Japan advises Philippines on manufacturing

Rating and Investment Information Inc. (R&I) of Japan said the Philippines must revitalize industry and raise the investment rate to create an economy propelled by two drivers, investment and consumption.

"Promoting investment and stimulating industry, however, continue to be major challenges. R&I will pay close attention to whether the Philippines can upgrade investment conditions while maintaining fiscal discipline," it said.

R&I said that in 2009, as neigh-boring countries fell into negative growth, the Philippine economy posted positive growth of 1.1 percent.

"More than 10 percent of the country's GDP is remitted home by Filipino nationals living abroad, and such remittances remained strong even in 2009, rising by 5.6 percent year-on-year. This supports private consumption," R&I said.

"Note that the economy, heavily reliant on consumption, showed relative resistance as external demand dropped. Though consumption is strong, infrastructure conditions are not necessarily adequate, and an industrial base has been slow in forming, particularly for manufacturing. Investment has been weak for this reason," the ratings firm said.

R&I has affirmed the "BBB minus" credit score on the Philippines, as remittances from overseas workers continued to sustain growth, while the budget deficit is expected to narrow in line with the Aquino administration's strong commitment to fiscal consolidation.