The Philippine Development Plan 2011-2016 Midterm Update: Challenges and Strategies

1. The Philippine Development Plan 2011-2016 Midterm Update: Challenges and Strategies EMMANUEL F. ESGUERRA Deputy Director-General 13th PESO Congress 25 September 2013

2. Outline • The Philippine Development Plan (PDP) Midterm Update – Framework and Process • The Development Challenge • National Short-term Economic Outlook • Investment Plan for Strategic Sectors

3. Social Contract PDP 2011-2016 • Promote transparent and responsive governance • Develop human resources through improved social services and protection • Achieve stable macroeconomic environment • Boost competitiveness in productive sectors • Improve access to financing • Invest massively in physical infrastructure • Advance peace process and guarantee national security • Ensure ecological integrity • Transparent, accountable and participatory governance • Poverty reduction and empowerment of the poor and vulnerable • Rapid, inclusive and sustained economic growth • Just and lasting peace and the rule of law • Integrity of the environment and climate change mitigation and adaptation

4. We are on track with respect to our economic targets; the present challenge is to improve social outcome targets. PDP 2011-2016 Targets 7-8% Gross Domestic Product 22% Investment/GDP ratio 6.8-7.2% Unemployment Rate Poverty Incidence down to 16.6% Where are we now? Unemployment rate 7.0% (2012) 7.3% (ave. of LFS’ 2013 Jan, Apr & Jul round) Underemployment rate 20.0% (2012) 19.8% (ave. Jan, Apr & Jul 2013) 27.9% (S1 2012) 28.6% (S1 2009) Poverty Rate 20.3% (2012) 20.8% (SI 2013) Fixed Capital as ratio to GDP 6.8% (2012) 7.6% (SI 2013) Real GDP Growth

5. More needs to be done to achieve inclusive growth..... 2011 2012

6. We need to generate more and better jobs Source: Labor Force Survey, National Statistics Office

7. Lessons Learned: Midterm Assessment of PDP 2011-2016 Implementation • Good governance has proven to be an effective platform upon which strategies should be implemented. • Macroeconomic (fiscal, financial, external) and political stability fuels positive expectations that lead to growth. • Economic growth is necessary but not sufficient for poverty reduction. • Growth strategies need to have spatial and sectoral dimensions to ensure inclusivity. • Disasters can negate the gains and even push back development.

8. Guiding Principles • Efficiency (catalytic; government intervention facilitates and not substitutes for private action) • Equity (broadening opportunities through connectivity, human capital investments) • Feasibility (doable within the Plan period) Desired Outcomes • Rapid increase in employment opportunities to significantly reduce the stock of unemployed persons • Significant reduction in poverty incidence to come as close as possible to the MDG

9. reduced poverty , massive employment creation Hence we will do more to pursue inclusive growth. National Security Ecological Integrity Good Governance (Secure property rights, Efficient regulation, Transparent and accountable) POSITIVE ACTION with Spatial and Sectoral Dimensions Equalize development opportunities, Improve resilience Market demand Rapid and sustained growth jobs Investments Science, technology , innovation Boost competitiveness Improve access to financing Education and skill set of the workforce Infrastructure Macroeconomic Stability (fiscal, monetary, external, financial)

10. Focusing on Priority Sectors Map courtesy of DOLE

11. Positive actions with sectoral and spatial dimensions will be undertaken to achieve inclusive growth. • Infrastructure development focusing on connectivity between regions/provinces, esp. transport and power • New growth drivers outside NCR (agri/agribusiness, tourism, IT/BPM in next wave cities, public housing, manufacturing, infra/logistics) • Investment in human capital to improve the competitiveness/ productivity of current and future stock of the labor force • Provision of social protection against income and employment shocks for the most vulnerable • Improved resilience to natural disasters

12. In order to accelerate economic growth , we are diversifying our industries and investment Strategies to diversity industries • Strengthen the contribution of construction and utilities in line with the infrastructure development program (i.e., transport and power) • Diversify manufacturing: strengthen other subsectors, not only semi-conductors; diversify exports; promote higher value chain subsectors; strengthen link with agriculture (agri-industry) • Reduce the cost of doing business • Quality Infrastructure • Streamlining of registration and licensing procedures • Implementation of programs and projects that addresses bottlenecks

13. National Short-term Economic Outlook

14. We assume that growth will continue in 2013 and beyond Source: NEDA as approved in the DBCC

15. Growth Drivers - Production • Strong performance of agri-based manufacturing, and recovery of semiconductor and electronics • Robust public and private construction projects • Buoyant domestic and local tourism • Continued strong growth of wholesale and retail trade • Real estate particularly housing • Greater productivity in agriculture and rebound of the fisheries subsector

16. Growth Drivers - Expenditures • Higher public construction and investments in power generation • Robust private investment in construction and durable equipment • Strong household consumption due to better employment opportunities, strong remittance inflows, and low and stable inflation • Increased tourist arrivals and more demand for business process management • Improvement of external trade conditions

17. The proposed 2014 budget will help us move towards inclusive growth...

18. The budget will support positive actions with sectoral and spatial dimensions. • Infrastructure development focusing on connectivity between regions/provinces; power security, eventually reduced power cost • New growth drivers outside NCR(agri/agribusiness, tourism, IT/BPM in next wave cities, public housing, manufacturing, infra/logistics) • Completion of asset reform, particularly individual titling of lands under CARP/CARPer • Investment in human capital to improve the competitiveness/ productivity of current and future stock of the labor force • Provision of social protection against income and employment shocks for the most vulnerable • Improved resilience to natural disasters

19. We also remain vigilant against the following near-term global and domestic risks to growth... • Weather disturbances (e.g., Typhoons, prolonged monsoon rains) • Delays in the implementation of infrastructure development projects, particularly power • Excessive capital inflows/outflows • Uncertainty of economic recovery in the Euro area and Japan • Tapering of monetary stimulus in the US • Further economic slowdown in BRIC, particularly China • Possible spike in commodity prices (e.g., petroleum)

20. …while taking advantage of opportunities • Improvement in the global economic environment • Sustained consumption growth in emerging markets • Demographic transition • - Rising middle-income class, continued growth of working-age population  • Increased economic integration of ASEAN member countries • - Open flow of goods, services, labor, technology, finance • More financial resources available • - Fiscal space • - Investment credit-rating *Luncintel, Global Industrial Application Paper Industry 2012-2017: Trend, Profit, and Forecast Analysis

21. Investment Plan for Strategic Sectors

22. PIP Revalidation Process: Salient Features The Revalidated PIP veers away from the identification of all priority programs and projects of the government and has focused on strategic core investment programas/projects (CIPs) that will substantially contribute to the priorities embodied in the development objectives in the Plan and the critical indicators in the Result Matrix

23. In order to realize our medium term goal, we are prioritizing our programs and projects. Highlights of the First Draft of the Revalidated PIP: Strategic CIPs By Theme

24. Most of investment targets are expected to be funded by NG: Highlights of the First Draft of the Revalidated PIP: Strategic CIPs: Funding Source Breakdown 2013-2016* * There are 12 emerging strategic CIPs under the theme ‘Accelerating Infrastructure Development’ with no 2013-2016 investment targets reflected in the submission to NEDA.

25. Highlights of the First Draft of the Revalidated PIP: Investment Targets By Theme* *There are 12 emerging strategic CIPs under the theme ‘Accelerating Infrastructure Development’ with no 2013-2016 investment targets reflected in the submission to NEDA

26. The Philippine Development Plan 2011-2016 Midterm Update: Challenges and Strategies EMMANUEL F. ESGUERRA Deputy Director-General 13th PESO Congress 25 September 2013