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The answers provided here by The Philippines were received after SOM2 in July 2009. The reference for the original document is 2009/SOM2/013anx4

Replies to the Written Questions Received Individual Action Plan Peer Review of the Philippines

ABAC Key concerns in investing in the Philippines: 1. Investment Environment for Foreigners

(a) There is a need to increase the foreign equity participation from the current

40% (40/60) to as high as 100% to attract more foreign investors. Regarding land ownership, foreigners should be given 100% for commercial, industrial and mixed use land rights.

Reply from the Philippines: 100% foreign equity ownership is allowed in all areas except those identified in the Regular Foreign Investment Negative List in effect at the time of investment. As a general rule, there are no restrictions on the extent of foreign ownership of export-oriented enterprises which exports at least 60% of its output. Non-Filipino companies registered with the Board of Investments (BOI) are required to become Filipino companies within 30 years by reducing foreign ownership ratio to less than 40%, except for export-oriented enterprises.

(b) The corporate tax was lowered from 35% to current 30%. However, in order to attract more investments from overseas, the Philippines needs to further lower the corporate tax.

Reply from the Philippines: Sections 28(A)(1) and (2) of the Philippine Tax Code provides 30% regular corporate income tax based on the taxable income derived during each taxable year from all sources within the Philippines, or 2% Minimum Corporate Income Tax (MCIT) based on the gross income as of the end of the taxable year, whichever is higher. The 30% corporate income tax was recently lowered from 35%. No further lowering of tax rate is seen at this time. .

(c) There is an inconsistency in regulatory framework between national agency (e.g., PEZA) and local government in the area of RET (Real Estate Tax). This creates huge pressure in operating there.

Reply from the Philippines: Local government units impose the real property taxes within their jurisdictions. Under Section 133(e) of the Local Government Code, however, BOI-registered companies may be exempted from payment of said taxes for four (4) years. Under PEZA Law (RA 7916),

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registered enterprises within PEZA’s jurisdiction pay only 5% of gross income earned in lieu of national and local taxes (including real property tax).

(d) It is suggested that the Philippines allow foreign ownership of REIT manager

when REIT is allowed. Reply from the Philippines: In both the Senate and House Bills on “Providing the Regulatory Framework for Real Estate Investment Companies and for Other Purposes”, a REIT that owns land must comply with foreign ownership limitations imposed under Philippine law. The REIT itself as a corporate entity must be registered under the Philippine Securities and Exchange Commission (SEC) and as such, foreign ownership of REIT is subject to the conditionality and limitations in SEC rules. The REIT bill is pending under both Senate and Congress.

(e) Lack of competition from foreign firms in construction industry. Allowing foreign participation in the industry can increase the competitiveness and efficiency of the locals. Therefore, a higher industry standard can be achieved.

Reply from the Philippines: According to the Construction Industry Authority of the Philippines (CIAP), there is no restriction on foreign participation in the construction industry. A Special License is issued to a joint venture, a consortium, a foreign contractor or a project owner which authorizes the licensee to engage only in the construction of a single, specific project/ undertaking after satisfying all the minimum requirements, and corresponding to the classification and category applied for. The license shall also be quantified and rated according to equivalent credit points and shall be the lowest sustainable by all three determinants as follows:

1. Financial Capacity 2. Experience of Sustaining Technical Employee 3. Overall credit points based on the four qualification criteria

(f) It is suggested that the Philippines open other services to foreign ownership e.g., legal practice and architecture practices.

Reply from the Philippines Under the 7th FINL, no foreign equity is allowed on the practice of law and architecture. Opening said sectors would require an amendment of the Constitution. 2. Legal Environment

(a) Bureaucratic inefficiency

�� Immigration: time and cost to process working visa for key expat staff. Cost of exit permit for visa holder on every trip out of Philippines.

Reply from the Philippines:

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Since 2008, the Philippines, through the Bureau of Immigration has implemented programs to address issues of time and cost to process working visas for business persons. One program in place is the Visa Issuance Made Simple (VIMS) program where the application of visas and permits are processed digitally, significantly shortening the processing time. The Visa upon Arrival Program allows foreign businessmen to proceed directly to the Philippines and secure an entry visa there. For more information about this, one can refer to www.immigration. gov.ph.

�� Lengthy and uncertain duration in processing of Permits and Licenses at various stages of a real estate development project.

Reply from the Philippines: The National Competitiveness Council (NCC) has been tasked to improve business procedures through its Working Group on Transaction Costs and Flows which aims to streamline the business registration and permit process, among others. The NCC is currently working on the Philippine Business Registry (PBR), which is a web-based I.T. system that will eventually allow the online filing of applications for business registration, business permits and licenses, and business dissolution using a single data entry facility, with links to the systems of the National Government Agencies and Local Government Units (LGUs). At present, seven (7) LGUs are electronically connected with PBR and six (6) are on-going connectivity testing; 19 LGUs have agreed to use the PBR printable form.

�� Lengthy and uncertain duration for resolution of dispute The resolution of disputes depends on the nature of the dispute as well on the willingness of the parties to settle a dispute. In a bid to de-clog the courts and facilitate resolution of cases, the Supreme Court has established “small claims” courts and the National Conciliation and Mediation Board (NCMB). The purpose of a small claims process is to provide a simpler, inexpensive and expeditious means of settling disputes involving purely money claims The NCMB formulates policies, develops plans and programs and sets standards and procedures relative to the promotion of conciliation and mediation of labor disputes through preventive mediation, conciliation and voluntary arbitration; facilitation of labor-management cooperation. This is done through joint mechanisms for information sharing, effective communication and consultation and group-problem solving. Further, the Alternative Dispute Resolution Law (RA 9285) was enacted on 2 April 2004 to actively promote party autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes. Towards this end, the State encourages and actively promotes the use of Alternative Dispute Resolution (ADR) as an important means to achieve speedy and impartial justice and de-clog court dockets. Likewise, the State enlists active private sector participation in the settlement of disputes through ADR. The Philippine Dispute Resolution Center Inc. (PDRCI) of the Philippine Chamber of Commerce and Industry was established in 1996 for the purpose of promoting and encouraging the use of arbitration as an alternative mode of settling commercial transaction dispute and providing dispute resolution services to the business community.

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(b) Perception of corruption due to points 1(c) and 1(d) above. According to the survey by Political and Economic Risk Consultancy (PERC), a Hong Kong- based consultancy firm that conducts an annual survey of foreign business executives, the Philippines marked an improvement in battling its corruption. The Philippines ranked 6th with a score of 7.0 from the bottom in the 2008 survey of Asian Economies. According to PERC, a grade greater than 7.0 indicates that a “serious” corruption problem exists while a score between 4.0 and 7.0 indicates a “moderate” level of corruption. But while “there is very little confidence in the government’s seriousness about fighting the problem,” PERC also said that “the actual level of corruption is not as bad as it is often portrayed.” (www.goodnewspilipinas.com, April 2009)

(c) Lack of peace and security perception.

The basic problem of investing in the Philippines lies in the restriction on the level of foreign equity participation that is enshrined in the Philippines Constitution and negative perception of the investment environment, regulatory coordination and administrative bureaucracy. Therefore, there are both legal and practical limitations to investment liberalization imposed by institutional framework, given that constitutional reform is difficult.

Reply from the Philippines: Media coverage has contributed to the perception of lack of peace and security in the economy. The Government is committed to fight terrorism through the formation of an Anti-Terrorism Task Force and to maintain peace and order through intensified campaign against organized crime, terrorism, kidnap-for-ransom syndicates, and illegal drugs. The Government also continually pursues peace talks and peace agreements with rebel groups. The Armed Forces of the Philippines continues to upgrade its defense capabilities to confront internal and external threats including through intelligence gathering. Indonesia 1. In addition to Philippines unilateral efforts, what has Philippines benefited from

the APEC process in terms of identification, review and reform of policies? Reply from the Philippines: The Philippines benefits from the APEC process as it aims to formulate an appropriate agenda towards active trade and investment rooted in liberalization, facilitation and economic and technical cooperation. The APEC agenda feeds into the Philippines’ economic policy environment. The Philippines finds it expedient to adopt many APEC principles because they are in consonance with domestic economic reform principles. APEC principles also usually complement programs already in place and confirm the propriety of policy tracks taken.

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2. Please provide a brief explanation on how Philippines protects its indigenous intellectual properties such as traditional medicine and other culture heritages.

Reply from the Philippines: Republic Act No. 8423 otherwise known as the Traditional and Alternative Medicines Act of 1997 (“TAMA”) provides for the acceleration of the development of traditional and aIternative health care in the Philippines, and establishes a legally workable basis by which indigenous societies can own their knowledge of traditional medicine. When such knowledge is used by outsiders, indigenous societies can require the permitted users to acknowledge its source, and can demand a share of any financial return that may come from its authorized commercial use. In this regard, TAMA defines intellectual property rights as the legal basis by which indigenous communities exercise their rights to have access to protect, control over their cultural knowledge and product, including but not limited to, traditional medicines, and includes the right to receive compensation for it. To implement TAMA, rules and regulations (“IRR”) were formulated by the Department of Health-Traditional Health Unit. 3. Does Philippines give any preferential Treatment (prices and others) to

environmentally friendly products?

Reply from the Philippines: This is a potential outcome of DDA negotiations. In any event ASEAN CEPT already covers environmentally friendly products. 4. With regard to the limitation of foreign equity participation in services sectors due

to the Philippines’ Constitution, we would like to know what kind of measures that have been implemented by the Philippines to meet the ASEAN Economic Community Blueprint (AEC) for Services Sectors Liberalization. As we understand, the threshold for foreign equity participation under the AEC Blueprint is 51 % for non-priority services sectors and 70% for 4 priority services sectors (telecommunications, air travel, health-care services, tourism) by 2010, which is only one year ahead.

Reply from the Philippines: This question is better raised and answered in the appropriate ASEAN forum. 5. It was also explained that education is a certain area which is fully or partially

closed to foreigners under the 1987 Constitution. What role could be played by foreign entities in this particular area? Please elaborate.

Reply from the Philippines: Section 4(2), Article XIV of the Philippine Constitution states that educational institutions, other than those established by religious groups and mission boards, shall be owned solely by citizens of the Philippines or corporations or associations at least 60 per centum of the capital of which is owned by such citizens. The Congress may, however, require increased Filipino equity participation in all educational institutions. The control and administration of educational institutions shall be vested in citizens of the Philippines. As such, foreign equity participation is limited to 40 per cent.

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Korea

1. Business Mobility

a. As of Jan. 2009, the Philippines has issued 374 active APEC Business Travel Cards (ABTC). (a) What are the ABTC issuance requirements?

Reply from the Philippines: The Philippines evaluates and screens applications to determine eligibility to hold an ABTC in accordance with the ABTC Operating Framework as agreed upon by all ABTC participating economies. In addition, other requirements such as membership in business organzations, the submission of documents like clearances, resumes and employment certificates, as well as information on the company, activities in the APEC region and travel records need to be submitted by the applicant.

(b) What is the pertinent agency or organization responsible for issuing ABTCs?

Reply from the Philippines: The Department of Foreign Affairs is the agency in charge of issuing ABTC's for the Philippines. The assistance of the Bureau of Immigration is also sought in the clearance procedures for applicants.

(c) How much is the ABTC application fee? Reply from the Philippines: The Department of Foreign Affairs does not charge application fees for ABTC. Applicants, however, must be a member of any of the following business organizations which in turn must endorse the application to the Department:

�� Makati Business Club (MBC) �� Philippine Chamber of Commerce and Industry (PCCI) �� Philippine Exporters Confederation, Inc (PHILEXPORT)

The business organizations may charge fees for the process.

b. According to Chapter 13 “Mobility of Business People” in Appendix I “Replies

to the Comments and Questions on the Philippines IAP,” Temporary Visitor's Visa upon Arrival (TVVUA) may be issued to businesspeople upon entry into the Philippines. (a) What are the specific requirements and procedures for acquiring a TVVUA?

Reply from the Philippines: The following documents are required for the issuance of the TVVUA:

a. Letter request from the guarantor or sponsoring organization;

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b. Endorsement letter from the appropriate Government Agency, as the case may be;

c. General application form duly accomplished and notarized (BI Form No. MCL-07-01);

i. May be secured at the Office of Atty. Marcela P. Malaluan or may be downloaded from the Bureau of Immigrations’ website (www.immigration.gov.ph)

d. Applicant’s flight information or details with booking reference; e. Clear photocopy of the bio-page of the applicant’s passport; f. Bureau of Immigration (BI) Clearance Certificate

i. May be secured at the Bureau of Immigration’s Verification and Certification Unit (VCU), 3rd floor Main Building with a corresponding filing fee of Philippine Pesos (PhP) 1,010.00.

g. Undertaking is fully accomplished by the petitioner and duly notarized; and h. Payment of visa, legal research and express lane fees.

(b) How much is the TVVUA application fee? Reply from the Philippines: Aside from the filing fee of PhP 1,010.00, the following fees are collected:

Visa fee: 5,000.00 Legal research fee: 10.00 Express lane fee: 500.00

2. Service

a. Regarding business movements, are there any plans to allow commitments for business visitors and intra-company transferees in future bilateral or multilateral negotiations?

Reply from the Philippines: There are no initiatives to relax current restrictions/entry requirements for business visitors and intra-corporate transferees. Nevertheless, the Department of Labor and Employment is in the process of reviewing the existing regime for possible positive listing of occupations. 3. Investment

b. What is the Philippines’ position on allowing foreign investment in the retail services?

Reply from the Philippines: Partnerships, associations and corporations, partially or wholly-owned by foreigners, formed and organized under the laws of the Philippines, upon registration with the Securities and Exchange Commission (SEC), or in case of foreign-owned single proprietorships, with the Department of Trade and Industry (DTI), may engage or invest in the retail trade business, subject to the following categories:

�� Category A: Enterprises with paid-up capital of the equivalent in Philippine Pesos

of less than US$2,500,000 shall be reserved exclusively for Filipino citizens and corporations wholly-owned by Filipino citizens.

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�� Category B: Enterprises with a minimum paid-up capital of the equivalent in the

Philippine Pesos of US$2,500,000 may be wholly owned by foreigners.

The opening of branches by foreign retailer is allowed, provided that the investments for each store/branch established under Category B must be no less than the peso equivalent of $830,000.00.

�� Category C: Enterprises with a paid-up capital of the equivalent in Philippine

Pesos of Seven million five hundred thousand US dollars (US$7,500,000.00) or more may be wholly owned by foreigners (no longer applicable since 25 March 2000)

�� Category D: Enterprises specializing in high-end or luxury products with a paid-up

capital of the equivalent in Philippine Pesos of US$250,000 per store may be wholly owned by foreigners.

Foreign retail stores shall secure a certification from the Bangko Sentral ng Pilipinas and the DTI, which will verify or confirm inward remittance of the minimum required capital investment.

The foreign investors shall be required to maintain in the Philippines the full amount of the prescribed minimum capital, unless the foreign investors has notified the SEC and the DTI of its intention to repatriate its capital and cease operations in the Philippines. The actual use in Philippine operations of the inwardly remitted minimum capital requirements shall be monitored by the SEC.

Foreign investors acquiring shares from existing retail stores whether or not publicly listed whose net worth is in excess of the peso equivalent of US$2,500,000 may purchase only up to a maximum of 60% of the equity thereof within the first two years from the date the Act came into effect and thereafter, they may acquire the remaining percentage consistent with the allowable foreign participation as provided.

Foreign investors may acquire 100% of the shares of an existing retail store whether or not publicly listed whose net worth is in excess of the peso equivalent of US$2,500,000.

c. In the Philippines, land ownership is restricted to citizens of the Philippines or corporations in which Filipinos possess more than 60% of the shares. How does the Philippines protect foreign-invested businesses that own buildings such as hotels but do not possess the land property rights? In the future, will the Philippines alleviate restrictions on foreign ownership of land?

Reply from the Philippines: There have been steps to review some policies to mitigate the effects of certain constitutional restrictions, e.g. the prohibition on foreign ownership of land and other real estate. The experience of our Asian neighbors, however, dispels the correlation between foreign land ownership and weak levels of investments as in the case for China and Vietnam which are getting huge share of FDIs despite not allowing foreigners to own land.

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To this end, the Board of Investments created an aftercare services department to forge stronger business ties and seek long-term strategic relationships with firms currently located in the economy. The overall aim is to simplify the business transaction process and to promote ease of doing business while effectively monitoring industry issues and concerns.

d. The electricity cost in the Philippines is relatively high compared with other

economies, which could be a major factor to make Korean and other APEC economies’ businesspeople reluctant to invest in the Philippines’ manufacturing industry. Are there any measures to solve this problem?

Reply from the Philippines: According to the Energy Regulatory Commission (ERC), the National Power Corporation (NPC) is currently implementing energy rates based on “time of use”. Lower rates are imposed during off-peak hours from 10:00 pm to 8:00 am in Luzon, 1:00 am to 7:00 am in Visayas, and 3:00 am to 9:00 am in Mindanao since the power plants used during these times are not fuel-based, such as hydro power plants. During peak hours, higher rates are charged because the fuel-based plants are being operated. As such, industries are encouraged to shift their time of operations to avail of the discounted rates during the off-peak hours.

e. What kind of tax reductions or other incentives does the Philippines provide investors? Is there any comparative advantage over other Asian economies?

Reply from the Philippines:

(a) Incentives offered under the Omnibus Investments Code of 1987

1. Income Tax Holiday (ITH) or Exemption from Corporate Income Tax for four (4) years (for “Non-Pioneer” projects) or six (6) years (for “Pioneer” projects), extendable to a maximum of eight (8) years.

2. Additional deduction for labor expense equivalent to 50% of the wages of additional skilled and unskilled labor force.

3. Tax and duty free importation of breeding stocks and genetic materials. 4. Tax credit on domestic breeding stocks and genetic materials. 5. Simplified customs procedures for the importation of equipment, spare parts, raw

materials and supplies and exports of processed products. 6. Importation of consigned equipment 7. Employment of foreign citizens in supervisory, technical or advisory positions.

Foreign citizens may hold indefinitely the position of president, general manager and treasurer (or their equivalent) of foreign-owned registered enterprises.

8. Tax credit for taxes and duties paid on raw materials, supplies and semi-manufactured products used in the manufacture of export products and forming part thereof.

9. Access to bonded manufacturing/trading warehouse system. 10. Exemption from wharfage dues and export tax, duty, impost and fees. 11. Exemption from taxes and duties on imported spare parts. 12. Additional deduction for necessary and major infrastructure works.

(b) Incentives offered under the Special Economic Zone Act of 1995

The Philippine Economic Zone Authority (PEZA) grants the following incentives to registered ecozone companies:

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1. Income Tax Holiday (ITH) or Exemption from Corporate Income Tax for four (4)

years (for “Non-Pioneer” projects) or six (6) years (for “Pioneer” projects), extendable to a maximum of eight (8) years.

2. Upon expiry of the ITH, exemption from all local and national taxes, and in lieu thereof, payment of the special tax of 5% on Gross Income.

3. Exemption from duties and taxes on imported capital equipment, spare parts, supplies and raw materials.

4. Zero % Value Added Tax (VAT) on local purchases of goods and services, including telecommunications, power and water bills.

5. Exemption from payment of local government fees such as Mayor’s Permit, Business Permit, etc.

6. Exemption from export tax, imposts, fees and wharfage dues. 7. Simplified import and export procedures. 8. Employment of foreign citizens. 9. Special non-immigrant visa with multiple-entry privileges for foreign investors and

employed foreign citizens and immediate family members.

(c) Incentives offered under the Bases Conversion and Development Act of 1992

The Subic Bay Metropolitan Authority and the Clark Development Corporation grant the following incentives to registered enterprises located at the Subic Special Economic Zone (SSEZ) and Clark Freeport Zone (CFZ), respectively.

1. Exemption from all national and local taxes but in lieu thereof, payment of a final

tax of 5% of their gross income earned from sources within the economic zone or freeport.

2. Tax and duty free importation of raw materials and capital equipment.

4. Telecommunication Services

a. In the report, it is noted that the Philippine Constitution defines telecommunication services as public utility and applies 40 percent limit to foreign ownership. Does the Philippine government have a plan to relax the restriction by redefining telecommunication services as non-public utility?

Reply from the Philippines: There are currently no plans to redefine telecommunication services as a non-public utility.

Malaysia 1. Pharmaceutical Industry

There is no tariff on Finished Pharmaceuticals in Malaysia and active pharmaceutical ingredients. Our drug registration system is very transparent and hence there are virtually no Non-Tariff Barriers for the importation of pharmaceuticals. Our pharmaceutical manufacturers would like to know what are the possible restrictions that they may face should they wish to export their products to the Philippines and what are the incentives the Philippines has to offer to a potential Malaysian pharmaceutical manufacturing investor.

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Reply from the Philippines: Pharmaceuticals are freely importable into the Philippines except for those that are prohibited or regulated under applicable laws. Prior to sale in the domestic market, enterprises are required to secure a certificate of product registration for each drug. A 100% Malaysian pharmaceutical manufacturing investor may qualify under the BOI 2009 Investments Priorities Plan (IPP)-Healthcare and Wellness products provided that it exports 70% of its products. The 2009 IPP Healthcare and Wellness Products and Services covers the manufacture of drugs and medicines in accordance with the Philippine National Drug Formulary (PNDF), food supplements limited to Vitamin A, iron and iodine compounds either mixed, coated or incorporated in appropriate medium added to flour, rice, sugar, oil as required by Food Fortification Law (R.A. 8976) and salt as required by ASIN Law (R.A. 8172), herbal medicines, and active substances of these drugs. The production of generic drugs and medicines is strongly encouraged. Non-pioneer incentives will be provided for projects that cost at least US$ 20 million if the company is registered with the Board of Investments. However, prior to availment of ITH, the firm shall submit a License to Operate (LTO) issued by the Bureau of Food and Drugs (BFAD). (For the list of incentives, please refer to 4(d) below.) Mexico 1. Foreign direct investment plays a less significant role in the Philippines than in

other large ASEAN economies. Considering the fact that global enterprises could make a strong contribution to the development of the economy, is Philippine government creating a plan of incentives to attract the establishment of transnational companies? Pag. 7

Reply from the Philippines: Under the Omnibus Investment Code of 1987, The Board of Investments, in consultation with the concerned government agencies and private sector, is mandated to annually develop an Investment Priorities Plan (IPP) which lists the priority economic activities (industries/sectors) that are encouraged through the grant of fiscal and non-fiscal incentives. Transnational companies may engage in any of these activities and qualify for incentive entitlement. Fiscal incentives include income tax holidays; tax and duty-free importation of capital equipment, raw materials and imported spare parts among others. Non-fiscal incentives include employment of foreign citizens, unrestricted use of consigned equipment, expedited customs procedures, among others. At present, different laws on investment incentives provide for the grant of incentives on the basis of activity/sector or location. The Government intends to rationalize the incentives regime and a review of the entire fiscal incentives system is being undertaken to place all incentive laws in a single statute. This is being done to provide for simple administration and to discourage incentives shopping. Amendments to the existing investment incentives laws are now being deliberated on by the Congress.

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2. Taking into account the importance of transportation in Philippines due to its geography, is the government carrying out any kind of transportation improvement plan, which includes costs reduction? Pag. 14.

Reply from the Philippines: Modern air and sea transport systems are critical for an archipelago such as the Philippines. The Strong Republic Nautical Highway and the Roll-on, Roll-off system (RORO) is an intricate network of improved roads and ports in various regions and provinces which bridge the economy’s three main islands of Luzon, Visayas and Mindanao. These two projects are in the Sustainable Logistics Development Program, which is a collaboration between the government and private sector to bring about cost-effective ways of moving goods and people by linking up the island masses of the archipelago to open up domestic economies and production resources to national and international markets. 3. Could you please be more specific about the public tendering and process of

selection for enterprises interested on signing a joint venture agreement with the government? Which benefits has this system brought to the government procurement? Pag. 23 y 24.

Reply from the Philippines: The Guidelines and Procedures for Entering into Joint Venture Agreements between Government and private entities can be downloaded from the following weblink:

http://www.gppb.gov.ph/laws_rules/laws/JV%20Guidelines.pdf Annexed to these Guidelines are the detailed guidelines and procedures for competitive selection for public-private joint ventures; guidelines for limited negotiation procedures in case of failed competitive selection under Section 6 of Annex A; and guidelines for competitive challenge procedure for public-private joint ventures. 4. Could you please be more specific about the ASEAN Single Window Agreement on

customs? Which administrative steps have been eliminated since its implementation? How effective it has been to reduce corruption? Pag. 19

Reply from the Philippines: The ASEAN Single Window (ASW) aims to provide the mechanism for transmission of exports information to be received as import data among the ten (10) ASEAN economies. The target is to complete the cargo release cycle in 30 minutes. To date, Indonesia, Malaysia, Myanmar, the Philippines and Thailand have set up respective national working bodies to implement their National Single Window (NSW), which will be integrated to form the ASW. The NSW concept is a system which enables a single submission; a single and synchronous processing of data and information; and a single decision-making for customs release and clearance of cargo. To implement the NSW in the Philippines, the Bureau of Customs’ e-Customs Project was set-up. The project aims to develop a dynamic and faster end-to-end cargo clearance process through the use of mobile broadcasting and Internet/Electronic Data Interchange connectivity to optimize revenue collection, facilitate trade, improve transparency and

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integrity in government transactions. It is also intended as a means to effectively enforce the Tariff and Customs Code of the Philippines (TCCP). Wireless connectivity is deployed through a secured network – VPN (Virtual Private Network) – by attaching a GPRS wireless modem in each government agency that will be networked and linked to the BOC e-Customs system. The NSW also instituted the Licenses and Clearance System, one of the components of the 32 modules of the e-Customs Project. When fully operational, the ASW and NSW will make customs procedures more efficient, streamlined and less susceptible to human discretion. 5. Could Philippines deepen on the achievements reached in eight years of domestic

power reforms? Over this time, what has been the experience on indigenous energy resources implementation to this program? Pag. 14 y 15.

Reply from the Philippines: The “domestic power sector reform” in pages 14-15 refers to the ongoing implementation of Republic Act (RA) 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA), which is on its 8th year of implementation. The law restructured the electric power industry sector to make existing and emerging industries competitive without compromising quality. The law also plans to improve reliability and adequacy by increasing competition and economic efficiency in the delivery of electricity services through the unbundling of rates, operation of the wholesale electricity spot market (WESM), and introduction of open access and retail competition, among others. Please note however, that although utilization of indigenous energy resources is a clear government directive, there is no specific provision in the EPIRA that directly relates to the utilization of indigenous energy.

Nevertheless, an increase in the utilization of indigenous as well as renewable energy has been observed. Changes in the energy mix were primarily due to more use of indigenous and renewable energy, mainly from hydropower, geothermal and other indigenous renewable sources. However, of the targeted eight plants for commissioning: only the wind-diesel hybrid plant in Basco, Batanes; the Northwind’s 25 MW Wind Power Project, and the Northern Negros Geothermal Power Plant started operation in 2004, 2005, and 2007, respectively. The commissioning of these power plants together with the retirement of about 400 megawatts (MW) of oil-based capacity during the period, gave impetus to the increased self-sufficiency level. Moreover, in line with the goal of attaining energy independence, the Department of Energy launched the Philippine Energy Contracting Round (PECR) in 2005 and 2006 to attract private investments in developing more productive oil and gas fields, coal and geothermal resources. As a result, four (4) service/operating contracts for geothermal project were awarded. In addition, the preferred use for gas ensures sustained interest in indigenous oil and gas exploration and development. Likewise, the improved interest in coal resource development due to application of clean coal technologies in both upstream and downstream coal industry have contributed to the renewed interest in the coal sector, resulting in the awarding of several contracts since the passage of the EPIRA. This has been a continuing activity of the Department of Energy to include other technologies to harness renewable energy such as hydro, wind and solar power.

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6. Bangko Sentral ng Pilipinas maintains a list of regulated commodities. Where can these commodities be consulted? Pag. 10.

Reply from the Philippines: The Philippines requires clearances/permits from appropriate government agencies for importation/exportation of certain products classified as “regulated” and “prohibited” for purposes of national interest, international agreements, environmental reasons or to conserve depletable raw materials. The list of regulated and prohibited commodities can be found as one of the appendices of the “Manuals on Foreign Exchange Regulation” which can be accessed at www.bsp.gov.ph. 7. The second paragraph of chapter 10 of the IAP Study Report of the Philippines

states that “Philippine officials acknowledge that there have been problems with implementation in some cases, as examples described elsewhere in this report indicate”. Which kind of problems regarding the implementation of the regulatory reforms has been detected? Is there any strategy in sight with the aim of resolving these problems? Pag. 24

Reply from the Philippines: Meetings with several representatives of various government agencies took place during the in-economy visit and it is not clear from the experts’ report what specific area of regulatory reform is being referred to in the report. 8. Taking into account that there is no comprehensive program of Regulatory Impact

Analysis in place, is there any other mechanism available to regulators to evaluate the costs and benefits of stock or flow regulation used by the Government of Philippines? (last paragraph). Pag. 24, 25.

Reply from the Philippines: Since the 1980s, Regulatory Impact Analysis (RIA) has become a global response to widespread pressures for more effective and efficient governance. International bodies, such as the OECD, the WTO, and the European Commission, began to call for empirical methods of decision-making, or explicitly for RIA. Although Philippine laws do not specifically mandate the use of RIA per se, the principle that characterizes a search for “a method that reliably answers the questions posed by increasingly difficult public policy questions, and does so in a low-cost, transparent, and rapid manner” has been a norm in the economy’s governance.

The thrust of RIA has always favored cost-benefit analysis (CBA) as the most inclusive and socially responsible method of public decision-making. CBA also offers the important advantage of comparing costs and benefits occurring at different points in time. This approach has been an integral part of the economy’s investment and regulatory programming and decision-making, as institutionalized in its various committees and inter-agency bodies and working groups. Furthermore, regulatory interventions are accompanied by Implementing Rules and Regulations (IRR), and these are often quantitative with time-bound targets. Other documents such as logical frameworks (LogFrame) and other monitoring and evaluation documents are also widely required and utilized.

Singapore

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1. Chapter 2: Non-Tariff Measures

a. At the 1994 Leaders’ Declaration in Bogor, APEC Members committed to a “continuing process of unilateral trade and investment liberalization” and to refrain from “using measures which would have the effect of increasing levels of protection”. In the current climate of economic slowdown and uncertainty, protectionist measures could provoke retaliation and beggar-thy-neighbour policies, and in turn worsen the economic crisis and undo the progress made toward the Bogor Goals.

Based on reports 1 , effective from 27 Feb 2009, Philippines imposed a safeguard measure that will require importers of steel angle bars to post cash bonds. This measure has been applied in the first instance for 200 days.

Question: What is Philippine’s rationale for imposing the safeguard measure on steel angle bars? Is Philippines considering extending the measure beyond the initial 200 days?

Reply from the Philippines: The rationale for the imposition of a provisional safeguard measure on steel angle bars is to provide the Philippine Steel Angle Bar Industry a breathing space or a temporary relief from import surge, thus preventing further injury to the domestic industry while the case is with the Tariff Commission for formal investigation. It will be recalled that the Department of Trade and Industry-Bureau of Import Services (DTI-BIS) initiated the preliminary investigation on the case and the DTI Secretary, following the BIS’ positive preliminary determination, issued a Department Order (DO) for the imposition of provisional safeguard measure on imported steel angle bars. Following the conclusion of the investigation by the Tariff Commission, it submitted a report of findings and recommendations to the DTI Secretary on 29 June 2009. The existence of a causal link between the increased imports of steel angle bars and serious injury to the domestic industry having been established, the Tariff Commission recommended the imposition of a definitive safeguard duty on imported steel angle bars. The measure shall be effective for a period of three (3) years commencing from the date the provisional measure took effect, which was on 10 March 2009. The measure was signed as a Department Order by the Secretary of Trade and Industry on 27 July 2009, and duly notified to the Committee on Safeguards of the WTO. 2. Chapter 3: Services

a. Legal

Question: Please describe any plans Philippines may have to further liberalise its legal sector and the practice of foreign law and Philippine law by foreign lawyers.

1 Annex I, WTO monitoring report 26 March 2009. Notification to the WTO G/SG/N/7/PHL/7,

G/SG/N/8/PHL/7, G/SG/N/11/PHL/7, 27 February 2009, 09-1023.

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Reply from the Philippines: The legal profession is regulated by the Supreme Court of the Philippines as provided for in Item 5, Section 5, Article VIII of the Philippine Constitution which states that the Supreme Court shall promulgate rules concerning the admission to the practice of law and the integrated bar. Section 14, Article XII of the Philippine Constitution limits the practice of all professions in the Philippines to Filipino citizens save in cases prescribed by law. In addition, a Resolution of the Supreme Court en banc dated 27 July 1993 provides that beginning 1994, the Supreme Court will not allow graduates of foreign law schools to take the bar examinations. However, Section 3, Rule 138 of the Rules of Court states that citizens of the United States of America who, before July 4, 1946, were duly licensed members of the Philippine Bar, in active practice in the courts of the Philippines and in good and regular standing as such may, upon satisfactory proof of those facts before the Supreme Court, be allowed to continue such practice after taking an oath of office quoted in said provision. This arrangement has rarely, if ever, been availed of.

b. Energy

(a) It is mentioned in the ‘Energy Services’ that open market access and retail competition, a key feature of the Electric Power Industry Reform Act of 2001(EPIRA), has not yet been implemented, due to a delay in achieving compliance with the remaining preconditions.

Question: Does the Philippines have a timeline for implementing the open market access and retail competition in the electricity market?

Yes. Retail competition and open access on distribution wires shall be implemented not later than three (3) years upon the effectivity of the EPIRA LAW which was in 2001 subject to compliance with the following conditions precedent:

(a) Establishment of the wholesale electricity spot market; (b) Approval of unbundled transmission and distribution retail wheeling charges; (c) Initial implementation of the cross subsidy removal scheme; and (d) Privatization of at least 70% of the total capacity of generating assets of NPC and of the total capacity of the power plants under contract with NPC in Luzon and Visayas.

The first three conditions has been complied with, however, we are still trying to meet the terms of the fourth condition. There is now a bidder for the Calaca power facility (DMCI Holdings Inc.). DMCIHI will be declared the winning bidder after PSALM verifies the accuracy, authenticity and completeness of all the bid documents that the consortium had submitted. PSALM will then issue the Notice of Award to DMCIHI, officially signifying that the company is the winning bidder for the Calaca power plant. If the sale pushes through, the Philippines will breach the 70% targeted privatization level for generating assets in the Luzon and Visayas grids which is one of the preconditions to the declaration of open access and retail competition stipulated in the Electric Power Industry Reform Act.

(b) There is a reference on ADB funding an energy efficiency project in the Philippines that is expected to save $100 million every year in fuel costs.

Question: Can the Philippines elaborate on this funding/programme?

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The Philippine Government recognizes that it alone cannot identify and finance various energy-efficiency initiatives. Studies carried out by the Department of Energy (DOE) with assistance from the Asian Development Bank (ADB) demonstrate that by investing $46.5 million in energy efficiency, the Government could defer $450 million of investments in new power plants, and save about $100 million annually in fuel cost. Funding Programme: The Philippine National Economic and Development Authority (NEDA) Investment Coordination Committee (ICC)-Technical Board (TB) and Cabinet Committee (CC) approved the Philippine Energy Efficiency Project (PEEP), which costs about PhP2.17 billion, on 5 September 2008 and NEDA Board confirmed on 7 October 2008. The Funding will be sourced from the following:

�� PhP1.58 billion of the funding for the Project will be sourced from a loan from Asian Development Bank (ADB),

�� PhP67.5 million from the ADB Clean Energy Fund grant, and

�� The remaining PhP517.5 million will come from the Department of Energy�s (DOE) counterpart fund.

In respect to the aim to reduce fuel costs by $100 million annually, the project will reduce government expenditure on electricity by 20 percent in pilot government buildings as well as average cost of production by electric cooperatives (ECs) by 10 percent. The project also intends to increase cooperatives electric consumption by 10 percent from 2007 levels. Among the components of the project are the National Residential Lighting Program and the creation of the Super Energy Service Company (ESCO). The lighting program involves the distribution of 13 million (13,14 and 15-watt) compact fluorescent lamps (CFL) to residential and small commercial sectors that cover about 6.68 million households nationwide. The PEEP will “reduce peak demand in ECs through consumer savings for each compact fluorescent lamp (CFL) distributed. It will also reduce energy consumption in 42 pilot public buildings by five percent from 2007”. 3. Chapter 5: Standards and Conformance

a. Comment: As Chair of APEC EE MRA, Singapore commends Philippines for its participation in Part I of the MRA. Noting that the APEC EE MRA was endorsed in 1999, Singapore would like to encourage Philipppines to participate in both Part II (Mutual Recognition of Test Reports) and Part III (Mutual Recognition of Certification) to facilitate intra-APEC trade in Electrical and Electronic Equipment.

Question: As Chair of the APEC EE MRA, Singapore has organised seminars with the funding from APEC in both 2008 and 2009 to facilitate understanding and participation in the MRA and also chaired 5 APEC JAC EE MRA Meetings since assuming the Chair in 2007. In this regard, Singapore would appreciate it if Philippines could share on its time table to consider participation in both Part II and III of the MRA.

Reply from the Philippines:

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The Bureau of Product Standards of the Department of Trade and Industry is in consultation with stakeholders on whether to participate in Parts II and III of the MRA.

4. Chapter 6 Customs Procedures

a. Under Customs Procedures, the report states that "As part of ASEAN Single Window Agreement, the Philippines has initiated and established measures and institutions related to National Single Window."

Question: What are these measures and institutions?

Reply from the Philippines: On November 5, 2005, the Bureau of Customs of the Republic of the Philippines and the Royal Thai Customs Department of the Kingdom of Thailand entered into a Letter of Commitment for the Pilot Implementation of the ASEAN Single Window (ASW) Project in a phased approach. The first phase consists of exchange of information on:

�� Customs Declaration Document and its information and data, and �� Regulatory documents of relevant agencies such as the Certificate of �� Origin (CEPT Form D)

The second phase includes the implementation of an end-to-end cargo clearance process that will involve the six spokes of the ASW conceptual model. In line with ASEAN Single window, Executive Order 482 created the National Single Window Task Force for Cargo Clearance (NSW Task Force) on 27 December 2005. The Executive Order created the Steering Committee and a Technical Working Group with specific task on setting of policy guidelines; crafting of financial schemes and strategies to finance the activities, to ensure the effective and efficient implementation of the NSW. 5. Chapter 7: Intellectual Property Rights

b. Under IPR, the report states that "The combined enforcement efforts of the Philippine Bureau of Customs (BOC), Optical Media Board (OMB), Philippine National Police (PNP), and National Bureau of Investigation (NBI) since 2005, and of the NCIPR member agencies in 2008, have strengthened the government’s continuing campaign against pirated goods."

Question: What is BOC’s role in IPR enforcement?

Reply from the Philippines:

The Bureau of Customs is responsible for enforcement at the border to prohibit the importation of goods or products that infringe upon intellectual property rights.

c. One of the questions in the Comments and Questions section is "How does the mock/pilot test solution of the cell phone based License and Clearance System (LCS) work?" Philippines’ answer was, “Under the e2M Customs system, the mobile technology is being used to verify the submitted permit/license by the importer/declarant. Access to the system is given to concerned customs offices as well as to concerned government agencies”.

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Question: The mobile technology seems to be an innovative and facilitative measure. Can the Philippines provide more details on how this mobile technology works?

Reply from the Philippines: The e2m (electronic-to-mobile) Customs Project is an ICT project of the national government that seeks to streamline the agency’s processes (imports and exports) and improve trade facilitation between the Bureau and its stakeholders, including other government agencies, through the development and integration of various systems allowing Internet enabled and SMS-enabled transactions, all towards the realization of the National and ASEAN Single Windows. Launched in January 2005, this Project was awarded to Unisys Philippines through a multi-million grant from President Gloria Macapagal Arroyo’s e-Government fund, which was specifically created to finance strategic ICT projects of government agencies. The e-Customs system or the electronic component of the integrated e2m-Customs automated process is an Internet-based technology that allows Customs officers and traders to handle most of their transactions—from Customs declarations to cargo manifests and transit documents—via the Internet. It makes use of advanced technology including electronic signatures to provide government officials, specifically Customs administrators with new tools that will enable them to make dramatic improvements in security and trade efficiency. Among the enhancements offered by the e2m system include: (1) online submission of declarations; (2) automatic advice on declaration status; (3) engagement of Value Added Service Providers; (4) online submission of manifests by airlines and shipping lines; (5) automated process for other types of import transactions such as informal (including passenger baggage system), warehousing and transhipment entries; (6) automated process for liquidation of raw materials; (7) centralized management of bonds transactions; (8) links with relevant government agencies; (9) online resource access through BOC website on issuances, processes, policies, guidelines and other related information. (www.customs.gov.ph/dynamic/FAQs_March_2009.pdf). Chinese Taipei 1. The report states: “Enterprises with paid-up capital of less than $2.5 million are

reserved for Philippine-owned companies.” This relatively high capital investment threshold would seem to be a serious deterrent to foreign investment in the retail trade, and it is a feature that is frequently criticized by foreign chambers in the Philippines. Will the Philippines consider lowering the minimum paid-up capital required of potential foreign investors in the retail sector to $200,000, the standard minimum in the Foreign Investment Act?

Reply from the Philippines: The US$2.5 million paid-up capital requirement for full foreign participation is prescribed under Section 6 of the "Retail Trade Liberalization Act of 2000"; legislation/congressional amendment of the law will be required to lower the prescribed amount.