Republic of the Philippines

Investor Presentation

March 2018

2

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3

Table of Contents

Key Terms of the Inaugural Panda Bond….............................................................................4

Philippines – China Relations…..............................................................................................6

Strengthening Credit Profile……………………….......................................................................9

Favorable Macroeconomic Trends.........................................................................................12

Strong External Position….....................................................................................................17

Sound and Stable Financial System…………….......................................................................20

Sound and Strengthening Government Finances..................................................................22

Accelerating Infrastructure Development.............................................................................29

Annex: Socioeconomic Agenda of the Duterte Administration..............................................32

Key Terms of the Inaugural Panda Bond

5

Key Terms of the Inaugural Panda Bond

Offering Summary

Issuer Republic of the Philippines

Issue Size RMB 1.46 bn

Issuer RatingAAA National Scale by China Lianhe Credit Rating Co., Ltd;Baa2 by Moody’s , BBB by S&P, and BBB by Fitch

Issue Date 20th Mar 2018

Book Open Period 9:00am - 16:30pm on 20th Mar 2018

Tenor 3 year

Denoms RMB 1 million * 1 million

Trading and Custody

CIBM Trading; Bond Connect Eligible; PRC Law; Shanghai Clearing House

Settlement Date 23rd Mar 2018

Custody Institution Shanghai Clearing House

Philippines – China Relations

7

Trade between the two countries is expected to further flourish

Philippines – China Investment and Trade Relations

Year Total Export Import Balance of Trade

2014 18.3 8.5 9.9 (1.4)

2015 17.7 6.2 11.5 (5.3)

2016 21.9 6.4 15.6 (9.2)

2017 23.7 6.9 16.8 (9.9)

Note: Details may not add up to total due to roundingSource: Philippine Statistics Authority (PSA)

Robust Philippines-China bilateral merchandise trade

(USD bn)

Major investments between China and the Philippines

Filipino Investors in China Chinese Investors in the Philippines

• San Miguel Group - Beer• Liwayway (China) Co., Ltd - snack food• Solid Industrial (Shenzhen) Co., Ltd - electronic• SM City in China – retail • URC China Commercial Co., Ltd – biscuits• Philippine Airlines Shanghai Office – airline• Metrobank – financials• Eton Properties• Jollibee/Yong He King• Bench Body

• Shanghai Electric Transfer Engineering(Phil)• Dalian Wanyang Heavy Industries Co.,Ltd.• New Hope Central Luzon Agriculture Inc• HLD Clark Steel Pipe Co. Inc.• China State Construction Engineering Corporation• Wuhan Fiberhome International Technologies Phils., Inc.• National Grid Corporation of the Philippines• Sinosteel (Philippines) Co. Ltd. Inc

0.6

10.89.2

27.6

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2015 2016 Jan-Nov 2016 Jan-Nov 2017

1,775.8%

199.2%

Strong growth of Chinese FDIs

Net equity FDI (USD mn) and y-o-y growth (%)

Source: Department of Trade and Industry

Source: Bangko Sentral ng Pilipinas (BSP)

8

Revitalized ties brings promise of massive development deals

Continued Progress in Expanding Philippine Ties with China

President Duterte participated in the Belt and Road Forum in May 2017

The PHP8-9tr infrastructure program of the Duterte Administration will remove transport bottlenecks and promote transport connectivity allowing the Philippines to fully benefit from the BRI

The Roll-on/Roll-off (RORO) Modernization Program of the government, designed to improve and promote the inter-island sea transportation will complement the country’s capability to take advantage of the BRI

Chinese financing and expertise are being tapped to accelerate development of infrastructure projects.

In Dec 2016, the Phil. Senate ratified the membership of the Philippines to the Asian Infrastructure Investment Bank (AIIB) . DPWH’s USD500mn Metro Manila Flood Management Project will be co-financed by AIIB and World Bank

In 2017, the following projects have been approved by the NEDA Board, which is chaired by President Duterte, for Chinese official development assistance: Chico River Pump Irrigation (USD55.1mn), New Kaliwa Dam (USD 222.4mn), PNR Long-haul Rail (Calamba-Bicol) (USD3.5bn), Binondo-intramuros Bridge (USD 91.2mn),

Estrella-Panteleon Bridge (USD27.3mn)

High Level Bilateral

Meetings

President Rodrigo Duterte’s state visit to China in Oct 2016 yielded USD24bn worth of aid and investment pledges

Chinese Premier Li Keqiang and President Duterte met in November 2017 during the ASEAN Meeting in Manila

Increased

Investments from

China

More than 20 infrastructure projects eyed for Chinese funding

Developing Export

Partner

China has resumed giving permits to Philippine companies exporting tropical fruits to China

Booming Tourist

Activity

Average number of

visa applications

processed by the

Philippine Embassy in

China is now at 1,400

per day compared to

less than 500 visa

applications in 2016

FY2017 visitor arrivals

from China reached a

total of 968K an

increase of 43.3%

Strengthening bilateral relations

The Belt and Road Initiative (BRI)

Strengthening Credit Profile

10

Duterte Administration: a Reform-Minded Leadership Focused on Delivering Results

The Philippines ranked No. 1 among the “Best Countries to

Invest In” per US News.

Transformative policies anchored on domestic-led growth and continuing structural reforms

High GDP growth of 6.7% in 2017 and manageable inflation of 3.2% in 2017.

Continued sound macroeconomic

management yields strong results

Fiscal initiatives strengthen public

finances and provide growth

impetus

Massive infrastructure development

Sustained reform momentum

Established a system that promotes ease of access to and efficient

government services.

Source: NEDA Presentation entitled “Infrastructure Boosts Philippine Economy”, PIP 2017-2022 Working Draft

Invest heavily in infrastructure through “Build Build Build” program.

Firm commitment to fiscal sustainability.

Long history of prudent fiscal management.

Huge increases in the 2018 budget of two major infrastructure agencies.

The Public Investment Program (PIP) 2017-2022 contains the

list of priority programs and projects worth over USD150bn to

accelerate infrastructure development.

Launched the Capital Markets Development Roadmap.

Structural current account flows from remittances, BPO revenues and

revenues from tourism sector.

Further liberalized FX rules.

Sound banking system.

Healthy external payments position.

Early enactment of national budget.

Improving the business environment through

streamlined processes.

Simplified Implementing Rules and Regulations (IRRs) of the Government

Procurement Reform Act.

2018 National Budget, largest national budget thus far, to

sustain robust and inclusive growth.

Total approved investments rose 32.9% to PHP911.3bn in

2017.

FY2017 national government disbursements was up

by 10.8% yoy.

11

Metric 2013 2014 2015 2016 2017

Credit Ratings• Fitch• Moody’s• S&P

BBB-/stable

Baa3/positive

BBB-/stable

BBB-/stable

Baa2/stable

BBB/stable

BBB-/positive

Baa2/stable

BBB/stable

BBB-/positive

Baa2/stable

BBB/stable

BBB/stable

Baa2/stable

BBB/stable

Real GDP Growth Rate (%) 7.1 6.1 6.1 6.9 6.7

GDP Per Capita* (USD), PPP Concept 6,546 6,953 7,332 7,810 8,297

GNI Per Capita* (USD), PPP Concept 7,953 8,426 8,869 9,401 9,972

Inflation Rate (2006 = 100) (%) 3.0 4.1 1.4 1.8 3.2

National Government Interest Payments(as % of Revenues)

18.8 16.8 14.7 13.9 12.6

Fiscal Balance (as % of GDP) -1.4 -0.6 -0.9 -2.4 -2.2

Tax Revenue (as % of GDP) 13.3 13.6 13.6 13.7 15.7

General Government Debt (as % of GDP) 39.2 36.4 36.2 34.6 36.4 (end-Jun)

Gross International Reserves (USD billion) 83.2 79.5 80.7 80.7 81.6

‒ Import Cover (months) 11.6 9.9 9.9 8.8 8.3

Overseas Filipinos’ Cash Remittances (USD billion)

23.0 24.6 25.6 26.9 28.1

Foreign Direct Investments (USD billion) 3.7 5.7 5.6 8.0 8.7 (Jan-Nov)

Current Account (as % of GDP) 4.2 3.8 2.5 -0.3 0.0 (Jan-Sep)

External Debt (as % of GDP) 28.9 27.3 26.5 24.5 23.4 (Jan-Sep)

Sustained Strengthening of Philippines Credit Profile

* At current pricesNA not availableSource: BSP’s Selected Economic and Financial Indicators, DOF, BTr

Favorable Macroeconomic Trends

13

7.16.9

6.7

6.2

5.0

4.2

3.3

6.46.7

6.9 6.8

5.1

5.9

3.9

7.4

6.7 6.66.3

5.35.0

3.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

India(BBB-/Baa2/BBB-)

Philippines(BBB/Baa2/BBB)

China(A+/A1/A+)

Vietnam(BB-/B1/BB-)

Indonesia(BBB-/Baa3/BBB)

Malaysia(A-/A3/A-)

Thailand(BBB+/Baa1/BBB+)

2016 2017 2018P

Philippines is one of the fastest growing economies in Asia

GDP growth of selected Asian economies

Rating: S&P/Moody’s/FitchIMF EstimatesSource: PSA; International Monetary Fund (IMF); Bloomberg L.P.

14

2.5 3.3 4.0 4.4 4.8 4.00.3

0.3

0.70.8

0.90.8

0.40.7

2.94.0

5.7

2.5

-0.3

0.2

-1.2-3.1

-4.5

-0.6

1990-1999 2000-2009 2010-2017 2015 2016 2017

Consumption Government Investment Net Exports Statistical Discrepancy

2.8

4.5

6.36.1

6.9

6.7

0.2 0.4 0.1 0.0 -0.10.3

0.71.2

2.42.2

2.8 2.51.8

2.8

3.83.9

4.2 3.9

1990-1999 2000-2009 2010-2017 2015 2016 2017

Agriculture Industry Services

69.3

69.3

68.7

10.3

10.5

10.5

24.2

28.0

28.6

-3.8

-7.8

-7.8

Household Expenditure Government Spending

Capital Formation Net ExportsSource: PSA National AccountsNote: Numbers may not add up due to rounding

Capital formation remains strong

Gross capital formation (PHP bn, constant prices)

… and is an increasingly key driver of growth

GDP breakdown by expenditure (%)

2011 2012 2013 2014 2015 2016 2017

Construction Durable Equipment Others

+2.8% -4.3%+27.9% +4.2%

Consumption and services as major drivers of growth

GDP breakdown by component

1,5531,490

1,1651,217

1,838

+18.4%

Contribution to growth: supply side (%)Contribution to growth: demand (%)

2,275

2016

2015

+9.0%

2017

2.8

4.5

6.3 6.1

6.96.7

2,480

Economic Rebalancing Towards a More Broad-Based Growth

15

1.12.0

3.23.7

5.7 5.6

8.07.3

8.7

0.0

2.0

4.0

6.0

8.0

10.0

2010 2011 2012 2013 2014 2015 2016 Jan-Nov2016

Jan-Nov2017

• Based on 2018 US News and World Report***,ROP is considered #1 out of 80 countries to investin (survey of US business decision makers)

• ROP is in the top 15 investment destinations ofchoice by multinationals for 2017-2019 based onUNCTAD’s World Investment Report 2017.

• 2017 Investment Climate Statements of the USState Department’s Bureau of Economic andBusiness Affairs cites ROP’s increased attractivenessas FDI destination

Rising Investments Highlight Confidence in Philippine Growth Prospects

Source: PSA, NEDA, BSP, UNCTAD, Bloomberg; * BOP Concept; ** Investment approved by the Philippines’ Investment Promotion Agencies – Board of Investments (BOI), Clark Development Corporation (CDC), Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), Authority of the Freeport Area of Bataan (AFAB), BOI-Autonomous Region of Muslim Mindanao (BOI-ARMM), and Cagayan Economic Zone Authority (CEZA); ***Developed by US News and World Report together with Y&R's BAV Group and The Wharton School of the University of Pennsylvania

Average Growth of FDI, 2013-2016 (%)*

Sustained inflows from both foreign and local investors and bright prospects highlight confidence in ROP’s fundamentals

Net Foreign Direct Investment (FDI) Flows* (USD bn)

-20.3

-7.9

11.2 12.817.1

27.4

-30

-20

-10

0

10

20

30

Indonesia Thailand Vietnam Malaysia India Philippines

542.7

747.1697.7

754.0 755.9686.9 686.0

911.3

2010 2011 2012 2013 2014 2015 2016 2017

Investors continue to place their bets on ROP

+32.9%

YOY growth

Total Approved Foreign and Filipino Investments (PHP bn)

+20.1%

YOY growth

16

3.7

3.1

2.5

2.2

2.2

2.3

2.0

1.9

1.5

1.5

1.4

3.1

3.3

2.1

1.0

1.7

1.3

0.9

3.0

1.6

1.7

1.5

Iceland (A3/A/A)

Kazakhstan (Baa3/BBB-/BBB)

Panama (Baa2/BBB/BBB)

Peru (A3/BBB+/BBB+)

Thailand (Baa1/BBB+/BBB+)

Spain (Baa2/BBB+/BBB+)

Mexico (A3/BBB+/BBB+)

Uruguay (Baa2/BBB/BBB-)

Philippines (Baa2/BBB/BBB)

Colombia (Baa2/BBB-/BBB)

Poland (A2/BBB+/A-) CPI volatility GDP volatility

5.5

2.9

8.3

4.2

3.8

4.6

3.23.0

4.1

1.4 1.8

3.24.2 4.3 3.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Jan-Feb2018

2018F 2019F

Inflation Target Band Headline CPI

Sustained Manageable Inflation Environment

Source: BSP; PSA

Inflation remains benign demonstrating monetary policy credibility

Headline CPI (yoy, %), 2006-100

Inflation condition supportive of growth

GDP, CPI volatility (20Y Standard Deviation, 2001-2020F)

Source: IMF World Economic Outlook, October 2017Rating: Moody’s/S&P/Fitch

Strong External Position

18Sources: BSP, IBPAP,NEDA, Department of Tourism

3.53.9

4.34.7 4.8

5.46.0

6.6

7.4

2.5 3.0

3.8 4.4

4.8 5.0 4.8

6.6

2010 2011 2012 2013 2014 2015 2016 2017 2018P

Arrivals Receipts

3.44.5 6.1 7.1 8.9 11 13.2 15.8 18.0 20.5 22.9 24.5 38.9

236 298 371 424527

640777 858

958 1,0441,146

1,250

1,800

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017P 2022P

Revenues Employment

Structural and ‘Sticky’ Current Account Flows

BPO – a strong driver of employment and revenues

BPO employment (‘000s) and revenues (USD bn)

Sustained growth of remittances over the years

Overseas Filipinos' cash remittances (USD bn)

Tourism industry providing key support to the current account

International visitor receipts (USD bn) and arrivals (mn)

+11.0% YOY growth

arrivals in 2017

• Business Process Outsourcing (BPO) and increasingly tourism sector act as additional, strong economic engines,helping ensure resiliency of ROP’s external payments position against external stresses

12.814.5

16.4 17.3 18.8 20.1 21.4 23.0 24.6 25.6 26.9 28.1 29.2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018P

+4.3% YOY growth in

2017

19Source: BSP, Bloomberg

Reserve buffer provides protection against external payments shocks…

FX reserves (USD bn) and months of import cover

… while helping smoothen volatility in the foreign exchange market by enabling the necessary adjustments in a continued

volatile global environment

Implied Volatility (YOY %, as of March 9, 2018)

Sustained decline in external debt-to-GDP ratio underscores the health of external finances

External debt (USD bn) and external debt/GDP (%)

Healthy External Finances Shield the Economy from External Shocks

18.523.0

33.837.6

44.2

62.4

75.3

83.8 83.279.5 80.7 80.7 81.6

80.6

4.65.1

6.7 6.4

9.2

10.4

11.6

11.5 11.6

9.9 9.98.8

8.3 8.2

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Feb-18

International reserves Import cover

61.6 61.4

66.5 65.2 64.7

73.6 75.6 80.0 78.5 77.7 77.5 74.872.4

59.7

50.244.5

37.6 38.4 36.933.7 32.0 28.9 27.3 26.5 24.5 23.4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jan - Sep 2017

External Debt External Debt Ratio

9.48.8 8.6

7.9

6.1 5.8 5.6

Korean WonJapanese

YenMalaysianRinggit

IndonesiaRupiah

PhilippinePeso Thai Baht

ChineseRenminbi

Sound and Stable Financial System

21

15.0

15.7

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sep2017Solo basis Consolidated basis

7,612

8,863

1.9 1.7

0

1

2

3

4

5

6

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Loans outstanding (in PHP bn, LHS) NPL, Gross ratio (in %, RHS)

BSP Regulatory Requirement: 10%

International Standard: 8%

13,59115,161

10,507

11,725

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Assets (in PHP bn) Deposits (in PHP bn)

Solid asset growth

Total Asset and Deposit Levels (PHP bn)

Improved quality of loan portfolio

Total Loan Portfolio (PHP bn) and NPL ratio (%)

Strong capitalization well above international norms

Capital adequacy ratio (%) of U/KBs *

Source: BSPNote: Except otherwise indicated, statistics refers to Philippine Banking System

* UK/Bs – Universal and Commercial Bank

Sustained profitability

Net Profit and ROE

154.3 167.7

10.5 10.2

0

2

4

6

8

10

12

14

020406080

100120140160180

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Annualized Net Profit (in PHP bn, LHS) ROE (in %, RHS)

+11.6% YOY growth

in deposits (Dec 2017)

Sound banking system effectively funds productive sectors

Sound and Strengthening Government Finances

23

Double-digit revenue growth due to intensified implementation of administrative reforms

Note: Some values may not sum up to exact figure due to roundingSource: Bureau of the Treasury (BTr) and Department of Budget and Management (DBM)

National Government Fiscal Performance

Actual

Jan-Dec 2017 Jan-Dec 20172018

Program

PHP bn YoY Growth (%) % of GDP PHP bn

Total Revenues 2,473.1 12.6 15.72,788.9

15.9% of GDP12.8% YoY Growth

Tax Revenues 2,250.7 13.6 14.2 2,620.1

Bureau of Internal Revenues 1,772.3 13.1 11.2 2,025.4

Bureau of Customs 458.2 15.6 2.9 577.9

Non-Tax Revenues 222.4 3.2 1.4 166.8

Bureau of the Treasury 99.9 (1.8) 0.6 55.8

Privatization 0.8 26.3 0.0 2.0

Expenditure 2,823.8 10.8 17.93,312.6

18.9% of GDP17.3% YoY Growth

Surplus/(Deficit) (350.6) (0.8) (2.2) （523.7）（3.0) % of GDP

Primary Surplus/(Deficit) (40.1) (18.1) (0.3)

Sound Fiscal Position Creating Fiscal Space for Productive Public Investments

24

68.5

61.4

53.9 54.7 54.852.4 51 51.5

49.2

45.4 44.742.1 42.1

59.2

51.6

44.2 44.2 44.343.5 41.4

40.6 39.336.4 36.2

34.636.4*

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National Gov't Debt General Gov't Debt

Sustained decline in debt/GDP ratio

NG Debt and GG Debt (% of GDP)

*as of end-June 2017Sources: DOF, BTr

Long History of Prudent Fiscal Management Supports Growth Momentum

25

Focus on Social Services to empower human capital development

2018 and 2017 National Budget by Sector, PHP bn and % Share

Infrastructure and Other Capital Outlays get a big allocation

2018 National Budget by Expense Class, PHP bn and % Share

Huge increases in the budget of two major

infrastructure agencies

*Includes Philippine Health Insurance CorporationSource: DBM

Department2018 GAA (PHPbn)

2017 GAA (PHPbn)

Share to Total Budget(%)

2018 2017

Social Services 1,425.7 1,351.5 38.8 40.3

Economic Services 1,153.6 922.9 30.6 27.5

General Public Services 655.4 575.4 17.4 17.2

Debt Burden 370.8 351.6 9.9 10.5

Defense 161.5 148.7 4.3 4.4

Total 3,767.0 3,350.0 100 100

Note: Rounding off may not add up to total

Agency2018 GAA(PHPbn)

2017 GAA (PHPbn)

Growth Rate (%)

(2018 vs. 2017 )

DPWH 650.9 467.7 39.2

DOTr 68.1 55.7 22.3

Accelerating human capital development

Agency2018 GAA (PHPbn)

Programs/Projects

DepEd 580.6Implementation of K-to-12 Program, creation of teaching and non-teaching positions

SUCs 65.2 Operations and improvements of public education institutions

CHED 50.5 Scholarships, grants, and subsidies for higher education

TESDA 7.7Training of competitive and technically-proficient students who are employable

DOH* 170.4

Health for All Agenda: Doctors to the Barrios, construction of treatment and rehabilitation centers in provinces, improvement of existing health facilities, free services to the poor in government hospitals

DSWD 141.9Conditional Cash Transfer Program, social pension for indigent senior citizens, supplementary feeding program

Fiscal Policy Focused on Closing the Infrastructure Gap and Enhancing Human Capital

26

The borrowing strategy incorporates debt management objectives in meeting the financing program

National Government Financing 2015 – 2018

Source: Bureau of the Treasury

Strategic Financing Program

Particulars (in millions PHP) Actual 2015 Actual 2016 Actual 2017Program

2017Program

2018

NET FINANCING 242,851 330,939 758,929 584,780 634,863

External (Net) 64,782 -24,113 27,569 43,170 116,735

External (Gross) 189,538 149,523 168,103 182,770 179,720

Less: Amortization 124,756 173,636 140,534 139,600 62,985

Domestic (Net) 178,069 355,052 731,360 541,610 518,128

Domestic (Gross) 420,072 357,497 733,569 544,969 523,158

Treasury Bills -17,303 23,501 26,433 54,969 -

Fixed Rate T Bonds 437,375 333,996 707,136 490,000 -

Less: Net Amortization 242,003 2,445 2,209 3,359 5,030

Gross Borrowing 609,610 507,020 901,672 727,739 702,878

Total Amortization 366,759 176,081 142,743 142,959 68,015

Financing Mix (Domestic : External) 69:31 71:29 81:19 75:25 74:26

27

52 56 56 59 57 56 58 5864 66 67 65 65 67

48 4444 41

43 4442

42 36 34 3335 35

33

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

External Domestic

30

19

10 8 9 7 7 7 7

41

26

20 14 1210 10 10

18

29

54

7078 79 82 83 84

75

2005 2010 2011 2012 2013 2014 2015 2016 2017

Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr

Ample domestic liquidity allows ROP to source majority of its financing needs from domestic market minimizing FX risks

Long-dated debt profile reduces refinancing risk

Unless otherwise indicated, graphs pertain to National Government (NG) debtSource: Bureau of the Treasury, BSP

Total debt breakdown (%)

Domestic debt breakdown (%) External debt breakdown (%)

10 4

9096

99.1 100 100 100 100 100 100 100

2003 2005 2010 2011 2012 2013 2014 2015 2016 2017

Long-term: >10yrs Medium-term: 1yr to 10yr Short-term: <1yr

* End Jun 2017

Steady decline in the Republic’s interest service burden

Interest payments / NG revenue (%) and Interest payments / NG expenditure (%)

35.436.9 36.7

31.7

23.6 22.624.8 24.4

20.5 20.418.8

16.8 14.7 13.912.6

27.029.2

31.129.7

23.321.4

19.6 19.317.9 17.6 17.2 16.2

13.9

11.9

11.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Interest Payments/Revenue Interest Payments/Expenditure

Fiscal Deficit is Increasingly being Funded from Domestic Sources

28

Game Changing Tax Reform Supports Expansionary Fiscal Policy

Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN)

Package 1A of the Comprehensive Tax Reform Package, or TRAIN (RA No. 10963) was implemented on 1 Jan 2018

Seeks to correct structural weaknesses in the current tax system to make it simpler, fairer, and more efficient and to generate stable revenue stream to upgrade infrastructure and reduce poverty. It includes mitigating measures designed to redistribute some of the gains to the poor

99% of the country’s population is expected to benefit from income tax cuts and tax exemption

30% of revenues earmarked for social protection programs, eg. cash transfers for the poorest 10mn households and social welfare card

70% of the incremental revenues to develop the country’s infrastructure

Salient Features of Package 1

Lowered personal income tax (PIT) - PIT exemptions for the first PHP250th taxable income and significant PIT cuts for other tax brackets

Simplified estate and donor’s tax to 6% flat rate

Increased excise tax on automobiles

Increased excise tax on petroleum products

Introduced excise tax on sugar-sweetened beverages using caloric and non-caloric sweeteners, and high fructose corn syrup

Introduced cosmetic excise tax of 5%

Increased excise tax on tobacco products

Simplified and reduced exemptions on Value-Added Tax (VAT) system

Revenue Impact

Package 1B: PHP39bn for 2018

Package 1A and 1B: PHP129bn for 2018

Package 2: revenue neutral

Package 2 Plus: PHP60bn and to grow 10% every year

Package 3: revenue neutral

Package 4: revenue neutral

Other Reforms on the Pipeline

Package 1B (one-third of Package 1) involves provisions on estate and general tax amnesty, adjustments in the Motor Vehicle Users Charge, amendments to the bank secrecy law and automatic exchange of information. Reduce estate tax to 6% for properties up to 1mn hectares. Congress committed to pass Package 1B by Q1 2018

Package 2 involves Corporate taxation and fiscal incentives

Lower Corporate Income Tax (CIT) rate to 25% from 30% while rationalizing fiscal incentives to make it performance-based, targeted, time-bound and transparent. Submitted to the House of Representatives in Jan 2018

Package 2 Plus involves increasing taxes on mining and coal and a revisit of alcohol and tobacco taxes

Package 3 involves property taxation to rationalize capital gains on properties and other property taxes and fees

Package 4 involves financial and capital income taxation which will align different transaction rates of financial instruments

TRAIN is a sound continuation of decades of reforms and a testament of solid support for the President’s reform agenda

Year Amount (PHPbn)

Package 1A

2018 90

2019 144

2020 188

2021 187

2022 179

Total 788

Accelerating Infrastructure Development

30

Public Investment Program (PIP) 2017-2022

Biggest, Boldest and Most Ambitious Infrastructure Program

Source: DBM Medium Term Fiscal Program as approved during the 170th DBCC Meeting on June 9, 2017 and 171st DBCC Meeting on December 22, 2017, DBM Presentation dated March 9, 2018 at the Philippine Economic Briefing in Davao (for updated 2017 and 2018 infrastructure spending program on an obligation basis), NEDA Presentation entitled “Infrastructure Boosts Philippine Economy” dated January 23, 2018; *PIP 2017-2022 Working Draft dated July 25, 2017; **9 projects without estimated cost yet; ***Purely private investments, corporate funds of GOCCs and internally generated funds of GFIs; Note: Exchange Rate Used is Midpoint of USD49-52 for 2018 DBCC Exchange Rate Assumption, December 22, 2017

Higher investment in

infrastructure is expected to

usher in the Golden Age of

Infrastructure

The country’s development partners are actively extending assistance to

fund the Build Build Build Program

Expanded and newly cemented relations emerging as major

contributors to the game changing infrastructure plan of the

government

4,490projects under the PIP 2017-2022* (USD150bn+)

75 Infrastructure

Flagship Projects

(USD45.3bn)**

Financing the Priority Infrastructure Projects 2017-2022

Mode of Implementation

No. of Projects Investment Requirements

(USD bn)

NG 4,095 95.5

ODA 68 19.9

PPP 39 25.3

Others*** 227 12.4

To be Determined 61 0.1

TOTAL 4,490 153.2

Infrastructure Spending Program (% of GDP)

4.2

5.1

5.4

5.8

5.9

6.1

5.4

6.1

6.8

6.9

6.9

7.3

2017

2018

2019

2020

2021

2022

Cash basis Obligation basis

31

Completed and

Operational4

Under Construction

8

Under Pre-

construction

416

12

4

7

AwardedUSD6.1bn

Under ProcurementUSD10mn

For Evaluation & Approval

Under Development

Under Review By Implementing Agencies

USD1.3bn

Robust Pipeline of Critical Infrastructure Projects75 Flagship Projects

High-impact Infrastructure Projects

- of which 23 projects worth over USD20bn

have been approved by the NEDA Board

Source: DBM, NEDA Presentation entitled “Infrastructure Boosts Philippine Economy” dated January 23, 2018; PPP Center Status

of PPP Projects as of March 7, 2018; *Amount does not include cost of 11 projects without estimate yet

Acronyms: National Economic and Development Authority (NEDA),Department of Public Works and Highways (DPWH), Department of Transportation (DOTr), National Irrigation Administration (NIA), Department of Agriculture (DA), Bases Conversion and Development Authority (BCDA), Department of Energy (DOE), Metropolitan Waterworks and Sewerage System (MWSS), Cebu Port Authority (CPA), Autonomous Region in Muslim Mindanao (ARMM)Note: Exchange Rate Used is Midpoint of USD49-52 of DBCC Exchange Rate Assumption for 2018, December 22, 2017

Agency Type of Project No. of

Projects

Amount

(USD mn)

DPWH Roads, Bridges and Flood control 31 17,386.2

DOTr Airport, Rail, Mass Transit & Ports 14 22,357.9

NIA Water 8 1,140.8

DA Ports 3 298.7

BCDA New Cities, Mass Transit, Rail & Airport 5 3,536.3

DOE Energy 2 14.8

MWSS, CPA, ARMM Water, Ports, Roads 3 595.1

Sub-Total 66 45,329.7

Cost to be Determined

DPWH Roads, Bridges and Flood control 5 TBD

BCDA New Cities 1 TBD

DOTr Airport, Rail, Mass Transit & Ports 1 TBD

DOE Energy 2 TBD

Sub-Total 9 TBD

69.5km Malolos-Clark Railway Project /PNR North 2 (USD4,186.6mn)

25km Metro Manila Subway Project (USD7,068.5mn)

72km PNR South Commuter Line Tutuban-Los Baños(USD2,457.4mn)

581km PNR Long-haul from Los Baños to Bicol, Sorsogon, Batangas (USD3,471.3mn)

Improving Growth Corridors in Mindanao Road Sector Project (USD419.7mn)

102.3km Mindanao Railway: Tagum-Davao City-DigosSegment (USD698.2mn)

Select NEDA Board Approved Flagship Infrastructure

Projects

Status of PPP projects

30projects

USD7.4bn*

Annex: Socioeconomic Agenda of the Duterte Administration

33

Strong mandate from people ensures political capital to advance transformational reforms that will move the economy to even higher growth plane and improve welfare of Filipinos. Action-oriented, results-driven leadership style of the President boosts prospects for a more robust investment climate characterized by common compliance to law and order in a more conducive regulatory environment

10-Point Socioeconomic Agenda of the Duterte Administration

ACCELERATE

INFRASTRUCTURE

SPENDING

INSTITUTE PROGRESSIVE

TAX REFORM

INCREASE

COMPETITIVENESS & EASE

OF DOING BUSINESS

CONTINUE SUCCESSFUL

MACROECONOMIC

POLICIES

PROMOTE RURAL

DEVELOPMENT

IMPROVE SOCIAL

PROTECTION

PROGRAMS

INVEST IN HUMAN CAPITALPROMOTE SCIENCE,

TECHNOLOGY & ARTS

ENSURE SECURITY OF LAND

TENURE & ADDRESS

BOTTLENECKS IN LAND

MANAGEMENT

STRENGTHEN

IMPLEMENTATION OF

RESPONSIBLE PARENTHOOD

& RH LAW

34

Philippine Development Plan Framework for Long Term Growth

Source: NEDA

The Philippine Development Plan (PDP) 2017-2022 serves as policy anchor to realize the national long-term visions of inclusive growth, a high-trust society, and a globally-competitive knowledge economy.

The PDP is anchored on Ambisyon Natin 2040 - which is the collective vision of the Filipino people over the next 25 years

Republic of the Philippines

Investor Presentation

March 2018