The Philippines is an archipelago and one of the largest island groups in the world with over 4,000 uninhibited islands. The islands stretch from the south of China to the northern tip of Borneo. The country has over a hundred ethnic groups and a mixture of foreign influences. After ruling for 333 years, the Spaniards left in 1898 and were replaced by the Americans who ruled for 48 years. On July 4, 1946, the Americans recognized Philippine independence.

The Philippines is the third largest English-speaking country in the world. The country is divided into three geographical areas: Luzon, Visayas, and Mindanao. It has 17 regions, 79 provinces, 115 cities, 1,495 municipalities, and 41,956 barangays (villages).

The Philippine archipelago is comprised of over 7,100 islands with a land area of approximately 300,000 sq. km. The islands are located in South East Asia with the Pacific Ocean on the eastern boarders, the South China Sea on the west and north boarders, and the Celebes Sea boarding the south. The total Philippine coastline is approximately 17,500 km while the islands measure a length of 1,850 km beginning at the southern tip of Taiwan and ending near the northern boarders of Borneo. Luzon is the largest of the islands in the Philippines where its capital, Manila, is situated.

Figure 2

Source: The Government of the Philippines

Demographics The nationality of The Philippines is Filipino and is ethnically comprised of 91.5% Christian Malays, 4% Muslim Malays and 1.5% Chinese. Filipino (Tagalog) and English are the two official languages, while eight other major dialects are spoken throughout the country. Roman Catholic is the predominant religion practiced in the Philippines as shown in the picture.

Figure 3

Religious Affiliation, 2000 Census

Description

Source: 2000 Census

Population The total population of the Philippines as reported by the National Statistics Office (NSO), Census of Population and Housing in 2000, was 76,504,077 persons, compared to 68.6 million people counted in the 1995 census. This represents an 11.5% growth rate during the 5 year period and an approximate 2.3% annual growth rate. The urban population was reported to comprise 48.1% of the total population. The Asian Development Bank (ADB) estimates that the population has grown to approximately 80 million people by mid 2003.

Table 1

Source: NSO, 2000 Census of Population and Housing

Labor Force According to the Income and Employment Statistics Division, unemployment for people aged 15 years and above was 4,348,000 (12.7% unemployment rate) as of July 2003. A total of 34.2 million people are considered to be a part of the labor force in the Philippines. Table 2 indicates the total employed by major occupational categories while Table 3 breaks-down the total employed by major industrial group.

Table 2

Source: Income and Employment Statistics Division, Labor Force Survey
Household Statistics Department, National Statistics Office

Table 3

Source: Income and Employment Statistics Division, Labor Force Survey
Household Statistics Department, National Statistics Office

Poverty Levels:

Country-specific poverty lines are generally used due to variations between countries and are affected by local tastes and cultural norms according to the United Nations. According to the ADB, in 1999, 34.2% of the population were considered below the national poverty line with 20.4% in urban areas while 47.4% of the rural population were considered below the national poverty level.

Economic Indicators

Personal consumption expenditures were the primary reason for the Gross Domestic Product (GDP) growth in 2002, which was propelled by a strong demand for household furnishing, transport and communications. Benefiting from the gradual recovery of the world economy, exports and imports increased by 12.2% and 4.6%, respectively in 2002. In spite of budget constraints, government consumption expenditures grew by 1.8% compared with 0.3% in 2001.

During 2002, the fiscal deficit increased and reached 5.4% of GDP, compared to 4% in 2001. Tax revenue collections improved during 2002 primarily due to increased tax on net income as well as in VAT. Measures were taken to enhance tax revenues by tightening collection measures, setting up a tax payment warning system, charging VAT on professionals and sanctioning some firms on VAT compliance. However, the increase in tax revenues were not enough to cover increasing government spending, which increased by 8.2% from 2001 levels. Public expenditures are estimated to have remained at 19% of GDP during 2002.

According to the ADB, GDP growth is expected to increase to 4.5% in 2004 due to improvements in external factors. This growth will aid in offsetting the contractionary forces resulting from a reduction in the fiscal deficit. Consumption and net exports will likely continue to lead aggregate demand. Imports are anticipated to rise more slowly than exports and therefore contribute more strongly to GDP growth. Inflation is projected to increase to 4.5%, reflecting partly the effect of a weaker peso on import prices.

Gross Domestic Product According to the ADB, GDP growth strengthened to 4.6% from 3.2% in 2001. Industrial growth strengthened from 1.3% in 2001 to 4.1% in 2002, largely as a result of a recovery in manufacturing, due to stronger external demand for electronics and garments. The services sector grew by 5.4% driven by the transport and communications sectors. Agricultural growth decelerated to 3.5% from 3.7% in 2001.

According to the National Statistical Coordination Board, GDP was approximately US$77.4 billion in FY2002 based on current prices. The industrial break-down of GDP is as follows:

Figure 4

GDP by Industry, FY2002

Description

Source: Department of Budget and Management

Budget According to the Department of Budget and Management, the total proposed budget for the Fiscal Year 2004 amounts to 864.8 billion Pesos, computed on an obligation basis. Out of the total budget proposal, an amount of 575.8 billion Pesos are for new General Appropriations and comprises 24.6 billion Pesos of Un-programmed Appropriations which will be provided as standby authority to be released only when revenue collections exceed revenue targets. The proposed budget is allocated among all the various governmental agencies and special purpose funding. Figure 5 breaks down the percentage by department.

Figure 5

Budget Expenditures, FY2002

Description

Source: Department of Budget and Management

Imports As a result of stronger domestic demand in 2002, merchandise imports increased 4.6%, which is a reversal from a contraction in the sector of 4.5% during 2001.

Table 4

Source: BSP

Exports Merchandise exports increased by 12.2% in 2002, due to the general recovery in global demand for electronics, which account for half of total exports. Other improvements included garments and agricultural products.

Table 5

Source: BSP

The Philippines is a Republic with a President, Vice President and a bi-cameral Congress consisting of a Senate and a House of Representatives, which are elected by popular vote and serve three-year terms. Additional members may be appointed by the President. The current President of the Philippines is Gloria Macapagal-Arroyo, while the Vice President is Teofisto Guingona both of which came to power in January 2001. The next general election is scheduled to be held in 2004. Figure 6 highlights the Departments of the Government:

Figure 6

Executive Branches of the Government

Description

The Social Security Act of 1954 was the first piece of legislation which established a formal social security system in the Philippines and was fully implemented in 1957. The legislation was enacted as follows:

"It is the policy of the State to establish, develop, promote and perfect a sound and viable tax-exempt social security system suitable to the needs of the people throughout the Philippines which shall promote social justice and provide meaningful protection to members and their families against the hazards of disability, sickness, maternity, old age, death and other contingencies resulting in loss of income or financial burden. Toward this end, the State shall endeavor to extend social security protection to workers and their beneficiaries."

Through the Social Security Law, the Government also adopted the social insurance approach to social security, covering the employed segment of the labor force in the private sector. Social security provides replacement income for workers in times of death, disability, sickness, maternity and old age. The Social Security System (SSS) administers social security protection to workers in the private sector, while the Government Service Insurance System (GSIS) takes care of workers in the public sector. Membership in the SSS at the end of 2001 covered 633,306 employers, 19.4 million employees and 4.2 million self-employed people in the private sector.

The SSS administers two programs namely:

1. The Social Security Program
2. The Employees Compensation Program

The EC program, was established in 1975 and provides double compensation to workers when illness, death or accident occurs during work-related activities. EC benefits are granted only to members with employers other than themselves.

Through The National Health Insurance Act of 1995, the SSS and GSIS transferred the administration of the countries Medicare program to the Philippine Health Insurance Corporation (PhilHealth) for an integrated and comprehensive approach to health development. The Medicare program provides coverage for hospitalization and other medical needs of public and private sector workers.

Education System: The education system in the Philippines is similar in structure to that of the United States. Education is compulsory from age 6-12. There are three levels of education, which begins with primary school (4 years in duration). Intermediate schools have a duration of 2 years, while Secondary schools have a 4 year program and upon graduation from secondary schools, students receive a High School Diploma allowing them to move on to higher education.

Table 6

Source: Department of Education

Structure: Secondary education usually lasts for four years, following six to seven years of primary and intermediate education. Compulsory subjects include English, Filipino, Science, Social Studies, Mathematics, Practical Arts, Youth Development Training and Citizens Army Training. The cycle culminates in the examinations for the High School Diploma. The National Secondary Aptitude Test is taken at this time. It is a prerequisite for university admission.

Higher education is provided by higher education institutions composed of public and private universities and colleges. The state universities and colleges on which charters have been conferred are autonomous. According to the Department of Education, in terms of enrolment, 72% (2000-2001) of all students are in private schools. The Commission on Higher Education (CHED) encourages the institutions to raise the accreditation level of their programmes/courses with the accrediting agencies under the Federation of Accrediting Agencies of the Philippines. The Philippine Association of State Universities and Colleges maintains cooperation among its members and with the CHED to attain excellence in higher education. The CHED, created in 1994, oversees both public and private schools. The Technical Education and Skills Development Authority oversees post secondary technical and vocational education, while the Department of Education, Culture and Sports oversees basic education (elementary and high school).

Enrolment Ratios: According to UNICEF, the net primary enrolment ratios for the period of 1995 to 1999 were 98% for males and 93% for females. Gross secondary enrolment rates during the same period were 73% for males and 79% for females. Table 7 highlights the highest education attained by sex based on the 2000 census.

Table 7

Source: NSO, 2000 Census of Population and Housing
Based on the population aged 5 years old and above

Public Expenditure on Education The Department of Education receives the highest proportion of budgetary allocations as compared to other Departments of the Executive Branch of the Government. In the FY2004 budget, the allocation was 108 billion Pesos (US$2.1 billion) or 28.7% of all allocations for governmental agencies.

Literacy Rates According to the 2000 Census, The Philippines had a literacy rate of 92%, which was primarily distributed equally between both male and females.

Table 8

Source: NSO, 2000 Census of Population and Housing

According to the World Health Organization (WHO), the life expectancy at birth in the Philippines is 64.2 years of age for males and 71.5 years old for females. Infant mortality per 1,000 births was 46 for males and 33 for females. It is estimated by the WHO that as of 1996, there were 123 physicians, 418 nurses and 163 midwives for every 100,000 Filipinos.

Total expenditures on health as a percentage of GDP in 2000 were 3.4% according to the WHO, while general government expenditures on health as a percentage of total general government expenditures in 2000 were 6.7%.

According to the WHO, HIV/AIDS is still a relatively small threat to the Philippines with an estimated adult prevalence rate of approximately 0.1% or between 5,000 to 13,000 people in 2000 (with the established number of 10,000). Based on the WHO estimated HIV prevalence rates in 2000, the annual number of AIDS related deaths in 2000 was approximately 200.

According to the United States Central Intelligence Agency, as of 2000, there were 33 internet service providers in the Philippines. It was estimated that there are over 4.5 million users of the internet while there are approximately 7 million land line telephone subscribers and 11.35 million mobile phone users. The internet code for the