Archives: Business World Article

Philippine exports to the US, especially garments and textiles, will face stiffer competition after Indonesia obtained a 19% tariff rate, according to an industry group.

Foreign Buyers Association of the Philippines President Robert M. Young called the Indonesia-US deal a “big blow.”

“This is again a big blow to the Philippines, particularly to the exports of garments, textiles, and apparel, because we are now at 20% and they are on 19%,” he told BusinessWorld by phone.

“To start with, they are much bigger in terms of exports to the US. Indonesia right now is shipping something like almost USD 5 billion worth of garments and textiles to the US, while the Philippines is still fighting for USD 1 billion,” he added.

US President Donald J. Trump said on his Truth Social platform that he finalized a deal with Indonesia on Tuesday that reduced the US tariff on Indonesian goods to 19%, much lower than the 32%. Mr. Trump assigned to Indonesia in a tariff letter last week.

Aside from opening the Indonesian market to the US, Mr. Trump said that Indonesia also committed to purchasing energy, agricultural products, and Boeing airliners from the US.

“For the first time ever, our ranchers, farmers, and fishermen will have complete and total access to the Indonesian market of over 280 million people,” Mr. Trump said.

“In addition, Indonesia will pay the US a 19% tariff on all goods they export to us, while US exports to Indonesia are to be tariff and non-tariff barrier free,” he added.

Mr. Young said the outlook for Philippine tariff negotiations is dimming as other countries’ negotiations with the US are weighted towards more geopolitical considerations.

“We really don’t know because actually in the past we have already offered everything in terms of military assistance and benefits. It was all exhausted by the Philippines, having been laid on a silver platter to the US,” he said.

“On trade, we are not at the level of the other countries to offer this kind of concession. As you know, we are a small player. It will be a difficult situation for the Philippines. I wish the team of negotiators good luck, but it seems like it will be a dim chance,” he added.

The government sent its negotiators to Washington this week to seek a lower tariff, with President Ferdinand R. Marcos, Jr. expected to arrive later this month.

Mr. Young said that he does not think the Philippines can offer a zero rate on US imports to match Indonesia.

“I don’t know if we can afford it. We are also relying on the taxes for our revenue. The other thing is, of course, this will be a Presidential action. But, in the Philippines, we have (to contend with) all kinds of legalities here and there,” he said.

“It has to go through the Congress. We really don’t know how we can manage. But we have so little to offer, so I don’t know if it will be attractive enough to the US. This is what we have been trying to say,” he added.

However, he said Secretary Frederick D. Go, the special assistant to the President for investment and economic affairs has hinted that the Philippines still “has some bullets.”

“I do not know what kind of bullets he is talking about, but that is what he said,” he added.

Aside from garment and textile exports, he said that Indonesia’s lower tariff can also impact other Philippine exports, including agricultural and mineral products.

“I’m not very familiar with the figures of agri and other minerals. But all of that can be affected because it’s a competition,” he said, noting that Indonesia already sells more because of its lower costs.

Meanwhile, he said that the garment and textile industries are still not giving up and seeking other markets to survive.

“We are not waving the white flag. We are fighting. We are looking for other markets; Russia is there,” he said.

“We are in survival mode,” he added. — Justine Irish D. Tabile, Reporter

Money sent home by overseas Filipino workers (OFWs) rose by an annual 2.9% in May, although the monthly haul was the lowest in 12 months, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Cash remittances coursed through banks jumped by 2.9% to USD 2.658 billion in May from USD 2.583 billion in the same month a year ago, the central bank said on Tuesday.

It was also the lowest level of monthly remittances in 12 months or since May 2024.

May remittance growth also slowed from the 4% pace in April, when cash remittances reached USD 2.664 billion.

Money sent home by land-based workers went up by 2.8% to USD 2.12 billion in May from USD 2.06 billion in the same month a year ago.

Remittances from sea-based migrant workers jumped by an annual 3.1% to USD 536 million in May.

“The increase in cash remittances drove an increase in personal remittances as well,” the BSP said.

Personal remittances, which include inflows in kind, rose by 3% to USD 2.97 billion in May from USD 2.88 billion in the previous year.

Broken down, remittances from workers with contracts of a year or more increased by 2.8% to USD 2.29 billion, while those with contracts of less than a year jumped by 3.4% to USD 590 million.

Five-month period

In the first five months, cash remittances grew by 3% to USD 13.77 billion from USD 13.37 billion in the comparable year-ago period.

This as remittances sent by land-based workers climbed by 3.3% to USD 10.94 billion in the January-May period, while sea-based workers’ remittances edged higher by 2% to USD 2.82 billion.

The United States was the top source of remittances in the five-month period, accounting for 40.2% of the total.

This was followed by Singapore (7.4%), Saudi Arabia (6.4%), Japan (5%), the United Kingdom (4.6%), the United Arab Emirates (4.2%), Canada (3.3%), Qatar (2.9%) Korea (2.8%) and Taiwan (2.7%).

Personal remittances increased by 3% to USD 15.34 billion at end-May from USD 14.89 billion a year prior.

“The slower global economy amid Trump’s tariffs could have slowed down OFW remittances volume recently,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Jonathan L. Ravelas, a senior adviser at Reyes Tacandong & Co., likewise noted the increased uncertainty due to tariffs.

“The tariff move adds to geopolitical and trade uncertainty, which may deter foreign direct investment (FDI),” he said.

US President Donald J. Trump first announced the initial round of tariffs it planned to impose on its trading partners in April.

Earlier this month, Mr. Trump sent out notices with the updated tariff rates it plans to impose.

“The imposition of a 20% tariff on all Philippine exports to the US starting Aug. 1, 2025 by President Trump is expected to have significant and multifaceted effects on the Philippine economy,” Mr. Ravelas added.

The Philippines was hit with a 20% reciprocal tariff, higher than the 17% announced in April.

“For the coming months, protectionist policies by Mr. Trump, particularly stricter immigration rules could weigh on some OFW remittances, especially from the US,” Mr. Ricafort said.

Mr. Trump has vowed mass deportations, which he says are needed after high levels of illegal immigration under his predecessor, Reuters reported.

Mr. Trump’s recently passed “One Big Beautiful Bill” also imposes a 1% excise tax on remittance transfers from the United States to other countries, effective after Dec. 31, 2025. This was lower than earlier proposals of a 3.5% levy.

The tax was also initially aimed at non-US citizens but now applies to any remittance sender.

“Trump’s threats of higher tariffs and other America-first policies could also slow down global trade, investments, employment including some OFW jobs, and overall world economic growth, thereby could also indirectly slow down the growth in OFW remittances,” Mr. Ricafort added.

This year, the central bank is projecting remittances to grow by 2.8%.  — Luisa Maria Jacinta C. Jocson, Senior Reporter

Reforms to enhance job creation and quality could propel Philippine economic growth to close to 7% and transform it into a middle-class economy by 2040, the World Bank said.

“To stay on a path to upper middle-income status and to realize the national ambition of a middle-class society free of poverty by 2040, the country needs a new wave of reforms. Faster, broader, deeper,” World Bank Country Director for the Philippines, Malaysia, and Brunei Zafer Mustafaoğlu said.

In its maiden launch of the Country Growth and Jobs Report for the Philippines on Tuesday, the World Bank said that it is “feasible” for economic growth to accelerate to 6.8% by 2040, along with ramping up employment and wages.

“The implementation of the set of reforms recommended in this report is estimated to increase annual gross domestic product (GDP) growth to 6.8%, create over 5.1 million additional jobs, and boost real wages by 12.9% by 2040,” according to the report.

World Bank models show the Philippines growing by an additional 1.4 percentage points (ppts) if its recommended reforms are implemented.

Broken down, economic growth could increase by 0.78 ppt annually through reforms aimed at productivity and human capital; by 0.45 ppt through deeper capital reforms; and by 0.18 ppt by boosting labor force participation.

The report has about 45 actionable recommendations, with the reforms focused on those three main pillars.

The World Bank said reforms are needed to boost project infrastructure investment, especially in connectivity.

“In an archipelagic economy like the Philippines that has spent so much in connectivity infrastructure, keeping restrictions to inter-island transport, the form of cable path restrictions, is sort of a big distortion, a big cost,” World Bank lead economist for Brunei, Malaysia, the Philippines and Thailand Gonzalo J. Varela said.

“Lifting restrictions to inter-island shipping, domestic shipping, is something that is also going to help the economy grow, and a lot of the growth happens at local levels.”

The multilateral institution also recommended policies to lower entry barriers for businesses; open domestic shipping to lower inter-island transport costs; and strengthen service delivery by local government units.

“Ensuring that local governments have the capacity to deliver the key services that they are mandated to deliver is also going to be crucial,” Mr. Varela added.

To further mobilize private capital, there is also a need to support small and medium enterprises and multinational companies linkages and deepen capital markets.

“The Philippines has received more foreign direct investment in the last few years, and we are yet to see that small and medium enterprises are connecting to these multinationals, that they are gaining from that connection as suppliers, gaining productivity,” he said.

Faster growth

With these reforms implemented, growth can further accelerate. “What it does is it brings that baseline that we had estimated at 5.4%, closer to that Philippine Development Plan target,” Mr. Varela said.

“It means that if these reforms are implemented by 2040, the Philippine economy would be 24% larger than it would have been otherwise,” he added.

The government is targeting 5.5-6.5% GDP growth this year and 6-7% from 2026 to 2028, according to latest Development Budget Coordination Committee  estimates.

Under the Philippine Development Plan, the government had placed an upper bound of 8% on economic growth targets until 2028.

“To achieve its goal of becoming a middle-class society, the Philippines needs to sustain annual growth of 6-10% for decades,” the World Bank said.

It noted that though job quality remains a concern despite an increase in the number of jobs.

“Despite impressive gains, productivity growth remains weak. Job creation has tilted heavily toward non-tradable sectors, while the tradable economy — so critical for long-term growth and innovation, is shrinking,” Mr. Mustafaoğlu said.

“Top firms are not expanding fast enough. Competition is limited and too many workers remain in low-quality, low-wage jobs.”

The latest data from the local statistics agency showed the Philippines’ unemployment rate went down to 3.9% in May from 4.1% in April, with the number of individuals in the labor force hitting an all-time high of 52.32 million.

“The middle-class society by 2040 national ambition is not a utopia. It is something that is achievable if there is a commitment, both from the public sector to double down on reforms, and from the private sector to innovate and compete,” Mr. Varela said.

Based on the World Bank’s latest income classification, the Philippines still remains a lower middle-income economy, narrowly missing the threshold to achieve upper middle-income status.

The Philippines posted a record gross national income per capita of USD 4,470, only USD 26 shy of the World Bank’s upper middle-income threshold of USD 4,496-USD 13,935.

Artificial intelligence

Meanwhile, the World Bank also flagged the impact of disruptive technologies such as artificial intelligence (AI).

“Some jobs in the Philippines are at risk of technology displacement. AI exposure and AI’s potential complementarity can affect employment. The Philippines has slightly fewer jobs comprising routine tasks than its peers,” according to the report.

“However, the Philippines is more exposed to AI’s displacement effect than other East Asia and the Pacific countries due to its higher engagement in cognitive services sectors, such as contact centers in the IT-BPO sector.”

Mr. Varela said these technologies are “fast moving” and so far, they have yet to see displacement in the implementation of AI.

“At the moment, that is not yet happening. The sector is looking at it very carefully, but neither in the Philippines nor in other countries that have a large share of the economy and productivity, we see that these are at the moment being displaced.”

“What AI will do is it will create new jobs, similar to what we saw with other technological changes that created some new jobs and displaced others.”

Mr. Varela said it will be crucial to have labor market institutions that facilitate the movement of people across sectors and activities.

“It’s also having the skills to do that. So, there’s an agenda on skilling and upskilling workers… science, technology, engineering, mathematics, are also going to be increasingly important with AI.”

Mr. Mustafaoğlu said that there is a “very good opportunity” for the Philippines to benefit from the shift to AI.

“It has a young population, and things are happening a lot in the case of Asia and the East Asia region. If we can take that opportunity to actually benefit from this new development of AI and integrate AI and technologies in a way that firms increase their capability… and the economy continues to benefit and grow.”

“That will also attract FDI (foreign direct investment), because when you have those capabilities, foreign firms will also come and invest here with new technologies,” he added. — Luisa Maria Jacinta C. Jocson

Philippine President Ferdinand R. Marcos, Jr. on Tuesday approved the proposed PHP 6.793-trillion national budget for 2026 that the Executive branch will submit to Congress later this month.

The national expenditure program (NEP) reflects the government’s commitment to boosting education and driving inclusive economic growth, Palace Press Officer Clarissa A. Castro told a news briefing.

The Department of Budget and Management (DBM) said in a separate statement on Tuesday that the proposed 2026 budget is higher by 7.4% from this year’s budget of PHP 6.326 trillion.

The proposed P6.793-trillion budget is equivalent to 22% of the country’s gross domestic product (GDP). Economic managers are targeting 6-7% GDP growth for 2026 through 2028.

The 2026 NEP is expected to be submitted to Congress within 30 days after the opening of the regular session on July 28.

Budget Secretary Amenah F. Pangandaman said the details of the budget proposal are still being finalized.

Allocations for key sectors, such as education, defense, and agriculture, will increase for next year, she said in a Viber message.

“The President himself sat down with the different agencies to ensure that all our priorities are aligned towards our common goal of achieving our vision of a Bagong Pilipinas,” Ms. Pangandaman said in a separate statement.

The DBM said that it had initially received budget proposals totaling PHP 10.101 trillion but had to cut these due to “limited fiscal space and the fiscal consolidation strategy.”

The DBM said it had considered budget submissions based on several criteria: alignment with the Philippine Development Plan 2023-2028; “shovel-readiness”; absorptive capacity of agencies; and prioritization of programs that deliver the “highest value and impact.” It also took into consideration the implementation of sustainable practices and the government’s fiscal space when evaluating the proposals.

The Marcos administration is targeting to gradually cut the fiscal deficit from 5.5% of GDP in 2025 to 4.3% by 2028.

By expense class, the DBM said the largest share of next year’s proposed budget will go to maintenance and other operating expenses at PHP 2.639 trillion to support the implementation of government programs and projects.

Personnel services expenditures will increase by 16.8% to PHP 1.908 trillion next year, representing 28.1% of the proposed NEP. This covers salaries, benefits, and the creation and filling of government positions.

Only PHP 1.296 trillion will be allotted for capital outlays to fund priority infrastructure projects. Financial expenses will receive PHP 950 billion to cover government financial obligations.

Of the total budget, National Government agencies will receive PHP 4.305 trillion (63.4%) while local government units will get PHP 1.35 trillion (20%). Government-owned or -controlled corporations (GOCCs) will be allocated PHP 188.3 billion in subsidies or equity support as well as net lending assistance.

Reinielle Matt M. Erece, an economist at Oikonomia Advisory and Research, Inc., said an ample national budget can drive economic growth.

“This is as the government plays a role in empowering households through assistance and development programs as well as in developing infrastructure to support productivity,” he said via Viber.

However, Mr. Erece noted the impact of an increasing budget would depend if it increases productivity.

“If it does, we may expect debt burden to slowly go down as better economic conditions may also result in higher tax revenues if businesses and households are earning well,” he said.

“In addition, reducing red tape and improving government efficiency are ways for the government to reduce costs and needed borrowings and be able to focus more on developmental and social programs.”

Jose Enrique “Sonny” A. Africa, executive director of economic think tank IBON Foundation, said the 7.4% increase in the proposed 2026 NEP is “too small for the bold response needed in the face of the continuing domestic economic slowdown and mounting global turmoil.”

“The government has to spend more and on the right things for the stability that really matters in agriculture, Filipino industry, and social services for all those in need,” he said in a Viber chat.

“A narrow-minded avoidance of progressive taxes places the burden of fiscal consolidation on the poor and middle-class through higher consumption taxes and inadequate social services, made worse by spending skewed towards pork barrel projects, inappropriate infrastructure, and bloating debt service.” — Chloe Mari A. Hufana, Reporter

Philippine shares dropped on Tuesday on profit taking in the absence of new trading drivers.

The Philippine Stock Exchange index (PSEi) sank by 1% or 65.57 points to close at 6,459.47, while the broader all shares index went down 0.65% or 25.09 points to 3,807.27.

“The local market pulled back as investors took profits amid the lack of fresh leads,” Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message. “With no new positive catalysts, global trade concerns amid the United States’ planned tariffs got the best of market sentiment.”

“Philippine shares weakened as investors responded to the tariff threats from President Donald J. Trump, as many analyzed whether any measures would likely be softened through negotiations,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message. “Investors have also been watching other tariff developments after Mr. Trump announced new levies on the European Union (EU) and Mexico, with talks ongoing and key inflation data expected to reveal the economic impact.”

Shares climbed worldwide on Tuesday as market participants entered a key week for US earnings, inflation data and trade talks in a relatively optimistic mood, Reuters reported.

Mr. Trump signaled he was open to discussions on tariffs after his weekend threat to impose 30% duties on the European Union and Mexico from Aug. 1. Japan is reportedly trying to schedule high-level talks with the US this Friday.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.8%, while Europe’s STOXX benchmark rose 0.2% and Nasdaq futures gained after Nvidia said it would resume sales of its H20 chips to China.

Investors are also waiting for US consumer price data for June due later on Tuesday and will monitor for any upward pressure on prices from tariffs.

Back home, all sectoral indices closed lower on Tuesday. Holding firms decreased by 1.87% or 107.78 points to 5,636.28; property went down by 1.7% or 42.32 points to 2,434.4; mining and oil retreated by 0.97% or 94.77 points to 9,651.96; services sank by 0.71% or 15.63 points to 2,186.81; financials declined by 0.2% or 4.66 points to 2,235.83; and industrials fell by 0.1% or 10 points to 9,234.49.

“Century Pacific Food, Inc. was the day’s best index performer, climbing 2.99% to PHP 37.95. SM Prime Holdings, Inc. was the worst index performer, dropping 3.37% to PHP 24.40,” Mr. Tantiangco said.

Value turnover decreased to PHP 5.9 billion on Tuesday with 1.65 billion shares exchanged from the PHP 6.5 billion with 2.3 billion shares traded on Monday.

Advancers edged out decliners, 98 versus 96, while 56 names were unchanged.

Net foreign selling reached PHP 322.36 million on Tuesday, a turnaround from the PHP 632.24 million in net buying on Monday. — Revin Mikhael D. Ochave with Reuters

TAIPEI — Taiwanese companies are looking to set up shop in the Philippines as the country faces a US tariff that is lower than most of its Southeast Asian neighbors, according to analysts.

This as Taiwan expects further deepening of ties with the Philippines, a Ministry of Foreign Affairs (MoFA) official said.

“We consider the Philippines as a very important partner for freedom, for democracy, for stability in the region,” MoFA Deputy Minister Francois Chichung Wu told visiting foreign journalists here last week.

Taiwan is also trying to work with the Philippines on “high-level projects,” he added.

The Philippines is emerging as a “top priority” for Taiwan in the region amid heightened tensions with China and uncertainty over the US tariffs, an analyst said.

Kristy Hsu, director of the Chung-Hua Institution for Economic Research’s (CIER) Taiwan ASEAN Studies Center, said the Taiwanese firms are taking notice of the Philippines because it currently faces one of the lowest US reciprocal tariffs in the region.

“I would say that Philippines right now is back on the radar (of Taiwanese firms),” she told visiting foreign journalists here last week.

US President Donald J. Trump last week announced it was raising the tariff on most Philippine goods entering the US to 20% from 17% previously. However, this is still lower than the 32% tariff that the US is looking to impose on Taiwan.

“I talked to someone who has an industrial park in the Philippines, and he told me just last week that he received a lot of requests from Taiwanese companies that have operations in Vietnam and other countries. They are very interested to probably open an office or open warehouses in the Philippines,” Ms. Hsu said.

While these Taiwanese firms are unlikely to close existing operations in Vietnam and China, there is a possibility that these firms will seek to de-risk their supply chains by expanding into other countries like the Philippines.

“Taiwanese companies will adjust their structure and probably they are seeing that the Philippines has its benefits, and they will start to allocate small part of their capacity to Philippines, depending on further policy development,” Ms. Hsu said.

A foreign affairs analyst noted that Taiwanese businesses are now figuring out a new route for their supply chains amid the US tariff uncertainty.

Shin-Horng Chen, research fellow and vice-president of CIER’s second research division, said it is difficult to predict what will happen with US tariffs because Mr. Trump is “changeable.”

“We used to think that when Taiwan was charged with high reciprocal tariffs, we may be able to mobilize our resources in Southeast Asia, even in Mexico, in the United States, to reduce certain impacts. But now quite a few Southeast Asian countries are facing high tariffs than expected,” Mr. Chen said at a separate briefing last week.

The US will impose a 20% tariff on Vietnamese exports, alongside a 40% duty on goods that are considered to have been transshipped.

Other Southeast Asian countries are also facing higher tariffs on goods sent to the US such as Laos (40%), Myanmar (40%), Cambodia (36%), Thailand (36%), Indonesia (32%), Malaysia (25%) and Brunei (25%).

Ms. Hsu said the US tariffs, once implemented on Aug. 1, will have a huge impact on the Taiwanese economy, as well as Southeast Asia.

“Everyone expected that Trump should have lower rates for Southeast Asian countries, especially those are the destination for friendshoring under the Biden administration, but right now they are going to be hit by the tariffs,” she said.

“If the tariffs for Southeast Asian countries remain high and that will also impact Taiwan a lot because we invested a lot in supply chain. We do see a possible shift of supply chain in Southeast Asian countries. But something is certain that is Taiwanese companies used to invest hugely in China are right now, they are already diversifying their supply chain,” she added.

Luzon Economic Corridor

Meanwhile, an analyst said Taiwan could potentially join the Luzon Economic Corridor (LEC) project.

Taiwan’s government last year signaled its interest in participating in the Luzon Economic Corridor project, which is being undertaken via a trilateral commitment among the Philippines, US and Japan.

The project seeks to enhance the connectivity of Luzon’s key economic areas — Subic Bay, Clark, Metro Manila and Batangas. It is widely seen to counter China’s Belt and Road Initiative.

CIER’s Ms. Hsu said some Taiwanese firms are keen on the LEC project. “We have a lot of companies who are very interested in the Luzon Economic Corridor,” she said.

Some Taiwanese firms are also considering investments in the energy sector, she added.

“I would say that the Philippines right now is important not only because of the (lower tariff) rates but also because of its very strategic position for the US and also for Taiwan and Japan,” Ms. Hsu said.

The Philippines maintains a “One-China Policy,” but has ties with Taiwan with the Manila Economic and Cultural Office serving as a de facto embassy. — Cathy Rose A. Garcia, Editor-in-Chief