Services

Services has been one of the strongest and fast-growing sectors of the Philippine economy. Its gross value added contribution reached to 57% in 2014 (from 36.6% in the 1970s), and it also grows by an average of 6.3% from 2000 to 2014.

While this performance is considered as stellar by most analysts, there is still huge potential for increasing value-added in services outputs, as well as deepening participation in global value chains. Taking advantage of this unique competitive advantage in the services sector, the Philippines aims to position itself as the core of services trade in Southeast Asia and the Asia-Pacific region.

01

Vision of the Industry

The vision of the Services Roadmap is to create a globally competitive services sector that is capable of creating quality jobs, moving up the global value chain particularly in IT-BPM, and becoming a regional hub in human resource development and skills training, services embedded in manufacturing, ship repair, aircraft MRO, and construction engineering.

02

Goals and Strategies

Goals

Short-run (2014-2017) Goals:

  • Improve competitiveness in tourism
  • Accelerate infrastructure investments (ICT and other infrastructure, logistics, ports, airports, roads, telecommunications, energy, water)
  • Move up the IT-BPM global value chain: knowledge process outsourcing, manufacturing engineering, and architectural engineering

Medium-run (2018-2021) Goals:

  • Attract more investments in HRD, design, R&D, finance, and infrastructure
  • Nurture the development of services embedded in manufacturing
  • Establish innovation ecosystem linked with manufacturing

Long-run (2022-2025) Goals:

  • Continue to upgrade the services sector to sustain its growth and competitiveness

 

Strategic Actions

Innovation

  • Utilize government procurement as tool to drive innovation
  • Continue to strengthen intellectual property rights protection enforcement
  • Establish the National Quality Infrastructure (government support in technology extension services, incubation, metrology, standards testing, quality control)
  • Establish standards and rating system; require third party accreditation

Investment promotion and market access

  • Pursue greater market access for the services sector and maximize FTA gains by promoting trade and services that harness the potentials of global value chains

Competition and regulatory environment

  • Create a pro-competitive environment, need an effective competition law and policy
  • Relax foreign ownership restrictions in services
  • Improve regulatory and institutional frameworks for services, improve government regulation at all levels (local and national)

Human Resource Development

  • HRD and skills development, make education more industry appropriate

Clusters and SMEs

  • Support services clusters and networks and provide support to SMEs

services roadmap

 

03

Economic Contribution and Growth Performance

Since the 1990s, the services sector has been a major source of economic growth for the Philippines. On the average, the sector has grown continuously, particularly in the last two decades, as its growth increased from 4% in the 1990s to 5.3% in the 2000s. For the 2010 to 2014 period, it posted a very modest growth rate of 6.6%. Broad growth has taken place in the sector as most of its sub-sectors have also registered consistently rising growth rates over the years.

The 2010 to 2014 average growth rates of most of the sub-components of the services sector have increased from their 1990s and 2000s values. The most notable increases have been manifested by the construction, finance and real estate sub-sectors. Meanwhile, the sub-sectors that have experienced a slowdown in average growth rate are private services, transport, communication and storage. Nonetheless, it is crucial to point that the recent average growth rates of these two sub-sectors are still above 5%, indicating modest growth performances.

Growth Performance (in percent)

Year 1991-00a 2001-10a 2010b 2011b 2012b 2013b 2014b 2010-14b
Gross Domestic Product 3.1 4.7 7.6 3.6 6.8 7.2 6.1 6.3
Service Sector 4.0 5.3 7.9 3.4 8.1 7.3 6.1 6.6
Construction 5.0 2.8 14.3 -9.8 15.7 9.6 8.5 7.7
Electricity, Gas and Water 5.8 4.1 9.9 0.6 5.1 4.9 3.2 4.7
Transport, Communication & Storage 5.2 6.6 1.0 4.3 8.1 5.6 6.6 5.1
Trade 3.9 5.7 8.4 3.3 7.5 5.7 6.0 6.2
Finance 4.7 7.3 10.1 5.2 8.2 12.6 6.7 8.6
Dwellings & Real Estate 1.9 4.0 7.5 8.4 7.5 8.7 8.1 8.0
Private Services 3.7 7.2 8.4 5.6 7.7 7.1 4.2 6.6
Government Services 2.9 2.7 5.8 1.9 6.1 3.8 3.5 4.2

aat constant 1985 prices; bat constant 2000 prices.

Source of basic data: National Accounts of the Philippines, National Statistical Coordination Board

 

The Philippine economy’s output structure is characterized by a relatively large services sector. The share of the services sector increased from an average of 52.4% in the 1990s to 55.7% in the 2000s. Moreover, from 2010 to 2014, the sector’s value added share further increased, on the average, to 65.4%.

Of all the sub-sectors of the services sector, the trade and private services sub-components are among those which have the biggest value added contribution for the period of 2010 to 2014. Utilities (transportation, communication and storage) and government services meanwhile have the smallest value added share in the gross domestic product for the same period. Majority of the sub-sector have value added shares for 2010 to 2014 that are higher than their 1990s and 2000s figures.

 Value Added Contribution (in percent)

Year 1991-00 2001-10 2010 2011 2012 2013 2014 2010-14
Service Sector 52.4 55.7 65.0 64.9 65.7 65.7 65.7 65.4
Construction 5.6 4.5 5.7 5.0 5.4 5.6 5.8 5.5
Electricity, Gas and Water 3.1 3.2 3.6 3.5 3.4 3.3 3.3 3.4
Transportation, Communication & Storage 6.2 8.4 7.5 7.5 7.6 7.5 7.6 7.5
Trade 15.4 16.8 16.6 16.6 16.7 16.5 16.5 16.6
Finance 4.5 5.4 6.6 6.7 6.8 7.1 7.1 6.9
Private Services 7.0 8.3 10.2 10.4 10.5 10.5 10.3 10.4
Government Services 5.2 4.4 4.5 4.4 4.4 4.2 4.1 4.3

Source of basic data: National Accounts of the Philippines, National Statistical Coordination Board.

 

In terms of employment contribution, the services sector has started in the 2000s to become the largest employment provider. Currently, it is still the biggest provider of jobs. In the past decade, it registered an average share of about 54.3% in total employment. This is higher than its average contribution of 47.3% in the 1990s.

Of the services sub-sectors, the wholesale and retail trade segment and the aggregated community, social and personal services are some of the biggest contributors to employment relative to the other sub-sectors. With the exception of the construction sub-sector, all sub-components of the services sector have manifested an increased average employment contribution in the 2010 to 2014 period relative to their 1990s and 2000s average shares.

Employment Contribution (in percent)

Major Sector 1991-00 2001-10 2010 2011 2012 2013 2014 2010-14
Service Sector 47.3 54.3 57.9 58.2 58.9 60.0 60.6 59.1
Electricity, Gas and Water 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.4
Construction 5.1 5.2 5.6 5.6 5.9 6.2 6.6 6.0
Wholesale and Retail Trade 14.8 18.7 19.5 19.9 18.3 18.6 18.7 19.0
Transportation, Storage & Communication 6.1 7.5 7.6 7.5 7.9 7.2 7.0 7.4
Financing, Insurance, Real Estate & Business Services 2.3 3.5 4.3 4.6 4.6 4.8 5.1 4.7
Community, Social & Personal Services 18.6 19.0 20.5 20.2 21.8 21.9 22.0 21.3

Sources: Yearbook of Labor Statistics (1980-2000) and Current Labor Statistics (2001-2002), Bureau of Labor and Employment Statistics, Department of Labor and Employment and Employed Persons by Major Industry Group, National Statistics Office Labor Force Survey (2003-2010).

 

Net services trade balance shifted from continuous deficits during the first half of the 2000s to surpluses during the 2006 to 2010 and 2010 to 2013 periods. A change in the structure of services exports is also evident as exports of travel, transportation, and communication services declined over the years alongside a tremendous increase in the average shares of computer and information and other business services.

Balance of Trade in Services (in billion US$)

Indicator/Year 2000 05 06 07 08 09 10 11 12 13 00-05 06-10 10-13
Service Sector -1.87 -1.34 0.14 2.25 1.44 2.11 1.95 5.28 6.60 7.28 -1.87 1.68 5.28
Transportation -1.59 -2.16 -2.30 -2.52 -2.89 -2.51 -3.58 -2.84 -2.02 -1.96 -1.70 -2.77 -2.60
Travel 0.51 0.99 2.27 3.27 2.18 -0.37 -0.61 -2.18 -2.49 -1.83 0.42 0.97 -1.78
Communication 0.12 0.41 0.48 0.42 0.26 0.23 0.15 0.24 0.31 0.26 0.30 0.31 0.24
Construction -0.03 0.06 0.05 0.09 0.06 0.06 0.10 0.00 0.06 0.01 -0.05 0.07 0.04
Insurance -0.14 -0.19 -0.21 -0.23 -0.24 -0.18 -0.23 -0.27 -0.21 -0.12 -0.16 -0.22 -0.21
Financial 0.05 -0.04 -0.02 -0.12 -0.02 -0.06 -0.04 -0.14 -0.04 0.00 -0.02 -0.05 -0.05
Computer & Information -0.02 0.03 0.03 0.24 0.32 1.66 2.04 2.19 2.35 2.50 -0.02 0.96 2.27
Royalties & License Fees -0.19 -0.26 -0.34 -0.38 -0.38 -0.42 -0.44 -0.44 -0.46 -0.53 -0.23 -0.39 -0.47
Other Business Services -0.50 -0.11 0.26 1.61 2.38 3.92 4.80 9.01 9.69 9.53 -0.36 2.99 8.26
Personal, Cultural & Recreational Services -0.01 0.01 0.02 -0.02 -0.01 -0.01 -0.02 0.02 0.05 0.06 -0.01 -0.00 0.03
Government Services -0.07 -0.07 -0.10 -0.13 -0.21 -0.22 -0.23 -0.29 -0.28 -0.23 -0.05 -0.18 -0.26

Source of basic data: World Trade Organization

 

Revealed comparative advantage (RCA) gives an indication of those industries in which a country may have a comparative advantage. The RCA compares how much a country is exporting a given product relative to its total trade, in comparison to the share of that product in world trade. A country is said to have a revealed comparative advantage when its share of export of a given product exceeds the equivalent share of export of the world. This is captured when the RCA is above 1. An RCA below 1 suggests that the country does not have a revealed comparative advantage in a given product.

The RCA indices show the Philippines’ growing competitiveness in computer and information services as well as in other business services. While the RCA index in communications increased from 2.64 in 2000 to 6.05 in 2003, it steadily declined thereafter from 5.6 in 2004 to 1.00 in 2010. The RCA index in travel also dropped from 2.08 in 2000 to 0.93 in 2010; in transportation, it fell from 1.32 in 2003 to 0.51 in 2010; and in construction, it decreased from 1.5 in 2000 to 0.42 in 2010 indicating declining competitiveness.

 Revealed Comparative Advantage in Services Sector

Year Transportation Travel Communications Construction Insurance Financial Computer & information Royalties and license fees Other business Other personal, cultural, & recreational
2000 0.61 2.08 2.64 1.5 0.2 0.41 1.04 0.04 0.4 0.39
2001 0.87 1.89 4.99 1.02 0.19 0.24 0.23 0.01 0.39 0.39
2002 1.18 1.75 5.34 0.43 0.13 0.17 0.33 0.01 0.38 0.16
2003 1.32 1.61 6.05 0.72 0.12 0.2 0.22 0.02 0.41 0.23
2004 1.13 1.77 5.6 0.88 0.12 0.18 0.21 0.05 0.41 0.15
2005 0.96 1.84 5.22 0.66 0.2 0.18 0.49 0.02 0.52 0.42
2006 0.81 2.08 3.64 0.45 0.15 0.21 0.32 0.02 0.61 0.35
2007 0.62 2.03 2.24 0.47 0.1 0.11 0.66 0.01 1.06 0.2
2008 0.59 1.06 1.7 0.34 0.09 0.08 2.25 0 1.84 0.22
2009 0.54 0.89 1.27 0.26 0.23 0.09 2.82 0 2.02 0.29
2010 0.51 0.93 1 0.42 0.27 0.04 2.85 0 2.08 0.45

Source of basic data: UN Services Trade Data

 

 

04

Industries

Housing

The Philippine housing industry believes that every Filipino family has the right to live with dignity in the comfort of one’s own home regardless of economic status. It aims to eliminate the housing backlog by the year 2030.

The Philippine housing sector has enormous potential for growth, as demand for living spaces continue to increase. Through several industry-led initiatives, the sector hopes to sustain its robust growth and development – at affordable prices for the Filipino household.

Towards this vision, the industry's objectives are:
1. Increase housing production capacity to sustain 12% annual volume growth
2. Implement a comprehensive government housing subsidy for targeted segments
3. Improve the regulatory environment for housing
4. Generate and mobilize funds for end-user financing

IT-BPM

The Philippines’ Information Technology and Business Process Management (IT-BPM) sector is one of the best-performing and employment generating activities in the past four years. Its global leadership in voice-based services as well as continuing improvements in non-voice and complex process outsourcing show the promising growth trajectory of the IT-BPM sector. To be able to cement its position in the global IT-BPM sector, the Information Technology and Business Process Association of the Philippines (IBPAP) has advocated for deeper policy reforms which will support employees’ skills development and maintain a competitive business environment for the industry.

The industry's initiatives focus on four action areas: (1) widening and deepening human capital by scaling up industry public-private partnerships; (2) strengthening Philippine attractiveness as an investment destination through advocacy activities; (3) achieving Roadmap 2016 goals by leading cross-sectoral efforts; and (4) building Philippine IT-BPM brand globally through marketing programs.