Secretary of Finance
June 21, 2024
Tokyo, Japan
Fellow workers in government, our partner banks, friends in Japan, ladies and gentlemen: good morning.
Thank you for investing your time in this briefing.
If there is one thing that you should know about us Filipinos, it is that we honor long, reliable friendships. And Japan, I would say, is the Philippines’ best friend in the region.
Over the years, we have seen how our countries’ progress is deeply connected.
Japan is the Philippines’ second biggest trading partner.
It is our largest source of foreign direct investment inflows.
Japan is our number one provider of very concessional official development assistance–from infrastructure, human capital development, peace process, to maritime security.
In fact, Manila is scheduled to have its first-ever underground subway up and running by 2029, thanks to Japan.
Additionally, Japan stands as the largest investor in our economic zones. And Batangas, which is incidentally my hometown, houses the majority of larger-scale Japanese enterprises.
Beyond our strong economic ties, the Philippines considers Japan its best friend because we share mutual respect.
We both understand that harmony and security are crucial to achieving economic prosperity.
And this is evident in the historic Philippines-Japan-United States trilateral alliance, which brings us here today.
We deeply value this strong alliance that will take our partnership and friendship to greater heights.
So now, allow me to share how both our nations can capitalize on opportunities and strategic complementarities to bolster our national and economic security.
To begin with, the Philippines is booming and has all the makings of a tiger economy. This makes us the most strategic safe haven for Japanese investors.
We are an economic superstar in ASEAN, with GDP growth expanding among the fastest at 6.2 percent since President Marcos, Jr. took office.
All indicators from global research firms and analysts point to a strong medium-term growth trajectory.
In less than a decade, the Philippines will join the club of trillion-dollar economies.
And we will continue to outpace the growth of Asia’s economic powerhouses in the coming years.
Fast forward to 2075, the Philippines will overtake France to become the 14th largest economy in the world. We will only be one step closer to Japan.
With our arsenal of growth-enhancing strategies, the Marcos, Jr. administration has the right policy tools and determination to take us there.
First, we are decisively managing inflation risks stemming from geopolitical tensions.
The Philippine central bank and the government are in sync in ensuring that we respond to these risks through proactive monetary policy and well-targeted non-monetary interventions.
We share the view of the IMF that forecasts Philippine inflation to remain manageable, settling at 3.4 percent this year.
This is well within the government’s target of 2 to 4 percent, and significantly lower than the global average of 5.9 percent.
As inflation eases, we anticipate a further acceleration in our already robust domestic demand with household consumption accounting for about 75 percent of our economy.
This is our sturdy shield against external factors contributing to slow global growth.
Our ascent towards becoming an upper-middle-income country next year and the world’s 13th largest consumer market by 2030 should offer a huge headroom for Japanese enterprises to thrive in our domestic market.
The country’s strong labor force fuels the dynamism of our economy. Our unemployment rate has steadily declined to a historically low level and is even better than pre-pandemic.
We boast a strong and growing middle class, with the largest portion of the Filipino workforce engaged in formal, stable work.
With a median age of only 25 years old, the Philippines enjoys a demographic sweet spot.
Given Japan’s aging population, averaging 48 years old, this presents a unique opportunity for our two countries to form a strong demographic partnership.
Japanese investors can also find assurance in the Philippines’ resilience to trade wars, supported by hefty overseas remittances, increasing tourism receipts, and growing BPO revenues.
These, along with our low external debt and healthy reserves that exceed standard benchmarks, should keep our currency stable and resilient.
The Philippine banking system’s strength and stability are also indisputable, with capital adequacy and liquidity coverage ratios well above global standards.
Meanwhile, the Philippine government’s commitment to prudent fiscal management ensures stability for Japanese businesses.
In response to global headwinds, we proactively recalibrated our growth and fiscal targets to be more realistic and adaptive to external issues.
With a conservative approach to fiscal policy-making, our revenue performance is projected to increase steadily, reaching 16.4 percent by 2028. Spending remains above 20 percent of GDP.
We are focused on further growing our tax revenues by addressing tax leaks and enhancing tax administration, particularly in the e-commerce market, through digitalization.
Simultaneously, we have strategically tapped into non-tax revenue streams to generate additional funds without imposing new or increased taxes on our people.
These measures will enable us to reduce the fiscal deficit sustainably to only 3.7 percent in 2028.
At the same time, the economy will continue to outgrow the country’s debt with the debt-to-GDP ratio further dropping to 55.9 percent in 2028.
Japan’s strong investor base, with a keen interest in yen-denominated assets, has helped maintain affordable and lower interest rates for our Samurai bond issuances.
As such, it makes perfect sense for us to increase our financial integration.
Despite our heavy bias in domestic financing, we will continue tapping the Samurai market as a viable option for our fundraising activities.
Recently, the Philippines’ high credit ratings were also affirmed, including our A-minus grade from the Japan Credit Rating Agency and triple B plus from R&I. This summarizes all our efforts in exercising fiscal discipline and prudent debt management.
Meanwhile, the Philippines has a stable political environment and an investment landscape that has never been more open and liberalized.
President Marcos, Jr. has been our primary marketer, actively engaging with leaders and investors around the world to strengthen partnerships and form alliances.
As we aggressively enhance our logistics backbone and human capital through productivity-boosting investments, Japan’s role has never been more crucial.
We need more Japanese expertise and technology for our 185 flagship infrastructure projects.
Our new Public-Private Partnership Code streamlines the process, making your participation faster and easier.
We invite you to submit unsolicited proposals for our PPP projects, respond to solicited proposals, or enter into joint venture agreements.
Aside from infrastructure projects, the Luzon Economic Corridor is a perfect hub for Japanese investors involved in cutting-edge manufacturing, semiconductor supply chains, and agribusiness.
The current amendments to the country’s fiscal incentives regime–known as CREATE MORE–should entice more Japanese investors to establish roots and expand in this corridor.
CREATE MORE enhances both fiscal and non-fiscal incentives while addressing key concerns of Japanese investors.
For example, the policy exempts export-oriented enterprises from paying value-added tax. VAT refund will no longer be an issue for you.
The bill also provides a more attractive incentive package for registered projects or activities with an investment capital exceeding about 40 billion Japanese yen.
We envision CREATE MORE to give birth to more thriving economic corridors in every corner of the Philippine archipelago, with Japan taking a leading role.
Simultaneously, we are actively addressing bottlenecks and streamlining processes to clear the way for your participation in high-priority sectors such as clean energy, mining, critical minerals, retail, digital technologies, and many others.
The Philippines now allows full foreign ownership for renewable energy projects and public services like telecommunications, airports, and shipping.
We have also lowered the minimum paid-up capital requirement for foreign retailers.
The Philippine Domestic Submarine Cable Network—which was by the way initiated by a local affiliate of a Japanese telecom giant—positions our country as an attractive host for technology-centric businesses such as hyper-scale data centers, smart manufacturing, and high-tech agriculture.
Meanwhile, to unlock the full potential of our mining sector valued at 6.4 trillion US dollars, we are advocating for legislation to rationalize the mining fiscal regime. You can be assured of predictability in our mining policy.
These reforms are just a fraction of the transformative changes underway in the Philippines to make us stand out as the most hospitable economy for Japanese enterprises.
We are committed to working non-stop until good becomes better and better becomes the best for business.
So, I extend a warm invitation to all our friends here in Japan to explore the wide range of investment opportunities waiting to be explored in the Philippines.
And if you have more concerns, you are most welcome to visit me at the Department of Finance. I will do the hand-holding to make it easier and more profitable for you to invest in the Philippines.
And if this briefing has left you wanting more, we brought here with us Filipino conglomerates from key industries such as retail, real estate, banking, brewery, and manufacturing.
You can hear firsthand from these successful businessmen about the predictability, stability, and sustainability of doing business in the Philippines. They are more than ready to collaborate with you.
We are very eager to work closely with you and forge new partnerships to shape an exciting shared future for both the Filipino and Japanese people.
With that, domo arigato gozaimasu. Mabuhay ang Bagong Pilipinas!
