PSA and NordCham Philippines Kick Off 2024 with Latest Updates on the situation in the Philippines

On January 10, 2024, the Nordic Chamber of Commerce of the Philippines (NordCham) kicked off its jam-packed year of events by hosting its monthly “Latest Updates on the Situation in the Philippines” via MS Teams in collaboration with its advisory business partner, the Philippine Strategic Associates (PSA).

This month's discussions revolve around PSA’s update regarding the potential economic impact of the geopolitical tensions in the West Philippine Sea, peace talks between the Philippine Government and the Communist Party of the Philippines-New People's Army (CPP-NPA), an overview and updates of the economic status of the Philippines for 2024, and some roundtable discussions to answer questions related to the topic.

The online event began with a warm welcome and message from Jesper Svenningsen, the Executive Director of NordCham Philippines, where he greeted all attendees at their first event of the year and showcased an overview of upcoming events for NordCham Philippines. After his brief message, he later on introduced the event’s speaker Gregg Wyatt, the Director of Business Intelligence of PSA Philippine Strategic Associates to formally start the discussion.

ECONOMIC IMPACT OF THE GEOPOLITICAL TENSIONS

The event kicked off with a discussion about the effects and impact of the escalating geopolitical tensions in the West Philippine Sea and the efforts of the government to safeguard its territorial interests. The PSA pointed out a positive development amidst the tension for this year, as the Philippine Government actively allocates part of its budget to not only maintain but also expand the country's outposts in this strategically significant region. This commitment aims to protect our territory as well as the welfare and interests of the people.

Despite the tensions, PSA reassured everyone that the immediate economic and business impacts of these disputes in the region remain relatively limited. Before moving on to the next topic, PSA emphasized the role of the business community in the Philippines in ensuring a more secure economy. They also highlighted the pivotal role of the government in ensuring the resilience of the nation's economy amid the risks of potential conflict. For them, amidst the tension, joint efforts are crucial in developing strategies that will mitigate the possible economic impacts and in improving the country's economic standing.

PEACE TALKS BETWEEN THE GOVERNMENT AND CPP-NPA

Moving to the second point of discussion, PSA gave a brief status on safety and security, based on the ongoing peace talks happening between the Philippine government and insights over its potential impact to business communities and investors in the country for 2024.

In a major positive development, PSA highlighted the peace talks between the Philippine Government and the Communist Party of the Philippines-New People's Army (CPP-NPA) and its promising signs of progress. PSA pointed out that the military situation, which has seen steady improvement since 2019, is contributing to a more safe environment for dialogue, not only essential for peace and order but also to securing a more positive image for potential investors in the country.

As of 2024, according to PSA, the issues about CPP-NPA's direct impact on most businesses is minimal, even in rural areas where their influence has been historically more evident.  However during the discussion, PSA pointed out that while the ongoing peace talks may have minimal impact, exceptions may exist, particularly for major landowners in the agricultural sector. But for PSA, the outcomes of these negotiations are unlikely to create alarming disruptions for businesses.

To sum up the discussions on this topic, PSA expressed their confidence in the positive trajectory of peace talks between the Philippine Government and the CPP-NPA as a significant step towards stability and security. With improvements in the military situation and the current status of the CPP-NPA, PSA assures the business community, whether in rural or urban areas, that a more favorable investment climate in the Philippines for 2024 can be anticipated due to positive developments in peace talks.

IS 2024 A YEAR EXPECTED TO BE BETTER THAN 2023? 

To actively engage participants and foster an open flow of discussions, PSA addressed inquiries submitted during registration and responded to live questions from attendees.

In the discussion, PSA was asked about their thoughts on whether 2024 will be better than 2023, especially regarding aspects like housing, education, and poverty reduction. According to their current reports and insights, they believe that macro-economic indicators are pointing towards better results, with an inflation forecast of 4% for 2024 and a projected GDP growth between 5.5% and 6%, the economic status appears to be off to an optimistic start for the year.

But aside from these statistics, PSA was also looking at the positive note about the growing awareness and efforts within the business community about the pressing challenges that have long affected the Philippines such poverty, unequal economic growth, malnutrition, high costs of living, and poor educational situation.

To solve malnutrition in the Philippines, PSA highlights significant efforts made by the government particularly on how the Department of Health (DOH) is prioritizing food stamps, and international support from organizations such as the World Bank and the Asian Development Bank is actively contributing to these initiatives. The government's commitment to alleviating the country's malnutrition problems shows its dedication to improving the overall situation of the health sector in the country. 

Education also emerges as another critical factor as PSA cited reports from the 2022 PISA results that reveal how the education system in the Philippines is lacking behind its neighboring Asian countries like Indonesia, Thailand, Malaysia, and Vietnam. On the other hand,  PSA commended The Department of Education (DepED), for acknowledging the negative impacts of these reports and for their response to call for a collective responsibility to enhance the country's education system.

For PSA’s perspective, it is worth taking note that it is great to know that both the business communities, private, and the government sector are now having a great appreciation and actions over these challenges especially with current financial assistance and on-going support available coming from the International community. 

WHAT IS THE OVERALL FDI ASSESSMENT FOR THE PHILIPPINE MARKET? 

As reported by PSA during the meeting, Foreign Direct Investment (FDI) has experienced a downturn in 2023 with only about 5.88 billion USD 1st to 3rd quarter of 2023, influenced by high interest rates globally. 

However, PSA is still optimistic in the potential improvements in the Philippine Market citing some positive developments like the recent liberalization of foreign investments that is anticipated to pave the way for significant new ventures and business opportunities, particularly in the sectors of renewable energy, infrastructure, and mining. 

What is encouraging investors to invest in other Asian countries instead of the Philippines?

During this discussion, another question was asked about what is encouraging investors to invest in other neighboring Asian countries like Vietnam and Indonesia as compared to the Philippines. As for PSA’s insights, they have mainly pointed out the high cost of electricity for business investors in the country is what distinguishes it from the rest. 

The Philippines faces a notable challenge with high electricity prices in comparison to its neighboring countries, like Vietnam. They highlighted that this significant cost difference has a noticeable impact on investor decisions, prompting many businesses to consider Vietnam or Indonesia as a more financially attractive destination for their business ventures.

NordCham Philippines’ Commitment to Sustainable Development

To conclude the roundtable discussion and the meeting, PSA reminded that despite various economic challenges, the Philippines continues to be a positive and attractive destination for various sectors, including remote work, business process outsourcing (BPOs), retail, and manufacturing for the domestic market. With more businesses and investments expected to focus on sustainable and renewable energy projects in the next five to ten years, PSA emphasizes the significance of engaging and joining organizations like NordCham Philippines for insights, projects, and networking activities related to sustainable efforts.

PSA perceives these sustainable efforts from the organization highly valuable not only for 2024 but for the succeeding years to come as they are seeing an uprise trend in investors focusing more on investing on renewable energy related projects both globally and here in the Philippines especially with how ambitious the governments is in hitting their target goals towards a more sustainable economy.