BUSINESS OPPORTUNITIES IN THE PHILIPPINES. Stable and Resilient Economic Growth GDP (2012) 6.8% GDP (2013) 7.2% Headline Inflation (2012) 3.2% Headline

BUSINESS OPPORTUNITIES IN THE PHILIPPINES

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

GDP

Stable and Resilient Economic Growth Stable and Resilient Economic Growth

GDP (2012) 6.8%

GDP (2013) 7.2%

Headline Inflation (2012) 3.2%

Headline Inflation (2013) 3.0%

Source: National Statistical Coordination Board & National Statistics Office

Continuous Inflow of OFW Remittances Continuous Inflow of OFW Remittances

•2013: US$22.76 Billion (6.4% higher than 2012 record)

•2012: US$21.39 Billion (6.3% higher than 2011 record)

•Remittance drew strength from demand for skilled and professional Filipinos abroad, along with better data capture through banks and financial institutions

3

Merchandise Exports:

Steady Export GrowthSteady Export Growth

Service Exports:

2011: US$11.9 Billion

2012: US$13.1 Billion(anchored on BPO sector with direct employment of 772,000)

Growth of 11.3% in Gross International Reserves to an all-time-high of US$83.8 Billion in 2012 relative to

US$75.3 Billion in 2011



(7.6% higher than 2011)

4

TOTAL BOI & PEZA APPROVED INVESTMENTS(in PhP Billion)

Steady Investment FlowsSteady Investment Flows

10.4% *

US$ 15.17B US$ 15.92B

US$ 17.48B

US$ 5.05BUS$ 6.69B

Total Investments Foreign Investments

*Preliminary Estimate

World Bank

Ease of Doing Business

Report 2014

World Economic Forum (2013/2014)

Global Competitiveness Index

Economic Freedom of the World

(2013 Annual Report)

2014 Index of Economic Freedom

7. Improving Global Competitiveness Ranking7. Improving Global Competitiveness Ranking

+5Out of 152 countries:

From #61 to 56


From #138 to 108


From #97 to 89

6


From #65 to 59

Credit RatingsCredit Ratings

Standard & Poor’s

Moody’s

FROM TO

BB+

Ba1

BB-

BBB-

Outlook: Stable

Baa3

Outlook: Positive

BBB-

Outlook: Stable

INVESTMENT GRADE

7

Fitch Ratings

World Bank (2012)

Government Effectiveness Indicator

Transparency International (2013)

Corruption Perceptions Index +11

Out of 177 countries:

From #105 to 94


From #57 to 58

Strengthened Governance and Anti-Corruption Measures

Strengthened Governance and Anti-Corruption Measures

8

I. Preferred ActivitiesRegular List:

Agriculture/ Agri-business and Fishery Creative Industries/Knowledge-Based

Services Shipbuilding Mass Housing Iron and Steel Energy Infrastructure Research and Development Green Projects Motor Vehicles Strategic Projects Hospital /Medical Services Disaster Prevention, Mitigation and Recovery

Projects

II. Export Activities

III. Mandatory List

Manufacture of export products Services exports Activities in support of exporters

IV. ARMM List

Investment Priorities Plan 2013Investment Priorities Plan 2013

9

Food ProcessingFood Processing

King Salmon grown, washed, gutted, without head, in New Zealand

Filleting, Salting, Smoking, Slicing, and Packaging, in the Philippines

Exported to Philippines (GenSan) duty free

Exported and consumed in Australia, NZ, USA, Korea, HK, etc.

Other Countries

Auto PartsAuto Parts

• Philippine top exports products to Australia are auto parts

• Auto part exports include wiring harness, steelbelted tires, lead acid batteries, road wheels, intake air filters, brake and clutch pedals are also major exports products to the world

Furniture and HomewareFurniture and Homeware

ShipbuildingShipbuilding• Philippines is now the 4th largest

shipbuilder in the world• Building a wide range from small

high tech vessels to the largest commercial ships in the world

• One company Hanjin employs 21000 workers in Subic and makes 320K DWT Capesize tankers

• One of Australia’s top 4 shipbuilders, Austal, just located in Cebu last year

2012FTEs Revenue

(US$M)% inc.fr ’11

Voice BPO 497,000 8,697 18%

Non-voice BPO/KPO

154,380 2,470 20%

ITO 57,078 1,160 17%

Health Info Mgt & Care

45,000 460 66%

Engineering Services

10,836 206 20%

Animation 9,000 132 3%

Game Development

3,500 50 251%

TOTAL FTEs 776,794 13,174 19%

ICT and Business Process OutsourcingOne of the most active sectors right now for global and Australian investments


Philippine IT-BPM industry size2008–2014e; US$ billion

x% YoY Growth

# FTEs(~’000)

383 424 527

Global share1

6% 7% 8%

6.1 7.1

8.9 11.0

13.2 15.0

18.0

2008 2009 2010 2011 2012 2013e 2014e

34% 17%25%

24%

CAGR:

~20%

19%

640

9.5%

777

10.4%

3.2

7.18.9

11.013.4

15.0

20.0

25.0

Philippines IT-BPO industryUS$ billion

1.3M 2.2MIndirect employment 600K 1.1M 3.2M

% of GDP 2.6% 4.5% 6.7%4.2% 8.3%

1.7M

5.0%

2006 20102009 Road Map 2016

Baseline 2016

CAGR: ~28%

PPPCAGR: ~19%

Low-end 2016

525K 900KDirect employment 240K 423K 1.3M680K

2011 2012

1.6M

5.2%

638K

1.9M

5.9%

772K

15%‒20% CAGR over next 5 years expected



The Philippine AdvantageThe Philippine Advantage

Rich Talent Pool

Robust Infrastructure

Strategic Business Location

First-Class Lifestyle

Attractive Investment Incentives

Robust Infrastructure

• 9 international and 20 domestic airports,

• 3 connecting railways which span across the Metro, and 12 roll-on/roll-off ports.

• Newly constructed roads such as the 94-kilometer four-lane Subic-Clark-Tarlac Expressway (SCTEX), the 84-kilometer North Luzon Expressway (NLEX), the 42-kilometer STAR Tollway and Cavite Expressway (CAVITEX)


Strategic Business Location

The country’s location is a critical entry point to over 500 million people in the ASEAN Market and a natural gateway to the East- Asian economies.

• The country is likewise placed at the crossroads of international shipping and airlines.

• Within Asia, the Philippines is reachable within 3 to 4 hours by plane.


First-Class Lifestyle

• Accessible and affordable luxuries – value-for-money housing, modern recreational facilities, first-rate educational institutions adopting international standards, business centers, hospitals, etc.

• A growing favorite tourist destination, as evidenced by the steadily increasing tourist arrivals.

• Second home to expatriates who enjoy the company of the warmest people in the region, the country's openness to varied cultures and a decidedly global outlook.


Income Tax Holiday (ITH) for 4 years, extendable to 8 years

After the ITH period, special 5% tax on gross income in lieu of all national and local taxes

Exemption from duties and taxes on imported capital equipment, spare parts, supplies, and raw materials

Domestic sales allowance of up to 30% of total sales Exemption from export taxes, wharfage dues, imposts

and fees Exemption from Value Added Tax (VAT) on allowable

local purchases such as telecom, power, and water bills

Additional deduction of 50% of total manpower training cost under the special 5% gross income tax regime


Investment Incentives

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Number of college degree graduates

Medical and natural sciences, allied fields

119,378

Business, accounting, and related fields

117,339

Social and behavioral sciences, education

68,811

Engineering and architecture 50,734

IT-related and mathematics 47,928

Fine arts, masscom, humanities 12,269

TOTAL Tertiary level 481,862

Abundant labor force of 39+ million

460,000+ college graduates per year

3,000+ CPAs English proficiency & other

languages Affinity with Western culture Customer service orientation Highly trainable Cost effective High level of commitment

and loyalty


Our People

Asia’s friendliest country 8th World’s friendliest country

~ HSBC World Explorer Survey 2011 ~

12th largest population in the world

Set to become the world’s 16th largest economy, up 27 places from today One of the new emerging countries due to favorable demographics and strong economic

fundamentals

~ HSBC’s “The World in 2050” Report ~

8. Dynamic People8. Dynamic People

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BUSINESS OPPORTUNITIES IN THE PHILIPPINES. Stable and Resilient Economic Growth GDP (2012) 6.8% GDP (2013) 7.2% Headline Inflation (2012) 3.2% Headline