DEVELOPMENT

POLICIES AND
PROGRAMS
HUMAN DEVELOPMENT
POLICIES
HUMAN DEVELOPMENT
HUMAN DEVELOPMENT
 about expanding the richness of human life, rather
than simply the richness of the economy in which
human beings live.
 focused on creating fair opportunities and choices
for all people
 Inequalities in human development hurt societies
and weaken social cohesion and people’s trust in
government, institutions and each other.
HUMAN DEVELOPMENT
HUMAN DEVELOPMENT
 MEASURES OF
MEASURES OF HUMAN
HUMAN
DEVELOPMENT
DEVELOPMENT
a) Human Development Index
(HDI)
 MEASURES OF
MEASURES OF HUMAN
HUMAN
DEVELOPMENT
DEVELOPMENT
b) Inequality-adjusted Human Development Index
(IHDI)
 takes into account inequality in all three dimensions
of the HDI by ‘discounting’ each dimension’s
average value according to its level of inequality
 As the inequality in a country increases, the loss in
human development also increases.
 MEASURES OF
MEASURES OF HUMAN
HUMAN
DEVELOPMENT
DEVELOPMENT
c) Gender Development Index (GDI)
 measures gender inequalities in achievement in three
basic dimensions of human development: health
(measured by female and male life expectancy at
birth), education (measured by female and male
expected years of schooling for children and mean
years for adults aged 25 years and older) and
command over economic resources (measured by
female and male estimated GNI per capita).
 MEASURES OF
MEASURES OF HUMAN
HUMAN
DEVELOPMENT
DEVELOPMENT
d) Gender Inequality Index (GII)
 interpreted as the loss in human development due to
inequality between female and male achievements in
the reproductive health (measured by maternal
mortality and adolescent birth rates), empowerment
(measured by the share of parliamentary seats held by
women and attainment in secondary and higher
education by each gender), and economic activity
(measured by labour market participation rate for
women and men).
 MEASURES OF
MEASURES OF HUMAN
HUMAN
DEVELOPMENT
DEVELOPMENT
e) Multidimensional Poverty Index (MPI)

 multiple overlapping deprivations suffered by

individuals in 3 dimensions: health, education and
standard of living.
Pantawid Pamilyang Pilipino Program
• Aims to improve health, nutrition and education of children
aged 0-18 by giving cash grants to the poorest citizens
• Department of Social Welfare and Development – lead
agency
• Complement program - Modified Conditional Cash Transfer
Program (Street families, itinerant indigenous families,
displaced families, families with PWDs, child laborers,
children in conflict with the law, families with terminal
diseases, victims of human trafficking)
Circular No. 2018-0017 on Expansion of
Primary Care Benefit (PCB)
• current and existing Primary Care Benefit (PCB) Package of
Philhealth has been expanded to include other sectors, such
as the Formal Economy (employed), Lifetime members
(retirees), and Senior Citizens.
• PCB is a program dedicated as a preventive mechanism
ultimately aimed at keeping basic health indicators in check.
Republic Act No. 11036 (The Mental Health Act)
• secure the rights and welfare of persons with mental health
needs by providing mental health services down to the local
level. These services include psychiatric, psychosocial, and
neurologic services and mental health education.
Masustansyang Pagkain para sa Batang
Pilipino Act
• national feeding program among Filipino children in public
day care centers, kindergarten, and elementary

Philippine HIV and AIDS Policy Act

• to increase access of the vulnerable groups, including at-risk
youth, to HIV/AIDS testing and counselling. It will also
lower the minimum age allowed for HIV testing and
counselling to 15 years olds from 18 years.
The First 1,000 Days Act
• recognizes the importance of providing health and nutrition
services to children during their early days of development.
This Act will scale up nutrition interventions and programs in
the first one thousand days of the child’s life. These include
prenatal care services, antenatal care services, maternal
immunization, micronutrient supplementation, lactation
management services, psychosocial support for mothers, oral
health, health and nutrition counselling and consultations,
among others.
The Universal Health Care (UHC) Bill
• seeks to ensure that all Filipinos have access to quality health
care services. This measure will automatically cover all
Filipinos under the PhilHealth and will help strengthen the
health service delivery system.
House Bill 5727(Sin Tax Bill)
• imposes tax on alcohol and tobacco goods (funds Universal
Health Care Program) and to discourage the use of these
products
EXECUTIVE ORDER NO. 26 (PROVIDING FOR
THE ESTABLISHMENT OF SMOKE-FREE
ENVIRONMENTS IN PUBLIC AND ENCLOSED
PLACES)
• bans smoking in schools, workplaces, sidewalks and public
vehicles; various anti-smoking campaigns; smoking cessation
program such as DOH Quitline
K to 12 Program
• aims to enhance learners’ basic skills, produce more
competent citizens, and prepare graduates for lifelong
learning and employment.
Why push K to 12 Program?
• It gives students sufficient time to master skills and absorb
basic competencies.
• Students of the new system will graduate at the age of 18 and
will be ready for employment, entrepreneurship, middle level
skills development, and higher education upon graduation.
K to 12 Program
Why push K to 12 Program?
• It accelerates mutual recognition of Filipino graduates and
professionals in other countries.
• Kindergarten is mandatory for five-year-old children, a pre-
requisite for admission to Grade 1.
• The new curriculum gives students the chance to choose
among three tracks (i.e. Academic; Technical-Vocational-
Livelihood; and Sports and Arts) and undergo immersion,
which provides relevant exposure and actual experience in
their chosen track.
K to 12 Program
Why push K to 12 Program?
• It accelerates mutual recognition of Filipino graduates and
professionals in other countries.
• Kindergarten is mandatory for five-year-old children, a pre-
requisite for admission to Grade 1.
• The new curriculum gives students the chance to choose
among three tracks (i.e. Academic; Technical-Vocational-
Livelihood; and Sports and Arts) and undergo immersion,
which provides relevant exposure and actual experience in
their chosen track.
Republic Act No. 10931 (Universal Access to
Quality Tertiary Education Act)
• promoting universal access to quality tertiary education by
providing for free tuition and other school fees in state
universities and colleges, local universities and colleges and
state-run technical-vocational institutions, establishing the
tertiary education subsidy and student loan program,
strengthening the unified student financial assistance system
for tertiary education
Republic Act No. 10354 (The Responsible
Parenthood And Reproductive Health Act Of 2012)
• State recognizes and guarantees the human rights of all
persons including their right to equality and
nondiscrimination of these rights, the right to sustainable
human development, the right to health which includes
reproductive health, the right to education and information,
and the right to choose and make decisions for themselves in
accordance with their religious convictions, ethics, cultural
beliefs, and the demands of responsible parenthood.
MONETARY AND
MONETARY AND FISCAL
FISCAL POLICIES
POLICIES
 are macroeconomic tools used to manage or
stimulate the economy
 used to accelerate growth when an economy starts
to slow or to moderate growth and activity when
an economy starts to overheat.
 is the creation of an economic environment where
growth is stable and positive, and inflation is stable
and low.
Monetary Policies
• refers to the actions of central banks to achieve
macroeconomic policy objectives such as controlling
inflation, managing employment levels, maintaining long
term interest rates and a stable economic growth.

• has two types; a) Expansionary Monetary Policy

b) Contractionary Monetary Policy
 Monetary Policies
Expansionary Monetary Policy
Aims to Increase money supply by decreasing interest rates,
purchasing government securities by central bank, and
lowering the reserve requirements for banks
Used When Economy is in a recession; Unemployment is a problem
Effects • Consumer spending increases, private sector borrowings
increases, unemployment decreases, overall economy grows
• If supply of money and credit increases too rapidly, the
result could be inflation. Thus, central bank and legislators
must know when to stop the supply of money and apply
contractionary policy
 Monetary Policies
Contractionary Monetary Policy
Aims to Decrease the money supply and the spending in the economy
by raising interest rates, selling government bonds, and
increasing the reserve requirements for banks.

Used When Government wants to control inflation levels and the economy
needs to slow down by curtailing the supply of money.
Effects • The banks charge a higher interest rate, making loans more
expensive.
• Fewer businesses and individuals borrow, slowing growth.
Monetary
Tools
a) Discount Rate

Is the interest rate a central bank charges members to borrow

funds. It raises the interest rate to discourage people from
borrowing. That action reduces liquidity and slows the
economy. (Contractionary policy) In contrast, by lowering the
discount rate, it encourages borrowing. That increases liquidity
and boosts growth. (Expansionary policy)
 Monetary
Tools
b) Reserve requirement
• How much money the central banks tell their members to keep
on reserve. Not everyone needs all their money each day, so it is
safe for the banks to lend most of it out. That way, they have
enough cash on hand to meet most demands for redemption.
• When a central bank wants to restrict liquidity, it raises the
reserve requirement. That gives banks less money to lend
(Contractionary Policy). When it wants to expand liquidity, it
lowers the requirement. That gives banks more money to lend.
(Expansionary Policy)
Monetary
Tools
c) Open Market Operations

The central bank can either purchase or sell securities from

banks. This action changes the interest rates. When they buy
securities, it adds credit to the bank’s reserves. This gives the
bank more money to lend therefore interest rates decrease
(Expansionary Policy). In contrast, when they sell securities to
banks, interest rates increase (Contractionary Policy).
Philippines Monetary Policy
Developments as of 2020
 Objectives of Bangko Sentral ng Pilipinas

The BSP’s primary objective is to maintain price stability

conducive to a balanced and sustainable economic growth.
The BSP also aims to promote and preserve monetary stability
and the convertibility of the national currency.
 Inflation Targeting: The BSP's Approach
to Monetary Policy
•Inflation targeting is focused mainly on achieving a low and stable
inflation, supportive of the economy’s growth objective. This
approach entails the announcement of an explicit inflation target that
the BSP promises to achieve over a given time period.

•To achieve the inflation target, the BSP uses monetary policy
instruments in implementing the desired monetary policy stance. The
reverse repurchase (RRP) or borrowing rate is the primary
monetary policy instrument of the BSP.
 Inflation Targeting: The BSP's Approach
to Monetary Policy
Other monetary policy instruments include:
• increasing/decreasing the reserve requirement;
• adjusting the discount rate;
• outright sales/purchases of the BSP's holding of government
securities
Fiscal Policies
• is based on the theories of British economist John Maynard
Keynes, which hold that increasing or decreasing taxes and
expenditures (spending) levels influence inflation, employment and
the flow of money through the economic system.

• with the goal to increase GDP and aggregate demand in a

sustainable manner
• has two types; a) Expansionary Fiscal Policy
b) Contractionary Fiscal Policy
 Fiscal Policies
Expansionary Fiscal Policy Contractionary Fiscal Policy
Most often used during a recession, times Used to slow economic growth,
of high unemployment or other low such as when inflation is growing
periods of the business cycle. too rapidly.
Entails the government to spend more Raises taxes and cuts spending.
money, lower taxes or both.
The goal is to put more money in the
hands of consumers so they spend more.
Hence, demand increases which forces
businesses to add jobs to increase supply.
These stimulate the economy and
decreases unemployment.
Fiscal Tools
a) Taxation
Includes income, capital gains from investments, property, and
sales. Taxes provide the income that funds the government.

b) Government Spending
Includes subsidies, welfare programs, public works projects,
and government salaries. Whoever receives the funds has more
money to spend, which increases demand and economic grow.
 Fiscal Policy Monetary Policy

Change in government spending Change in interest rates/ money

and tax rates supply

Set by government Set by Central Bank

No specific target Targets inflation
Side effect on government budget/ Side effect on exchange rate and
borrowing housing market

Strong political dimension to Mostly independent from the

changing tax rates. political process
Philippine Fiscal Policy
 Fiscal measures are frequently used in tandem with
monetary policy to achieve certain goals. In the Philippines,
this is characterized by continuous and increasing levels of
debt and budget deficits, though there have been
improvements in the last few years. The Philippine
government generates revenue mainly through personal or
income tax collection, but small portion of non-tax revenue is
also collected through fees and licenses, privatization proceeds
and income from other government operations and state-
owned enterprises.
Tax Revenue
revenues collected from taxes on income and profits, social
security contributions, taxes levied on goods and services,
payroll taxes, taxes on the ownership and transfer of property,
and other taxes.
Income Taxes
tax on person income, wages, profits arising from property,
practice of profession, conduct of trade or business
E-Vat (Expanded Value Added Tax)
form of sales tax imposed on the sale of goods and services
and on import of goods
Tariffs and Duties
Tariffs are taxes that are imposed by the government on the
goods imported from a different country. Duties are similar to
indirect taxes and are imposed on consumers. Duty is also
popularly known as the consumer tax.
Non-Tax Revenue
are government revenue not generated from taxes. For
example - bond issues and profits state owned companies
History of Philippine Fiscal Policy
Marcos Administration (1981-1985)
• primarily focused on indirect tax collection and on
government spending on economic services and infrastructure
development.

Aquino Administration (1986-1992)

• inherited a large fiscal deficit from previous administration
but manage to reduce fiscal imbalance and improve tax
collection through the introduction of the Tax Reform
Program and the value added tax.
History of Philippine Fiscal Policy
Ramos Administration (1993- 1998)
• In 1997, Comprehensive Tax Reform Program (CTRP) was enacted
• Ramos administration had 4 years budget surpluses for the
government benefited from the massive sale of government assets,
strong foreign investment and continued to benefit from 1986 TRP.
However, the implementation of CTRP and onset of Asian financial
crisis results to deteriorating fiscal position.

Estrada Administration (1999-2000)

• Faced a large deficit due to decrease in tax effort and repayment of
Ramos Administration’s debt.
History of Philippine Fiscal Policy
Arroyo Administration (2002-2009)
• Expanded Value Added Tax Law was enacted, under spending on
public infrastructure and other capital expenditures was observed.
Aquino Administration (2010-2016)
• the country was among the top 30 fastest-growing economies
worldwide. It focused on the domestic economic activities, due to
successful fiscal reforms which reduced the fiscal deficit
substantially due to enactment of the ‘sin’ taxes against cigarettes
and alcohol products as well as foreign investors’ perceived
improvement in governance and sincere efforts to fight corruption.
• Enactment of Republic Act 10351 or Sin Tax Reform Law
History of Philippine Fiscal Policy
Duterte Administration (2017-2022)
• Tax Reform for Acceleration and Inclusion (TRAIN) Act, officially
cited as Republic Act No. 10963
• The Duterte Administration aims to achieve a GDP growth rate of 7
percent in the medium-term, pushing the Philippine economy to
high-middle income status by 2022. TRAIN, which raised state
revenues in 2019 to more than 50 percent than it was before the
administration of President Duterte, helped provide the government
the fiscal space required to meet the massive state funds needed to
fight COVID-19 and provide relief to the poor and other virus-hit
sectors.
 DEVELOPMENT OF
DEVELOPMENT OF THE
THE BANKING
BANKING AND
AND
FINANCIAL INSTITUTIONS
FINANCIAL INSTITUTIONS
Financial Institutions
• a government agency or privately owned entity that collects funds
from the public, and from other institutions and invests those funds
in financial assets, such as loans, securities, bank deposits and
income generating property.
• offers a variety of services to individual consumers as well as
businesses these services include deposit products, loans and
investments
• act as intermediaries between saver and borrowers and are
differentiated by the way they obtain and invest their funds.
 HISTORY OF
HISTORY OF BANKING
BANKING IN
IN THE
THE
PHILIPPINES
PHILIPPINES
16th Century
Obra Pias (Pious Work) was established and began the
banking in the Philippines
19th Century
Rodriguez bank was the first bank that emerged in early 19th
Century
1851
Banco Espanol- Filipino de Isabel II was the first state bank
in the Philippines that was established on August 1, 1851. In
January 12, 1912, the name was changed to Bank of the
Philippine Islands.
 HISTORY OF
HISTORY OF BANKING
BANKING IN
IN THE
THE
PHILIPPINES
PHILIPPINES
1906
Postal Savings Bank was the first Agricultural Bank. Later
on, Its assets and liabilities was transferred in 1916 to the
Philippine National Bank.
1993
The Central Bank of the Philippines was created, established
a managed monetary system in the Philippines. It was given the
sole authority to issue the republic’s new paper money and
regulate and supervise the Philippines’ banking system.
PHILIPINNES FINANCIAL
PHILIPINNES FINANCIAL
INSTITUTIONS
INSTITUTIONS
CENTRAL BANK/ BANGKO SENTRAL NG PILIPINAS (BSP)

BANKING INSTITUTIONS

GOVERNMENT BANKING INSTITUTIONS

 CENTRAL BANK/ BANGKO SENTRAL
NG PILIPINAS (BSP)

Bangko Sentral ng Pilipinas (BSP) is the central bank of

the Philippines. It was established on July 3, 1993 pursuant
to the provisions of the 1987 Philippine Constitution and
the New Central Bank Act of 1993.
 CENTRAL BANK/ BANGKO SENTRAL
NG PILIPINAS (BSP)
Main Responsibilities and Functions
1. Promotes Price Stability
2. Supervisor of all Banks
3. Issues Banknotes and Coins
4. Determines Country’s Exchange Rate Policy

3 Pillars of Central Banking

1. Price Stability
2. Financial Stability
3. Efficient Payments and Settlement System
BANKING INSTITUTIONS
BANKING INSTITUTIONS

Private Banks
Rural Banks
Thrift Banks
Cooperative Banks
Microfinance Banks
Private Banks – Commercial Banks
• accepts deposits, offers checking account services, makes various
loans, and offers basic financial products like certificates of
deposit (CDs) and savings accounts to individuals and small
businesses.
• Make money by providing loans and earning interest income from
those loans. The types of loans a commercial bank can issue vary
and may include mortgages, auto loans
• Examples are BDO Private Bank, Inc; CTBC Bank Corp.;
Robinsons Bank Corporation
Private Banks – Universal Banks

• a bank that combines the three (3) main services of banking

under one roof.
• The three (3) services are wholesale banking, retail banking,
and investment banking. In other words, it is a retail bank, a
wholesale bank and also an investment bank.
• Examples are Land Bank of the Philippines, Bank of the
Philippines, BDO Unibank
Private Banks – Universal Banks
a.) Retail Banking
Retail Banking Services members of the public and small and
medium-size businesses. It focus on looking after customers’ money
as well as offering loans and mortgages.
b.) Wholesale Banking
Involves borrowing and lending money on a very large scale. It
include pension funds, giant companies, governments, and other
financial institutions.
c.) Investment Banking
Investments banks focus on services for major investors and
companies. They specialize, for example in the investment
requirements of pension funds.
Private Banks – Universal Banks

As of July 2020, there were 46 Universal & Commercial banks

in the Philippines. 21 Universal banks and 25 Commercial Banks
(of the 25 commercial banks, 20 are foreign banks). These
foreign banks were established in the Philippines under RA No.
10641 (amending RA No. 7721), which allowed the full entry of
foreign banks into the country, signed into law by President
Benigno S. Aquino III in July 2014.
Rural Banks
has a smaller size (in assets) than the very large banks. It is
located generally in smaller cities and concentrates in making
loans and other services to that immediate location
• One Network Bank Inc • Insular Savers Bank Inc
• Country Builders Bank • Banco Dipolog Inc
Inc • Marayo Bank Inc
• Cantilan Bank Inc • Camalig Bank Inc
• Katipunan Bank Inc
Thrift Banks
a term for a financial service organization that specializes in
offering savings accounts and originating mortgage loans to
consumers. Some are mutually owned—that is, owned by their
depositors—while others are owned by stockholders.
• Phil Savings Bank • Bank Of Makati
• Pen Bank Inc • Sterling Bank Of Asia Inc
• China Bank Savings Inc • UCPB
• City Savings Bank Inc
Cooperative Banks
a bank that holds deposits, makes loans and provides other financial
services to cooperatives and member-owned organizations.
also known as Banks for Cooperatives
• Coop Bank of Cotabato
• Mindanao Consolidated Cooperative Bank
• Ilocos Consolidated Cooperative Bank
• Coop Bank of Palawan
• Coop Bank of Quezon Province
Microfinance Banks
Microfinance, also called microcredit, is a type of banking
service that is provided to unemployed or low-income individuals
or groups who otherwise would have no other access to financial
services.
• Aakay ang Milamdec Microfinance Foundation, Inc.
• Ahon Sa Hirap, Inc.
• Alalay Sa Kaunlaran, Inc.
• ASA Philippines Foundation
 GOVERNMENT BANKING
GOVERNMENT BANKING
INSTITUTIONS
INSTITUTIONS
the role of the government in the banking system is
to supplement the credit facilities of the private
financial institutions.
Examples
• Philippine National Bank
• Banking Operations In General
• Land Bank of the Philippines
• Development Bank of the Philippines
• Philippine Amanah Bank
HOW DO
HOW DO BANKS
BANKS CONTRIBUTE
CONTRIBUTE TO
TO THE
THE
ECONOMY
ECONOMY
1. Banks promote capital formation.
2. Investment in new enterprises.
3. Promotion of trade and industry.
4. Development of Agriculture
5. Balanced development of different regions
6. Influencing economic activity
7. Implementation of monetary policy
8. Monetization of the economy
9. Export promotion cells
TAX
TAXES
ES
• Taxes are compulsory levies enforced by a government
entity in order to finance government activities.
• It is the most important source of revenue, also called the
lifeblood of the government. The tax collected is used for
the betterment of the economy and all living in it.
• Taxes are applied to some form of money received by a
taxpayer. The money could be income earned from
salary, capital gains from investment appreciation,
dividends received as additional income payment made
for goods and services, etc.
TAXATIO
TAXATION
N
• Taxation is an imposition of compulsory levies on
individuals or entities by government.
• It is the inherent power of sovereign, exercised through
the legislature, to impose burdens upon subjects and
objects within its jurisdiction for the purpose of raising
revenues to carry out the legitimate objects of
government.
• It is also defined as the act of levying a tax.
Essential Elements of a Tax
• It is an enforced contribution.
• It is generally payable in money.
• It is proportionate in character.
• It is levied on persons, property, or the exercise of a right or privilege.
• It is levied by the State which has jurisdiction over the subject or
object of taxation.
• It is levied by the law-making body of the State.
• It is levied for public purpose or purposes.
Purposes of Taxation
REVENUE or FISCAL
The primary purpose of taxation on the part of the government is to
provide funds or property with which to promote the general welfare and
the protection of its citizens and to enable it to finance its multifarious
activities.
NON-REVENUE or REGULATORY
Taxation may also be employed for purposes of regulation or control.
a.) Imposition of tariffs on imported goods to protect local industries.
b.) The adoption of progressively higher tax rates to reduce inequalities in
wealth and income.
c.) The increase or decrease of taxes to prevent inflation or ward off
depression.
Purposes of Taxation
The government impose taxation mainly to raise revenue to
finance government spending. Building of infrastructures,
electrification projects, social security and welfare programs,
free education, scholarship programs, job fairs are some of the
social services of the government funded by taxes. The more tax
collections, the wider scope of expenditures the government
will have in developing programs and projects to improve the
quality of basic services and thus provide more economic
benefits to every Filipino.
Effects of Taxation on Development
POSITVE EFFECTS
• Taxation may be beneficial for the economy if it provides the financial
basis for the provision of public goods that improve average living
standards and social welfare.
• More and public goods and services may also increase the productivity of
private fixed and human capital and hence increase economic growth.
• Government transfers may reduce poverty and improve social cohesion.
NEGATIVE EFFECTS
• Higher taxes may increase distortions, reduce saving, investment, work
incentives, living standards and economic growth.
 TAX REFORM
TAX REFORMFOR
FOR ACCELERATION
INCLUSION LAW
ACCELERATION INCLUSION LAW
Pres. Rodrigo R. Duterte signed into law package 1 of the
Comprehensive Tax Reform Program (CTRP), also known as Tax
Reform for Acceleration Inclusion Law (TRAIN), as Republic Act
(RA) No. 10963 last December 19, 2017 that stood effect on January
1, 2018. The aim for this program is to make the country’s tax
system simpler, fairer, and more efficient to promote investments,
create jobs and reduce poverty. CTRP also aims to raise revenues
that will fund the President’s Build, Build, Build Project that will
sustain high and inclusive growth of the country, and finance
investments in our people through enhanced education, health and
social services.
Foreign Direct Investment and the Philippine
Economy
Foreign Direct Investment (FDI)
is a long-term investment in a business by private multinational
corporations (MNC) from another country for which the foreign investor
has control over the company purchased. There is currently 82,000
MNC’s operating worldwide with over 810 affiliates.

FDI occurs in two ways:

a) MNC’s build new plants or expand their existing facilities in foreign
countries
b) MNC’s merge to acquire existing firms in the foreign country.
Foreign Direct Investment and the Philippine
Economy
Operating businesses need workers and suppliers that are
derived from the host country. It opens the door to job
opportunities especially those professionals related to the
corporate world. Small enterprises are emerging through
multinational companies that raise the economic activity of the
Philippines. The tax revenues received are used in constructing
infrastructures and developing technologies that lead to more
job opportunities.
 Why MNC’s prefers in developing
nation?
• Rich in Natural Resources
• Has a Huge Markets
• Low Cost of Labor
• Fewer Government Regulations
 Philippine Economy
Despite the improvement in the Philippine investment
climate, the Philippine Constitution (1987) still has an
antiquated article that supports laws restricting foreign
ownership of the property to 40% (Article XII), with minor
adjustments and deviations by subsequent legislation. These
Constitutions need to be changed in order to be fully
opened to foreign investors that will cause an increase in
the Philippines ' economic growth.
 Million USD
450

400 390.1

350

300 289.5
274
252.8
250 245.2

219
196.1
200 187 183.3

150

105.7
100

50

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Table 1.Net Equity Capital of the Philippines

(As of 2010-2019)
Table 2.Approved Foreign Investments (Philippines)
8 Key Benefits of FDI
1. Increase infrastructure – it improves both physical and
financial infrastructure.
2. Increase free-trade – activities along with the liberalized
trade can lead to more allocation of the world’s resources.
3. Increased tax revenue – the host’s government will receive
tax revenue from the profit of the MNC’s.
4. Increase employment and creation of new jobs – due to
operating businesses it opens more job opportunities that may
lead to decreases in the unemployment rate and poverty.
8 Key Benefits of FDI
5. Increase choice in the market place – the existence of MNC’s may
provide more choices at lower prices for consumers.
6. Multiplier effect of increased income – increase income and
employment may have a multiplier effect on the host country
stimulating growth.
7. Gain access to new research and development – it allows in the
developing country to greater access in research, technology,
marketing, and industrialization
8. Increase savings – FDI contributes to economic growth that leads to
an increase in savings in developing countries.
Possible Disadvantages of FDI
1. MNC’s bring their own management teams - They are
taking advantage of expensive low workers for basic
production.
2. Too much power to MNC’s – they tend to have gained some
favour with the government.
3. Practice of transfer pricing –it reap little tax reward and
lose out on potential tax revenue.
4. Increased pollution due to low regulations –MNC’s pollute
at a higher rate because of lack of government regulations.
Possible Disadvantages of FDI
5. MNC’s extract natural resources from the host country – host
country’s resources have been keeping extracting from the MNC’s.
6. MNC’s use of capital-intensive production methods - MNC
using labor-intensive production methods that would be more
appropriate.
7. MNC’s purchase domestic firms – the actual money will never
be used in developing countries.
8. MNC’s often repatriate profits – the money that has been
gained by the work that is doing in the developing nation will no
longer use in the developing nation.
Free Trade Agreement
• Free trade agreements reduce or eliminate barriers to trade
across international borders.
• Under the free trade policy, it allows trading goods and
services with little or no government tariffs, quotas,
subsidies, or prohibitions to hold back their trading.
• In the U.S. and E.U., free trade agreements do not come
without regulation and oversight.
Effect of Free Trade in the Economy
It allows nations to manufacture products that are best
use of their resources, which are typically unavailable or
scarce in other nations. It enables them to focus on their
core products, making them competitive in the international
market and maximizing their profit.
On the other hand, other businesses won’t survive
competing with the imported goods in the national markets
because of cheaper prices produced in other nations.
Effect of Free Trade in the Economy

Positive Negative
Increase in Economic Growth Increased Job Outsourcing
Lower Government Spending Crowd-out Domestic
Industries
Technology Transfer Theft of Intellectual Property
Expertise Reduced Tax Revenue
Positive Impacts of Free Trade Agreement
1. Increase in Economic Growth. Industries profit more in exporting goods
and services to other countries, especially those countries who need the
exported goods and services.
2. Lower Government Spending. Many governments subsidize local
industries. With the free trade agreements, it prohibits the export subsidies
and import subsidies.
3. Technology Transfer. Multinational companies offer latest technologies to
their local partners.
4. Expertise. International companies have more expertise than domestic
companies in developing local resources, just like in mining, oil drilling, and
manufacturing. Free trade agreements allow international firms access these
business opportunity. When the international firms partnered with the local
firms, they train them on best practices.
Negative Impacts of Free Trade Agreement
1.Increase in Job Outsourcing. Reducing tariffs on imports allows
companies to expand to other countries. Without tariffs, imports from
countries with a low cost of living cost less. It makes it difficult for local
companies in those same industries to compete, so they may reduce their
workforce.
2. Crowd-out Domestic Industries. Many emerging markets are
traditional economies that rely on farming for most employment. These
small farms can’t compete with other agri-businesses in developed
countries. It would result to losing their farms and this will increase the
unemployment and poverty.
3. Theft of Intellectual Property. Patents, inventions, and new processes
are not protected by the many developing countries. The laws they have are
not strictly enforced, resulting to the ideas of some corporations to be stolen
4. Reduced Tax Revenue. Many smaller countries struggle to replace
revenue lost from import tariffs and fees.
References
Amadeo, K. (2020, August 19). Retrieved from https://www.thebalance.com/what-is-fiscal-policy-types-objectives-and-tools-3305844
Amadeo, K. (2020, August 18). The Balance. Retrieved from https://www.thebalance.com/what-is-monetary-policy-objectives-types-and-tools-3305867
Amadeo, K. (2020). Free Trade Agreement with Their Pros and Cons. Retrieved from: https://www.thebalance.com/free-trade-agreement-pros-and-cons-3305845
Augustyn, A. (2020). Encyclopaedia Britannica . Retrieved from https://www.britannica.com/topic/monetary-policy
Business Jargons. (n.d.). Retrieved from https://businessjargons.com/types-of-monetary-policy.html
Center, D. o. (2015, June). Where Does Your Tax Money Go? Retrieved from https://www.google.com/url?q=http://www.ntrc.gov.ph/images/Publications/where-does-your-tax-
money-go.pdf&usg=AFQjCNHIVJNcHbgWewAD3xkAhY5dzlaFkw
Center, D. o. (2018, March). Tax Changes You Need To Know Republic Act No. 10963 Tax Reform for Acceleration and Inclusion (TRAIN). Retrieved from https://www.google.com/url?
q=https://www.ntrc.gov.ph/images/Publications/train/tax-changes-you-need-to-know.pdf&usg=AFQQjCNFda-BwkoD-ezOnZMrQM-RafRhamQCFA Institute. (2020). Retrieved from
https://www.cfainstitute.org/en/membership/professional-development/refresher-readings/2020/monetary-fiscal-policy#:~:text=Monetary%20policy%20refers%20to
%20central,regulate%20economic%20activity%20over%20time.
Comprehensive Tax Reform Program. (2019). Retrieved from TaxReform Department of Finance: https://taxreform.dof.gov.ph
Corporate Finance Institute. (n.d.). Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/economics/monetary-policy/
Dotong, E. (2018). A Study of the Philippine Economy During the Administration of President Benigno Aquino III. ISBN (eBook)9783668850347
Fiscal policy of the Philippines. (n.d.). Retrieved from Wikipedia: https://en.m.wikipedia.org/wiki/Fiscal_policy_of_the_Philippines
General principles of Taxation. (n.d.). Retrieved from Angelfire: http;//www.angelfire.com/me4/francute/tax-gp2.htm
Kagan, J. (2020, June 11). Income Tax Terms Guide: Taxes. Retrieved from Investopedia: https://www.ivestopedia.com/terms/t/taxes.asp
Kuligowski, K. (2019, June 17). Retrieved from https://www.businessnewsdaily.com/3484-fiscal-policy.html
Neumark, F. (n.d.). Taxation. Retrieved from Britannica: https://www.britannica.com/topic/taxation/Shifting-and-incidence
Pettinger, T. (2020). Retrieved from https://www.economicshelp.org/blog/1850/economics/difference-between-monetary-and-fiscal-policy/
Simpson, A. (n.d.). Retrieve from https://www.academia.edu/13536335/Fiscal_Policy_in_the_Philippines
Trade Guide: WTO Subsidies. (n.d.). Retrieved from https://www.trade.gov/trade-guide-wto-subsidiesWilli Leibfritz, John Thornton, Alexandra Bibbee. (1997). Taxation and Economic
Performance. Retrieved from OECD: https://www.google.com/url?q=https://www.oecd-ilibrary.org/economics/taxation-and-economic-performance_668811115745%3Dtrue
%mimetype%3Dapplication/pdf&usg=AFQjCNG_ccv6RrZbvSyT62Tn-5s9gGy97Q
References https://www.youtube.com/watch?v=JOuvMBy-U-Q
https://www.coursehero.com/file/23218010/History-of-the-Philippine-Banking/
http://hdr.undp.org/en/content/human-development-index-hdi
https://www.imoney.ph/articles/banking-guide/bank-system-philippines/?
https://www.officialgazette.gov.ph/programs/conditional-cash-transfer/ fbclid=IwAR0qNBAr2n0YSjvypISmU-fT6J1TpHmE6FPYlIjxsKJKSTe5ndQWTVudtcE
http://k12philippines.com/ https://doingbusinessinthephilippines.com/list-of-banks-in-the-philippines/
https://ched.gov.ph/k-12-project-management-unit/ https://www.workingpinoy.com/2011/01/list-of-banks-in-philippines-universal-banks-commercial-
banks/
https://pcw.gov.ph/republic-act-10354/
https://www.youtube.com/watch?v=BTE7iNkYqR8
https://www.publichealthnotes.com/responsible-parenthood-and-10-principles-of-responsible-
parenting/#:~:text=Responsibility%20parenthood%20is%20an%20ability,become%20responsible http://www.bsp.gov.ph/banking/psoc_rb/Rank%20(Total%20Assets).htm
%20and%20responsible%20children.
http://www.bsp.gov.ph/banking/psoc_tb/assets.htm
https://www.officialgazette.gov.ph/sin-tax/
https://microfinancecouncil.org/regular-members/
http://hdr.undp.org/en/content/what-human-development
https://www.youtube.com/watch?v=BTE7iNkYqR8&fbclid=IwAR0gAz7Eluxhc-
https://doingbusinessinthephilippines.com/list-of-banks-in-the-philippines/ 53LX_gVL5CaPo5MFspP2HsKES88rojyyqoV59vR5gtbJo
https://www.workingpinoy.com/2011/01/list-of-banks-in-philippines-universal-banks-commercial- https://www.economicshelp.org/blog/glossary/banks/
banks/
https://www.ebf.eu/facts-and-figures/structure-and-economic-contribution-of-the-banking-sector/
https://www.youtube.com/watch?v=BTE7iNkYqR8
https://www.yourarticlelibrary.com/banking/commercial-banks/4-ways-in-which-the-banking-
http://www.bsp.gov.ph/banking/psoc_rb/Rank%20(Total%20Assets).htm system-helps-in-economic-growth/37851
http://www.bsp.gov.ph/banking/psoc_tb/assets.htm https://www.economicshelp.org/blog/7102/economics/would-an-increase-in-savings-help-the-
economy/#:~:text=A%20rise%20in%20the%20savings,significant%20impact%20on%20economic
https://microfinancecouncil.org/regular-members/ %20activity.&text=If%20people%20save%20more%2C%20it,consumption%20over%20long%2Dterm
%20investment.
https://www.youtube.com/watch?v=BTE7iNkYqR8&fbclid=IwAR0gAz7Eluxhc-
53LX_gVL5CaPo5MFspP2HsKES88rojyyqoV59vR5gtbJo https://www.worldbank.org/en/results/2018/04/03/stronger-open-trade-policies-enables-
economic-growth-for-all
https://www.economicshelp.org/blog/glossary/banks/
https://www.youtube.com/watch?v=JOuvMBy-U-Q
https://www.ebf.eu/facts-and-figures/structure-and-economic-contribution-of-the-banking-sector/
https://www.coursehero.com/file/23218010/History-of-the-Philippine-Banking/
https://www.yourarticlelibrary.com/banking/commercial-banks/4-ways-in-which-the-banking-
system-helps-in-economic-growth/37851 https://www.imoney.ph/articles/banking-guide/bank-system-philippines/?
fbclid=IwAR0qNBAr2n0YSjvypISmU-fT6J1TpHmE6FPYlIjxsKJKSTe5ndQWTVudtcE
https://www.economicshelp.org/blog/7102/economics/would-an-increase-in-savings-help-the-
economy/#:~:text=A%20rise%20in%20the%20savings,significant%20impact%20on%20economic
%20activity.&text=If%20people%20save%20more%2C%20it,consumption%20over%20long%2Dterm
%20investment.
https://www.worldbank.org/en/results/2018/04/03/stronger-open-trade-policies-enables-
economic-growth-for-all