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The administration of Benigno Aquino III aspires to achieve inclusive, broad-based growth, a goal which necessitates a strong manufacturing base that presents employment prospects for skilled, semi-skilled and low-skilled workers. The country’s demographic dividend, attractive workforce, projected economic growth and the continued improvement of its business environment are combining to generate investor interest. ASEAN integration offers newfound market access to a wide and emerging consumer base, and the Philippines will need to ramp up its manufacturing competitiveness to ensure it becomes a net exporter, rather than a pure importer, of value-added products moving throughout the region. This chapter contains interviews with Hikosaburo Shibata, President and CEO, Mitsubishi Motors Philippines; and Ben Chan, Chairman and CEO, Suyen Corporation.

Although the industry remains somewhat crowded and highly competitive, a recent push for consolidation, including ongoing hikes in capital requirements, should keep the sector on a strong upwards trajectory in 2015 and beyond. The industry stayed resilient despite the destruction caused by Typhoon Haiyan in November 2013, with double-digit increases in investments and assets in 2014. While the life segment continues to drive growth, the non-life segment holds considerable potential. Meanwhile the industry remains open to foreign investment, despite a high tax burden and rising capital requirements. Recently enacted legislation, though painful for some smaller players, should improve industry stability and spur consolidation in 2015, keeping the industry on a steady long-term growth path. This chapter contains an interview with Peter G Coyiuto, President & CEO, First Life Financial Company

Despite having one of the oldest stock exchanges in Asia and a relatively advanced bourse for its level of economic development, the Philippines lags behind the leading South-east Asian exchanges. However, as domestic liquidity surged and foreign investors gradually returned after a general flight from emerging markets in 2013, the country’s capital markets were riding a wave of optimism in 2014 and early 2015. The Philippine market’s strong performance in a weak year for emerging markets bodes well for the capital markets sector and was an important show of confidence by investors in the country’s broader economic prospects. The development of a local corporate bond market is also a promising sign and will reduce the economy’s dependence on banks to finance investment. The expected consolidation of the two major exchanges would be in line with regional and international trends and should make for a stronger and more resilient exchange to compete with regional peers. This chapter contains interviews with Jose Pardo, Chairman, Philippines Stock Exchange; and Eduardo V Francisco, President, BDO Capital & Investment Corporation, and Co-Chair, Capital Market Development Council.

A positive feedback loop is at work in which banks are increasingly driving economic growth, supported by inflows of foreign investment and from Filipinos working abroad, while growing trust in the banking system is drawing greater volumes of savings. With real GDP roughly doubling between 1999 and 2014, bank deposits as a share of GDP also rose, from 40% in 1999 to 52% in 2014, while the number of bank deposit accounts per 1000 adults increased from 356 in 2004 to 542 in 2013. The 2014 reform, which is aimed at preparing for ASEAN banking integration, seeks to revive broader foreign investment in the banking sector by easing other obstacles that have put foreign banks at a disadvantage. Given the amount of ground that Philippine banks have covered in such a short period of time, it is inevitable that the pace of their growth will moderate from here. Still, Philippine banks have much going for them: rapid economic development; a young, consumerist demographic, a largely under-banked population; and a government that is boosting infrastructure spending. This chapter contains interviews with Amando M Tetango Jr, Governor, Bangko Sentral ng Pilipinas; and Hikmet Ersek, President and CEO, Western Union; and a roundtable with Batara Sianturi, CEO, Citibank Philippines; Wick Veloso, CEO, HSBC Philippines; Herminio Famatigan Jr, President and CEO, Maybank Philippines; and Mahendra Gursahani, former CEO, Standard Chartered Bank Philippines.

Although foreign direct investment (FDI) volumes are smaller than what countries in its peer group attract, the Philippines has been catching up at an impressive pace. FDI rose from $1.1bn in 2010 to $4.9bn in the first nine months of 2014 as economic growth has accelerated and business policies have improved. With seven investment promotion agencies offering a variety of tax exemptions and other benefits, the Philippines provides considerable incentives to attract foreign investment. FDI is likely to continue to grow as low oil prices benefit consumers of the Philippines’ electronics and business process outsourcing services exports. In the long run, the country’s success will depend on whether it tackles the tough issues of institutional reforms and infrastructure investment. This chapter contains an interview with Alfred M Yao, President, Philippine Chamber of Commerce and Industry; and a roundtable with Arthur P Tugade, President and CEO, Clark Development Corporation; Deogracias G P Custodio, Chairman and Administrator, Freeport Area of Bataan; Lilia B de Lima, Director-General, Philippine Economic Zone Authority; and Roberto Garcia, Chairman and Administrator, Subic Bay Metropolitan Authority.

The Philippines’ emergence as a growth leader has been building gradually since the 1990s, following a long period of low growth and political upheaval. The country’s economy continues to enjoy a period of rapid, broad-based expansion as the business process outsourcing sector and rising remittances from overseas workers drive growth in consumer-oriented industries and construction. Although real growth decelerated in 2014 to 6.1%, it remained higher than South-east Asian peers, and is expected to stay near 6% for the remainder of the decade. The Philippine economy is in a strong position with many factors in its favour, from positive demographics and growing bank penetration to improving revenue collection and public governance. After too long spent as the slowest-growing economy in South-east Asia, the Philippines can finally look forward to catching up. This chapter contains an interview with Cesar V Purisima, Secretary, Department of Finance; a viewpoint from Ramon R Del Rosario Jr, Chairman, Makati Business Club, and President and CEO, PHINMA; and a dialogue with Doris Magsaysay Ho, President and CEO, A Magsaysay, and Jaime Augusto Zobel de Ayala, Chairman and CEO, Ayala Corporation.