Foreign Economic Relations

The Philippines’ foreign economic relations revolve around its Asian neighbors, with which it conducts a majority of its trade, and the United States, which is a major trading partner. The Philippines helped to found the Association of Southeast Asian Nations (ASEAN) in 1967. The Philippines also belongs to the Asia-Pacific Economic Cooperation (APEC) forum. ASEAN’s goal of establishing a regional free-trade area has been only partially realized.

The country has been a member of the World Trade Organization (WTO) since January 1, 1995. In 2001 the Philippine Bureau of International Trade Relations issued a positive assessment of the WTO’s impact on the country’s economic development. WTO membership has enabled the Philippines to adopt transparent trade rules regarding customs valuation, defenses against unfair trade, and protection of intellectual property rights. For example, in 1998 the government passed a law that improves the protection of intellectual property rights in the areas of copyrights, patents, and trademarks. However, the United States maintains that the intellectual property protections are inadequate and has taken initial steps toward imposing trade
sanctions.

Imports:
In 2004 the Philippines’ imports were valued at US$45.1 billion, up 10.6 percent from the previous year. Principal imports were telecommunications and electronics equipment (34 percent), chemicals (7 percent), and crude petroleum (6 percent). The main origins of imports
were Japan (19.8 percent), the United States (13.7 percent), China (7.7 percent), Singapore (7.4 percent), Taiwan (7.0 percent), and South Korea (5.6 percent).

Exports: In 2004 the Philippines’ exports were valued at US$38.7 billion, up 9.6 percent from the previous year. Principal exports were electronic products (68.8 percent), clothing (5.6 percent), coconut oil (1.5 percent), and petroleum products (1.0 percent). Exported electronic products were primarily semiconductors. The main destinations of exports were Japan (20.1 percent), the United States (17.9 percent), the Netherlands (9.1 percent), Hong Kong (7.9 percent), China (6.7 percent), and Singapore (6.6 percent).

Trade Balance:
In 2004 the Philippines incurred a merchandise trade deficit of US$6.4 billion, or 14 percent of imports. However, remittances of US$8.8 billion from Filipinos working overseas during 2004 more than offset the trade deficit. Such remittances surpassed US$10.8 billion in 2005. As recently as 2002, the Philippines had a slight trade surplus.

Balance of Payments:
In 2004 the current account balance was US$2.1 billion. Since 1998, the Philippines has achieved a positive current account balance. Reflecting the sustained period of balance of payments surpluses, gross international reserves rose to a record US$18.6 billion in September 2005.

External Debt:
In 2004 external debt amounted to US$61 billion, or 72.2 percent of gross domestic product (GDP).

Foreign Investment: In 2004 direct investment inflows were a modest US$57 million. Over the long term, direct and portfolio investment have been anemic, reflecting the relative unattractiveness of the economy, restrictions on foreign ownership, and the perception of political risk. The three top sources of foreign direct investment—ranked by amount—are the United States, Japan, and the Netherlands.