already ordered the Local Government Units (LUs) to conduct an assessment of buildings and structures within their area. 36 bridges

. In 2018, DPWH allotted PHP 1 billion to strengthen 36 bridges in 10 in cities in Metro Manila to make the bridges resilient in an event of a large magnitude earthquake.

. In addition, the government, in partnership with JICA, allotted PHP 7.9 billion to strengthen two bridges, Lambingan Bridge and Guadalupe Bridge, with improved seismic specifications which would make it withstand a major earthquake should it occur. The project is called Metro Manila Priority Bridges for Seismic Improvement Project and is part of the infrastructure flagship program.

Source:DOE,DPWH, NEDA, PIA, PNA 93 Proactive Approach to Disaster Risk Reduction and Climate Change Adaptation

Select accomplishments, 2016-2020

The government increased capacity to prepare and mitigate the impacts of earthquakes, typhoons and flooding through equipment upgrades of Department of Science and Technology Clearing of National Roads . In July 2019, all local government units (LGU) were 17* Doppler Radars ordered to clear public roads that were being used for private purposes such as parking spaces. High Frequency 104 24* . 402,460 total obstructions, i.e., illegally parked Doppler Radars Seismic Stations nationwide from 98 vehicles were cleared from roads nationwide which seismic stations in 2017. enabled smoother flow ofLocation: traffic and Luzonbetter access 13* Flood Forecasting and The additional stations will aid in for responders in times of disasters. monitoring small earthquakes which are Warning systems necessary in forecasting potential sites of larger earthquakes *current count of specified equipment as of June 2020

Disaster Risk and Recovery Center– The first smart, green, and sustainable city in the country, spanning almost 9,500 hectares. New Clark City will also serve as 197 alternate site (National Government Administrative Center) for government offices in case of disaster/national calamities to provide continuous . Evacuation centers to be business and service by the National Government. The constructed worth PHP7.2bn structures in the National Government Administrative under the Evacuation Center Center have been built to have an earthquake resistance Development Program beyond the intensity 7 seismic tolerance prescribed . As of June 2020, 129 evacuation under the building code. centers were completed, while 68 are ongoing construction

94 Source:DPWH, NEDA, PCOO Proactive Approach to Disaster Risk Reduction and Climate Change Adaptation

Select projects to ensure the country’s water supply and enhance response to disasters National Water Programs

Water Security The government ensures continuous supply of water through conservation and regulation of water resources and construction of infrastructure projects which are vital to ensure adequate water supply in the future.

Luzon . Angat Water Transmission Improvement Project (Completed) – PHP3.3bn . Wawa Bulk Water SupplyLocation: Project – PHP20bnLuzon . Balog-Balog Multipurpose Project Phase II, Tarlac – PHP13.4bn . New Centennial Water Source - Kaliwa Dam Project – PHP 12.2bn . Aqueduct No. 7 Project – PHP 7.4bn . Chico River Pump Irrigation Project – PHP4.4bn Luzon Flood Management . Lower Agno River Irrigation System Improvement . Metro Manila Flood Management Project, Phase I – PHP18bn Project, Pangasinan – PHP3.5bn . Visayas Cavite Industrial Area Flood Management Program – . Jalaur River Multipurpose Project - Stage II, Iloilo – PHP9.9bn PHP14.8bn . Pasig-Marikina River Channel Improvement Phase IV – . Bohol Northeast Basin Multipurpose Dam Project – PHP33.1bn PHP4.3bn . Integrated Disaster Risk Reduction and Climate Change Mindanao Adaptation Measures in the Low-Lying Areas of Pampanga Bay . Malitubog-Maridagao Irrigation Project – – PHP6.2bn . PHP 5.4bn Mindanao Nationwide . Water District Development Sector Projects (ADB- . Ambal Simuay River and Rio Grande de Mindanao River Flood WDDSP) – PHP 4.2bn Control Projects – PHP39.2bn . National Irrigation Sector Rehabilitation and Improvement Project (NISRIP) – PHP3.4bn

95 Source: NEDA, DILG, DPWH, DOTr, PCOO Proactive Approach to Disaster Risk Reduction and Climate Change Adaptation Other government initiatives on climate change

Air Quality . ROP committed to the 21st United Nations Convention on Climate Change to limit global temperature rise to 2 degrees centigrade through national climate adaptation and mitigation programs . Green, Green, Green Program of the Department of Budget and Management to assist 145 cities develop open public spaces, making life livable . Promoting of renewable sources and technologies in both the power and non-power sectors and the regulation of the exploration, development and utilization of renewable energy sources  2.6mn tons oil equivalent were saved through energy efficiency and conservation program which avoided the release of 5.6mn tons of carbon dioxide equivalent Environment and Natural Resources

. Strengthening Multi-Hazard, Impact-Based Forecasting and Early Warning Systems to be ahead of the curve in pre-empting risk risk events. Deemed to make warning messages understandable, especially people residing in high-risk areas . Launching of HazardHunterPH by the Department of Science and Technology, a GeoRiskPH Platform web application used to generate assessment reports on user’s location with information on seismic (earthquake), volcanic and hydro-meteorological hazards. Provided hazard assessment reports to land developers and property owners . Climate Information for Agriculture – Philippine Astronomic, Geophysical and Astronomical Services Administration (PAGASA) releases a Ten-Day Regional Agri-Weather Information that helps farmers make well-informed decision in light of potential disruptive weather conditions . Department of Agriculture’s Adaptation and Mitigation Initiative in Agriculture or AMIA - development of new planning tools towards climate-ready crop management systems and science-based interventions to assist stakeholders (farmers and fisher folks, private sector) . National Color-Coded Agricultural Guide Map – to identify the crops that are most suitable in agricultural parcels, and overlays soil properties, elevation, rainfall pattern, temperature and the projected climate-induced multi-hazards . Sustained the National Greening Program which aims to reduce poverty, attain food security, and conserve and protect the country’s biodiversity and forests . Sustainable tourism with continued rehabilitation of Boracay Island towards a productive, inclusive and climate-resilient economy . Pursued Manila Bay Rehabilitation Program for a massive clean-up of rivers and esteros in the city, relocation of informal settlers residing in danger zone 96 Source: DBM,DA, PAGASA, OP – PMS, The President’s Penultimate Report to the People 2016-2020 Investing in Human Capital Development to Improve Social Inclusion

• Nutrition and health for all improved • Income-earning ability increased • Lifelong learning opportunities for all ensured PDP Strategies to Care at all life stages guaranteed; access through Employability improved; Quality, accessible, relevant, and liberating basic accelerate human functional service delivery ensured; health financing productivity improved; labor education for all achieved; quality of higher and capital development sustained mobility and income security technical education and research for equity and enhanced global competitiveness improved

The national government is committed to uplifting the lives and livelihoods of its citizens and expanding the economy’s productive capacity National Government Spending on Social Services Sector, 2010-2021 2,000 In PHP bn, % share 40.0 1,500 30.0 1,000 20.0 500 10.0 0 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 GAA 2021 NEP Education, Culture and Manpower Development Health Social Security, Welfare and Employment Housing and Community Development Others* Share to Total Spending, % (RHS)

Milestone legislations to reduce poverty, promote social inclusion, and build stable conditions for sustained inclusive economic growth Targeted spending on social services Below are select critical and historic policy interventions Major social safety programs include among others: . RA No. 10931 Universal Access to Quality Tertiary Education Act (2017) . Conditional Cash Transfer program which is institutionalized during this . RA No. 10969 Free Irrigation Service Act (2018) Administration provides cash assistance for health and education outcomes . RA No. 11037 National Feeding Program (2018) benefiting over 4.3mn registered households; . RA No. 11210 105-Day Expanded Maternity Leave Law (2019) . Unconditional Cash Transfer Program released a total of PHP43.4bn to 9.2mn . RA No. 11223 Universal Health Care Act (2019) qualified beneficiaries in 2018-2019 . RA No. 11228 An Act providing mandatory Philhealth coverage for all persons with disability . Expanded Social Pension Program benefiting over 2.8mn indigent senior citizens; (2019) . Socialized and low-cost housing under the Building Adequate, Liveable, . RA No. 11291 Magna Carta for the Poor (2019) Affordable, Inclusive Filipino Communities Program which has already benefited . RA No. 11463 Malasakit Centers Act (2019) or One Stop Shops in All DOH Hospitals over 650,000 families . RA No. 11371 Affordable Electricity Act (2019) . Pantawid Pasada Fuel Subsidy Cards provided PHP5,000 to 113,953 beneficiaries . RA No. 11230 Tulong Trabaho Act (2019) or the Act Instituting a Philippine Labor Force in 2018 and PHP20,514.8 to 110,382 beneficiaries in 2019 nationwide Competencies Competitiveness Program and Free Access to Technical-Vocational Education . LinGap sa MaSa or the Free Medicine program provided 89,940 indigent and Training patients nationwide with free medicines and assistance to avail of other medical . RA No. 11058 Occupational Safety and Health Standards Act (2018) needs and treatment (worth PHP878.8mn) as of March 2020 Source: PCOO, NEDA, DBM, BESF various years 97 NEP National Expenditure Program *includes Land Distribution under the Comprehensive Agrarian Reform GAA Government Appropriations Act Program, Other Social Services, and Subsidy to LGUs Investing in Human Capital Development to Improve Social Inclusion Targeted social reforms bearing fruit

Sustained decline in unemployment rate and poverty incidence Select labor sector accomplishments 5.9mn Filipinos were lifted out of poverty in 2018 July 2016 to March 2020

8.9mn 1.7mn 30 8.0 The Public Employment Service (PES) 7.0 beneficiaries provided with 7.0 helped 8.9mn qualified jobseekers to 25 land a job emergency employment 25.2 6.0 23.5 5.1 20 5.0 PHP7.4bn 560,086 Amount of benefits awarded Special Program for the Employment of 15 4.0 Students beneficiaries assisted that have 16.7 to 1.3mn people with work-related completed college and technical- 3.0 disabilities 10 vocational education 2.0 5 340,928 95,065 1.0 beneficiaries provided with The Government Internship Program 0 0.0 livelihood assistance assisted 95,065 youth for 2011 2012 2013 2014 2015 2016 2017 2018 2019 employment Poverty Incidence (LHS) Unemployment Rate, % (RHS)

Comprehensive Agrarian Reform Malasakit Centers Pantawid Pamilyang Program As of July 2020, there are 74 Malasakit Centers or Pilipino Program The Administration has distributed a total of one-stop help centers in all government-run For academic year 168,741 hectares of land to 118,715 poor and hospitals nationwide to provide efficient medical 2017-2018, 23,489 landless farmers nationwide and financial assistance students beneficiaries graduated with Free Higher Education Bangsamoro Organic Law honors. Of this 12,000 former rebels became productive civilians number, 58 are A total of PHP31.8bn worth of tertiary education Magna Cum Laude, subsidy were already released to support poor receiving socio-economic assistance from the national government, which includes transitional 858 are Cum Laude, but deserving students for Academic Years 2019- and 57 received 2020 cash assistance, health insurance, and other benefits leadership awards 98 Source: PSA, PCOO, PNA Reaping the Benefits of Social Inclusion through Improved Productivity and Security

The GTCI highlights that the Philippines is in the top quartile in terms of Global Knowledge Skills (rank 32nd), where it scores well in both High-Level Skills (37th) and The Philippines ranked 46th Talent Impact (29th) among 132 countries in the The country is very close to the top quartile when it comes 2020 Global Talent to growing (34th) talent, where its strengths in Lifelong Competitiveness Index (GTCI) Learning (17th) and Access to Growth Opportunities (24th) launched by Insead and Definitions: High-level skills/Global Knowledge Skills deal with United Nation’s Sustainable knowledge workers in professional, managerial, or leadership roles that require creativity and problem solving. Their economic impact is Development Goals Tent in evaluated by indicators of innovation, entrepreneurship, and the development of high-value industries while growing talent has Davos, Switzerland traditionally meant education, but its definition broadened to include apprenticeships, training, and continuous education as well as experience and access to growth opportunities. The more talented the person, the wider the global opportunities he or she can find elsewhere

The Philippines joined the Top 50 safest countries in the world with a score of 84. The Philippines ranked 12th among 144 countries in the The score tied with Australia, New Zealand, Poland, 2020 Global Law and and Serbia. Order Report surveyed by Gallup in 2019 Gallup’s report affirms the efforts being made to attain the first of the 0-10 Socioeconomic Agenda of the Administration—Peace and Order 99 Strengthened Institutions to Support Transformational Reform Momentum Results of entrenched reforms are positively recognized by various independent third-party assessors

+53 +45 +4 +16

th th th th 148th to 95th 115 to 70 27th to 31st* 66 to 50 2011 to 2020 2011 to 2020 2011 to 2019 2013 to 2017

World Bank Heritage Foundation World Bank World Economic Forum Ease of Doing Business Index of Economic Freedom Control of Corruption Human Capital Index WGI

+21 +28 +12 +2

85th to 64th 48 to 76** 43rd to 55th* CCC to BB 2011 to 2019 2012 to 2019 2011 to 2019 2010 to 2019

World Economic Forum International Budget World Bank EIU Global Competitiveness Ranking Partnership Regulatory Quality Political Risk Open Budget Survey WGI Country Risk Report

Stamping out corruption and improving government services are paramount to ease of doing business

Citizens can request for information and assistance on Established to oversee the implementation government frontline service procedures, and report of the national policy against red tape commendations, appreciation, complaints, and feedback.

The President’s drive against corruption in government is relentless. Several officials have been ordered to tender resignation due to issues of corruption. Created thru EO No. 43, the Presidential Anti-Corruption Commission (PACC) is mandated to fight and eradicate graft and corruption in the different departments, bureaus, offices, and other government instrumentalities to ensure public officials and employees are worthy of public trust .

*Percentile rank ** Score out of 100 100 Source: Various third-party annual ranking reports, PIA, PNA Stronger Fiscal Institutions Result in Improved Expenditure Management

Philippines’ Fiscal Transparency Open Budget 2019 Philippines among the top 10 worldwide in terms of fiscal transparency based on the 2019 Open Budget Survey (OBS) — a significant leap from its 19th spot in 2017 OBS

The country’s score of 76 (out of 100) Philippines’ score exceeded the 2019 and 2021 OBI target scores of 67 This budget transparency score is the is above the global average of 45 in and 71, respectively, under the PDP 2017-2022 highest in the region the Open Budget Index (OBI)

Scores improved in 7 out of 8 Philippines score on participation is Budget oversight remained strong budget documents reflecting the sixth highest score worldwide (31 The country’s score improved by with a composite oversight score comprehensive and high-quality out of 100) and is significantly above 9 from the 2017 OBS of 74 (out of 100) information the global average score of 14

Most Fiscally Transparent in Southeast Asia (Score) 2019 Open Budget Index Global Rankings (Top 10) Global Average 45 Philippines 76 South Africa 87 New Zealand 87 Indonesia 70 Sweden 86 Thailand 61 Mexico 82 Malaysia 47 Brazil 81 Timor-Leste 40 Georgia 81 Vietnam 38 Norway 80 Australia 79 Cambodia 32 United States 76 Myanmar 28 Philippines 76

101 Sustainable and Green Finance in the Philippines and BSP’s Initiatives

BSP’s Approach and Initiatives

Enabling Regulations: Sustainable Finance Framework or Circular No. 1085 issued on April 2020 on sustainability principles on corporate governance; risk governance; credit risk management; operational risk management Advocacy & Capacity Building: internal capacity building and capacity building for financial institutions . BSP is now a member of the Network for Greening the Financial System (NGFS) to enhanced the role of financial sector in managing climate and environment-related risks and mobilize capital to support the transition towards a sustainable economy . Environmental and social governance (ESG) and Environmental and Social Risk Management (ESRM) trainings in partnership with IFC targeted for C-suites and risk officers of banks; forums in partnership with Maybank Foundation and British Embassy; participation in inter-agency consultations on policies/initiatives focused on climate finance, green growth, and sustainability PH Compliant with the ASEAN Green Bonds Standards for Eligibility of Green Projects . Securities and Exchange Commission approved the “Guidelines on the Issuance of Green Bonds Under the ASEAN Green Bonds Standards” to improve awareness and appetite for green financing and enable local issuers to tap into the global green bond market. Eligible projects are: renewable energy and efficiency, pollution prevention and control, environmentally sustainable management of living natural resources and land use, clean transportation, climate change adaptation and green buildings . BSP invests in US$350mn Green Bond Fund of the Bank for International Settlements to promote environmental sustainability and green finance, as well as, diversify the gross international reserves PH Government to Strengthen Policies on Green Financing . Expand coverage of the ASEAN Framework for Green Bonds to cover such sectors as transportation, infrastructure and commercial banking . Explore possible green financing of various public-private partnerships (PPP) Select Private Sector Initiatives to Help Mobilize Investments in Green Projects Jun 2018 Oct 2018 Jan 2019 Feb 2019 Aug 2019 Aug 2019 July 2020 Nov 2020 . International . China Bank . AC Energy . Rizal . Bank of the . BPI . AC Energy . AC Energy Finance Corp (IFC) . US$150mn to . US$225mn Commercial Philippine Islands . US$300mn for . US$60mn for . US$300mn . US$90mn to invest in to scale up Banking Corp (BPI) projects renewable fixed-for-life support renewable renewable renewable . PHP15bn . CHF100mn eligible under investments green perpetual energy energy, green energy . First bank to . First to issue CHF BPI’s Green in transition bond for green . First internationally buildings and investments issue a Green green bonds from Finance to low projects on AAA-rated PHP water in Asia- PHP Bond, first the Philippines at Framework carbon solar, wind, and green bond, called conservation Pacific listed in PDEx 2Y interest-free portfolio geothermal “Mabuhay Bonds” bourse for green projects energy . Development Bank of the Philippines has activated its Green Financing Program to assist strategic sectors, industries and local government in adapting environment- friendly processes and technologies through financing and technical assistance 102 Source: BSP, Securities and Exchange Commission, DOF, various sources REPUBLIC OF THE PHILIPPINES THE OF REPUBLIC The Investor Relations Office

XI Sound Fundamentals Lend Strong Support to Pandemic Response and Economic Recovery

103 Promoting the Philippine economy at home and abroad The IRO undertakes a range of initiatives to build awareness among domestic and international investment audiences around the Government’s economic reform program, promote specific investment opportunities in the Philippines and facilitate information exchange and dialogue between key economic policy decision-makers in the Government and domestic/international investors. These initiatives include: . Regular Economic Briefings to update the business community, media and industry organizations on the country’s economic performance . Investor Roadshows to bring the Government’s resilient economic performance record, commitment to sound economic management and responsible reform to members of the international financial community . Media Briefings to raise awareness on the Government’s progress in economic reforms and plans for ongoing reforms . Government Policy Roadshows to increase the business community’s understanding of government policy measures to generate support for the policy implementation process . Investor Teleconferences to provide timely updates on key economic performance indicators . E-mail service to keep investors and other investors abreast of data releases on a regular basis . An English Language website, www.iro.ph, to provide a wide range of easily accessible information about the Philippines’ economic performance and the government’s economic policies

Contact Information For further information about the Investor Relations Office, or about the Philippine economy, please contact: Editha L. Martin Executive Director Bangko Sentral ng Pilipinas A. Mabini St. cor. P. Ocampo St. Malate Manila, Philippines 1004 Tel: (632) 8708-7487 / (632) 5303-1581 ThinkGrowthThinkPhilippines #ThinkGrowthPH InfoIROatBSP Email: [email protected] Fax: (632) 8708-7489 Website: www.iro.ph

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