M RahmanPESTEL 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), World Bank, World Trade Organisation (WTO), and the Group of 24.
The Philippines 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. It has a multi-party system, with several major parties competing for power.
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 remains a major problem in the country.
Economic factors affecting the Philippines
Economic discussion is a key part of this PESTEL analysis of the Philippines. The country’s GDP is expected to reach 414.19 billion US dollars by the end of 2023 (Trading Economics, 2023). The GDP forecasts for the year 2024 and 2025 are 439.04 billion US dollars and 464.94 billion US dollars respectively.
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 popular destination for tourists, with a wide range of attractions and activities. It has numerous beaches and coral reefs, as well as a variety of natural landscapes and cultural sites. Popular tourist destinations include the beaches of Boracay, the historic city of Intramuros, and the UNESCO World Heritage Site of Banaue Rice Terraces.
World Travel & Tourism Council (2023) forecasts that travel and tourism’s contribution to the GDP of the Philippines could be worth in excess of 155 billion US dollars in 2032. That will account for over 21% of the whole economy. This industry supported 7.8 million jobs in 2021.
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. It attracts a lot of foreign direct investment (FDI) every year.
According to ITA (2022) there are many opportunities in the Philippines for U.S. companies. They include but not limited to ICT, defense, clean energy, transportation infrastructure, and healthcare.
Corporate tax rate in the Philippines is 30% for both resident and non-resident corporations, charged against their net income (KPMG, 2023). The individual tax rate varies from 20% to 35% depending on the income generated both in the country and abroad.
Social factors affecting the Philippines
The people in the Philippines are generally very friendly, hospitable, helpful, and optimistic. 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. The population of the country is approximately 109 million. The life expectancy for men is 70 years, while 74 years for women (BBC, 2022).
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.
Public education is free, and a thirteen-year education is mandatory by law. Most children attend public schools, which are funded by the government. However, the quality of education at public schools remains poor; classes are large, teaching material is lacking, and teachers are poorly paid (Allianz Care, 2023).
Some parents send their children to private schools. These schools are not funded by the government, however, follow much the same curriculum as public schools. In fact, private education is a growing industry in the country.
The Philippines also has a vibrant nightlife, with a variety of bars, clubs, and live music venues. There are also numerous shopping malls, restaurants, and museums to explore. The country also has a wide range of adventure activities, such as diving, snorkelling, trekking, and mountain biking.
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, 2022). 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, typhoon, 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 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, 2023).
All employers must ensure that they have adequate first-aid medicines and equipment in the workplace in accordance with the guidelines of the Department of Labour and Employment. Though strikes are authorized (if they comply with the Labour Code), workers who organize or participate in illegal strikes may be subject to dismissal (GOVPH, 2023).
Summary of PESTEL analysis of the Philippines
The Philippines is a nation with a rich and vibrant culture, and a complex history. From its vibrant festivals and colourful costumes to its beautiful beaches and vibrant nightlife, it is a nation of contrasts and contradictions.
The country has a diverse political structure, vibrant economy, diverse demographics, and a good education system. It is also renowned for its friendly people and has become a popular destination for tourists from around the world.
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Last update: 03 March 2023
References:
Allianz Care (2023) Schools in the Philippines, available at: https://www.allianzcare.com/en/support/health-and-wellness/my-expat-life/school-guides/schools-in-philippines.html (accessed 02 March 2023)
BBC (2022) Philippines country profile, available at: https://www.bbc.co.uk/news/world-asia-15521300 (accessed 02 March 2023)
GOVPH (2023) Labor Code of the Philippines, available at: https://blr.dole.gov.ph/2014/12/11/labor-code-of-the-philippines/ (accessed 03 March 2023)
ITA (2022) Philippines – Information and Communications Technology, available at: https://www.export.gov/article?id=Philippines-Information-and-Communications-Technology (accessed 02 March 2023)
KPMG (2023) Corporate tax rates table, available at: https://kpmg.com/ph/en/home/services/tax/tax-tools-and-resources/tax-rates-online/corporate-tax-rates-table.html (accessed 01 March 2023)
Trading Economics (2023) The Philippines GDP, available at: https://tradingeconomics.com/philippines/gdp (accessed 01 March 2023)
World Travel & Tourism Council (2023) WTTC’s latest Economic Impact Report…. Available at: https://wttc.org/news-article/wttcs-latest-economic-impact-report-reveals-significant-recovery-in-the-philippines-travel-and-tourism-sector-in-2021 (02March 2023)
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.
