APEC DEREGULATION REPORT 2000

Chapter 10 : Deregulation/ Regulatory Review

Objective

APEC Economies will facilitate free and open trade and investment in the Asia-Pacific Region by, inter alia:

(a) Improving the transparency of regulatory regimes; and

(b) Eliminating those distortions arising from domestic regulations that restrict trade or investment and are not necessary to achieve a legitimate objective.

Guidelines

Each APEC economy will:

(a) explore economy-wide processes for the transparent identification and review of those domestic regulations that may cause distortions that restrict trade or investment, ensuring that reviews consider whether identified distortions are necessary to achieve a legitimate objective; and

(b) consider the adoption of regulatory reform programs that seek to reduce the costs of regulation of particular industries or sectors whilst maintaining the achievement of legitimate objectives.

Collective Actions

APEC Economies have agreed to take collective actions to help achieve these goals. These actions are contained in Collective Action Plans (CAPs) which are updated annually. The current CAP relating to deregulation/regulatory review can be found in the Deregulation Collective Action Plan.

APEC Principles to Enhance Competition and Regulatory Reform

The APEC Leader’s Declaration of September 1999 endorsed the following Principles: Non Discrimination

(a) Application of competition and regulatory principles in a manner that does not discriminate between

or among economic entities in like circumstances, whether these entities are foreign or domestic.

Comprehensiveness

(b) Broad application of competition and regulatory principles to economic activity including goods and services, and private and public business activities.

(c) The recognition of the competition dimension of policy development and reform which affects the efficient functioning of markets.

(d) The protection of the competitive process and the creation and maintenance of an environment for free and fair competition.

(e) The recognition that competitive markets require a good overall legal framework, clear property rights, and non discriminatory, efficient and effective enforcement.

Transparency

(f) Transparency in policies and rules, and their implementation.

(g) Clear responsibility within domestic administrations for the implementation of the competition and efficiency dimension in the development of policies and rules, and their administration.

The Philippines has accelerated its adoption of market friendly reforms cognizant of the primacy of the private sector as the engine of growth, with the government providing the proper policy environment. The deregulation of the domestic regime has been undertaken in tandem with privatization and liberalization initiatives.

The Philippines has successfully privatized a number of government-owned or -controlled corporations and returned to private sector hands certain acquired assets. These include hotels, banks, an airline, steel firm, mining companies, petroleum refinery, copper smelting and refinery company, among others. Scheduled for privatization are, among others, a fertilizer plant, and a power-generating and transmission corporation. This comprises the first wave of privatization.

The Philippines is now in the second and third waves of its privatization efforts. The second wave has been done through the BOT scheme and its variants primarily for the provision of energy,

construction of roads and other infrastructure facilities. The third wave covers social sectors such as

*The Philippines' Approach to Deregulation/Regulatory Review in 2000*
*Section*	*Improvements Implemented* *Since Last IAP*	*Current Regulatory Review Policies / Arrangements*	*Further Improvements* *Planned*
*General Policy* *Position*	No improvements implemented.	The Philippines has accelerated its adoption of market friendly reforms cognizant of the primacy of the private sector as the engine of growth, with the government providing the proper policy environment. The deregulation of the domestic regime has been undertaken in tandem with privatization and liberalization initiatives. The contact point for further information is: Trade, Industry and Utilities Staff National Economic and Development Authority 12 Amber Avenue, Pasig City Philippines Tel: (632) 631-3734 Fax: (632) 631-3734 Email: mrsongco@neda.gov.ph; brmendoza@neda.gov.ph	The Philippines will continue to review and improve its regulatory regime.
*Identification and Review of Proposed Regulations*	No improvement implemented	The identification and review of policies is lodged with the relevant government agencies (e.g., the Department of Energy for the oil industry and the power sector; the Bangko Sentral ng Pilipinas for banking; the Department of Finance for investment houses, financing companies, investment companies and insurance; and the Department of Trade and Industry and the Board of Investments for trade and investments and consumer protection; etc.). The identification and review of policies is guided by and should be consistent with the development goals and objectives, key policies and strategies, and priority sector activities under the Medium-Term Philippine Development Plan (MTPDP). The Philippines maintains transparency in all its actions as part of the democratic process. Public hearings or consultations are usually	The Philippines will endeavor to further improve transparency of its regulatory regime through more timely publication of laws and rules and in the most widely read newspapers.

*The Philippines' Approach to Deregulation/Regulatory Review in 2000*
*Section*	*Improvements Implemented* *Since Last IAP*	*Current Regulatory Review Policies / Arrangements*	*Further Improvements* *Planned*
		conducted in the formulation of policies. The private sector and civil society have representation in certain government councils/committees. Laws, rules and regulations cannot take effect until after fifteen days following complete publication in the Official Gazette or in a newspaper of general circulation in the Philippines unless otherwise provided. Details of the MTPDP may be obtained from http://www.neda.gov.ph The contact point for further information is: Trade, Industry and Utilities Staff ^{National Economic and Development Authority} 12 Amber Avenue, Pasig City Philippines Tel: (632) 631-3734 Fax: (632) 631-3734 Email: mrsongco@neda.gov.ph; brmendoza@neda.gov.ph
*Identification and Review of Existing Regulations*		Same as above	Same as above

*The Philippines' Approach to Deregulation/Regulatory Review in 2000*
*Section*	*Improvements Implemented* *Since Last IAP*	*Current Regulatory Review Policies / Arrangements*	*Further Improvements* *Planned*
*Reform of Industry/Secto r Specific Regulation*	Issued EO 286 (Promulgating the Fourth Regular Foreign Investment Negative List) which amends the restrictions on retail trade to reflect the provisions of RA 8762 (Retail Trade Liberalization Act of 2000) (August 2000). Enacted RA 8756 (Regional Headquarters Law) which expands the scope of permissible activities and provides further incentives for multinational corporations wanting to set up their regional headquarters in the Philippines (November 1999). See Investment Chapter Enacted RA 8791 (The General Banking Law of 2000) which allows increased foreign ownership of a local bank from 30% to 40% of the voting stock and under certain conditions, up to a maximum of 100% (May 2000). See Services Chapter Enacted RA 8762 (Retail Trade Liberalization Act of	A major restructuring of the tax system has been undertaken. This is aimed at making the system more equitable, the rates more reasonable and to facilitate administration. A major reform in the financial sector is the liberalization in the entry of foreign banks, with the issuance of RA 7721 in May 1994 (see Services Chapter). Insurance has been opened to up to 100 percent foreign equity since October 1994 (see Services Chapter). Other reforms that have been implemented are:· - further reduction of the reserve requirement; - lower capital requirement for bank branching, particularly as regards thrift banks; - expanded use of ATMs; - liberalization of accreditation guidelines for securities dealership of Treasury bills; - simplification of reportorial procedures of banks; - lifting of restrictions on repatriation of foreign investments; - increasing the ceiling on outward foreign investments; - reduction of requirements against deposit and deposit substitutes of banks and non-banks;

*The Philippines' Approach to Deregulation/Regulatory Review in 2000*
*Section*	*Improvements Implemented* *Since Last IAP*	*Current Regulatory Review Policies / Arrangements*	*Further Improvements* *Planned*
	2000) which allows the entry of foreign investments in the retail trade sector, subject to certain categories and qualification requirements (March 2000). See Services Chapter Enacted RA 8799 (Securities Regulation Code) which mandates the reorganization of the Securities and Exchange Commission into an effective market regulator and adopts the full disclosure approach to regulation of the securities market (July 2000). See Services Chapter	- removing restrictions on automatic conversion into pesos of a certain portion of foreign loans, limiting foreign loan approvals; - extension of foreign currency denominated loans to indirect exporters; - lowering of BSP rediscount rate to increase utilization thereof; and - creation of an exporters’ dollar facility funded by the Bangko Sentral ng Pilipinas (BSP). The exchange rate continues to be market-oriented with the BSP participating in the foreign exchange market when warranted to minimize unwanted fluctuations.RA 8479 (Downstream Oil Industry Deregulation Act of 1998) was approved on 10 February 1998. The law provides for the deregulation of downstream activities such as importation, exportation, manufacturing, marketing and distribution (see Services and Investment Chapters). The Foreign Investments Act of 1991 has been amended by RA 8791 on 28 March 1996. The amendments include, among others, the following: deletion of List C; elimination of the list of strategic industries; reduction of the minimum paid-in equity capital from $500,000 to $200,000 for foreign-owned domestic market enterprises and to $100,000 if they involve advanced technology or if they employ at least 50 direct employees; and deletion of the three-year requirement before a domestic market enterprise may change its status to export enterprise. RA 8366 (Investment Houses Law) was passed on 21 October 1997. It increases foreign equity participation to 60 percent of the voting stock of an investment house. It further allows foreign nationals to

*The Philippines' Approach to Deregulation/Regulatory Review in 2000*
*Section*	*Improvements Implemented* *Since Last IAP*	*Current Regulatory Review Policies / Arrangements*	*Further Improvements* *Planned*
		become members of the Board of Directors to the extent of their participation in the equity of the enterprise (see Services and Investment Chapters). RA 8556 (Financing Company Act of 1998) was signed into law on 26 February 1998. It increases foreign equity participation to 60% of the voting stock of a financing company (see Services and Investment Chapters). EO 11 (Approving the Third Regular Foreign Investment Negative List) was issued on 11 August 1998. It delists private domestic construction contracts from the Negative List, thus allowing up to 100 percent foreign equity participation therein. RA 529, which prohibits the payment of domestically contracted obligations in foreign currency, except in four cases, was repealed by RA 8183 on 11 June 1996. Under the new law, all monetary obligations are to be paid in Philippine currency. However, the parties may agree that the obligations shall be settled in any other currency at the time of payment. The restriction on domestic borrowing of foreign firms has been lifted effective 1 January 1997. The Metropolitan Waterworks and Sewerage System was privatized on 1 August 1977. The contact point for further information is: Trade, Industry and Utilities Staff ^{National Economic and Development Authority} 12 Amber Avenue, Pasig City Philippines

*Improvements in the Philippines' Approach to Deregulation/Regulatory Review since 1996*
*Section*	*Position at Base Year (1996)*	*Cumulative Improvements Implemented to* *Date*
*General Policy* *Position*	In 1996, the Philippines was pursuing market friendly reforms. The deregulation of the domestic regime was being undertaken in tandem with privatization and liberalization initiatives.	None
*Identification and Review of* *Proposed Regulations*	In 1996, the Philippines maintained transparency in all its actions as part of the democratic process. Public hearings or consultations were conducted in the formulation of policies. The private sector and civil society was represented in certain government councils/committees.	None
*Identification and Review of* *Existing Regulations*	Same as above	None
*Reform of Industry/Sector* *Specific Regulation*	Taxation In 1996, the Philippines was undertaking a major restructuring of the tax system. Financial In 1996, the Philippines had already liberalized the entry of foreign banks (see Services Chapter). Insurance was opened to foreign equity up to 100 percent (see Services Chapter).	Taxation Restructured the tax system. This was aimed at making the system more equitable, the rates more reasonable and to facilitate administration (1999). Financial Lifted the restriction on domestic borrowing of foreign firms (1997). Increased foreign equity participation to 60 percent of the voting stock of an investment

*Improvements in the Philippines' Approach to Deregulation/Regulatory Review since 1996*
*Section*	*Position at Base Year (1996)*	*Cumulative Improvements Implemented to* *Date*
	Other reforms implemented include: - further reduction of the reserve requirement; - lower capital requirement for bank branching, particularly as regards thrift banks; - expanded use of ATMs; - liberalization of accreditation guidelines for securities dealership of Treasury bills; - simplification of reportorial procedures of banks; - lifting of restrictions on repatriation of foreign investments; - increasing the ceiling on outward foreign investments; - reduction of requirements against deposit and deposit substitutes of banks and non-banks; - removing restrictions on automatic conversion into pesos of a certain portion of foreign loans, limiting foreign loan approvals; - extension of foreign currency denominated loans to indirect exporters; - lowering of BSP rediscount rate to increase utilization thereof; and - creation of an exporters’ dollar facility funded by the Bangko Sentral ng Pilipinas (BSP). The latter three were adopted to support the export sector in the face of an appreciation of the peso. The exchange rate was left to the market forces, with the BSP participating in the foreign exchange market when warranted to minimize unwanted fluctuations. Energy	house and allowed foreign nationals to become members of the Board of Directors to the extent of their participation in the equity of the enterprise (RA 8366, Investment Houses Law) (1997). Increased foreign equity participation to 60% of the voting stock of a financing company ((RA 8556, Financing Company Act of 1998) (1998).Increased foreign ownership of a local bank from 30% to 40% of the voting stock and under certain conditions, up to a maximum of 100% (RA 8791, The General Banking Law of 2000) (2000). Mandated the reorganization of the Securities and Exchange Commission into an effective market regulator and adopted the full disclosure approach to regulation of the securities market (RA 8799, Securities Regulation Code) (2000).

*Improvements in the Philippines' Approach to Deregulation/Regulatory Review since 1996*
*Section*	*Position at Base Year (1996)*	*Cumulative Improvements Implemented to* *Date*
	In 1996, the Philippines had liberalized the domestic oil industry. Restrictions on importation/exportation of petroleum products were removed. An automatic pricing mechanism for petroleum products was also adopted. Investments In 1996, the Philippines had amended the Foreign Investments Act of 1991. Amendments included, among others: total removal of List C; elimination of the list of strategic industries; reduction of the minimum paid-in equity capital from $500,000 to $200,000 for foreign-owned domestic market enterprises and to $100,000 if they involve advanced technology or if they employ at least 50 direct employees; and deletion of the three- year requirement before a domestic market enterprise may change its status to export enterprise. In 1996, the Philippines had repealed RA 529, which prohibits the payment of domestically contracted obligations in foreign currency, except in four cases. All monetary obligations are to be paid in Philippine currency. However, the parties may agree that the obligations shall be settled in any other currency at the time of payment. The Philippines had provided for private sector involvement or participation in any or all of the segments, operations, and/or facilities of the Metropolitan Waterworks and Sewerage System (MWSS). Private sector involvement or participation may include, but shall not be limited to: franchising, concession, management, or other arrangements, privatization, or contracts for projects to be implemented under BOT and/or related schemes for the financing, construction, repair, rehabilitation,	Energy Deregulated downstream activities such as importation, exportation, manufacturing, marketing and distribution (RA 8479, Downstream Oil Industry Deregulation Act of 1998) (1998). Investments Issued EO 11 (Approving the Third Regular Foreign Investments Negative List) which delisted private domestic construction contracts from the Negative List, thus allowing up to 100 percent foreign equity participation (1998). Issued EO 286 (Promulgating the Fourth Regular Foreign Investment Negative List) which amended the restrictions on retail trade to reflect the provisions of RA 8762 (Retail Trade Liberalization Act of 2000 (2000). Expanded the scope of permissible activities and provided further incentives to multinational corporations wanting to set up their regional headquarters in the Philippines

*Improvements in the Philippines' Approach to Deregulation/Regulatory Review since 1996*
*Section*	*Position at Base Year (1996)*	*Cumulative Improvements Implemented to* *Date*
	improvement, and operation of water facilities and projects related to consumers.	(RA 8756, Regional Headquarters Law) (1999). Private Sector Involvement/Privatization Privatized MWSS (1997). Distribution Allowed the entry of foreign investments in the retail trade sector, subject to certain categories and qualification requirements (RA 8762, Retail Trade Liberalization Act of 2000) (2000).

APEC Agreements and Declarations

APEC DEREGULATION REPORT 2000 - PHILIPPINES