Situation and Cooperation

Following the turn of the century, the economy of the Philippines initially grew by an average of five to six per cent per annum. Economic development is mainly centred on the electronics industry and the service sector, which generates half of the gross national income. Telecommunications is one of the strongest sectors. Filipinos' good knowledge of English has given rise to a large number of companies offering telephone-based services to firms in the United States (call centres).

Political and economic development in the Philippines is tense in the run-up to the parliamentary elections in May 2010 and in the wake of the financial crisis. The peace process in Mindanao, an island with a predominantly Muslim population, where separatist groups have been fighting for an independent Muslim state for more than thirty years, appears to have got bogged down. Volumes of trade are fluctuating and falling, and according to the International Monetary Fund economic confidence has suffered a damper. Remittances from Filipino guest workers abroad, currently put at between 13 and 23 billion US dollars, are expected to fall.

Poverty

Between 10 and 25 per cent of the total population are forced to eke out a living on less than 1.25 US dollars a day. In the mid-1990s 32 per cent of the population lived in extreme poverty, and the figure topped 45 per cent in rural areas.

40 per cent of the population earn their living in agriculture but productivity is low in this sector. 19 per cent of the population are undernourished. To reduce poverty, higher state revenues are needed, so that the government can fund urgently needed social spending. Widespread corruption and nepotism, however, act as a deterrent to Filipino and foreign investors. Neither has the progressive decentralisation legislation passed by parliament so far been translated into practice to any extent. Unemployment and underemployment remain serious problems.

Environment

The ecological diversity of this island state is at high risk. Deforestation, decimation of the coral reefs and fish stocks and high levels of air and water pollution result from massive overexploitation, coupled with a lack of protection.

The management of natural resources is therefore a particular priority for German development cooperation with the Philippines.

Peace and human rights

Many regions of the country are beset by violent conflict. In 1996, the government and one of the rebel groups, the Moro National Liberation Front (MNLF), signed a peace agreement. The government has been in peace talks with another rebel group, the Moro Islamic Liberation Front (MILF), for several years. After setbacks in 2008, however, it remains unclear whether or not these negotiations will succeed.

The population of the Philippines is young and is growing far more rapidly than the economy, which means that the education and social systems are overstretched and there is a shortage of employment. The country also has high maternal and child mortality. Since the fall of President Marcos in 1986, the human rights situation has improved significantly, although serious violations do still occur. Journalists in particular live dangerously. In 2004 alone, 13 journalists were murdered, and to date not one suspect has yet been arrested. Local reporters are particularly at risk.

Development potential

Among other areas, the telecommunications sector and mining industry hold development potential. The Philippines have large deposits of gold, copper and nickel. Promotion of tourism could also bring economic progress.

There is excellent potential in the area of renewable energy, especially in geothermal energy, wind power and hydropower. The country could become one of the leading producers of renewable energy, and a major producer of solar cells. The Philippines also attended the conference to found the International Renewable Energy Agency (IRENA) in January 2009 in Bonn.

Priority areas of cooperation

Germany is one of the four largest bilateral donors to the Philippines alongside Japan – which is well in the lead – and the USA and Australia. After the Asian Development Bank and the World Bank, the EU is the Philippines' most important multilateral partner.

At the government negotiations in June 2007, Germany pledged the Philippines 20 million euros for a two-year period – 7 million euros for Financial Cooperation and 13 million euros for Technical Cooperation. It also contributes federal government funding to support the work of church organisations, political foundations and non-governmental organisations. For 2009 further pledges are planned from the BMZ's Asia regional fund.

In the wake of the concentration of German development cooperation on fewer partner countries and a stronger thematic and regional focussing, the thematic focus of cooperation with the Philippines will in future be on peace-building and conflict transformation. In regional terms, cooperation will concentrate on the Caranga region on the southern island of Mindanao, where the German government is already supporting projects.

Projects and programmes in the former priority areas of sustainable economic development and environmental protection and sustainable natural resources management will continue to receive assistance for a few years. In various parts of the Philippines support will also be given to strengthening local self-government, taking into account the imperatives of conflict transformation, peace-building and poverty reduction.

last changed: April 2009