PESTEL analysis of the Philippines
This detailed PESTEL analysis of the Philippines aims to examine the political, economic, social, technological, environmental, and legal factors that shape the Philippines today. The Philippines is officially known as the Republic of the Philippines. It is a country of more than 7,640 Islands.
Political factors affecting the Philippines
The Philippines has a presidential system with the president being the head of state, the head of government, and the commander-in-chief of the armed forces. It is a unitary state; however, the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) is mostly free from the control of the national government.
The Philippines is an active member of the UN. It is also an active member of a number of prestigious organisations e.g. the East Asia Summit (EAS), the Asia-Pacific Economic Cooperation (APEC), the World Bank, World Trade Organisation (WTO), and the Group of 24. It has also put efforts in place to obtain the observer status of the Organisation of Islamic Cooperation (OIC). It maintains very good trade and diplomatic relations with China, the USA, and many other countries.
The political environment is relatively stable; however, nepotism, controversial anti-drugs campaigns, and extra-judicial killings of suspects in the Philippines have drawn a lot of local and international criticisms. Though the government has launched wars, corruption still remains a major problem in the country (Mourdoukoutas, 2018).
Economic factors affecting the Philippines
The Philippines is the 38th largest economy in the world. Its GDP in 2018 was worth $330.91 billion (Trading Economics, 2019). The industries that dominate the country’s economy are travel and tourism, agriculture, manufacturing, mining and mineral processing, pharmaceuticals, shipbuilding, and electronics. The Philippines’ top trading partners are China, Hong Kong, the United States, Japan, Germany, South Korea, and Thailand.
The Philippines is a very good country to invest because of the low business set-up cost, strategic location, and the availability of a top-notch workforce. Foreign direct investment (FDI) to the country was worth $8.7 billion in 2017; however, it fell to $6.46 billion in 2018 which was below the target set by the Central Bank of Philippines (Santander, 2019).
As of December 2019, corporate tax rate in the Philippines is 30% for both resident and non-resident corporations, charged against their net income (Trading Economics, 2019). The individual tax rate varies from 5% to 32% depending on the income generated both in the country and abroad.
Social factors affecting the Philippines
Filipinos are generally very friendly, hospitable, helpful, and optimistic people. They are also well-known for their positive attitude and the sense of humour. Many of them do their best and go extra miles in making visitors feel almost like VIP’s. No wonder why many tourists visit the country time and again.
Both Filipino and English are the official languages in the Philippines; however, about 87 dialects are spoken all over the country. Christianity is the major religion, and Islam is in the 2nd position. As of January 2020, the population of the country is approximately 108 million. The life expectancy for men is 66 years, while 73 years for women (BBC, 2018).
An educated, highly trainable, and English-speaking work force has made it easy for foreign companies to run their operations in the Philippines. However, the country is not without some social challenges e.g. corruption, poverty, drug abuse, extra-judicial killings, and lack of job opportunities to name but a few.
Technological factors affecting the Philippines
The Philippines has made rapid progress over the years in terms of technology and innovation. Its IT spending is projected to reach US$8.1 billion by 2023 (ITA, 2019). The demand for tech products, services, and automation across sectors is on the rise. A growing middle class and young population and their love for tech products and services have been the key drivers behind this growing demand.
The use of smartphones and social media has permeated every socio income class in the Philippines. Educational organisations have blended traditional learning methods with technologies to increase the digital literacy of the average Filipino. In fact, the country has a very tech-savvy work force that has made the operations of multinational companies easier in the country. However, many analysts argue that the government should invest more on advanced science, technology, engineering, and mathematics (STEM) education.
Environmental factors affecting the Philippines
More than 7,640 Islands, stunning beaches, water parks, world-class malls, hotels, emerald rice fields, crowded megacities, lurking volcanoes, and many other attractions mesmerise tourists in the Philippines. However, the country is constantly faced with some environmental challenges. For instance, it is prone to earthquakes, typhoons and volcanic eruptions. It loses around $6.4 billion each year due to natural disasters and 20 typhoons on average hit it every year. Other environmental challenges to mention are air and water pollution, illegal mining, deforestation, coastal erosion, and loss of biodiversity.
Legal factors affecting the Philippines
The last factor to discuss in the PESTEL analysis of the Philippines is the legal environment. The constitution of 1987 is the main source of law. The Labour Code of the Philippines, enacted in 1974 governs the employment practices and labour relations in the country. It provides guidance on employment issues such as hiring, firing, holiday pay, retirement pay, working hours, overtime, collective bargaining etc (GOVPH, 2020).
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Last update: 01 January 2020
BBC (2018) Philippines country profile, available at: https://www.bbc.co.uk/news/world-asia-15521300 (accessed 25 December 2019)
CNN Philippines (2016) More islands, more fun in PH, http://nine.cnnphilippines.com/videos/2016/02/20/More-islands-more-fun-in-PH.html (accessed 01 January 2020)
GOVPH (2020) Labor Code of the Philippines, available at:https://blr.dole.gov.ph/2014/12/11/labor-code-of-the-philippines/ (accessed 01 January 2020)
ITA (2019) Philippines – Information and Communications Technology, available at: https://www.export.gov/article?id=Philippines-Information-and-Communications-Technology (accessed 25 December 2019)
Mourdoukoutas, P. (2018) Corruption is still a big problem in the Philippines, available at: https://www.forbes.com/sites/panosmourdoukoutas/2018/02/21/the-philippines-is-getting-more-corrupt-under-duterte/#353b4f53256a (01 January 2020)
Santander (2019) Philippines: foreign investment, available at: https://santandertrade.com/en/portal/establish-overseas/philippines/foreign-investment?&actualiser_id_banque=oui&id_banque=17&memoriser_choix=memoriser (accessed 25 December 2019)
Trading Economics (2019) The Philippines GDP, available at: https://tradingeconomics.com/philippines/gdp (accessed 25 December 2019)
Photo credit: Pixabay
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.