A Brief
The Philippines, an archipelago comprising over 7,600 islands in Southeast Asia, is strategically located about 500 miles off the coast of Vietnam in the western Pacific Ocean. With Manila as the capital and Quezon City as the most populous city, forming part of the National Capital Region on Luzon, the country boasts a diverse geographical landscape. Geopolitical dynamics in Asia, the world’s largest continent, present a tapestry of diversity and complexity, encompassing numerous nations, languages, cultures, and intricate geographical features. The Southeast Asian region, characterized by extensive coastlines, rivers, and plains, houses eleven nations, among which Taiwan and the Philippines harbor historical complexities and present-day challenges. The Philippines, once a Spanish colony for over three centuries and subsequently under U.S. rule, gained full independence in 1946, shaping its linguistic, religious, and governmental influences. Presently, the Philippine economy is poised for healthy expansion, with the Asian Development Outlook projecting growth at 6.2% in 2024. Driven by increasing domestic demand, a revival in tourism, and robust public infrastructure spending, the nation’s growth trajectory aligns with its aspirations to attain upper middle-income status. However, challenges such as inflation, impacted by local food supply constraints and global commodity prices, and the evolving labor market due to emerging technologies, pose considerations for sustained progress. Despite these challenges, the Philippines exhibits positive signs, reflected in an improved unemployment rate, steady remittances from overseas Filipino workers, and a narrowing current account deficit, propelled by strong service exports and tourism recovery.
Challenges with Global Significance:
Territorial Disputes in the West Philippines Sea:
The longstanding conflict between China and the Philippines in the Western Philippine Sea, also known as the South China Sea, has its roots in a protracted territorial dispute over the Spratly Islands. Comprising of islands and reefs, the Spratlys hold strategic importance along major trade routes, serve as valuable fishing grounds, and harbor natural resources such as oil. Multiple countries, including Vietnam, Taiwan, Malaysia, and Brunei, lay claim to the region, citing historical records. China, however, asserts its sovereignty through the contentious “new ten-dash line,” first appearing in 1947 atlases, demarcating its continental shelf without fixed coordinates. This claim extends China’s national boundary over a significant portion of the South China Sea, leading to the construction of artificial islands in the Spratlys, causing ecological damage to the West Philippine Sea. Notably, China’s self-proclaimed demarcation contradicts the United Nations Convention on the Law of the Sea (UNCLOS).
Despite diplomatic efforts, tensions escalated in 2012 with the Scarborough Shoal Standoff, a critical incident where Chinese surveillance vessels prevented the Philippine Navy from apprehending Chinese fishermen within the atoll. The Scarborough Shoal, situated about 230 kilometers from the Philippines and 650 kilometers from China’s Hainan province, lies within the Exclusive Economic Zone of the Philippines, with both China and Taiwan also laying claim to its sovereign territory. This standoff, coupled with China’s aggressive actions like constructing artificial islands and engaging in illegal fishing and harvesting of marine resources, prompted the Philippines to bring the matter before the UN-backed Permanent Court of Arbitration (PCA) in The Hague, Netherlands.
The tensions surrounding Scarborough Shoal, exacerbated by China’s actions since 2012, particularly its interference with Filipino fishermen exercising fishing rights, have underscored the need for international adjudication. The PCA’s involvement reflects a commitment to resolving disputes in accordance with established international laws, highlighting the importance of upholding the principles outlined in UNCLOS. The outcome of this legal process will undoubtedly shape the trajectory of the territorial disputes in the South China Sea and influence the broader geopolitical landscape in the region.
Fisheries Management:
The Philippines stands as a prominent fishing nation, ranking among the top 25 globally, as per the United Nations’ Food and Agriculture Organization. The nation is home to approximately 2 million small-scale fishers whose daily needs and livelihoods hinge on the nearshore waters. However, the fishing sector grapples with multifaceted challenges, including the absence of a scientific foundation in policy development and insufficient involvement of stakeholders in decision-making processes. The imperative to enhance Philippine fisheries cannot be overstated, given that the well-being of every Filipino reliant on the sea for their livelihoods is at stake.
The trajectory of Philippine fisheries policy has been largely influenced by political considerations and the influence of a select few powerful entities, sidelining the perspectives of scientists and the multitude of stakeholders directly impacted by the resource. Despite the collection of data through the stock assessment program spanning five to nearly 10 years in certain areas, a critical deficiency lies in the capacity to transform raw data into actionable information for decision-makers. Strikingly, there has been minimal investment in cultivating the necessary expertise and skills for stock assessment and data analysis within the country.
Addressing this gap demands the establishment of a comprehensive system or framework that seamlessly integrates science and management, paving the way for more informed policies adaptable to the dynamics of the fisheries sector. Crucially, there is an urgent need to empower the primary users of the resource—the fishers themselves—with a significant voice in the decision-making processes. This shift toward a more inclusive and science-driven approach is pivotal for steering Philippine fisheries toward sustainable practices and securing the livelihoods of those dependent on the bounty of the sea.
Sea Level Rise Vulnerability:
The global threat of climate change looms large over coastal communities, necessitating a comprehensive approach that combines local knowledge and innovative practices like parametric insurance to bolster coastal resilience and alleviate the impacts of climate change. As the planet experiences rising temperatures, the oceans are swelling, leading to an increase in the frequency and severity of coastal disasters. Communities residing on climate change’s frontlines grapple with the stark realities of death, infrastructure damage, and the loss of homes, compelling them to seek refuge on higher ground. Coastal disasters, such as typhoons, not only inflict immediate harm but also pose the risk of prolonged recovery with enduring consequences, raising questions about the feasibility of rebuilding.
The latest assessment report from the Intergovernmental Panel on Climate Change underscores the heightened threat of more intense tropical cyclones in a warming world. The prospect of warmer ocean temperatures fueling stronger cyclones and rising sea levels inundating coastal regions looms large. Even under a low-carbon emissions trajectory, the report projects sea levels to rise by up to approximately 0.7 meters by the close of this century. Southeast Asian countries, with some of the world’s longest coastlines, find themselves exceptionally vulnerable to the impacts of a warming ocean. The International Monetary Fund notes that the extensive coastlines and densely populated low-lying areas in this region, home to over 640 million people, make it highly susceptible to weather extremes and rising sea levels.
Recognizing the urgency, developing the resilience of coastal communities takes center stage, offering a crucial means to enable swift recovery from disasters and prevent a singular event from spiraling into a protracted community-wide catastrophe. Amidst discussions on climate’s impact on conflict, a nuanced and context-specific understanding is emphasized, acknowledging the complex relationship between climate and conflict. The Philippines, defining national security in terms of safeguarding sovereignty, territorial integrity, well-being, core values, and the state and its institutions, grapples with the profound implications of sea-level rise on these foundational elements of security. The looming threat jeopardizes the lives and livelihoods of Filipinos, particularly those in coastal areas, emphasizing the need for people-centered discussions on the peace and security implications of sea-level rise. The far-reaching consequences extend to statehood and security, involving the loss of territory, displacement of populations, and tensions over resource access, livelihoods, and services, ultimately challenging the stability of national boundaries.
Challenges with Local to Regional Significance:
Infrastructure Gap:
Infrastructure plays a crucial role in fostering development, yet the Philippines has grappled with insufficient infrastructure hindering economic growth and poverty reduction. Despite relatively high access levels to water, sanitation, and electricity, service levels have lagged behind due to rapid population growth and urbanization. Challenges include a poor business environment, coordination issues, and a decline in private-sector involvement. A comprehensive roadmap is essential to boost infrastructure expansion and improvement, propelling the country into a cycle of growth. Achieving sustained development requires increased infrastructure investments, aiming for at least 5 percent of GDP, enhanced spending efficiency, fiscal reforms, sector-specific improvements, and strategic public-private partnerships to address key bottlenecks swiftly. Despite being among Asia’s top-performing economies, outdated and insufficient infrastructure poses a challenge, prompting the Philippines to ramp up spending on vital projects through initiatives like Build Build Build, targeting a ratio exceeding 6 percent of GDP by 2022.
Natural Disasters:
The Philippines is highly prone to disasters triggered by natural calamities, with some estimations placing 60% of its land area and 74% of its population as exposed to numerous hazards, including floods, cyclones, droughts, earthquakes, tsunamis, and landslides. Since 1990, the country has faced 565 such disasters, killing 70,000 and costing $23 billion in damages. Except earthquakes and volcanic eruptions, the multiple natural hazards facing the Philippines are projected to intensify under climate change. The country is particularly prone to cyclones due to its location in the Northwestern Pacific Basin, the most active tropical cyclone basin in the world, with the country experiencing an average of 20 cyclones per year within its area of responsibility, with approximately 8 making landfall. The strongest recorded typhoon happened in recent years, Typhoon Haiyan in 2013 killing 6,000 people, devastating nine regions and resulting in 1.1 million homes damaged and agricultural and infrastructure damages of $802 million. While not directly climate-related, the Philippines are also located in an area of considerable tectonic activity, possessing 22 active volcanoes. An example of the threat from volcanic activity is witnessed in the eruption of Mount Mayon in early 2018, which resulted in the evacuation of up to 90,000 people
Energy and Power:
The Philippines confronts a pressing energy crisis with the imminent depletion of the Malampaya natural gas fields, responsible for 30% of Luzon’s energy. Compounded by a growing population, high electricity costs, and challenges from COVID-19, the country aims for energy self-sufficiency by 2030. However, with 43 Gigawatts of additional power capacity needed by 2040, the nation lags in developing timely solutions. The energy mix, led by coal 30.2% and renewables 35.5%, lacks penalties or incentives for specific energy sources. The fully privatized electricity sector, dominated by Meralco, poses hurdles for both larger and smaller players in adopting sustainable energy solutions.
The renewable energy sector holds promise with diverse resources like geothermal, solar, hydropower, wind, biomass, and ocean energy. Policy mechanisms and trading systems support renewable energy initiatives, while plans for the nation’s first LNG import terminal are underway. Over 70 power generation companies engage in rehabilitation and maintenance projects, offering opportunities for equipment and services. With a shift toward renewable resources, conglomerates make decisions based on pricing and diversification needs. Despite challenges, solutions are sought for grid enhancement, off-grid options, and micro-grid solutions, aligning with the Philippines’ evolving focus on energy diversification and sustainability.
Freshwater Resources:
The looming threat of a global water crisis, as highlighted by the UN World Water Development Report 2023, becomes starkly evident in the Philippines as authorities warn of potential water interruptions in Metro Manila affecting over 600,000 households. The declining water level in Angat Dam, reaching a precarious 181.83 meters as of July 4, nears the minimum operating level of 180 meters. Unlike power interruptions that elicit a casual “brownout” reaction, water shortages evoke a more visceral response from Filipinos, emphasizing the critical nature of this issue. With water scarcity joining the ranks of current existential challenges, the National Water Resources Board implements a temporary two cubic meter per second cut in water allocation as a conservation measure. While the Kaliwa Dam project is anticipated to alleviate the issue in the long term, there is a growing need to explore innovative solutions like desalination, given the severity of the problem.
Thousands have lived without love but not one without water” – W.H. Auden
To address the pressing water crisis, policymakers in the Philippines are turning to measures like reducing water allocation and proposing large-scale projects such as the Kaliwa Dam. However, these efforts may fall short, prompting consideration of desalination as a viable solution. While traditional desalination methods are energy-intensive and environmentally challenging, advancements in technology offer promising alternatives, such as solar-powered desalination plants. Gulf countries and Independent Water and Power companies are leading the way with cost-effective and eco-friendly desalination projects, potentially reducing CO2 emissions significantly. In the Philippines, several local governments and private corporations are exploring desalination plants, with some pioneering solar-powered solutions. These innovative approaches aim to address water scarcity, offering hope for a more sustainable and resilient water supply in the face of a global water crisis.
Difficult Governance and Administration:
The Philippines grapples with a complex array of governance challenges, spanning inclusive growth, human capital, and resilience. Utilizing the Worldwide Governance Indicators, the country excels in Voice and Accountability and Regulatory Quality but lags in Government Effectiveness, Control of Corruption, and Rule of Law. Weak government effectiveness hinders policy implementation, with corruption identified by over one-third of firms as a major constraint, impeding economic growth. The rule of law suffers from judicial inefficiency, causing delays and favoring powerful firms. Limited voice and accountability result from political dynasties and vote buying. Challenges include overlapping responsibilities and duplication among agencies, hindering policy implementation, and fostering a cautious culture. Addressing these issues is crucial for effective governance and sustainable development.
Healthcare issues in the Philippines
The healthcare landscape in the Philippines is a dynamic blend of public and private sectors. Public hospitals focus on preventive and primary care, leading health education efforts, while private hospitals specialize in cardiovascular diseases, cancer, pulmonology, and orthopedics. The Universal Health Care (UHC) Law, signed in 2019, strives to provide accessible healthcare services to all Filipinos, including Overseas Filipino Workers (OFWs), through the PhilHealth insurance program, covering at least 50% of medical expenses.
The country’s healthcare system is evolving, with private equities investing in and upgrading hospital infrastructure. The majority of hospitals are concentrated in the Calabarzon region, Central Luzon, and the National Capital Region. In 2021, the leading causes of death were ischemic heart disease, cerebrovascular diseases, and COVID-19. Despite these challenges, the Philippines is emerging as a medical tourism destination, ranking 24th globally, offering competitive prices and English-speaking medical professionals. The healthcare market presents opportunities for health IT and innovative medical devices, with a focus on accurate diagnostics and specialty fields like cancer treatment.
Philippine Education Disparities:
Likewise, the Philippines is also facing a significant learning crisis as data reveals that 9 out of 10 10-year-olds struggle to read simple texts. Despite the constitutional mandate to protect and promote the right to accessible and quality education, the country faces persistent challenges in its education system. Access to quality education remains uneven, with completion rates dropping significantly from primary to secondary education, and further diminishing for bachelor’s or equivalent degrees. Notably, while 49% of the wealthiest attend higher education, only 17% from the poorest decile can do the same. Productivity lags, with Filipino students spending more time in school but achieving less than their counterparts in comparable countries. Higher education enrollment rates, once on par with middle-income countries, are stagnating, contributing to an erosion of overall educational standards.
The Philippines’ education system is marked by disparities, with significant gaps between rich and poor in accessing higher education. Proficiency levels in reading, math, and science are below the desired benchmarks, and the country’s enrollment rate is struggling to keep pace with rising trends in neighboring nations. The challenges are underscored by a large proportion of school leavers and out-of-school youth, reflected in the low representation of 15-year-olds in international assessments like PISA. Addressing these disparities and enhancing overall educational outcomes are critical imperatives for the Philippines to meet its constitutional commitment to providing accessible and quality education for all.
Internal Migration and Urban Congestion:
Migration is a key strategy for Filipinos seeking economic improvements, with 45% engaging in internal migration and 89% in international migration primarily for employment, as reported by the Philippine Statistics Authority. The resulting overseas Filipino workers (OFWs) contribute significantly to households, sending record-high cash remittances of US$36.14 billion in 2022, as per the Bangko Sentral ng Pilipinas. While studies emphasize the positive impact of international migration, there is limited research on the combined effects of internal and international migration on those left behind. Recognizing the substantial non-migrant population, comprising 60% of the 2018 National Migration Survey is vital to understanding and addressing the broader economic and financial implications of migration on the country.
The Philippines stands out as a global example of an effective migration policy, acknowledged in a 2023 World Bank report. Highlighting the urgency of better migration management, the report emphasizes the increasing demand for foreign workers in aging rich and middle-income countries, presenting a unique opportunity for countries like the Philippines. The country’s proactive approach includes labor agreements with Gulf States, establishing minimum wages, and implementing reforms to enhance workers’ technical skills. Additionally, pre-departure orientation programs inform migrants about migration risks, labor rights, safety measures, and destination-specific information, showcasing a comprehensive strategy to harness the benefits of migration for both individuals and the nation’s development.
A Way forward for a prosperous Philippines
The Philippines stands out as one of the most dynamic economies in the East Asia and Pacific region, driven by factors such as increasing urbanization, a growing middle class, and a youthful population. Rooted in strong consumer demand, supported by a vibrant labor market and robust remittances, the country’s private sector, particularly the services sector, remains resilient. Despite facing challenges like the COVID-19 pandemic and global economic headwinds, the poverty rate has declined from 23.3 percent in 2015 to 18.1 percent in 2021. The government is committed to further economic growth, focusing on significant investments in both human and physical capital for the medium and long term.
The Philippines is experiencing a noteworthy economic recovery, with growth reaching 7.6 percent in 2022, up from 5.7 percent in the previous year. This rebound is attributed to robust domestic demand, a strong labor market, ongoing public investments, and positive effects from recent investment policy reforms. With sustained recovery and reform initiatives, the country aims to transition from a lower middle-income status to an upper middle-income country, with a targeted gross national income per capita range of US$4,466 to US$13,845. Key priorities include creating fiscal space to boost infrastructure and public services, addressing perennial challenges in raising public revenues, and improving the investment climate to foster business growth and job creation, particularly by reducing the cost of doing business and resolving infrastructure bottlenecks.
