The Philippine Development Plan 2011-2016 Midterm Update:

Challenges and Strategies

EMMANUEL F. ESGUERRADeputy Director-General

13th PESO Congress25 September 2013

OutlineI. The Philippine Development Plan (PDP) Midterm

Update – Framework and Process

II. The Development Challenge

III. National Short-term Economic Outlook

IV. Investment Plan for Strategic Sectors

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

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

Social Contract

PDP 2011-2016

6.8-7.2% Unemployment Rate

6.8% (2012) 7.6% (SI 2013)Real GDP Growth

20.3% (2012)20.8% (SI 2013)

Fixed Capital as ratio to GDP

Unemployment rate7.0% (2012)

7.3% (ave. of LFS’ 2013 Jan, Apr & Jul round)

Underemployment rate20.0% (2012)

19.8% (ave. Jan, Apr & Jul 2013)

27.9% (S1 2012)

28.6% (S1 2009)

Poverty Rate

Where are we now?Where are we now?

PDP 2011-2016 Targets

7-8% Gross Domestic

Product

22% Investment/GDP

ratio

Poverty Incidence down to

16.6%

We are on track with respect to our economic targets; the present challenge is to improve social outcome targets.

More needs to be done to achieve inclusive growth.....

2011

2012

Indicator Ave 2010 Ave 2012Ave 2012

(Jan, Apr & Jul)

Ave 2013 (Jan, Apr &

Jul)

Labor Force Level (‘000) 38,893 40,426 40,424 40,972

Employment Level (‘000) 36,035 37,600 37,577 37,978

Wage and salary workers (% share to total employment)

54.5 57.2 57.1 58.6

Unemployment Level (‘000) 2,859 2,826 2,847 2,994

Unemployment Rate (%) 7.4 7.0 7.0 7.3

Underemployment Level (‘000) 6,762 7,514 7,632 7,509

Underemployment Rate (%) 18.8 20.0 20.3 19.8

Source: Labor Force Survey, National Statistics Office

We need to generate more and better jobs

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.

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Lessons Learned: Midterm Assessment of PDP 2011-2016 Implementation

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

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POSITIVE ACTION with Spatial and Sectoral Dimensions Equalize development opportunities, Improve resiliencePOSITIVE ACTION with Spatial and Sectoral Dimensions Equalize development opportunities, Improve resilience

Boost competitiveness

Boost competitiveness

Improve access to financing

Improve access to financing

Macroeconomic Stability (fiscal, monetary, external, financial)

Macroeconomic Stability (fiscal, monetary, external, financial)

Science, technology ,innovation

Science, technology ,innovation

Education and skill set of the

workforce

Education and skill set of the

workforce

InfrastructureInfrastructure

InvestmentsInvestments

Rapid and sustained growthRapid and sustained growth

jobs jobs

Market demandMarket demand

REDUCED POVERTY ,MASSIVE EMPLOYMENT CREATION

REDUCED POVERTY ,MASSIVE EMPLOYMENT CREATION

National Security

Ecological Integrity

Good Governance

(Secure property

rights, Efficient

regulation, Transparent

and accountable)

National Security

Ecological Integrity

Good Governance

(Secure property

rights, Efficient

regulation, Transparent

and accountable)

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Hence we will do more to pursue inclusive growth.

Focusing on Priority Sectors

PDP Midterm UpdateoAgribusiness/AgricultureoManufacturingoBPM/IT oHousingo Infrastructure/LogisticsoTourism

Map courtesy of DOLE

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

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

National Short-term Economic Outlook

Source: NEDA as approved in the DBCC

We assume that growth will continue in 2013 and beyond

2012 Actual

2013 S1 Actual

2013 Outlook

2014 Target

GDP Growth (%) 6.8 7.6 6.0-7.0 6.5-7.5

Agriculture Growth (%) 2.8 1.4 3.5-4.5 3.2-4.2

Industry Growth (%) 6.8 10.6 6.4-7.5 7.4-8.5

Services Growth (%) 7.6 7.1 6.3-7.3 6.7-7.6

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

Growth Drivers - Production

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

Growth Drivers - Expenditures

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

• 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

The budget will support positive actions with sectoral and spatial dimensions.

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)

We also remain vigilant against the following near-term global and domestic risks to growth...

*Luncintel, Global Industrial Application Paper Industry 2012-2017: Trend, Profit, and Forecast Analysis

…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

Investment Plan for Strategic Sectors

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

Highlights of the First Draft of the Revalidated PIP: Strategic CIPs By Theme

In order to realize our medium term goal, we are prioritizing our programs and projects.

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* There are 12 emerging strategic CIPs under the theme ‘Accelerating Infrastructure Development’ with no 2013-2016 investment targets reflected in the submission to NEDA.

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*

Theme (Chapter)Number of

Strategic CIPs

2013-2016 Total Investment

Targets (in PhP Million)

Accelerating Infrastructure Development (Chapter 5) 69 551,545.75

Social Development Sector(Chapter 8)

5 50,354.08

Peace and Security (Chapter 9) 7 42,439.94Competitive and Sustainable Agriculture and Fisheries Sector (Chapter 4)

10 41,870.69

Conservation, Protection and Rehabilitation of the Environment and Natural Resources (Chapter 10)

7 23,306.40

Competitive Industry and Services Sector (Chapter 3) 2 5,028.96

Governance and the Rule of Law (Chapter 7) 1 2,076.18

Macroeconomic Policy (Chapter 2) 1 1,809.47

GRAND TOTAL 102 718,431.47

*There are 12 emerging strategic CIPs under the theme ‘Accelerating Infrastructure Development’ with no 2013-2016 investment targets reflected in the submission to NEDA

Highlights of the First Draft of the Revalidated PIP: Investment Targets By Theme*

The Philippine Development Plan 2011-2016 Midterm Update:

Challenges and Strategies

EMMANUEL F. ESGUERRADeputy Director-General

13th PESO Congress25 September 2013