WT/TPR/M/368/Add.1 29 May 2018 (18-3249) Page

WT/TPR/M/368/Add.1

29 May 2018

(18-3249) Page: 1/152

Trade Policy Review Body Original: English/anglais/inglés 26 and 28 March 2018 Spanish/espagnol/español

TRADE POLICY REVIEW PHILIPPINES MINUTES OF THE MEETING Addendum

Chairperson: H.E. Mr Juan Carlos González (Colombia)

This document contains the advance written questions by WTO Members and replies provided by the Philippines.1

Organe d'examen des politiques commerciales 26 et 28 mars 2018

EXAMEN DES POLITIQUES COMMERCIALES PHILIPPINES COMPTE RENDU DE LA RÉUNION Addendum

Président: S.E. M. Juan Carlos González (Colombie)

Le présent document contient les questions écrites communiquées à l'avance par les Membres de l'OMC et les réponses fournies par les Philippines.1

Órgano de Examen de las Políticas Comerciales 26 y 28 de marzo de 2018

EXAMEN DE LAS POLÍTICAS COMERCIALES FILIPINAS ACTA DE LA REUNIÓN Addendum

Presidente: Excmo. Sr. Juan Carlos González (Colombia)

En el presente documento figuran las preguntas presentadas anticipadamente por escrito de los Miembros de la OMC, así como las respuestas facilitadas por las Filipinas.1

1 In English and Spanish only./En anglais et espagnol seulement./En inglés y español solamente.

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CANADA ...... 3 JAPAN ...... 6 ARGENTINA ...... 12 AUSTRALIA ...... 15 BRAZIL ...... 20 CHINA ...... 24 DOMINICAN REPUBLIC ...... 34 EL SALVADOR ...... 38 EUROPEAN UNION ...... 39 NORWAY ...... 59 SINGAPORE ...... 63 THAILAND ...... 63 UKRAINE...... 73 UNITED STATES ...... 86 CHILE ...... 105 NEW ZEALAND...... 115 INDONESIA ...... 119 MALAYSIA ...... 122 SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU ...... 131 REPUBLIC OF KOREA ...... 135 TURKEY ...... 136 BRAZIL, FOLLOW-UP QUESTIONS ...... 140 CHINA, FOLLOW-UP QUESTIONS ...... 140 EUROPEAN UNION, FOLLOW-UP QUESTIONS ...... 147 MALAYSIA, FOLLOW-UP QUESTIONS ...... 151

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CANADA

PART I: QUESTIONS REGARDING THE SECRETARIAT REPORT

3 TRADE POLICIES BY MEASURE: STANDARDS AND OTHER TECHNICAL REQUIREMENTS Page 46 (para 3.62)

The Secretariat report notes that for the minority of Philippine National Standards (PNSs) not aligned with international standards, it is due mainly to long standing business practices, climatic conditions, the absence of specific international standards, and the need for higher requirements than international standards.

In those cases where PNSs are not aligned with international standards due to the need for higher requirements than those of international standards, could the Philippines provide examples of products that would fall into this category? Please explain what is meant by “higher requirements”?

Response:

Examples of products where PNSs are not aligned to International Standards are steel bars, galvanized iron sheets and other construction materials, among others. ‘Higher requirements’ refers to requirements specific to domestic conditions, consistent with Paragraph F, Annex 3 of the TBT Agreement.

Page 46 (para 3.65)

The Secretariat report notes that the Philippines Accreditation Bureau (PAB), which is responsible for the accreditation of inspection, testing and calibration laboratories and assesses the conformance of laboratories' quality management systems with international guidelines, has accredited 243 conformity assessment bodies.

Of the 243 conformity assessment bodies accredited by the PAB, how many are located outside the Philippines?

Response:

Three (3) foreign Conformity Assessment Bodies (CABs) are accredited by PAB as follows:

 Certification Body: Brixton Assessment Services, Abu Dhabi, UAE for Quality Management System, Environmental Management System and Food Safety Management System;  Testing Laboratory: Intertek Testing Services Guam for Chemical Testing; and  Testing Laboratory: SGS Guam Inc. Laboratory for Chemical Testing.

4 TRADE POLICIES BY SECTOR: AGRICULTURE

Page 64 (Para 4.15 and 4.17)

The Secretariat report notes that the General Council granted the Philippines an extension of special treatment for rice until June 30, 2017 and that as of October 2017, the Philippines rice regime is governed by the status quo.

Could the Philippines provide an update on its domestic process to tariffy rice?

Response:

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Agriculture and Food. Both Houses will transmit the bill to the Bicameral Conference Committee for a final bill to be approved. The approved version of the bill will then be transmitted to the Office of the President for approval. Note that both the Legislative and Executive branches of Government have given priority to this proposed legislation.

Page 65 (Para 4.24)

The state report mentions that “the NFA's operations include the buying/procurement of paddy on a nationwide scale at a fixed government support price. According to the authorities, the NFA only procures in the domestic market when the prevailing farm gate price of paddy significantly drops to a level that would deprive the farmers of earning a modest income for their produce.”

Could Philippines indicate how often the NFA evaluates the farm gate price of paddy to establish new rice and corn procurement?

Are these evaluations made as needed or are they done on a regular basis?

Response:

The NFA monitors the farm gate price of paddy frequently to assess the behavior of prices and to be able to reliably source the areas where the Agency can procure paddy. Determination of any change in the government’s buying price is done on need basis depending on several factors such as cost of paddy production; inflation rate, prevailing situation and outlook on the domestic/global rice market; income of rice/corn farmers relative to farmers of other crops and the government's capability to implement the program.

The Philippines will provide clarification on the Secretariat Report on the statement, to wit:

”NFA only procures in the domestic market when the prevailing farm gate price of paddy significantly drop to a level that would deprive the farmers of earning a modest income for their produce.”

Part of NFA’s mandated price stabilization function is the provision to farmers of a ready market for their produce by procuring their paddy harvest especially when prevailing farmgate prices of paddy significantly drop to allow fair returns on farmers’ investment. The paddy procurement intervention/activity of NFA is being conducted year-round to build-up rice buffer stocks for food security purposes

4 TRADE POLICIES BY SECTOR: TRANSPORT

Page 78 (Para 4.111)

The Secretariat Report notes that foreign equity in a domestically licensed airline may not exceed 40%.

Does the same foreign equity limitation (i.e., 40%) also apply to foreign equity in airlines licensed to fly internationally?

If not, what foreign equity limitation applies to airlines licensed to fly internationally?

Response:

An airline is considered a public utility pursuant to Section 9 of Act No. 2694. Act No. 2694 defines “public utility” to hereby include every individual, co-partnership, association, corporation or joint stock company, whether domestic or foreign, appointed by any court or department of the Government that owns or controls any common carrier engaged in the transportation of passengers and cargo for public use.

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Since the 1987 Constitution mandates that the operation of a public utility be granted to citizens of the Philippines or to corporations organized under the laws of the Philippines whose capital is owned by at least sixty percent (60%) of such citizens, the foreign equity limitation of airlines still applies, regardless if airlines are licensed to fly internationally. This rule applies even if the carrier is given a license to operate international flights. However, this is limited to domestic airline companies. Foreign airline companies are not covered.

Page 80 (Para 4.121)

The Secretariat Report notes that foreign vessels, under a special permit granted by MARINA, may provide cabotage services when no domestic vessel is available or suitable to provide the service required, and the public interest warrants it. The Report also notes that as of September 2017, MARINE granted 242 special permits to foreign vessels.

Could the Philippines please provide additional information on how the term “when the public interest warrants it” is, or has been interpreted in the past?

Could the Philippines please provide a breakdown, by activity, of the number of special permits granted to foreign vessels?

Response:

The term “when the public interest warrants it” may be interpreted to mean that the issuance by the MARINA of a Special Permit to foreign-registered highly specialized ship will not prejudice efficient trade and commerce in the delivery of critical services/commodities, infrastructure and development projects, in case the required shipping services are not readily available and suitable from the domestic fleet.

Another example refers to the significance of projects for the development of the Liquefied Natural Gas (LNG) Industry and Petroleum Operations which require highly specialized ships not normally available from the domestic fleet.

In addition, it covers companies/entities that intend to secure Special Permit to operate foreign-registered highly specialized ships within Philippine territorial waters includes, but not limited to, the operation of certain ships used in Petroleum Exploration and Operation.

Please refer to the following link for more detailed information: http://www.marina.gov.ph/policies/MCs/MC%202017-02.pdf

Page 80 (Para 4.123)

The Secretariat Report notes that international relays are now possible in the Philippines.

Could the Philippines please provide additional data on the effect that this liberalization has had? For example, have efficiency gains been realized by allowing domestic point-to-point movement of goods bound for international destinations?

Response:

On the effect of international relays, the Philippines does not have studies available. However, many stakeholders have welcomed the law for its expected effects in reducing shipping costs and efficiencies. It can also be noted that in the 2017 World Bank Ease of Doing Business indicator for the Philippines on “Trading Across Borders”, the “cost to export” went down from USD 585 (2014) to USD 456 (2017) and the “cost to import” went down from USD 660 (2014) to USD 580 (2017).

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JAPAN

2 Domestic Policies and Initiatives to Sustain Long-term Growth and Improve the Business Environment for Inclusive Growth

2.4 Services

2.4.4 Logistics

(Question 1 Paragraphs 2.31, Page 10)

According to the report by the Government, the Philippines seeks to improve distribution and transport services. Does the Philippines have any policy plan to promote these sectors, such as mitigating the restriction on foreign investment to promote these sectors?

Response:

The Philippines continues to review its domestic laws, rules and regulations in order to make distribution and transport services more responsive to the needs of the country.

Aside from the amendment of the Cabotage Law, which lifted the cabotage restrictions imposed on foreign operators, the Philippines is also currently reviewing Commonwealth Act No. 146 otherwise known as the Public Service Act (PSA). The said review is for the purpose of clarifying the definition of public utilities in order to open up certain industries to more competition and attract investments on the same.

On 15 February 2018, the Senate Committee on Public Services jointly with Finance and Economic Affairs conducted a public hearing to consider five (5) Senate Bills and the approved House version relevant to the amendment of Commonwealth Act No. 146 or the Public Service Act. The Senate version is still pending before the Committee on Public Services. The draft bills provide a clear definition of public utility to cover three sectors: distribution of electricity; transmission of electricity and water pipeline distribution system or sewerage pipeline.

The National Transport Policy (NTP) which was adopted by the NEDA Board on 12 September 2017 is a priority strategy reflected in the Philippine Development Plan. It will serve as the guiding policy for transportation development, management, operations, and use, covering all elements of the transport system and its sub-sectors. It is intended to facilitate the realization of the Transport Vision of a safe, secure, reliable, efficient, integrated, intermodal, affordable, cost-effective, environmentally sustainable, and people-oriented national transport system that ensures improved quality of life of the people. The Philippine Transport Systems Master Plan (PTSMP) is currently being prepared and targeted for completion by the end of the year.

3 Industry and Trade Policy Developments

3.2 Participation in the Doha Development Agenda (DDA) Negotiations

3.22 Services

(Question 2 Paragraphs 3.14, Page 13)

Does the Constitution of the Philippines limit its government from liberalizing services or supply of services? If so, does the Philippines have any plan to amend the Constitution in terms of liberalization of trade in services and investment?

Response:

The Constitution is the supreme law of the Philippines. As such, laws, rules and regulations should be consistent with the 1987 Constitution including commitments in international agreements such as the GATS. It may be noted however, that several

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- 7 - steps have already been undertaken by the Philippines to review the 1987 Constitution with a view to revise or amend it.

The amendment of the restrictive economic provisions of the Constitution is stipulated in the Philippine Development Plan, but the timing is not yet ascertained. In the meantime, bills have been filed in both Houses of Congress that would amend certain laws such as the bill amending the Public Service Act, i.e. defining “public utility”, and the bill seeking to promote open access in data transmission. In December 2017, Executive Order 10 was signed creating a consultative committee that will conduct consultations and review the provisions of the Constitution relevant to the structure and power of the government, local governance and economic policies.

In January 2018, the Philippine Congress adopted a resolution constituting the Congress of the Philippines as a Constituent Assembly that will review the 1987 Constitution for the purpose of proposing amendments to or revision of the same. Subsequently, the Senate Committee on Constitutional Amendments and Revision of Codes have conducted hearings on Charter Change Proposal.

3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Measures Directly Affecting Imports

3.1.5 Import prohibitions, restrictions, and licensing

(Questions 3, Page 38-41)

1. The Government of the Philippines fined Sanofi for selling Dengvaxia (dengue shot), as it might cause serious side-effects. We would like to know what penalties could be imposed on a company that manufactures and/or exports pharmaceutical products with unforeseen side-effects.

2. Could you explain the legal framework and procedure to appeal against a decision which imposes penalties on pharmaceutical companies for supplying pharmaceutical products with unforeseen side-effects?

Response:

The Philippines, through the Food and Drug Administration (FDA), did not fine Sanofi Pasteur, Inc for selling Dengvaxia “as it might cause serious side-effects”. Sanofi was fined for violating Section V of the FDA Circular 2013-004, in relation to Section VII of the same circular, and Section 4 (B)(2)(3), Article I Book II of the Implementing Rules and Regulation of Republic Act No. 9711, otherwise known as the FDA Act of 2009.

Records and evidence showed that Sanofi failed to comply with its post-marketing authorization issuance commitments, such as submission of Pharmacovigilance Plan prior to the distribution of Dengvaxia and regular submission of safety data and updates as contained in the Pharmacovigilance Plan. For the said violation, the Certificates of Product Registration (CPR) of Dengue and Dengue multi-dose were suspended for a period of one year and an administrative fine of PhP 100,000.00 was imposed, with a stern warning that future violations of FDA laws, rules and regulations shall warrant stiffer sanctions, including but not limited to cancellation of the CPRs and/or License to Operate, and the closure of the establishment.

Under the Republic Act No. 9711, otherwise known as the FDA Act of 2009, erring establishments may be penalized under Section 5, “Imposition of Administrative Penalties”. Other details on the administrative penalties and appeal can be accessed from this link: http://www.officialgazette.gov.ph/2009/08/18/republic-act-no-9711/.

3.3 Measures Affecting Production and Trade

3.3.8 Intellectual Property

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(Question 4 Paragraphs 3.131, Page 57)

We would like to know if, in the Philippines, any third-party can register an unregistered trademark which is identical or similar to a trademark that is well-known in a foreign country.

If such trademark is filed or registered by any third-party in the Philippines, is it possible for the trademark owner of well-known mark in a foreign country entitled to invalidate or cancel such application or registration? If possible, we would like to know specific articles in the trademark act to be applied in such case.

Response:

A third-party may file an application for registration of a trademark that has been declared as a well-known mark in a foreign country; however, such application shall be subject to opposition proceedings where an opposer may present evidence that the third-party applicant is not the true owner of the trademark and is therefore not entitled to its registration in the Philippines. Under Section 123.1 of the IP Code, a mark which is identical with, or confusingly similar to, or constitutes a translation of a mark which is considered by the competent authority of the Philippines to be well-known internationally and in the Philippines, whether or not it is registered in the Philippines, and which is used for identical goods or services, cannot be registered by a third party. In determining whether a mark is well- known, account shall be taken of the knowledge of the relevant sector of the public, rather than of the public at large, including knowledge in the Philippines which has been obtained as a result of the promotion of the mark. The Rules and Regulations further provides that the “competent authority” for purposes of determining whether a mark is well-known shall be the Court, the Director General of the IPOPHL, the Director of the Bureau of Legal Affairs of the IPOPHL, or any administrative agency or office vested with quasi-judicial or judicial jurisdiction to hear and adjudicate any action to enforce the rights to a mark. Therefore, if in the appropriate proceedings the subject trademark is likewise declared as a well-known mark not only internationally or in a foreign country but also in the Philippines, such well-known mark cannot be registered by a third party for identical goods or services.

During the proceedings on determining whether the trademark application filed by the third party should be granted, evidence may also be submitted as to whether the application was filed in bad faith. The Supreme Court of the Philippines has held that the registrant of a mark was in bad faith in having it registered in its name since another entity is the true and lawful owner thereof. In another case, the Court decided, among other points, that the registrant of the mark had acted in bad faith because it was aware of the prior existence of the earlier mark and proceeded to obtain registration in its name despite of such knowledge.

In the event that the trademark is registered in the name of the third-party, the trademark owner of the well-known mark in a foreign country may also subsequently cause the cancellation of such registration through an administrative proceeding. Under Section 151.1 (b) of the IP Code, a petition to cancel a registration of a mark may be filed at any time with the Bureau of Legal Affairs of IPOPHL by any person who believes that he is or will be damaged by the registration of a mark, if the registration was obtained fraudulently or contrary to the provisions of the IP Code.

(Question 5 Paragraphs 3.133, Page 57)

We would like to know whether the Philippines is planning to become a member of the Hague Agreement Concerning the International Registration of Industrial Designs. If the Philippines has plan to become a member, we would like to know the schedule of accession.

Response:

The Philippines confirms its plan to accede to the Hague Agreement Concerning the International Registration of Industrial Designs. It is currently in the process of

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- 9 - finalizing a national work plan for accession. Initial consultations with the relevant stakeholders have also been conducted as part of pre-accession preparations.

(Question 6 Paragraphs 3.133, Page 57)

We would like to know whether partial design can be registered and protected as industrial design in the Philippines.

Response:

The Philippines can confirm that a partial design can be registered and protected as an industrial design in the Philippines. Partial designs are covered by the definition of an Industrial Design under the IP Code, as amended, to wit: “An Industrial Design is any composition of lines or colors or any three-dimensional form, whether or not associated with lines or colors: Provided, That such composition or form gives a special appearance to and can serve as pattern for an industrial product or handicraft”. An application for registration of an industrial design must contain a representation of the design, which may be in the form of drawings, which fully discloses those features for which protection is claimed.

Partial designs sought to be protected must include in the drawings the unclaimed "environment/outward form". The representation of the design should adopt solid lines to depict the portion of the design sought to be protected, while dashed, dotted, or broken lines should show the unclaimed environmental structure in the drawing disclosure.

(Question 7 Paragraphs 3.133, Page 57)

We would like to know whether exploitation of a design which is similar to a registered industrial design is deemed as the exploitation of such registered industrial design in the Philippines. Response:

The Philippines confirms that exploitation of a design which is similar to a registered industrial design is deemed as exploitation of such registered design in the Philippines. Pursuant to Section 71(a) of the IP Code, as amended, a registered industrial design confers to its owner the right to exclude others from making, using, offering for sale, selling or importing a similar registered industrial design.

(Question 8 Paragraphs 3.134, Page 57)

We would like to know whether the Philippines is planning to become a member of UPOV1991. If the Philippines has plan to become a member, we would like to know the schedule of accession.

Response:

At present, the Philippines is not inclined to become a member of UPOV 1991. Nevertheless, plant varieties that are new, distinct, uniform, and stable are protected under a sui generis system pursuant to Republic Act No. 9168 or the Plant Variety Protection Act of the Philippines.

4 TRADE POLICIES BY SECTOR

4.1 Agriculture

4.1.5 Rice

(Questions 9 Paragraphs 4.16, Page 62-63)

1. Regarding WT/L/932, Japan understands that the Philippines’ MFN in-quota tariff rate of the minimum access volume (MAV) of rice is 35% in 2017. We would like to know whether this rate remains unchanged in and after 2018.

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Response:

Executive Order No. 23 dated 22 May 2017 extends the concessions granted by the Philippines to interested trading partners for another three years (2018-2020) or until the enactment of a law removing the QR provisions of Republic Act (RA) 8178, whichever comes first. In the meantime, the MFN tariff rates remain at 35% for the in- quota rate and 50% for the out-quota rate.

2. We would like to know whether it is possible for private business operations to import rice through the MAV's allocations for "other" countries (50,000t) instead of country specific allocations (755,200t). If it is possible, we would appreciate it if you could indicate the eligibilities and procedures to apply for the MAV, and whether there are limits on the volume of import per application or per year.

Response:

Local eligible importers wishing to import rice from other countries which are not part of the Country Specific Quota could do so under the Omnibus Origin (total allocation of 50,000 MT) of the MAV Rice Importation for the Private Sector.

Any person and/or entity who is engaged in or is intending to engage in the importation of rice can apply for an Import License with NFA. The following documents required are as follows:

For New Applicants/Individual (Sole Proprietorship):

 Passport picture of the applicant.

For Corporation/Partnership/Association/Cooperative:

 Secretary’s Certificate of a Board Resolution authorizing the representative to sign for and in behalf of the corporate/entity

 Passport-size picture of the representative

 Article of Incorporation and By-Laws and All Amendments thereto

 Certificate of Registration with the Securities and Exchange Commission, in case of corporation, partnership or associations and Certificate of Registration with the Cooperative Development Authority in case of cooperative

For both categories, an interested importer who would like to apply for the MAV Rice Importation Program for the Private Sector needs to submit a Letter of Intent together with the required documentary requirements consisting of the three (3) parts: (1) Technical Documents; (2) Legal Documents; and (3) Financial Documents.

Prospective applicant-importer may check the electronic copy of the General Guidelines in the Importation of 805,200 MT White Rice Under MAV Country Specific Quota and MAV-Omnibus Origins (MAV-OMB) for CY 2017 by the Private Sector that is published at the NFA website through www.nfa.gov.ph for the detailed information on the process and procedures.

For CY 2017, eligible importers were allocated a maximum volume of 20,000 MT depending on their financial and technical capacity.

3. Could you illustrate policy direction on tariffication of the Philippines, as well as the current status and future prospect of amendments of the Agricultural Tariffication Act?

Response:

The Office of the President issued on 22 May 2017 the Executive Order No. 23 extending the concessions granted by the Philippines to interested trading partners. The extension

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- 11 - shall be in effect for three (3) years or until the enactment of a law removing the QR provisions of RA 8178, whichever comes first.

At the Lower House of Congress, the bill is under deliberation by the Committee on Appropriations before being submitted to the Plenary for approval. At the Upper House of Congress, a version of the bill is being deliberated by the Senate Committee on Agriculture and Food. Both Houses will transmit the bill to the Bicameral Conference Committee for a final bill to be approved.

The approved version of the bill will then be transmitted to the Office of the President for approval. Note that both the Legislative and Executive branches of Government have given priority to this proposed legislation.

Aside from the proposed legislative measure, the Philippines is planning to come up with a program and roadmap that would form part of the public policy on rice tariffication, specifically to enhance the productivity and efficiency of the rice sector and to put in place the necessary support for the affected farmers in the post-QR regime.

4.5.1 Financial Services

4.5.1.1 Banking

(Question 10 Table 4.4, Page 73)

According to the report by the Secretariat, 100% foreign ownership of banks in the Philippines is allowed. The data shown on Table 4.4, however, shows that even though the number of foreign banks (22) outnumbers that of domestic banks (17), total asset of foreign banker accounts for just 1,078.7 billion PHP, whereas that of domestic banks sum up to as much as 9,785.2 billion PHP. Could you provide information on any existing measures which may have attributed to the low figure of total asset of foreign banks?

Response:

The relatively modest size of the total assets of all the foreign banks established in the Philippines may primarily be attributable to the fact that nine (9) out of 22 of these foreign banks as of end-June 2017 are new entrants to the Philippine market. Domestic banks have been in the business longer and have extensive branch and customer networks.

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ARGENTINA

1. Paragraph 2.31 mentions that the Philippines continues to encourage investment in specific sectors, such as the manufacturing industry and agriculture. However, section 2.4 details that foreign investment in agriculture is regulated for foreign investors.

Could you explain what this regulation consists of?

Response:

The regulation being referred to are the Constitutional restriction on land ownership by foreigners and the FDI restrictions with respect to the cultivation, processing and trade of rice and corn.

On the land ownership restriction, only Filipino citizens or corporations with at least 60% of the capital stock owned by Filipino citizens may own land in the Philippines. Nevertheless, foreign investors may lease land for a period of 50 years, renewable for another 25 years.

On rice and corn, foreign-owned enterprises may engage in such activities subject to the requirement of divestment within 30 years or for a longer period as the Board may require from date of registration.

2. Paragraph 2.31 mentions that the Philippines encourages investment in specific sectors through the Inclusive Business Model, which encourages medium and large companies in agribusiness and tourism to turn to micro and small enterprises to help them supply raw materials and /or services. Could you indicate how this mechanism of promotion for SMEs is made effective?

Response:

Under the Inclusive Business (IB) Model, medium and large enterprises (MLEs) are encouraged to engage micro and small enterprises (MSEs) to be part of their supply chains as suppliers of either raw materials and/or services.

To promote IB, the BOI implements a nationwide information campaign and facilitates the matching between MLEs’ requirements and the MSEs’ capabilities. The BOI has likewise intensified awareness on IB in the APEC and ASEAN fora through High Level Dialogues and holding an ASEAN IB Awards Night to encourage more multinational companies (MNCs) to adopt IB Models.

3. Paragraph 3.24 mentions the power of the President to allow products to be imported duty-free if this is in the "interest of national economic development".

What are the criteria used to determine if the product is in the "interest of national economic development?

Response:

Under the rules governing the implementation of the last clause of the last paragraph of Section 800 of the Customs Modernization Act (formerly Section 105 of the Tariff and Customs Code, as amended), importation through purchase or donation may qualify for duty exemption provided these consist of essential machinery and equipment and other goods, subject to certain conditions, and are imported by qualified donees/recipients including among others government or private primary (Level1) or secondary (Level 2) hospitals duly registered and licensed to operate by the Philippine Department of Health pursuant to Republic Act No. 4226 Medical and hospital equipment including x ray machines, BP machines (excluding mercury type), ECG/EKG machines, wheel chairs, hospital beds (except cushion), ambulances may qualify for duty exemption so long as imported by qualified hospitals. Requests for duty exemption are processed on a per shipment basis (www.neda.gov.ph/citizens charter/).

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4. Could you provide an example where the franchise has been implemented based on the aforementioned criteria?

Response:

Not applicable.

5. In table 3.5, it is explained through the footnote that, annually, the specific tax on some products is increased by 4%.

What is the reason for this annual increase?

Does this increase apply to both domestic and imported products?

Is there a deadline for this increase, in terms of number of years?

Response:

The table was not included in the query. However, we assumed that it refers to the four percent (4%) indexation of alcohol and tobacco products indicated in the Republic Act (RA) No. 8424 or the National Internal Revenue Code of 1997, as amended by RA No. 10351 or the Sin Tax Reform Law of 2012.

The said annual indexation accounts for inflation which applies to both domestic and imported products. In addition, there is no sunset provision for this increase unless amended by another law.

6. Paragraph 3.63 refers to mandatory national technical standards and the need for the importer to have a certificate of conformity to guarantee the entry of the product into the country. The same paragraph mentions that even products that have a foreign certification that shows compliance with international standards can be subject to examination.

What is the procedure to obtain the certificate of conformity of the import product?

What are the criteria used to require that samples of imported products be examined, including those that have a foreign certification in accordance with international standards?

Response:

On the procedures on obtaining a certificate of conformity of the import product, Argentina may access http://www.bps.dti.gov.ph/index.php?option=com_docman&task=cat_view&gid=200& Itemid=104 which outlines the procedures for products covered by the BPS’ Certification Schemes which are mostly consumer products.

On the criteria used to require the submission of samples of imported products to be examined including those that have a foreign certification, the Philippines would refers Argentina to the rules and regulations of the Bureau of Philippine Standards Mandatory Product Certification Scheme covered by Department Administrative Order (DAO) 04 Series 2008 and DAO 05 Series 2008 which could be accessed at http://www.bps.dti.gov.ph/index.php?option=com_docman&task=cat_view&gid=56&li mit=5&order=name&dir=ASC&Itemid=78.

7. Paragraph 3.73 mentions the regime for the accreditation of imports of food products.

Does the Philippines have any agreement or recognition of establishments between its Food Department and other organizations of similar hierarchy in other countries? If it is affirmative, it would be desirable to know if this agreement facilitates the importation of this type of product.

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Response:

Agreements and recognition of establishments are in place. Based on Republic Act 9711, the prerequisites for importation of all processed food products is to obtain a license to operate (LTO) as a Philippine food distributor-importer and a certificate of product registration (CPR) of the specific prepackaged and processed food product. While the Philippine Food and Drug Administration does not provide accreditation to organizations from other countries, it does recognize the certificate of free sale (food) issued by its counterpart National Competent Authority. Certificates of free sale (food) issued by chamber of commerce and industries will need authentication by the Philippine Embassy.

For meat, a mechanism is in place to recognize establishments which have undergone the accreditation process under Administrative Order No. 16 to facilitate the importation of meats.

8. Paragraph 4.134 indicates that the Tourism Act of the Philippines creates "Tourism Enterprise Zones" (TEZs) with tax incentives through which, among other things, temporary exemption from income tax is granted for a period of 12 years, exemption from VAT and special taxes on imported goods, importation of capital goods and equipment under duty-free treatment and tax credits equivalent to national taxes paid for local services and goods destined for the activities of the TEZ. What requirements must foreign companies meet in order to obtain these benefits?

Response:

Foreign companies may invest in tourism enterprises inside a designated tourism enterprise zone and register it with the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) to avail of incentives under “Tourism Act of 2009 or R.A. 9593. More details are available in the Implementing Rules and Regulations of the Tourism Act which can be accessed from: http://www.tourism.gov.ph/Downloadable%20Files/RA%209593.pdf.

In addition to Paragraph 4.134 of the Secretariat Report, lands and buildings in each tourism enterprise zone may be leased to foreign investors for a period not exceeding 50 years, renewable once for a period of not more than 25 years. The leasehold right acquired under long-term contracts may be sold, transferred or assigned, subject to the conditions set forth under the Investor’s Lease Act.

9. Paragraph 3.14 reports on the tariff phenomenon "mixed escalation".

What logic corresponds to the adoption of this tariff profile?

Response:

The Philippines’ tariff structure is guided by higher tariffs for agricultural products and lower tariffs for finished goods, which is a common structure among other WTO members.

10. Paragraph 3.16 qualifies the quota administration system as "complex".

Do you share this diagnosis?

In such a case, would you consider adopting measures to simplify this system?

What economic effects are sought by introducing quantitative elements in the form of tariff quotas?

Response:

The Philippines has issued guidelines to effectively implement the tariff quota system administration where procedures and processes are clearly defined. Likewise, all

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- 15 - measures are regularly reviewed and any amendments introduced must be consistent with our domestic laws and international commitments.

11. Paragraph 4.7 indicates that the objective of agricultural policy is to achieve self-sufficiency. What role does international trade play in this strategy?

Response:

Food security has always been the priority of the Philippine Government. To achieve this, aside from increasing the production and competitiveness of the domestic agriculture and fisheries sector, importation of staple food such as rice is needed for buffer stocking purposes.

12. Paragraph 4.14 indicates that the Philippines has notified the granting of subsidies to exports of agricultural products until 2015.

Did these operations continue after 2015?

Response:

The Philippines has not provided any form of export subsidy to its agricultural products during the period of review. It will provide a new notification on this status as soon as possible.

AUSTRALIA

Report by the Secretariat (WT/TPR/S/368)

Summary

Page 8, paragraph 24

The report states that the National Broadband Plan aims to improve telecom infrastructure and promote an open access network, as well as to enhance foreign investment in the sector.

Question 1

What are the key aspects of the Plan that will result in improved infrastructure, greater foreign investment in the sector and promotion of an open access network?

Response:

The National Broadband Plan (NBP) has three major broad implementation strategies, as follows:

 Policy and Regulatory Reforms: With the rapid development and advancement in the telecommunications and ICT sector, existing frameworks governing this industry should undergo reforms to cope with the new trends in technologies. Given this situation, the government will focus on review and amendment of relevant laws.

 Investment on Broadband Infostructure: Establishment of the Philippine Integrated Infostructure (PhII) is proposed to address the bottlenecks in backbone and backhaul segments, as well as to serve the augmentation of bandwidth requirements of today’s digital society. To implement the PhII, the government will address the lack of market capacity for implementation within the required timeframe and will avoid infostructure surplus while building the network. Careful consideration between the scope variant and commercial strategies on direct government build and operation, PPP arrangement, and subsidized investment will be undertaken to establish a PhII. This may necessitate one or several public-private partnership (PPP) agreements to deliver new infrastructure and services.

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 Government Support to Stimulate Broadband Demand: In order to sustain the momentum of pervasive infostructure development, the government will establish necessary “pull” measures to stimulate demand, and eventually increase broadband take-up rate. These include programs and interventions that will focus on the following: (a) Local Content Development; (b) Conduct of Capacity Building and Information Outreach Programs; and (c) Introduction of Incentives to Broadband Users.

Report by the Secretariat (WT/TPR/S/368)

2. Trade and Investment Regimes

2.2 Trade Policy Formulation and Objectives

Page 23, paragraph 2.5(e)

The report states that the Interagency Committee on Trade in Services (IAC-TS) recommends positions on GATS implementation matters and has expanded its coverage to include bilateral and regional arrangements pertaining to trade in services.

Question 2

What role does the IAC-TS have in identifying opportunities for greater liberalisation in the services sector?

Response:

Aside from the GATS, the IAC-TS coordinates the preparation and recommends Philippine positions for services-related negotiations in bilateral, regional and multilateral fora.

Liberalization/facilitation initiatives laid out in the proposed legislative agenda in the Philippine Development Plan 2017-22 are proposed and/or supported by member agencies of the IAC-TS.

Report by the Secretariat (WT/TPR/S/368)

3 Trade Policies and Practices by Measure

3.3 Measures Affecting Production and Trade

3.3.8 Intellectual property rights

Pages 55 to 57 , Paragraphs 3.3.8.2, 3.3.8.4 and 3.3.8.6

The report outlines the protection provided in the Philippines for new plant varieties, inventions and trade marks.

Question 3

When does the Philippines expect to accede to the International Convention for the Protection of New Varieties of Plants, as revised at Geneva, March 19, 1991 (UPOV 91)? Australia notes that the Philippines has already initiated the procedure for accession to this agreement.

Response:

There was only an initial inquiry made by the Philippines in 2002 which need not be considered as a step towards accession. At present, the Philippines is not inclined to become a member of UPOV 1991. Nevertheless, plant varieties that are new, distinct, uniform, and stable are protected under a sui generis system pursuant to Republic Act No. 9168 or the Plant Variety Protection Act of the Philippines.

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Question 4

Does the Philippines intend to accede to the Patent Law Treaty and to the Singapore Treaty on the Law of Trademarks?

Response:

At this time, the Philippines is not inclined to accede to the Patent Law Treaty because some provisions, particularly Article 5 (“Filing Date”) and Article 13 (on the “Restoration of Priority Right”), are inconsistent with certain provisions of the IP Code, as amended.

On the other hand, the Philippines is currently studying the Singapore Treaty on the Law of Trademarks.

Report by the Secretariat (WT/TPR/S/368)

4 Trade Policies by sector

4.1 Agriculture

4.1.3 Domestic support

Page 60, Paragraph 4.7

Australia notes the Philippine Government policy is to be self-sufficient in the production of rice, sugar and maize. Australia sees trade liberalisation as enhancing food security in this context and welcomes the contribution of the ASEAN-Australia-New Zealand Free Trade Agreement in supporting enhanced regional food security needs.

Question 5

Can the Philippines please further advise how they are measuring their achievement of self- sufficiency?

Response:

It is the policy of the Philippines to attain reasonable levels of self-sufficiency in these commodities while honoring commitments under established international trading rules and disciplines.

The Philippines recognizes the importance of trade liberalization especially under the AANZFTA agreement. It should be noted, however, that trade is not the sole answer to the Philippines’ food security concerns. Crucial commodities need to be supported so that Filipino consumers are also protected against speculative elements and perturbations as in the international markets for rice, sugar and maize.

Report by the Secretariat (WT/TPR/S/368)

4 Trade Policies by Sector

4.1 Agriculture

4.1.6 Sugar

Page 65, Paragraph 4.30

Australia notes the Philippine Government’s increased support for the domestic sugar industry under the Sugarcane Industry Development Act of 2015.

Question 6

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Can the Philippines please explain what impact the measures under the Sugarcane Industry Development Act have had on the Philippine sugarcane industry?

Response:

The sugarcane industry was provided enhanced support under the Sugarcane Industry Development Act starting in end of 2016. The Act is a direct policy response to recent developments in the sugarcane industry that has been adversely affected by the comprehensive agrarian reform law. A vast majority of sugarcane farmers are agrarian reform beneficiaries with average farm sizes of two (2) hectares; the comprehensive agrarian reform transformed the plantation mode of sugarcane production to one that is dominated by small sugarcane farmers.

In view of the above, most of the enhanced support in the sugarcane sector consisted primarily of infrastructure, research and development, and capacity building. No trade-distorting support were introduced. There are currently no existing studies on the impact of the measures themselves.

Report by the Secretariat (WT/TPR/S/368)

4.5 Services

4.5.1 Financial Services

4.5.1.1 Banking

Page 72, paragraph 4.72

The report states the Full Entry of Foreign Banks Act abolishes restrictions on foreign ownership of banks, but banks are limited to establishing five branches.

Question 7

How has this policy assisted in encouraging foreign banks to enter the market? Are there plans to liberalise access further in the future?

Response:

The Bangko Sentral ng Pilipinas (BSP; Central Bank of the Philippines) declared microfinance as its flagship programme for poverty alleviation in the year 2000. Since then, it has been proactive in the development of microfinance in the banking system in terms of: (a) policy and regulatory environment; (b) training and capacity building within the BSP and the banking sector; and (c) promotion and advocacy. As a result, microfinance has become fully mainstreamed in the banking sector and more innovative products have been developed by the market to respond to the demand for a wider range of products beyond microcredit. These include micro-agricultural loans (Circular 748), housing microfinance (Circular 678), micro-deposit (Circular 694), and micro-insurance (Circular 683). In 2016, there were 168 banks with microfinance operation serving 1.7 million clients with outstanding microfinance loans amounting to PHP 13.7 billion.

In light of the importance and multi-dimensional nature of financial inclusion, the BSP led the implementation of the National Strategy for Financial Inclusion (NSFI) to help raise the level of awareness on financial inclusion issues, build trust among various stakeholders, identify the best modalities for coordination, and ensure relevance at the national level. The National Strategy for Financial Inclusion aims to systematically accelerate the level of financial inclusion in the Philippines through greater collaboration between public and private sector stakeholders. It provides a platform for public-private partnerships to harmonize initiatives and foster a more efficient process to achieve the shared vision of financial inclusion that contributes to inclusive growth.

Report by the Secretariat (WT/TPR/S/368)

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4.5 Services

4.5.2 Telecommunications

Page 77, paragraph 4.101

The report states that telecoms services are regarded as a public utility and subject to limitations under the Constitution and domestic legislation.

Question 8

Are there any plans to open up telecommunication services not subject to domestic limitations to greater foreign participation?

Response:

Senate Hearings are being conducted on the proposed bills amending the Public Service Act. These hearings are being conducted by the Senate Committee on Public Services jointly with the Committees on Finance and Economic Affairs. The proposed amendments to the Public Service Act aim to remove the transport and telecommunications sector from the definition of “public utility” to address the debate that although these sectors are public services, they are not necessarily public utilities. Public utilities are a subset of public services. By addressing this issue, the plan is to remove the said sectors from the coverage of the foreign equity limit of 40%, as provided under Article XII of the Philippine Constitution.

Report by the Secretariat (WT/TPR/S/368)

4.5 Services

4.5.4 Tourism

Page 82, paragraph 4.134

The report states that the Tourism Act developed the concept of a Tourism Enterprise Zone and as of the end of 2015, 52 tourism infrastructure projects had been implemented in the Tourism Enterprise Zone.

Question 9

Noting foreign ownership limitations, what proportion of the projects have foreign capital input?

Response:

There are no foreign capital input in the 52 infrastructure projects as these are TIEZA projects in government owned properties in various tourist destinations in the Philippines. Moreover, bidding for implementation of these infrastructure projects are not open to foreign companies.

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BRAZIL

PART 1: QUESTIONS REGARDING THE SECRETARIAT REPORT

3 TRADE POLICIES AND PRACTICES BY MEASURE

Page 30 (Para 3.7)

A Valuation and Classification Review Committee (VCRC) is organized in every district port to solve valuation and classification disputes. The decision of the VCRC is appealable to the Central Valuation Classification Review and Ruling Committee (CVCRRC) within 15 days of receipt of the decision. The CVCRRC's decision is subject only to one motion for reconsideration, which needs to be filed within five working days of its receipt. If no motion is filed in time or if denied, the CVCRRC resolution becomes final. The aggrieved importer may pay under "formal protest".

Question 1: Is it possible to detail the procedures and overview of the work of the Valuation and Classification Review Committees, in light of the short deadlines provided for the submission of a motion of reconsideration?

Response:

Under Customs Memorandum Order No. 3-2000, any appeal or motion for reconsideration from any decision of the Valuation and Classification Review Committee (VCRC) shall be submitted to the Commissioner of Customs. In line with such, under the Customs Modernization and Tariff Act, the Commissioner of Customs is given the power to decide any and all appeals submitted for decision.

The VCRC is composed of Customs Operations Officer III (COO III), Formal Entry Division Chief, Deputy Collector for Assessment and the District Collector (Presiding Chair). The VCRC Hearing is attended by the VCRC members, importer, broker or their lawyer.

Under VCRC, a formal protest will be addressed prior to the release of goods and approval of letter request in a timely protest. In payment under protest, goods are already released and VCRC hearing will be conducted to hear the side of the importers.

Page 46 (Para 3.59)

Certain tax incentives provided by the Board of Investments under the Omnibus Investment Code to exporters of non-traditional goods are contingent on export performance. The export performance requirement is higher for foreign-owned enterprises (70% of production) than for Philippine-owned companies (50%). According to the authorities, these provisions are currently under revision.

Question 2: Could the Philippines provide a list of the “non-traditional goods”? Would any good included in this category benefit from the tax incentives or are there other criteria that apply?

Response:

There is no specific list of non-traditional goods but are only described as those with an export value of less than USD 5 million in the year 1968. Being engaged in the production of a non-traditional good does not automatically merit tax incentives. Conditions may apply depending on the relevant policies and guidelines at the time the project was registered with the Board of Investments.

Under Article 22 of the Omnibus Investments Code of 1987, registerable "export products" (i.e. Non-traditional Export Products) are those that are “manufactured or processed products the total F.O.B. Philippine Port Value of the exports of which did not exceed five million dollars in the United States Currency in the calendar year 1968."

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Page 47 (Para 3.69)

The scientific basis of the food safety regime has been strengthened, according to the authorities. The new Act provides that SPS measures must be based, amongst others, on the principles of non- discrimination, scientific evidence, proportionality, precaution, traceability, and transparency. The principle of equivalence is recognized. The responsibility for achieving the Food Safety Act's objectives is shared between the Government and the food business operators. New traceability requirements apply along the food chain.

Question 3: There are reports that national sanitary authorities may adopt different expiry dates and deadlines for the acceptable date of the slaughter of the animal for the import of frozen beef meat, poultry and pork, depending on the country of origin of the product. In some cases, the acceptable date of slaughter would be 6 months and in others, 12 months. If so, how do these measures comply with the principle of non-discrimination included in the Food Safety Act of 2013?

Response:

The Philippines complies with principle of non-discrimination and does not adopt different expiry dates for the acceptable date of slaughter. The Philippines, however, adopts this particular provision - The meat to be exported shall arrive in the Philippine port not later than six months from the production date as shown in the label, Bill of Lading/Airway Bill, and International Veterinary Certificate. This particular condition was included to ensure that the Philippines does not receive meat that have been produced earlier and have been in storage for years before being exported into the country. We have reports of commodities arriving in the Philippines with near expiry or best before dates. This is not an issue on meat safety but rather on meat quality.

Question 4: Having the Food Safety Act of 2013 provided that SPS measures must be based, amongst others, on the principles of non-discrimination, scientific evidence, proportionality, precaution, traceability, and transparency, is there a roadmap or deadlines for the review of cases in which SPS measures are found to be non-compliant with such principles?

Response:

The Philippines can confirm that there is no roadmap nor deadlines for the review of SPS measures. At the same time, the Philippines is compliant with its domestic laws and international standards on this issue.

Page 48 (Para 3.73)

The main features of the import "accreditation" regime remain unchanged (see Annex Table A3.2): b. Import consignments of food (other than processed and pre-packaged) require a permit ("SPS import clearance") issued by the Department of Agriculture. Prior to arrival, an Import Notification Document is required, on the basis of which the need for inspections, including lab testing, is determined by the DA or the DoH. Inspections are risk-based; and according to the Food Safety Act are to take place prior to the assessment of customs duties and other charges (specific guidelines are to be developed).

Question 5: When an inspection is undertaken on raw beef or chicken MDM (mechanically deboned meat), what laboratory test(s) is(are) undertaken and what is the standard that must be complied with? Is it based on total plate count or on “zero tolerance” for specific presences such as salmonella? Is this standard the same for both domestic-produced meat and imported meat?

Response:

The assessment of the microbiological identification was guided by NMIS Memorandum Circular No.9-2008-5 Series of 2008 “Guidelines on the Assessment of Microbiological Quality of Fresh, Chilled and Frozen Meat”. The aforementioned guideline serves as the guideline for both locally produced and imported meat.

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While the Philippines is implementing its surveillance program to ensure food safety, the conduct of laboratory testing for meat, both local and imported, are done only when there are reports of adverse findings of contamination.

Page 48 (Para 3.74)

The Department of Agriculture and the Department of Health have implemented an electronic system for licence and permit applications. Furthermore, the Philippines has launched an initiative to establish an enhanced (web-based) single window, which would incorporate the DA/DoH import accreditation requirements and the DA's process of issuing import clearances.

Question 6: Is it possible to provide details on the functioning of the electronic system for processing import authorizations, in light of reports that indicate a return to the manual procedures for certain products, causing extensive delays on the process of concession of authorizations?

Response:

The Philippines is currently in the process of improving its automated system for processing import clearances in line with the national program to enhance the National Single Window. The TradeNet system is being prepared for live operation by the middle of 2018. This will allow parties involved in trade to lodge information and documents to fulfill all import, export and transit-related regulatory requirements.

In the meantime, the Food and Drug Administration (FDA) of the Department of Health has instituted an electronic system for the processing of import authorization (License to Operate and Certificate of Product Registration). A License to Operate (LTO) as food distributor-importer needs to be secured from the FDA while a Certificate of Product Registration (CPR), a pre-market approval certificate, needs to be obtained for each and every product prior to importation. The electronic system for the processing of import authorization can be accessed through the FDA website (https://www.fda.gov.ph) e-portal.

The general direction of the Philippines is to simplify and automate the processes; there are no plans to revert or return to manual procedures.

PART 2: QUESTIONS REGARDING THE GOVERNMENT REPORT

2 Domestic Policies and Initiatives to Sustain Long-Term Growth and Improve the Business Environment for Inclusive Growth

Page 08 (Paragraph 2.22)

One of the salient features of the overall growth strategy is its emphasis on investment. In particular, driving this area of the economy is the Comprehensive National Industrial Strategy. Since 2014, the strategy has produced several industrial roadmaps. The industrial strategy aims for a stronger linkage of agribusiness, manufacturing and services. Apart from the IT-BPM sector, which has remained a major growth driver of the country, the services roadmap focuses on the development of labor-intensive sectors like tourism, construction, ship repair, aircraft MRO (maintenance, repair and overhaul), logistics and infrastructure investments. The industrial strategy is targeted for implementation until the end of 2025. Based on data thus far, the industrial strategy has yielded investments and accelerated expansions in the recent years.

Question 7: Regarding “Comprehensive National Industrial Strategy”, could the Philippines provide more details about about its legal framework, results obtained since 2014 and also about the next steps of its implementation?

Response:

The Comprehensive National Industrial Strategy or now known as the Inclusive Innovation Industrial Strategy (I3S) is the new industrial policy of the government

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- 23 - which aims to grow innovative and globally competitive manufacturing, agriculture and services, while strengthening their linkages into domestic and global value chains.

The I3S emphasizes the role of the government as enabler of businesses and as such, should implement initiatives to address the most binding constraints that prevent the entry of new firms or hinder the country’s industries’ integration into the regional and global value chains. It serves as the policy framework to encourage the development of the private sector to build on the country’s comparative advantage.

Under the I3S, the government will pursue the following strategic actions:

1. Building new industries, clusters and agglomeration

2. Capacity-building and human resource development

3. MSME growth and development

4. Innovation and entrepreneurship

5. Ease of doing business and investment environment

Since the implementation of industry development initiatives in 2012, including the manufacturing resurgence program (MRP) and the broader I3S, the Industry and Services Sectors grew at an average of 7.7 and 6.9 percent from 2012-2017, respectively. These are higher than the average growth from 2006-2010 prior to the implementation of these initiatives wherein the Industry and Services Sectors posted 4.4 and 5.5 percent growth, respectively.

As to the next steps, the Philippines will further intensify efforts in infrastructure development, streamlining business processes, industry competitiveness enhancement and fostering innovative and inclusive business models.

Pages 09 and 10 (Paragraphs 2.23 and 2.26)

The Bangko Sentral ng Pilipinas (BSP; Central Bank of the Philippines) declared microfinance as its flagship programme for poverty alleviation in the year 2000. Since then, it has been proactive in the development of microfinance in the banking system in terms of: (a) policy and regulatory environment; (b) training and capacity building within the BSP and the banking sector; and (c) promotion and advocacy. As a result, microfinance has become fully mainstreamed in the banking sector and more innovative products have been developed by the market to respond to the demand for a wider range of products beyond microcredit. These include micro-agri loans (Circular 748), housing microfinance (Circular 678), micro-deposit (Circular 694), and microinsurance (Circular 683). In 2016, there were 168 banks with microfinance operation serving 1.7 million clients with outstanding microfinance loans amounting to PHP 13.7 billion.

(…)

Question 8: Could the Philippines explain further its public policies related to microfinance and financial inclusion? What kind of challenges is the Philippines facing on banking domestic regulation?

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Response:

In terms of microfinance and financial inclusion, the BSP has played a key role since 2000 in increasing access to financial services to the poor and low income population by mainstreaming microfinance in the banking sector. In 2007, it progressed the advocacy from microfinance to financial inclusion. The BSP was among the first central banks to create a unit dedicated to promoting financial inclusion.

The BSP recognizes financial inclusion as a worthy policy objective that can be pursued as a complement to the three pillars of central banking (price stability, financial stability, and efficient payments and settlements system). In this regard, the BSP has taken deliberate measures in promoting financial inclusion through: (1) policy and regulation; (2) financial education and consumer protection; (3) advocacy programs; and (4) data and measurement.

The general approach is to establish a supportive regulatory environment that enables market-based solutions to thrive. Useful innovations need not be stifled but instead be allowed to operate in an environment where the risks associated with such innovations are adequately understood and addressed, and where there is proportionate application of sound principles.

The Philippines’ regulations allow for (1) wider range of financial products; (2) expanded physical and virtual reach of financial services; (3) liberalized on-boarding of customers; and (4) protection of the financial consumers.

Building on these gains, the BSP continues to create an enabling regulatory environment for financial inclusion. This time, it is setting its sights on digital innovations as catalyst and strategic enabler for financial inclusion.

Digital technology can significantly reduce transaction costs and expand reach – making it possible and even compelling for banks and other financial institutions to serve the hugely untapped low-income market.

The goal is to develop a digital finance ecosystem that supports the diverse needs of all users in a manner that is secure, sustainable, convenient, and affordable. For the service providers - whether new or incumbent, this ecosystem enables them to tap into a wider client base, diversify revenue sources, and secure new growth opportunities.

The initiatives hope to address a key challenge that the Philippines is facing which is adoption/ actual increase in the number of included people. While the Philippines has been lauded for the policy and regulatory approach in microfinance and financial inclusion, only over 30% of the population have access to an account.

CHINA

Part I. Questions based on Report by the Secretariat (WT/TPR/S/368)

Summary, Para 2

“Imports of manufactured goods have increased significantly, from 50% of total imports in 2011 to 76% in 2016. The surge of manufactures imports, in particular capital goods and consumer products, can be attributed to increasing infrastructure investment and the improvement of living standards. The United States, the European Union, Japan, China, and ASEAN countries are the Philippines' main trading partners.”

Questions: 1. Which categories have been mainly covered by the manufactured goods and consumer products in the largest scale imported by the Philippines in recent years and which industries have been involved? 2. Which types of manufactured goods and consumer products are expected to increase as demanded by the Philippines in 2018?

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Response:

The manufactured goods and consumer products that covered most of the importation of the Philippines from 2015-2017 are the following:

1. Electrical machinery and equipment and parts (24.4%); 2. Machinery, mechanical appliances, nuclear reactors, boilers (13.1%); 3. Mineral fuels, mineral oils and products of distillation (11%); 4. Vehicles other than railway or tramway rolling stock, and parts and accessories (8.3%); 5. Iron and steel (3.4%); 6. Plastics and articles (3.4%); 7. Aircraft, spacecraft and parts (1.9%); 8. Cereals (1.9%); 9. Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical (1.7%); 10. Pharmaceutical products (1.7%)

Summary, Para 9

“The foreign investment regime of the Philippines is governed, inter alia, by the 1987 Constitution and the Foreign Investments Act of 1991, which covers all activities except financial services. Under the Act, the Philippines establishes (every two years) a Foreign Investment Negative List (FINL) of activities in which FDI is restricted. The Philippines continues to limit foreign investment in a number of activities (including agriculture, fisheries, telecom services, and public utilities), but has also taken some liberalizing steps. Thus, various FDI restrictions were eliminated for professional services (subject to certain exceptions and reciprocity), and banking services. Foreign ownership of land is not permitted, but foreign investors may lease land up to a maximum term of 75 years.”

Question: 3. Please specify the steps of foreign investment liberalization.

Response:

Laws have been passed and/or amended since the Philippines’ last Trade Policy Review in 2012 in order to remove restrictions on foreign investments. These include: 1) allowing the full entry of foreign banks in the Philippines; 2) lifting of the cabotage restrictions imposed on foreign operators; and 3) opening up of various professional services, subject to certain exceptions and reciprocity.

The President provided guidance via Memorandum Order No. 16, s. 2017, on the priority investment areas or activities where current equity restrictions will be reviewed. These include the following:

1. Private recruitment, whether for local or overseas employment 2. Practice of particular professions, where allowing foreign participation will redound to the public benefit 3. Contracts for the construction and repair of locally-funded public works 4. Public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system 5. Culture, production, milling, processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and the by- products thereof 6. Teaching at higher education levels 7. Retail trade enterprises 8. Domestic market enterprise

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At present, there is an ongoing review of the 1987 Constitution by a 25-member Committee created by the President through Executive Order No. 10 .The Committee is expected to complete its review in six months or until June this year. It will submit its recommendations and proposals to the President, who will transmit these to Congress.

Summary, Para12 “Most imports, like domestically produced goods, are subject to value-added tax which has a standard rate of 12%. Food products and agricultural inputs are exempt from VAT. Excise taxes are levied on alcoholic beverages, tobacco products, automobiles, petroleum products, minerals, perfumes and jewellery. A vast range of goods are subject to licences or permits when imported. For certain products, multiple permits or licences are required, and informal payments have been reported by the business community.”

Question: 4. Why multiple licenses or permits are required for certain imported products? Please list these products.

Response:

As indicated in the report, some products are regulated for public health, national security and welfare reasons which involve the assistance of one or more agencies as well to satisfy international treaty obligations, such the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES).

The list of products was notified by the Philippines in WTO document G/LIC/N/3/PHL/12 dated 19 October 2016 and is also included in the Secretariat Report as Table 3.6.

The list of regulated imports can be downloaded at http://customs.gov.ph/users-guide-to- the-bureau-of-customs-regulated-imports-list/

Page 27, Para 2.27

“The Philippines continues to restrict foreign investment in a number of activities including agriculture, fisheries, telecom services, and public utilities, but it has also taken some liberalizing steps...The remaining FDI restrictions are made public in a transparent manner through a consolidated negative list.”

Question: 5. The Philippines has made some efforts to lift restrictions on foreign investment in some sectors. However, there are still a number of restrictions in sectors relatively attractive to foreign investment such as mining, energy, construction and public utilities. In this regard, does the Philippines plan to further open up for foreign investment such as further lifting the restrictions on the proportion of foreign investment and relaxing access thresholds?

Response:

The President provided guidance via Memorandum Order No. 16, s. 2017, on the priority investment areas or activities where current equity restrictions will be reviewed. These include the following:

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5. Culture, production, milling, processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and the by- products thereof 6. Teaching at higher education levels 7. Retail trade enterprises 8. Domestic market enterprise

At present, there is an ongoing review of the 1987 Constitution by a 25-member Committee created by the President through Executive Order No. 10. The Committee is expected to complete its review in six months or until June this year. It will submit its recommendations and proposals to the President, who will transmit these to Congress

Page 31, Table 1 Structure of the MFN tariff schedule, 2011 and 2017

Question: 6. According to Table 3.1, international tariff peaks (% of goods with tariff rates exceeding 15% in total goods) in the Philippines rose from 4.5% in 2011 to 5.1% (HS12) and 8.5% (HS17) in 2017. Does this reflect the deepening of trade barriers set by the Philippines? Please explain.

Response:

There were no major changes in tariffs over the given period.

From 2011 to 2017, the most relevant Executive Orders issued were EO 61 s. 2011 which laid down tariffs from 2011-2016 and EO 20 s. 2017 which set the tariff structure for 2017-2020.

The increases in tariff peaks are mainly attributed to increases in the number of tariff lines, from 8,299 in 2011 to 9,559 in 2014 and to 10,813 in 2017, resulting from the HS/AHTN (ASEAN Harmonised Tarficc Nomenclature) transpositions from 2007 to 2012 to 2017. An example of this is the increase in tariff lines of HS Chapter 87 from 331 in 2011 to 932 in 2017 wherein most of the tariff lines have MFN rates of 30%.

Page 43, Para 3.47

“Export prohibitions apply to certain wildlife and plant species, gold from small-scale mining46, raw rattan, logs from naturally grown trees, and matured coconuts.47”

Question: 7. Footnote 46 mentioned the export prohibition of gold from small-scale mining. What is the purpose of this prohibition? How to avoid the indirect export by small-scale miners selling the gold mined to large-scale mining companies?

Response: The purpose of the export prohibition of gold from small-scale mining is for the Bangko Sentral ng Pilipinas (BSP) to be able to ensure the financial stability through adequate international reserves. The BSP holds gold as a reserve asset. Large-scale mining companies are not allowed to engage in buying gold from small-scale mining companies and will face sanctions for circumvention of the law. Large scale mining companies are subject to stricter regulations. They are required to submit monthly reports on production, sales and inventory of metallic minerals. Page 43, Para 3.48

“Export restrictions and licences apply to a very wide range of products (Table 3.9). The elimination of restrictions and licensing requirements for some products would facilitate their exportation.”

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Questions: 8. In terms of specific minerals, what are the basic conditions that need to be met to obtain export licenses? If an enterprise fails to obtain an export license, what are the Philippines’ requirements on the sale or disposal of its minerals?

Response:

Pursuant to the Mining Act of 1995 and Executive Order No. 469 as amended and in order to eradicate undervaluation, misdeclaration and red tape in the exportation of mineral ores and to improve the collection of excise tax on minerals, all transport/shipment of mineral ores, including tailings, outside the Philippines shall be covered by Mineral Ore Export Permit (MOEP).

The mandatory requirements in the acceptance of an application for MOEP are as follows:

 Ore Transport Permit (OTP) or Delivery Receipt in the case of sand and gravel permit holders;  Marketing Contract/Sales Agreement with the purchaser;  Copy of the Permit/contract issued to the Permit Holder/ Contractor, and/or Accreditation of traders, retailers, processors, whichever is applicable;  Other supporting papers as the Secretary of the Department of Environment and Natural Resources may require or the applicant may submit.

Any permit holders, including small scale mining permits and other mining rights holders who fail to present the MOEP in the course of transport/shipment of the mineral ore(s), including tailings upon demand by authorized MGB/DENR personnel and other deputies and/or law enforcement authorities, shall be considered as prima facie evidence of illegal mining/theft of minerals and shall be sufficient cause for the seizure/confiscation of the said materials and the tools and equipment, including the conveyances used in the transport/shipment of the said materials.

9. In other multilateral or bilateral agreements signed by the Philippines, are there any preferential treatments offered for the parties to the agreements in terms of mineral export restrictions?

Response: Philippine bilateral FTAs do not have any specific provisions on mineral export restrictions. Nevertheless, below are some related provisions under our FTAs. On export restrictions, the Philippines-EFTA (European Free Trade Association) FTA, Article 2.4 on Export Duties only specifies the elimination of all customs duties and charges on the exportation of goods and that no new export duties shall be introduced by the Parties upon entry into force of the Agreement, except on exports of logs from the Philippines. Article 2.6 of the PH-EFTA FTA also upholds the General Prohibition of Quantitative Restrictions for imports and exports under Article XI of GATT 1994. Similarly, Article 20 of the Philippines-Japan EPA (PJEPA) states that both sides will exert best efforts to eliminate duties on exported goods. Under Article 26, par.3 of the PJEPA, a Special Sub-Committee on Iron and Steel Products was established to "... review issues related to the implementation of tariff elimination commitment on iron and steel products." However, this sub-committee has not been convened to date. Page 69, Para 4.52

“The DOE issued the National Renewable Energy Programme (NREP), with the aim of diversifying and expanding renewable energy. Under the NREP, the Philippines aims to double the 2010 installed capacity of renewable energy sources by 2030, which implies an increase from 5,438 MW in 2010 to 15,304 MW in 2030. ” Questions: 10. According to the NREP, will the government subsidize on-grid prices? How much subsidy will be provided?

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Response:

The government will not subsidize on-grid prices. The RE developers who are entitled to the Feed-in-Tariff (FIT) rate will be paid in accordance with the FIT guidelines promulgated by the Energy Regulatory Commission and paid out of the FIT Allowance Fund that will be charged to the consumers.

11. What sizes of projects will new installed capacity be mainly used in? What is the estimated number of components to be imported?

Response: The sizes of the projects vary depending on the energy resource, i.e. biomass, hydropower, solar and wind, and the location. These can be less than 1 MW to 150 MW plants and supplied to the grid with priority dispatch. As to the components to be imported, there are no foreseen new importations as the FIT rate system already expired last December 2017. Page 68, Para 4.40

“According to the authorities, the Philippine National Oil Company (PNOC), a government-owned- and-controlled oil company, does not have special privileges with regard to the PECRs. During the process of a PECR for petroleum, PNOC Exploration Corporation (PNOC-EC) is given the option to farm out up to a 10% participating interest in the contract; the authorities noted that participation is entirely on a commercial basis.”

Questions: 12. How to ensure that government-owned companies do not have privileges? Are there any legal and policy measures?

13. The 10% requirement is not consistent with “entirely on a commercial basis” following it. Please explain.

Response: For the Philippine Energy Contracting Round (PECR5), the Philippines, through the Department of Energy (DOE), issued Department Circular (DC) No. DC2014-02-0005 Reiterating a Transparent and Competitive System of Awarding Service and Operating Contracts for Petroleum and Coal Prospective Areas, repealing previous Department Circulars for PECRs. Under Section 6 of the DC2014-02-0005, an option for Philippine National Oil Company Exploration Corporation (PNOC-EC) to participate in Petroleum Service Contracts is provided. Section 6 of the DC reads as follow, “For petroleum service contracts proposed under this Circular, an option shall be reserved for the PNOC-EC for a maximum of ten percent (10%) participating interest in a proposed service contract involving one (1) or more Filipino participant or maximum of fifteen percent (15%) participating interest in a proposed service contract involving no Filipino participant. DOE shall inform PNOC-EC within thirty (30) days from the award of the service contract, and, PNOC-EC shall give proper notice, within thirty (30) days from receipt thereof, to the winning applicant and the DOE whether it shall exercise said option. All rights, privileges, benefits, costs, expenses, obligations and liabilities of PNOC-EC shall be in proportion to its participating interest in the proposed service contract.” Part II. Questions based on Report by The Philippines (WT/TPR/G/367)

Page 5, Para 2.2

“Furthermore, the Philippine Development Plan espouses a national spatial strategy that describes the geographic development challenges and opportunities in population and economic growth. The national spatial strategy provides the basis for policies on urban development, infrastructure development, disaster mitigation, and environmental resource protection and conservation. It

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- 30 - recommends sustainable human settlements, efficient production, and effective service delivery systems.”

Question: 14. Under the national spatial strategy, what measures has the Philippines taken and what are the planned measures in land policies to ensure the implementation of the strategy?

Response:

The National Spatial Strategy (NSS) serves as the guiding framework to guide development planning in the country through three (3) core strategies: (a) regional agglomeration by steering growth in key centers, (b) connectivity, and (c) reduction of vulnerability.

To maximize the benefits of agglomeration and scale economies, the NSS identifies a network of settlements that shall: (a) guide long-term planning at the national and sub-national level; (b) give a scenario where the major centers will be, and their possible roles and functions; and (c) provide basis for planning for infrastructure and other services.

At the national level, the NSS guided the formulation of strategies across the various chapters of the Philippine Development Plan, namely, Accelerating Infrastructure Development (Chapter 19), Building Safe and Secure Communities (Chapter 12), and Reducing Vulnerability of Individuals and Families (Chapter 11). These strategies include the following:

 Enhancing the efficiency of the transport sector to sustain economic growth and increase competitiveness. Regional centers identified in the NSS will be supported with transport infrastructure and services in accordance with land use and urban planning methodologies (e.g., transit-oriented development, township approach, high density residential development) and other sustainable construction technologies that have been proven effective in livable cities.

The NEDA Board confirmed on 27 June 2017 a National Transport Policy (NTP). Among the policy areas of the NTP are: (a) transportation management in urban and rural areas through the development and alignment of local transport and traffic management plans with the area’s land use plan; and (b) support to other economic sectors by establishing seamless, intermodal tourism, agro-industry and trade, and logistics transport network through Convergence Programs.

 Developing integrated neighborhoods and sustainable communities particularly for low-income households. This entails ensuring that housing and auxiliary services and needs of resettled Informal Settler Families are adequately satisfied. The physical infrastructure of housing and location of human settlements must also ensure compliance with disaster risk reduction and management (DRRM) and climate change adaptation (CCA) requirements to mitigate risks and address vulnerability.

 Roll out climate and disaster vulnerability and risk assessment nationwide. To mainstream DRR/CCA, the Climate Change Commission will craft an enabling policy and provide assistance to local communities in conducting vulnerability and risk assessment.

At the subnational level, the NSS guided the formulation of Area Spatial Development Frameworks (ASDF) for Luzon, Visayas and Mindanao. These ASDFs aim to harmonize and strengthen socioeconomic and physical linkages between and among regions and provinces and contain core programs, projects and activities. These ASDFs also guided the formulation of the Regional Development Plans.

The NSS also served as guide for the Public Investment Program 2017-2022, particularly for infrastructure projects, which are being directed to address challenges in facilitating agglomeration and mobility and ensuring safety and resilience. In particular, to achieve

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- 31 - spatial efficiency and connectivity, the government has embarked on a massive infrastructure program, the “Build, Build, Build Program” (BBB), which aims to (a) improve regional connectivity, (b) lower cost of doing business thereby increasing the Philippines’ growth potential and competitiveness, and (c) link production areas to growth centers through an efficient transportation network.

Page 8, Para 2.23

“The Bangko Sentral ng Pilipinas (BSP; Central Bank of the Philippines) declared microfinance as its flagship programme for poverty alleviation in the year 2000. Since then, it has been proactive in the development of microfinance in the banking system in terms of: (a) policy and regulatory environment; (b) training and capacity building within the BSP and the banking sector; and (c) promotion and advocacy. As a result, microfinance has become fully mainstreamed in the banking sector and more innovative products have been developed by the market to respond to the demand for a wider range of products beyond microcredit. These include micro-agri loans (Circular 748), housing microfinance (Circular 678), micro-deposit (Circular 694), and microinsurance (Circular 683). In 2016, there were 168 banks with microfinance operation serving 1.7 million clients with outstanding microfinance loans amounting to PHP 13.7 billion.”

Question: 15. Please explain the role of microfinance on the development of micro and small enterprises.

Response:

The initiatives hope to address a key challenge that the Philippines is facing which is adoption/ actual increase in the number of included people. While the Philippines has

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- 32 - been lauded for the policy and regulatory approach in microfinance and financial inclusion, only over 30% of the population have access to an account.

Page 10, Para 2.34

“With a supportive market environment in the background, domestic producers could thrive, find their niche, and take advantage of scale and scope economies in the global value chain. In the Philippines, as of 2015, MSMEs accounted for 61.6% of total employment generated and approximately 35% of GDP. Their progress will directly contribute to the attainment of inclusive growth. With this in mind, the Philippines continues to push the MSME agenda and seeks to address key challenges in their development and search for prosperity.”

Question: 16. Please describe in detail the efforts to push the MSME agenda.

Response:

The development of MSMEs is one of the priority areas in terms of Philippine engagements in APEC and ASEAN to promote sustainable and inclusive growth.

In 2015 during its Philippine Chairmanship, APEC adopted to the Boracay Action Agenda to Globalize MSMEs and the Iloilo Initiative for Growing Global MSMEs as a practical and workable plan for MSME development and internationalization. The action agenda identifies priority actions on trade facilitation, e-commerce, financing, institutional support and women entrepreneurship which will lead to more global MSMEs.

During its 2017 ASEAN Chairmanship, the Philippines further pursued the MSME agenda. ASEAN adopted the ASEAN Inclusive Business Framework (AIBF) aimed at providing a platform for MSMEs to be integrated in the regional and global value chains by establishing strong linkage and cooperation between big and small enterprises. By engaging low-income communities as partners, customers, suppliers or employees in value chains, inclusive business (IB) models can transform communities into new markets and new sources of entrepreneurial talent. IBs go beyond philanthropy and invest in addressing the problems of the poor because it makes good business sense, according to him.

The Focused and Strategic (FAST) Action Agenda on Investment adopted by ASEAN Economic Ministers at the AEM Retreat in March 2017 is also an initiative of the Philippines and one of the key deliverables for its ASEAN2017 chairmanship, which is seen to further push greater linkage of the regional trade bloc’s MSMEs with ASEAN and global MNEs.

In line with socio-economic agenda of the administration to promote rural and value chain development toward increasing agricultural and rural enterprise productivity and rural tourism, the Philippines continues to promote IB especially in the sectors of agribusiness and tourism. This is complemented by the inclusion of IB in the ‎2017-2019 Board of Investments Investment Priorities Plan, which provides fiscal incentives to IB projects in agribusiness and tourism.

Page 16, Para 4.1

- Enabling and supportive economic environment. Inclusive growth will be achieved with an enabling and supportive economic environment. Macroeconomic stability will be maintained; fiscal prudence will be observed; strategic trade policy will be implemented. Policies, laws and regulations will be reviewed and measures will be undertaken to enhance market competition.

- Foundations for sustainable development. All of these will be underpinned by ensuring national security against internal and external threats. At the same time, territorial integrity and sovereignty will be upheld and protected. The next six years will be characterized as the “golden age of infrastructure” in the Philippines. An important partner of development is the environment and natural resources sector, and maintaining its integrity is crucial for the long term.

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Questions: 17. What measures will be taken in the strategic trade policy to be implemented with respect to trade in mineral resources?

Response:

In general, the Philippines will focus on providing support and in promoting products where the country has comparative advantage and has the potential for competitive advantage. External trade policy will support backward and forward linkages to both the domestic and international markets, spur the production of higher value added goods and services, diversify products and markets, as well as provide opportunities for growth of enterprises.

To ensure strategic trading of the country’s mineral resources, the Department of Environment and Natural Resources enforces the following measures and policies:

 Only those individuals and corporations accredited by the Department and registered with the Department of Trade and Industry can engage in the trading of mineral products either locally or internationally (Sec. 54, RA 7942). This policy is in line with the Government’s responsibility to have full control of the rational exploration, development, utilization, conservation and disposition of the country’s mineral resources.

 Starting July 6, 2012, all valuable metals in abandoned ores and mine wastes and/or mill tailing generated by previous mining operations now belong to the State and shall be developed and utilized through competitive public bidding (Sec. 7, EO 79). This results to broader participation of financially qualified individuals and corporations providing more revenues for the government and benefitting the people and the country as a whole.

 The excise tax on mineral products was increased from 2% to 4% pursuant to Section 244 in relation to Section 245 of the National Internal Revenue Code (NIRC) , as amended, and Section 85 of RA 10960 (TRAIN Act). Increased collection from the excise tax of mineral products redounds to an improved and better provision of basic services. The application procedures for mineral agreements was streamlined by creating a One-Stop Shop for all Mining Applications and Procedures. This simplified the whole process to encourage investments in the extractive industry.

 There are plans to implement a unified information, education and communication (IEC) policy to boost investments in the mining sector. This also involves a campaign to inform and educate the public about the processes involved in the extraction, disposition, utilization and trading of mineral resources extracted from mining operations in the countryside and communicate how the mining industry provides economic benefits to the people.

Value-adding activities and the development of downstream industries for the mineral sector will be pursued by the Department of Environment and Natural Resources in coordination with the Department of Trade and Industry, the Department of Science and Technology, the National Economic and Development Authority and other government agencies concerned. These plans will become part of the national program and road-map based on the Philippine Development Plan and National Industrialization Plan.

18. What measures will be mainly taken by the Philippines to maintain the integrity of the environment and natural resources sector?

Response:

Aside from securing an Environmental Clearance Certificate (ECC), contractors and other mining permit holders are required to submit an Environmental Protection and Enhancement Program (EPEP) and Environmental Work Program (EWP). The EPEP and the EWP are comprehensive and strategic environmental management plans which aim

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- 34 - to protect and rehabilitate the disturbed environment caused by the mining project.

Contractors and Permit Holders/Lessees are also required to prepare a Social Development and Management Plan (SDMP) and Community Development Plan (CDP) to enhance the development of the host and neighboring communities.

Consistent with the policy of full public disclosure of all transactions involving public interest, mining companies are now mandated to participate in the Extractive Industries Transparency Initiative (EITI).

Environmental standards, as prescribed by various mining and environmental laws, rules and regulations are fully enforced and strictly implemented. Sanctions will be imposed against violators.

DOMINICAN REPUBLIC

QUESTIONS:

SUMMARY

Page 7, Paragraph 12

"Most imports, like domestically produced goods, are subject to value-added tax which has a standard rate of 12%. Food products and agricultural inputs are exempt from VAT. Excise taxes are levied on alcoholic beverages, tobacco products, automobiles, petroleum products, minerals, perfumes and jewellery. A vast range of goods are subject to licences or permits when imported. For certain products, multiple permits or licences are required, and informal payments have been reported by the business community."

1. What kind of measures does the Philippines implement against the bad practice of informal payments?

Response:

Strategies to reduce corruption are outlined in the Philippine Development Plan 2017- 2022 and includes streamlining government transactions, modernizing regulatory processes, and establishing mechanisms for citizens to report complaints. In 2016, Executive Order No. 6 established a “citizens’ complaint hotline” and “complaint center” for the public to directly report corruption in government agencies. The Office of the President oversees the center, which can be reached by the hotline, text services (SMS) and social media.

Page 26, Paragraph 2.24

"Furthermore, during the review period, the APEC Trade Repository, an online portal on APEC economies' trade and tariff information, was developed by the DTI2, while the APEC Services Cooperation Framework provides long-term guidance on APEC's work on services.3 The Services Competitiveness Roadmap was adopted in 2016, which contains a concerted set of actions and mutually agreed targets to be achieved by 2025."

2. Can the Philippine authorities list some of the agreed measures referred to in paragraph 2.24?

Response:

The APEC Trade Repository (APECTR; accessible via http://tr.apec.org) begun as a Philippine-led initiative and was launched by APEC in 2015 during the Philippine Chairmanship. The APECTR serves as a single online reference point on APEC member

2 2015 APEC Ministerial Meeting (AMM) Statement. Viewed at: http://www.apec.org/Meeting- Papers/Leaders-Declarations/2015/2015_aelm/2015_Annex%20B. 3 2015 AELM Statement Annex B. Viewed at: http://www.apec.org/Meeting-Papers/Leaders- Declarations/2015/2015_aelm/2015_Annex%20B.

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- 35 - economies' trade and tariff regimes with the objective of further promoting APEC's work on transparency, connectivity and trade facilitation. It aims to provide information on regional and APEC economies’ domestic stakeholders with trade and tariff information related to navigating cross-border trade.

Updates are managed annually by the APEC Market Access Group (MAG) using a reporting template to be completed every September. Links and websites are provided on MFN and preferential tariff rates, rules of origin, trade and customs laws and procedures, among others.

With respect to the APEC Services Competitiveness Roadmap (ASCR) 2016-2025, APEC members adopted concerted set of actions and mutually agreed targets that will facilitate services trade and investment and to enhance the competitiveness of the services sector in the region by 2025. The following targets were agreed:

a) Progressively reducing restrictions to services trade and investment; b) Increasing the share (%) of services exports from APEC economies in the total world services exports; and c) Increasing trade in services in the APEC region so that the compound average annual growth rate exceeds the historic average of 6.8 percent and the share (%) of value-added of the services sector in the total GDP of the APEC region exceeds the global average level by 2025.

Implementation of the ASCR will be guided by the following enabling factors:

a) Promoting good regulatory practices, international regulatory cooperation and sound competition policy frameworks and institutions; b) Ensuring openness of services markets by extending APEC’s overall standstill commitment and rolling back protectionist and trade distorting measures on trade in services; c) Ensuring an adequate supply of skills in a rapidly changing economy, helping workers adjust to change and providing for increased participation in the workforce by such groups as women, youth, Micro Small and Medium Enterprises (MSMEs) and indigenous businesses; d) Fostering dynamic, competitive and effective telecommunications, innovation and information and communication technologies (ICT) policies; e) Facilitating effective financial markets, including through the use of new technologies to promote greater inclusion in financial markets; and f) Improving people-to-people, physical and institutional connectivity.

Page 45, Paragraph 3.58

"Guarantees cover up to 90% of the approved loan. Applicants must pay an application fee of PHP 100,000 plus Gross Receipts Tax (GRT), a processing fee of 0.125% plus GRT, and a guarantee fee of up to 2.5% plus GRT of the guaranteed amount. Any company registered in the Philippines is eligible for the programme. A special guarantee program also exists for SMEs, with slightly different conditions and a maximum guaranteed loan amount of PHP 20 million.”

3. Could you expand the information on the conditions applied to the guarantees for SMEs in the Special Economic Zones?

Response:

The Philippines, through the Philippine Export Zone Authority (PEZA), does not provide guarantees to SMEs inside the ecozones. SMEs in ecozones may seek guarantee cover in the same manner as other SMEs outside the ecozones.

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Page 55, Paragraph 3.117

"The Philippine International Trading Corporation (PITC) administers the Philippines' Countertrade Programme. Countertrade is mostly used as supplemental tool in connection with public procurement. Total completed countertrade transactions amounted to some US$14.5 million in 2016; most deals were carried out for the Philippines' armed forces."

4. Could you explain in more detail what the Countertrade Programme consists of?

Response:

The Countertrade Program of the Philippines is implemented pursuant to Executive Order No. 120 and its Implementing Rules and Regulations (IRR). It directs the national government, its departments, bureaus, agencies and offices including government- owned or controlled corporations to adopt countertrade as a supplemental trade tool with respect to the importation or procurement of foreign capital equipment, machinery, products, goods and services entailing the payment of at least USD 1 million and above or its equivalent in other foreign currency and to negotiate and conclude, on best effort basis, agreements or arrangements on countertrade with respect to such importation.

More details on procedures and guidelines can be accessed from this link: www.pitc.gov.ph/index.php/countertrade.

The Philippine International Trading Corporation is responsible for implementing and monitoring the countertrade policy.

Page 71, Paragraph 4.68

"A common difficulty faced by the manufacturing sector is the high production costs caused by inadequate infrastructure. These costs have to do with the transport network (that is, insufficient connections by land, sea and air) and the electricity sector (due to lack of capacity and high prices). The authorities indicate that a series of measures have been taken to address the concerns of the business community regarding infrastructure, including transportation and electricity. For example, the Department of Trade and Industry (DTI) and the Department of Public Works and Highways (DPWH) launched the DTI-DPWH Convergence Roads Leveraging Linkages for Industry and Trade (ROLL IT) Programme in 2016, in order to develop projects for infrastructures that connect the main manufacturing and economic zones of the country; in November 2017 there were 229 road project proposals throughout the country. "

5. Could you mention other measures applied or designed to improve the infrastructure?

Response:

The government has initiated measures to ensure the strategic and timely implementation of infrastructure projects in the pipeline to achieve maximum gains for the economy. These include, among others, the following:

 NEDA Board Approval of the Adoption of the 75 Infrastructure Flagship Projects (IFPs) and Creation of a Project Facilitation, Monitoring and Innovation (PFMI) Task Force. The 75 IFPs represent the major capital undertakings that are envisaged to promote growth centers outside the urban-industrial region centered around Metro Manila. To closely monitor the progress and address operational/implementation issues of these flagship projects, the NEDA Board approved the creation of the PFMI Task Force. Specifically, the Task Force shall undertake the following functions :

a) Recommend government-wide operational measures in resolving development and implementation issues, risks and bottlenecks on the IFPs;

b) Institute coordination mechanisms between oversight and implementing agencies to facilitate the above function; and

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c) Facilitate the deployment of resources, through the national government (NG) budget, official development assistance (ODA), and other sources to oversight and implementing agencies towards fast-tracking development and implementation of the IFPs.

 Creation of the Infrastructure Cluster under the Government Cabinet Cluster System. The Infrastructure Cluster was created pursuant to Executive Order (EO) No. 24 s. 2017 to focus on infrastructure development for the realization of the 10-Point Socioeconomic Agenda. In terms of monitoring, the Cluster will focus on the operationalization and performance tracking. Noting that the PFMI Task Force was also created to monitor project milestones specifically for the 75 IFPs, the Cluster can direct and channel its attention to the cross-cutting or overarching operational and implementation issues or to specifically monitor the other major capital projects or Core Investment Programs and Projects (CIPs) that are non-IFPs.

 Approval of Project Preparation Facilities to support the development of strategic development programs/activities/projects (PAPs). These include the Project Development and Other Related Studies (PDRS) Fund amounting to PhP1.595 billion to be administered by NEDA for 2018; and the Infrastructure Preparation and Innovation Facility (IPIF) amounting to PhP7.92 billion to be financed through a loan from the Asian Development Bank (ADB), with the Department of Finance (DOF) as executing agency. Both facilities intend to deliver more effective and innovative infrastructure projects through the conduct of pre- investment studies/activities that will help accelerate the approval process and ensure timely implementation of infrastructure projects.

 Adoption of the National Transport Policy (NTP) and Formulation of the Philippine Transport Systems Master Plan (PTSMP). The NTP was approved/adopted by the NEDA Board on 12 September 2017 to serve as the guiding policy for transportation development, management, operations, and use and covers all elements of the transport system and its sub-sectors. It is intended to facilitate the realization of the Transport Vision of a safe, secure, reliable, efficient, integrated, intermodal, affordable, cost-effective, environmentally sustainable, and people-oriented national transport system that ensures improved quality of life of the people. In accordance with the NTP, the PTSMP is currently being undertaken and targeted for completion by the end of the year, with the intention to guide the rational development of an intermodal transport network in the country through coordinated planning and operation of projects and programs as an integrated network of intermodal sub-systems.

 Reforms in the Energy Sector and Electrification Policies. Several policies, rules and regulations that support the government’s thrust to increase investments in the energy sector were put in place, among others:

a) EO 30 creating the Energy Investment Coordinating Council (EICC) was signed in 28 June 2017 which will streamline the regulatory processes and fast-track the implementation of major energy projects for power generation, transmission and ancillary services needed to sustain grid stability and security. The EO further requires government agencies receiving applications for permits of energy projects to process the same without awaiting the action of other government agencies within a 30-day period;

b) Department Order (DO) No. 2017-04-0005 – Prescribing the New Guidelines in the Processing of Applications for Renewable Energy (RE) Service/Operating Contacts which provides the procedural flow of evaluation of RE applications on a faster period;

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c) Department Circular No. 2017-05-0008 which provides the policies and guidelines of Performance Assessment and Audit for all power generation, transmission and distribution systems, and facilities that will be instrumental in the attainment of secure, reliable and affordable supply of electric power to support the economic growth of the country; and

 Department Circular No. 2017-11-0012 or the Philippine Natural Gas Regulation (PNGR) which will standardize the guidelines in the accreditation, operation and maintenance of natural gas infrastructures and facilities, including the supply importation and transportation. The PNGR aims to, among others, liberalize entry of investors/participants to the natural gas market and ensure adherence to international and Philippine health, safety, security and environment standards.

EL SALVADOR

1. In the Secretariat report we notice a reduction in the participation of the agricultural sector, both in terms of GDP and employment. In 2011 it represented 15,4% of GDP, and this figure dropped to 11,8 in 2016, while in the case of employment the figures fell from 33% to 27% in the referred period. Could Philippines please comment on the causes behind this decline?

Response:

It did not drop in nominal terms. Please refer to the actual GDP figures in the Secretariat Report.

2. It is important to note, the strong influx of Foreign Direct Investment registered in Philippines, during the year 2016 (7.900 million US Dollars). Could Philippines please comment on the causes behind this increase and how they are planning to maintain and promote the growth of the current levels of FDI?

Response:

For the past years, the Philippines is one of the fastest growing economies in Asia, outpacing the country’s Southeast Asian neighbors. In 2017, the Philippines recorded a new all-time high FDI flows at US$10 Billion, which 21.4% higher than in 2016. This remarkable economic performance can be attributed mainly, to: (1) the country’s growing population with strong consumer demand; (2) a stable pool of highly skilled labor force; (3) implementation of various programs and initiatives to facilitate doing business in the country; and (4) the introduction of a new industrial policy, which focuses on inclusive innovation and resurgence of the manufacturing sector towards Industry 4.0.

To sustain this growth, the government has passed laws amending country’s taxation scheme and expanding the Anti-Red Tape Act (ARTA) of 2007. The government is likewise implementing the Build Build Build Program is aimed at accelerating infrastructure development to enhance economic activities and further attract more FDIs.

Also, the Philippines continues to be aggressive in entering into free trade agreements (FTAs) with strategic partners to expand markets and forge industrial cooperation for mutual benefit. Recently, the Philippine Senate ratified the Philippines-European Free Trade Association Free Trade (PH-EFTA) Agreement. Negotiations on the Regional Comprehensive Economic Partnership (RCEP) are ongoing.

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EUROPEAN UNION

WT/TPR/S/368 – WTO Secretariat's Report

1. ECONOMIC ENVIRONMENT

1.2.2. Fiscal policy and structural reforms,

Paragraphs 1.7, 1.12 and 1.15 page 12 (and also Government report Paragraphs 2.2, 2.4, 2.5 and 2.10)

According to the report, persistently low investment has been reflected in the quality of infrastructure, particularly the inter-island connectivity bottleneck. The EU values the Philippines' ambition to increase expenditures for infrastructure to at least 7.4% of GDP over the medium term (railways, urban mass transport, roads, ports etc.).

EU question No 1: Could the Philippines provide further information about how it intends to carry out these major projects? Could The Philippines present concrete examples of investments done in the transport infrastructures carried out since last review? Could also the Philippines clarify what measures have been taken to favour digital infrastructures?

Response:

The government will implement several infrastructure projects either through various modes under the Public Private Partnership (PPP) Program, joint ventures or private sector undertaking, or government undertaking. Under the PPP Program, several transport and transport-related projects like the rehabilitation of MRT 3, construction of MRT 7, toll roads and expressways, and airports, among others, have been bidded out and awarded to the private sector under concession agreements. Some water treatment and distribution projects in different areas of the country as well as seaports are built with private sector investments. For the road networks, especially those that links tourism destinations and industrial areas to national roads, ports and airports are undertaken by government through the Department of Public Works and Highways (DPWH).

In terms of digital infrastructure, the government is encouraging new investments in the telecommunications sector. To pave the way for the entry of the third player in the telecommunications industry which has long been held by two incumbents, the Department of Information and Communications Technology issued in January 2018 Memorandum Order 001 on the guidelines on the qualifications and criteria for the selection of a new major player in the telecommunications industry. Recently, a new player with Japanese equity has entered the Philippine market to provide last mile connectivity.

Aside from the hard infrastructure, the Philippines is addressing the soft infrastructure issues to advance business competitiveness and productivity in the digital economy. A number of laws were passed and policies adopted, including among others, the Data Privacy Act of 2012; the creation of the Department of Information and Communications Technology in 2016; the creation of the National Privacy Commission in 2016; formulation of the e-Government Masterplan 2016-2022; formulation of the Philippine ICT Roadmap; formulation of the Roadmap for Digital Startup 2015 and Beyond.

2. TRADE AND INVESTMENT REGIMES

2.4 Investment Regime

Paragraph 2.28, page 27

Since the last review, the Philippines has removed some foreign ownership restrictions in certain sectors like in the professional and banking services. Nevertheless, there are still a number of activities in the Foreign Investment Negative List which are not fully open to foreign participation (telecommunication, water, electricity, media, agriculture). According to PH Memorandum Order

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No. 16 by the President of the Philippines signed on 21 November 2017, the 'National Economic and Development Authority (NEDA) Board and its member agencies are directed to exert utmost efforts to lift or ease restrictions on certain investment areas or activities with limited foreign participation, including in 8 sectors such as private recruitment, particular professions; contracts for construction, public services; culture, teaching, retail trade and domestic market enterprises.

EU question No 2: Could the Philippines provide further details on its plans to revise the maximum limit for foreigner ownership listed in the Foreign Investment Negative List? Given the need for especially renewable energy production, is the Philippines considering the easing of foreign ownership restrictions in this specific sector?

Response:

The President provided guidance via Memorandum Order No. 16, s. 2017, on the priority investment areas or activities where current equity restrictions will be reviewed. The list, however, does not include renewable energy production. The foreign equity restriction in this sector is based on the Constitutional limitation on the exploration, development, and utilization of natural resources.

At present, there is an ongoing review of the 1987 Constitution by a 25-member Consultative Committee created by the President through Executive Order No. 10. The Committee is expected to complete its review in six months or until June this year. It will submit its recommendations and proposals to the President, who will transmit these to Congress.

Paragraph 2.30, page 27

Reference is made to the restrictions to foreign ownership in the public utilities, telecommunication and agriculture. The Congress adopted House Bill 5828 in 2017, amending the Public Services Act which will provide a more precise definition of what constitute a public utility and should allow for greater foreign participation in sectors such as transport and telecommunication; electricity distribution and transmission; water pipeline and sewerage pipeline distribution.

EU question No 3: What are the Philippines' plans regarding the current restriction on foreign ownership in areas such as public utilities (notably telecommunications) and agriculture? Does the Philippines know if and when the Senate could adopt the Bill?

Response:

Senate Hearings are being conducted on the proposed bills to amend the Public Service Act. These hearings are being conducted by the Senate Committee on Public Services jointly with the Committees on Finance and Economic Affairs. The proposed amendments to the Public Service Act aim to remove the transport and telecommunications sector from the definition of “public utility” to address the debate that although these sectors are public services, they are not necessarily public utilities. Public utilities are a subset of public services. By addressing this issue, the plan is to remove the said sectors from the coverage of the foreign equity limit of 40%, as provided under Article XII of the Philippine Constitution.

There is no exact time frame on when the Senate Bill amending the Public Service Act will be approved.

Note that the version of the bill by the House of Representatives was approved in September 2017.

Paragraph 2.32, page 28

According to the report, the National Competitiveness Council has worked on further improving business processes through various initiatives. One initiative is the Expanded Anti-Red Tape Act of 2017 (HB 6579; SB 1311) allowing faster and fewer licensing.

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EU question No 4: Could the Philippines give an update on the status of this law in Congress and its impact on Ease of Doing Business?

Response:

To date, the bill has been approved by both Houses of Congress and is now awaiting the President’s approval and signature. The law is expected to improve the Philippines’ competitiveness rankings in the World Bank’s Doing Business report and provide for the efficient and effective delivery of public services.

Paragraph 2.34, page 29

Double taxation agreements are international treaties and so, are of direct application and prevail over local laws. In the Philippines the favorable conditions of the agreements (for example, reduced withholding rates) do not apply automatically, but have to be previously requested and authorized by the local tax agency (BIR), following an extremely cumbersome procedure. EU question No 5: Is the Philippines planning to foster the automatic application of these Double Taxation Agreements by eliminating the authorization requirement?

Response:

Under Revenue Memorandum Order (RMO) 8-2017, non-residents can already utilize the reduced withholding rates on dividends, interest and royalties provided they submit a duly accomplished Certificate of Residence for Tax Treaty (CORTT) Form to the withholding agent prior to the remittance of the income. The CORTT Form and/or the usual certificate of residence issued by the tax authority of the income recipient is sufficient for the automatic and immediate withholding of the reduced rates on those incomes subject to post-compliance check by the International Tax Affairs Division. The RMO is uploaded in the BIR website. After remitting the income net of the reduced tax, the nonresident (or its authorized representative) shall submit the CORTT Form to ITAD for recording and future compliance check.

For other types of treaty income such as business profits or capital gains, the BIR issues rulings or certificates for this purpose.

2.3.2 Regional and preferential agreements

2.3.2.1 ASEAN

Paragraph 2.14, page 24

Reference is done to the negotiations of the Regional Comprehensive Economic Partnership (RCEP) Agreement between ASEAN and its FTA partners launched in 2012.

EU question No 6: Could the Philippines present its priorities with regards to its trade negotiations agenda, both regional and bilateral, for the future?

Response:

The Philippines’ trade negotiations agenda is aligned with the 0 to 10-Point Socio-Economic Agenda and the Philippine Development Plan 2017 – 2022, which incorporates as an important economic strategy enhanced participation in international trade through effective bilateral, multilateral, and regional engagements and representation.

On the bilateral front, the Philippines seeks to explore intensified linkages with non-traditional partners in line with the country’s independent foreign policy while at the same time maintaining and further strengthening relations with our biggest trading partners. The Philippines will also continue to improve economic relations via bilateral preferential schemes (FTAs and non-reciprocal arrangements such as GSP schemes).

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The Philippines has ongoing talks with Japan for the General Review the Philippines-Japan Economic Partnership Agreement (PJEPA). The Philippines will continue to pursue the actualization of the Europe strategy through the ratification of the PH-EFTA FTA and continued engagement with the EU on bilateral FTA talks beyond the two rounds of FTA negotiations that have been convened. The Philippines also started scoping discussions with Chile and has commissioned a study to determine the feasibility of a PH-US FTA.

While the Philippines does not have an FTA with the US and EU, it enjoys preferential treatment under their respective GSP schemes, which the Philippines continues to maximize. Locking in the preferences enjoyed under these schemes also serve as an impetus for pursuing bilateral FTAs with these partners.

Apart from formal FTA talks, the Philippines also continues to strengthen its economic engagement with partners through its Joint Economic Commissions that serve as bilateral dialogue mechanisms to discuss ways to improve two-way trade and investments. Thus far, the Philippines has existing bilateral mechanisms with 28 countries. Talks for the creation of similar mechanisms are also underway with six countries, namely: South Africa, Mexico, Peru, Papua New Guinea, Germany and Spain.

The Philippines’ participation in ASEAN allows it to engage with important trading partners from within the regional grouping and external economies.

Through ASEAN, the Philippines is linked to Australia (AANZFTA), China (ACFTA), India (AIFTA), Japan (AJCEPA), South Korea (AKFTA), and New Zealand (AANZFTA) by an FTA.

The Philippines, through ASEAN, will soon implement an FTA with Hong Kong, following the completion of negotiations and signing of the ASEAN-Hong Kong FTA in November 2017 in Manila.

The Philippines is also engaged in the negotiations for the mega-FTA Regional Comprehensive Economic Partners (RCEP) with existing ASEAN+1 FTA Partners. When it enters-into-force, RCEP would be the largest free trade agreement, in terms of GDP and consumer base. The Philippines expects to gain better market access conditions for goods and services exports to RCEP countries, as well as attract inward FDI.

FTA possibilities with Canada, EU and Russia are provided to the Philippines through its ASEAN membership.

The Philippines considers regional and bilateral engagements as building blocks towards multilateral disciplines and objectives.

3 TRADE POLICIES AND PRACTICES BY MEASURE

3. Trade Policies and Practices by Measure

3.1.1 Customs procedures

Paragraph 3.4, page 30

According to the report, the Customs Modernization and Tariff Act (RA No 10863) has the aim to modernize customs rules. EU industry is concerned still with a number of practices occurring when importing goods to the Philippines, including the (on and off) use of reference prices for meat products. The EU industry is also concerned with a number of practices occurring when importing goods to the Philippines, including the possible expansion of the use of pre-shipment inspection to cargo.

EU question No 7: Does the Philippines still consider using reference prices for meat imports? Is the Philippines considering the expansion of PSI despite its recent commitments under the Trade Facilitation Agreement? Is the Philippines considering other (risk based) ways to manage some of its challenges in customs?

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Response:

The Philippines does not apply reference prices. For PSI, the Philippines will consider its use only for issues on quantity, rules of origin, but not on valuation and tariff classification. The Philippines, through the Bureau of Customs, adheres to the WTO Agreement on Customs Valuation on price actually paid or payable. Reference prices are tools only to ask questions to the stakeholders, for the production of sales contract, proof of payment.

The Philippines can confirm that it is considering other risk-based ways to facilitate customs procedures.

Paragraph 3.5, page 30

Customs Memorandum 2017_10-001 suspended the super green lane (SGL Customs Administrative Order 6-2003) (also referred to as Blue Lane in the report).

EU question No 8: When will the Philippines re-instate the super green lane for economic operators?

Response:

The Super Green Lane or 4ES code was not suspended; it was the Green Lane that was suspended.

3.1.4 Other Charges affecting imports

Paragraph 3.27, page 37

The Value Added Tax (VAT) refund is a generalized matter of concern particularly for foreign renewable energy companies. The Renewable Energy Law of the Philippines establishes the VAT exemption for renewable energy developers. Foreign subcontractors (who cannot be developers since the promotion of renewable projects is reserved to majority-owned Filipino companies) should be exempt from VAT, according to the law, but the Philippine Tax Agency (BIR) has not developed a form to implement this exemption, and in the end renewable subcontractors have to bill their customers without VAT and support the VAT of their suppliers. As a result, by not having other activities to compensate for, the companies end up obtaining systematic negative VAT balances and repayment takes years (sometimes up to 5), thus converting the VAT into practice at a non-recoverable and non-deductible cost.

EU question No 9: Does the Philippines plan to reform its VAT refund system in order to allow foreign companies (especially foreign renewable energy companies) to exercise their right to the exemption from VAT payments?

Response:

The Philippines can confirm plans to reform its VAT refund system. The Philippines has introduced reforms in the VAT refund system are covered by RA 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act . Section 106 (l) of RA 10963provides for the establishment of a cash refund system.

While all pending VAT refund claims as of 31 December 2017 shall be fully paid in cash by 31 December 2019. Starting 2019, applications of VAT refund will be paid in cash within 90 days from the filing of the VAT refund applications.

The Department of Finance shall establish a VAT Refund Center in the Bureau of Internal Revenue and Bureau of Customs that will handle the processing and granting of cash refund of creditable input tax.

The Renewable Energy Law of the Philippines, under Section 21 thereof, only provides for value-added tax exemption for all manufacturers, fabricators and suppliers of

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- 44 - locally-produced RE equipment and components on their shipments necessary for the manufacture and/or fabrication of RE equipment. There is no exemption for the sale of the service of subcontractors. However, the law provides for Zero percent value-added tax on purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities even for subcontractors.

While there is no specific action taken by the Bureau of Internal Revenue on RE, the recently passed RA 10963 or the TRAIN Law provides for the establishment of an enhanced VAT Refund system which processes refunds of input VAT within 90 days from filing of the VAT refund application. This enhanced process applies to all taxpayers, including entitles engaged in RE development, with claims for input VAT refund.

Paragraph 3.29, page 37 and also Government report (2.2.3 Tax Reform, Paragraph 2.14, page 6 -7)

Reference is made to the taxation on alcoholic beverages. According to both the Secretariat and the government reports, the first package of TRAIN started to be implemented as from January 2018 and it should include, among others, higher excise duties for a number of products (sweetened beverages, petroleum products coal, tobacco products and automobiles). Four more packages are under consideration by Congress also including possible higher excise duties on alcoholic beverages and other 'luxury' goods.

EU question No 10: How is the Philippines ensuring that higher excise duties will not disproportionately impact higher segment products from trading partners? Could the Philippine present its plans as regards the future taxation of alcoholic beverages?

Response:

The Philippines provides the same tax treatment to all products, regardless of origin.

With respect to the plans on the future taxation of alcoholic beverages, it is under review for further simplification and adjustment.

Republic Act No. 10351 - An Act Restructuring the Excise Tax on Alcohol and Tobacco Products, (RA 10351) was implemented to address the WTO panel findings on discriminatory treatment imported spirits, and to meet public health goals and to simplify alcohol and tobacco taxation. The EU understands that its implementation has met the government’s objectives as well as increasing tax revenues.

EU question No 11: Considering the success of the review of RA 10351, does the Philippines envisage any changes aimed at further simplify its tax system?

Response:

The Philippines can confirm plans to further simplify the tax system. The Department of Finance prioritizes establishing tax measures that could best accommodate future economic changes through efficient tax administration. Hence, it comes with it simplifying the tax system in a progressive approach. For instance, RA 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act was implemented last January 2018 which aims to establish a simpler, fairer, and more efficient tax system. In fact, as regards to the alcohol and tobacco taxation, amendments are being proposed in Congress that cover both health and revenue aspects.

Economic operators are concerned that further increases in taxation will push consumers towards illicit products.

EU question No 12: Are steps being taken to address the concerns of legitimate operators that increases in taxation would push consumers towards illicit products, for example by improving administration and enforcement of the existing RA 10351?

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Response:

Under RA 10351, mechanisms to alleviate, if not eradicate, illegal products are being put in place such as the alcohol and tobacco tax stamps. In addition, under RA 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, Petroleum products are planned to be marked under the fuel marking program in order to address smuggling.

Para 3.29 and Table 3.5, page 37

The WTO bound tariff for sparkling wine (HS 220410) is set by the Philippines at 50%, being the current applied MFN average duty only 5%. However, the abnormally high specific excise levied on this product may be working as a “de facto” tariff and/or trade barrier, given that the Philippines has no domestic production of this product.

The excise structure of sparkling wine is as follows [per 750ml bottle, Net Retail Price (excluding excise and VAT):

- PHP500 or less → PHP 292.47/litre - More than PHP500→ PHP 818.90/litre

For most prices ranges, except those in the upper end, the excise is well beyond the bound tariff for this product. Other reasons that may generally explain high specific duties on alcohol such as health concerns or public moral, should be discarded as the rest of the specific tax structure –e.g. still wine or liquor- is much lower.

EU question No 13: What is the rationale behind the excise tax levied by the Philippines on sparkling wine? What is the reason to levy this product over 23 times more than still or carbonated wine?

Response:

The distinction between sparkling and still wines has long been imposed under the RA 8240 of 1997. Excise taxation of alcoholic beverages is based on per proof litre and not ad valorem.

EU question No 14: We note that the ad valorem rate of 20% levied on spirits in the Philippines is calculated based on the Net Retail Price which can range greatly from retailer to retailer. Does the Philippines plan to simplify this toward an ad valorem structure based on CIF instead?

Response:

Currently, there are no plans to simplify the ad valorem structure to CIF.

3.2.8 Export performance requirements

Paragraph 3.59, page 46

According to the report, certain tax incentives provided to exporters of non-traditional goods are contingent on export performance. It is described that these incentives are granted to foreign- owned enterprises only if they export 70% of their production, whereas Philippine-owned enterprises are only required to export 50% of their production. The Philippine Government has announced that these provisions are currently under revision.

EU question No 15: Could the Philippines anticipate the outcome of the ongoing review, giving details on the treatment that will be reserved to national versus foreign enterprises?

Response:

Under the proposed Tax Reform for Acceleration and Inclusion (TRAIN) 2, outdated provisions of existing investments laws will be eliminated taking into consideration the current business models and engagements in free trade arrangements. In this

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- 46 - regard, there is not much difference between domestic and export markets since both are equally contestable.

3.3 Measures Affecting Production and Trade

3.3.1 Standards and other technical requirements

Paragraphs 3.60 and subsequent page 46

(Also Government report p. 2.7)

EU question No 16: Could Philippines clarify whether the 72 mandatory Philippines National Standards (PNSs) are all aligned with the international standards? If not, could the Philippines clarify what is the percentage of these 72 PNSs currently aligned with international standards? For those not yet compliant with, could the Philippines clarify if and when it plans to align them (in particular the automotive standards) with relevant international standards?

Response:

The Philippines would like to refer to the list of 72 PNS for mandatory certification (Memorandum Circular No. 17-09) with their corresponding products which can be accessed at: http://www.bps.dti.gov.ph/index.php?option=com_docman&task=cat_view&gid=97&It emid=77

Currently, 46% PNS of these 72 PNS are aligned with International Standards. For the remaining 54%, the Philippines is continuing the review of the same and these are prioritized based on national priorities.

Paragraph 3.64, page 46

Reference is made to the certification schemes.

EU question No 17: Does the Philippines certification system rely on risk assessment? Are third- party certification schemes reserved for high risk products? Does the Philippines consider using less burdensome conformity assessment procedures, i.e. Suppliers Declaration of Conformity (SDoC) for low risk products or accepting them from third countries? Does the Philippines accept products complying with UNECE Regulations for motor vehicles, part and components? How does the Philippines take into account SMEs as regards conformity assessment?

Response:

The BPS has no risk assessment guidelines established except for the ASEAN Harmonized Electrical and Electronic Equipment Regulatory Regime (AHEEERR) which will be implemented once finalized/ adopted by ASEAN. Furthermore, the BPS is in the process of developing risk assessment guidelines for consumer products that it regulates.

On SDoC, this is still being assessed at the moment as there is no enabling law.

The Philippines accepts UNECE Regulations for products such as helmets, automotive glass, and other automotive parts.

On the Philippines’ taking into account SMEs on conformity assessment, it implements graduated schemes in terms of conformity assessment fees based on the size of company and value of shipments.

Paragraph 3.65, page 46

EU question No 18: Could the Philippines specify the system for designation of conformity assessment bodies? Are the results from foreign conformity assessment bodies accredited under international accreditation schemes (ILAC, IAF) accepted in the Philippines? If so, in which sectors?

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Are there any foreign certification bodies that have been accredited by PAB? And if yes, are they then allowed to certify products under the (PS) Quality Scheme and/or Safety Certification Scheme?

Response:

The regulatory agencies have a system for designating or recognizing conformity assessment bodies (CABs). To illustrate, the Bureau of Philippine Standards (BPS) designates a testing laboratory, inspection body, and certification body to conduct testing/inspection/certification of products such as matches, cement, steel, and household appliances, among others. Meanwhile, the Food and Drug Administration (FDA), an ISO 17025 accredited laboratory, recognizes private testing laboratories to conduct testing and examination of samples of health products in accordance with FDA Order No. 2012-001 dated 04 May 2012.

The Philippine Accreditation Bureau (PAB), accredits conformity assessment bodies in accordance with specified international standards on voluntary basis

As a signatory to Mutual Recognition Arrangements and Multilateral Recognition Arrangements, PAB subscribes to the principle of “accredited once, accepted everywhere. At the same time, certain regulatory bodies have their own mandate and requirements to ensure that products entering Philippines meet the requirements of Philippine standards, regulations and other specifications.

For example, as stated in 3.63 of PH 5th TPR Secretariat Report, imported products including those certified abroad as meeting international standards may still be subjected to sample testing by BPS to ensure that imports consistently meet Philippine standards as well in the exercise of Police Power of the State to protect health and the environment consistent with Section 2.2, Article 2 of the TBT Agreement.

To date, PAB has no foreign certification bodies that have been accredited to certify products under the (PS) Quality Scheme and/or Safety Certification Scheme. PAB has one accredited foreign certification body for Quality Management System, Environment Management System and Food Safety Management System, which is the Brixton Assessment Services (www.bascert.com).

3.3.3 Labelling and marking requirements

EU question No 19: Does the Philippines require pre-approval, registration or certification of labels in any sector as a pre-condition for placing products on the market? Is labelling (including supplementary labelling or corrections) taking place in customs warehouses or other designated areas at the point of import as an alternative to labelling at the place of origin? Are non-permanent or detachable labels allowed, rather than labels physically attached to the product?

Response:

For products under the purview of the BPS, pre-approval, registration or certification of labels as a pre-condition for placing products on the market are required for products covered by the mandatory certification scheme.

This is allowed as long that is only intends to address non-conformities.

Permanent or detachable labels are allowed depending on the requirement of the standards of the product and its relevant implementing guidelines.

For the Food and Drug Administration, one of the bases for issuing the Certificate of Product Registration is evaluation and approval of product labels, based on the standards, rules and regulations issued by the FDA. Proposed product labels are submitted to the FDA for evaluation.

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3.3.2 Sanitary and phytosanitary requirements

Paragraph 3.76, page 48

The Philippines has accredited a number of countries as meat exporters, including 12 of the EU for various products (poultry, beef, pork), most obtaining a 'systems accreditation.' EU MS have been confronted with unclear audit and reporting procedures, in particular on fruit and vegetables.

EU question No 20: What are the measures envisaged by the Philippines in the short term to facilitate trade for the agricultural products, while ensuring a high level of sanitary and phytosanitary control? Is the Philippines working on a single set of rules to audit accreditation requests in meat and other food products?

Response:

The Philippines considers transparency as a cornerstone of the SPS Agreement. It has actively supported the SPS Committee’s efforts to significantly improve the level of transparency in the application of SPS regulations. That said, the Philippines has been transparent in its application of its SPS measures through the agreed notification procedures in the WTO. Every official introduction or change in SPS measures since accession to the WTO have been diligently notified and were made readily available from the national enquiry point.

All measures are under continuous review. The Philippines is working on a single set of rules that is based on risks, objective observations, and science.

3.3.4 Competition policy and price controls

Paragraphs 3.82 and 3.91, pages 50-51

According to the report, two-year transitory period of the Philippine Competition Commission (PCC) ended on 8 August 2017. The PCC has initiated a number of studies and statements, including on the issue of providing licenses to foreign constructing companies by Philippine Construction Accreditation Board (PCAB) which the PCC argued should be done notwithstanding the status of those companies in terms of capitalisation.

Foreign construction companies can acquire a construction license called “Quadruple A Platinum” from PCAB by which they could have 100% foreign capital under an investment of about 20 million euros (1 billion Php). “Quadruple A Gold” contractors may undertake private projects under the following contract cost:

a) For vertical projects - minimum contract cost of 100 million Euros (5 Billion Php); b) For horizontal projects - minimum contract cost of 60 million Euros (3 Billion Php)

Filipino construction companies can acquire “Quadruple A Gold” also under an investment of about 20 million euros (1 billion Php) but “Quadruple A Platinum” contractors may undertake government and private projects of any contract cost.

EU question No 21: Will the Philippines follow up on the advice of the PCC to do away with discriminatory arrangements by the PCAB and ease construction licenses to foreign operators? In particular, does the Philippines intend reducing differences between local and foreign contractors in the construction industry (Quadruple A Gold vs. Quadruple A Platinum)? Is the Philippines planning on increasing the current limit for foreign companies over the current 25% to the access to public contracts?

Response:

Clarification should be made on the Secretariat Report that Quadruple A Platinum contractors may only undertake government and private projects, not government, and subject to (a) and (b) above as stated in the Secretariat Report.

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In terms of the questions raised, the President issued Memorandum Order No 16 in November 2017. It directs the NEDA Board or the economic planning agency board and the member agencies to take immediate steps to lift or ease existing restrictions on foreign participation in eight areas or activities. The priority investment areas or activities where the equity restrictions will be reviewed include (1) contracts for the construction and repair of locally-funded public works and (2) public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system.

3.3.6 Government procurement

According to the report, there continues to be a high risk of corruption in the government procurement system. Industry wanting to contribute to the Philippines infrastructure plans is at times faced with issues of transparency and predictability. Provisions under Government Procurement Reform Act (2003) exclude or put foreign bidders at a disadvantage. President Duterte has expressed a number of times the ambition to reform the Philippines procurement system to allow more foreign participation in the build build build agenda. (See also his Order 16 of 2017).

EU question No 22: Does the Philippines intend to reform its legislation on government procurement and take measures to improve non-discriminatory access for foreign bidders and improving the independence of the review bodies?

Response:

At present, the preference for “domestic entities” in the Procurement of Goods has been removed by Republic Act No. 10667 or the Philippine Competition Act. Likewise, the President of the Philippines issued Memorandum Order No. 16, dated 17 November 2017 directing NEDA and its member agencies to exert utmost efforts to lift or ease restrictions on certain investment areas or activities with limited foreign participation, which include, among others, practice of particular professions, where allowing foreign participation will redound to the public benefit; and contracts for the construction and repair of locally-funded public works. Moreover, a number of bills are pending in Congress proposing for the amendment of the Government Procurement Reform Act in various areas.

The Philippines is not a signatory or observer of the WTO plurilateral Agreement on Public Procurement (GPA).

EU question No 23: Is the Philippines considering joining the WTO GPA, even as observer, to allow more comfort to foreign bidders?

Response:

The Philippines is currently assessing the possibility of joining the WTO GPA as an observer. Pending the outcome of the assessment, the Philippines is continuously undergoing capacity development activities on the WTO GPA through the participation of representatives of the Government Procurement Policy Board in the WTO’s global and Asian workshops. The Philippines will be hosting a national workshop on government procurement by the second quarter of 2018.

President Duterte has been making statements to allow the 'Swiss Challenge' method to procure infrastructure.

EU question No 24: What concretely does the Philippines mean with Swiss Challenge method and how would it be implemented to allow for fair competition?

Response:

Swiss Challenge is more applicable to Public-Private-Partnership/ Build-Operate- Transfer contracts where an unsolicited proposal is subjected to Swiss Challenge.

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The rules or guidelines in the conduct of Competitive Challenge or Swiss Challenge modality alongside Government Procurement Reform Act still need to be laid down, since this method is not prescribed under RA 9184 and its IRR.

Executive Order 34 (17 July 2017) aims to prescribe the rules and procedures on the review and approval of all governments contracts, allows for 'alternative' procurement processes should the product they require fall under exemptions from public bidding.

EU question No 25: Fully understanding the need for infrastructure investments and the sense of urgency, how does the Philippines aim to make procurement bidding more competitive to get the best value for money? Does the alternative procurement process allow more foreign ownership in infrastructure projects?

Response:

Through Executive Order No. 34 s. 2017, prior approval from GPPB for the use of any of the alternative methods of procurement for procurement projects with an approved budget for contract (ABC) of at least PhP500 million is no longer required.

Under the Government Procurement Reform Act and its Implementing Rules and Regulations, procuring entities consider Value for Money in the development of the project requirements during the procurement planning. There are relevant provisions as well on the application of value engineering in the procurement of infrastructure projects. Likewise, the use of Life-Cycle Costing, which is a tool to determine the most cost-effective option among different competing alternatives, is suggested in the conduct of procurement planning.

Neither Competitive Bidding nor the Alternative Methods of Procurement allow foreign ownership of government infrastructure projects except when provided for under any Treaty or International or Executive Agreement as provided in Section 4 of the RA 9184 and its IRR. Likewise, joint ventures/consortia in which Filipino ownership or interest is less than seventy-five percent (75%) may be eligible where the structures to be built require the application of techniques and/or technologies which are not adequately possessed by Filipinos and that Filipino ownership or interest shall not be less than twenty-five percent (25%).

EU question No 26: Is the Philippines planning to reduce the different conditions affecting foreign companies when it comes to public services, concessions and Information and communications technology (ICT)? For instance, the need of a bilateral Treaty or Agreement to allow foreign companies to participate in infrastructure projects; or the authorization required to foreign companies to offer consulting services.

Response:

As mentioned, the President issued Memorandum Order No. 16, dated 17 November 2017 directing NEDA and its member agencies to exert utmost efforts to lift or ease restrictions on certain investment areas or activities with limited foreign participation, which include, among others, practice of particular professions, where allowing foreign participation will redound to the public benefit; and contracts for the construction and repair of locally-funded public works. It includes public services, except activities and systems that are recognized as public utilities such as distribution of electricity, water pipeline distribution system, and sewerage pipeline system.

3.3.8.2 Patents

According to the Secretariat Report, in the case of drugs and medicines, the discovery of a new form or new property or new use of a known substance, or the use of a known process, are not patentable.

EU question No 27: If the invention of a new form or new property or new use of a known substance, or the use of a known process does clearly fall into the scope of the patentability

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- 51 - criteria, i.e. "any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable" would in such case the patent be granted?

Response:

As stated in the Secretariat Report, patentability is determined not only in accordance with the definition of patentable inventions under the IP Code, i.e. as "any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable", but also whether such inventions fall under non- patentable subject matter (e.g. discoveries, scientific theories, and mathematical methods), as well as whether they comply with the patentability criteria of novelty, inventive step, and industrial applicability.

For drugs and medicines, if the new form and new use of a known substance are not mere discoveries, and if the use of a known process produces a new product and at least employs a new reactant, then these may be considered as patent eligible. However, they must still satisfy the patentability criteria of novelty, inventive step, and industrial applicability in order to be granted a patent.

The Philippines is considering amendments to the Quality and Affordable medicines Act aim for price setting and a regulatory board.

EU question No 28: Is the Philippines considering other ways to make medicines more affordable for its citizens?

Response:

In addition to the legislative tract, the Philippines is undertaking initiatives to make medicines more affordable. The establishment of a drug manufacturing facility (Pharmazone) in the country is currently being explored. Apart from finished pharmaceutical products, manufacturing of Active Pharmaceutical Ingredients (APIs) for vaccines is likewise being considered.

The Department of Health has plans to revive the Botika ng Barangay (BnB; village pharmacy). The program aims to provide free medicines, (example, antibiotics, anesthetics and anti-asthma) for the poor especially in far flung areas. The implementing guidelines of BnB are being finalized.

3.3.8.3 Copyright and related rights

Paragraph 3.128, page 56

According to the report, copyright protection applies only to works done in the Philippines and/or of authors who are nationals of or have their habitual residence in the Philippines.

EU question No 29: Could the Philippines explain how its legislation on copyright protection is in line with the Berne Convention?

Response:

Therefore, the protection afforded by the IP Code to copyrightable works applies to:

(1) Works that are protected by virtue of and in accordance with any international convention or other international agreement to which the Philippines is a party, including the Berne Convention (Sec. 221.2 of the IP Code);

(2) Works of authors who are nationals of, or have their habitual residence in, the Philippines, consistent with Articles 3.1(a) and 3.2 of the Berne Convention (Sec. 221.1 [a] of the IP Code);

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(3) Audio-visual works the producer of which has his headquarters or habitual residence in the Philippines, consistent with Article 4(a) of the Berne Convention (Sec. 221.1 [b] of the IP Code);

(4) Works of architecture erected in the Philippines or other artistic works incorporated in a building or other stryctyre located in the Philippines, consistent with Article 4(b) of the Berne Convention (Sec. 221.1[c] of the IP Code);

(5) Works first published in the Philippines, consistent with Article 3.1(b) of the Berne Convention (Sec. 221.1[d] of the IP Code); and

(6) Works first published in another country but also published in the Philippines within thirty (30) days, irrespective of the nationality or residence of the authors, consistent with Article 3.4 of the Berne Convention (Sec. 22.1[e] of the IP Code).

Section 3 of the IP Code also states that “[a]ny person who is a national or is domiciled or has a real and effective industrial establishment in a country which is a party to any convention, treaty or agreement relating to intellectual property rights or the repression of unfair competition, to which the Philippines is also a party, or extends reciprocal rights to nationals of the Philippines by law, shall be entitled to benefits to the extent necessary to give effect to any provision of such convention, treaty or reciprocal law, in addition to the rights to which any owner of an intellectual property right is otherwise entitled by this Act.”

All these provisions, taken together, mean that protection is extended not only to works done in the Philippines and/or of authors who are nationals of, or have their habitual residence in, the Philippines. The IP Code, as amended, fully implements the provisions of the Berne Convention.

3.3.8 Intellectual Property Rights

Both Reports indicate the good progress made on the legal revision of the IP policies in the Philippines, including protection and enforcement. The EU has been invited to three meetings by IPOPHIL on a Consultation regarding Philippines Rules and Regulations on Geographical Indications (third in April 2015) but so far no final regulation on a sui generis system for GIs has been adopted.

EU question No 30: Could the Philippines indicate where the process is at the moment and if the country still intends to develop its own GI regulation?

Response:

Geographical indications are currently protected in the Philippines under the law on trademarks, pursuant to the IP Code, and in full compliance with the country’s obligations under the TRIPS Agreement. Nevertheless, the Philippines, through the IPOPHL, continues to develop possible enhancements of the GI protection system, including through the enactment of the appropriate legal issuance. Through a whole-of- government approach, consultations with stakeholders, including the relevant government agencies and foreign trading partners, continue. The Philippines remains committed to adopting the appropriate measures in due time, with the view of strengthening the protection of geographical indications and in pursuit of its national development agenda.

4 TRADE POLICIES BY SECTOR

4.1 Agriculture and 3.1.3.2 Tariff quotas

4.1.5 Rice

According to the report, the Philippines agreed to tariffy the quantitative restrictions on rice upon the expiry of the waiver, on the basis of the Executive Order 23 (Extending the effectivity of the MFN rates of duties on certain agricultural products).

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EU question No 31: Could the Philippines clarify whether it plans to reconsider increasing the tariffs for products concerned to provide predictability to operators and consumers (meat, dairy)?

Response:

Upon the enactment of a law to tariffy rice, concessions granted by the Philippines to maintain status quo in its rice import policies, as provided in Executive Order No. 23, shall be terminated. Thus, tariff for the said products may increase.

However, interested parties may voluntarily seek to change the tariff rates by invoking the provisions of the Customs Modernization and Tariff Act on flexibility clause.

4.3.2 Electricity

Paragraph 4.56, page 69

The report mentions that Feed-in-tariff incentives for hydropower and biomass are due to expire in December 2017 but are under review.

EU question No 32: Is the Philippines considering a more competitive procedure of granting certificates of eligibility (currently on a first-come-first serve basis)?

Response:

This has expired and has not been renewed.

Clarify that it is not on a first come first serve basis but is on a first to operate basis. Even then it is fully subscribed.

4.5.1 Financial services

4.5.1.2 Insurance

Paragraph 4.89, page 75

The report states that according to the amended Insurance Code, all insurance companies authorized to do business in the Philippines are required that risks must first be offered "to other companies similarly authorized to do business in the Philippines in such amounts and under such arrangements as would be consistent with sound underwriting practices".

EU question No 33: Could the Philippines clarify as to whether this refers to re-insurance?

Response:

The paragraph refers to reinsurance. For clarity, the Philippines proposes to add the phrase in the Secretariat Report, “before they can enter into reinsurance arrangements with unauthorized foreign insurers” on paragraph 4.89, page 75 to conform to Section 224 of the Amended Insurance Code and Circular Letter No. 2014-07. Hence paragraph 4.89 shall read:

“As per the Amended Insurance Code, "all insurance companies authorized to do business in the Philippines requires that risks must first be offered to other companies similarly authorized to do business in the Philippines in such amounts and under such arrangements as would be consistent with sound underwriting practices before they can enter into reinsurance arrangements with unauthorized foreign insurers ".

Paragraph 4.91, page 75

According to the report, companies must obtain a licence (Certificate of Authority) from the IC prior to commencement of business. There are no restrictions on the form of business that foreign companies may operate in the country (i.e. branches, subsidiaries, or joint ventures), nor are

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EU question No 34: Is the Philippines planning to allow foreign insurance companies to provide insurance to projects financed by the government?

Response:

Based on the Republic Act (RA) 656, the national government agencies and local government units, except those belonging to municipalities below first class are required to insure with GSIS their properties, assets and other interest against any insurable risk.

Conversely, Presidential Decree (PD) 245 provides GSIS the authority to reinsure with and accept reinsurance from insurance and reinsurance companies in the Philippines and abroad.

The Philippines will continue to explore ideas to relax this law to come up with a more liberal approach.

Paragraph 4.95, page 76

According to the report, re-insurance companies doing business in the Philippines are required to cede to the NRCP at least 10% of outward reinsurance placements. In addition, it is also stated that reinsurance services may be obtained from abroad upon the authorization of the IC.

EU question No 35: Would the Philippines consider removing this restriction so as to allow re- insurers full freedom of retrocession?

Response:

Presidential Decree 1270 series 1977 requires re-insurance companies to cede 10% to NRCP.

For reinsurance, please note that under Section 223 of the Amended Insurance Code, “insurance companies” in the Philippines are allowed to “cede their excess risks to authorized foreign reinsurance companies” provided they comply with the conditions under the Section.

Additionally, Section 225 of the Amended Insurance Code allows insurance companies to cede their insurance risks to foreign insurance or reinsurance companies provided they do so under such terms and conditions prescribed by the Commissioner. Currently, there is one Circular Letter that requires facultative placements of insurance companies abroad to be approved if this involves foreign currency. This circular is currently being reviewed in light of the review of the regulatory framework of reinsurance.

Furthermore, the Philippines is closely working with stakeholders and industry partners to discuss possible policy improvements to provide a more enabling regulatory environments for reinsurance/retrocession.

EU question No 36: Could the Philippines clarify the conditions for such an authorisation?

Response:

The facultative reinsurance placement shall first be offered locally as follows before the company can enter into facultative reinsurance placement with foreign reinsurance:

 for Marine Hull, Aviation, Money Securities Payroll and Robbery risks, to at least two (2) local direct writing companies, one (1) foreign authorized company and one (1) domestic professional reinsurer;

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 For all other risks, to at least five (5) local direct writing companies, three (3) foreign authorized companies and one (1) domestic professional reinsurer.

Notwithstanding, the provision under Section 4 of PD 1270, companies shall cede first to NRCP at least (10%) of their outward reinsurance placement. Likewise, the letters of declinations of reinsurance offer with specific reasons should be submitted to Insurance Commission.

Consequently, the circular on approval of facultative placements abroad is being reviewed in light of the review of regulatory framework on reinsurance. Likewise, Facultative Placement Abroad are always approved by the Insurance Commission given they comply with the terms and conditions prescribed by the Insurance Commissioner.

4.5.4 Tourism

Paragraph 4.133, page 81

Significant market access and barriers to foreign investment remain in the tourism sector. 100% foreign equity is allowed in accommodation facilities.

EU question No 37: Does the Philippines plan to increase the limits for foreign ownership in tourism?

Response:

The Philippines allows100% foreign equity for hotel/ lodging services. On the other hand, other sub-sectors under the travel and tourism services namely: restaurants, travel agencies and tour operator services and professional congress organizers shall still be subject to existing domestic rules and regulations.

It should also be noted that as regard public utilities and land ownership, the 60-40 rule applies.

4.5.5 Professional services

Paragraph 4.137, page 82

Even if there is a framework for the practice of some professions in the Philippines, the procedure to apply for licencing of a foreigner individual is unclear.

EU question No 38: Will the Philippines improve the procedure to apply for licensing of foreign professionals? The EU would appreciate to receive data about the number of professionals having actually been accredited since the last review.

Response:

Since 2016, the Philippines, through the Professional Regulation Commission (PRC), has issued policies to streamline the processing of applications for authority to practice by foreign professionals in the Philippines particularly in the processing of Special Temporary Permits that allow foreign professionals to practice in the country for specific purposes and definite period of time. This is covered by Memorandum Order No 3 & 4, Series of 2016. As of February 2018, there were 3,536 foreign professionals that were granted authority to practice a profession in the Philippines by way of a special temporary permit.

4.5.5 Professional Services

Reference is made to the existing restrictions for professional services. Under the 10th FINL most professional services were taken out of the list provided there was reciprocity. However, it still seems difficult for professional service providers to enter the Philippino market.

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EU question No 39: Is the Philippines considering measures to enhance the commitments on professional services and relative to homologation of titles/accreditations/studies (specially addressing the possibility to sign engineering projects)?

Response:

The practice of Pharmacy and Forestry profession through the respective laws Republic Act 10918 (An Act Regulating and Modernizing of Pharmacy in the Philippines, Repealing for the Purpose Republic Act 5921, Otherwise Known as the Pharmacy Law) and Republic Act 10690 (An Act Regulating the Practice of Forestry in the Philippines and Appropriating Funds Therefore, Repealing for the Purpose Republic Act 6239, Known as “The Forestry Profession Law”) now allows foreign individuals to practice in the Philippines. The provision on foreign reciprocity has been incorporated in the said laws.

The same provision of foreign reciprocity is also considered in the proposed bills in Congress for the practice of radiologic and x-ray technology as well as the criminology profession.

The difficulty of accessing the Philippine market by professionals may be attributable to the requirements being required by the respective professional boards. However, the processes involved has been clarified and simplified by several policy issuances by the Professional Regulation Commission (i.e., PRC Memorandum Order No.3 and 4, series of 2016). Again, the PRC has taken a liberal approach in the application of the principle of reciprocity.

On the homologation of titles, the PRC maintains that the use of titles (profession) is allowed only to individuals who are able to complete all the qualifications required for the said profession under their charter. This would include passing the respective licensure examination and registration in the roll of professionals.

On the Accreditation of Studies, the PRC is at the forefront of undertaking certain deliverables under the PQF and AQRF where accreditation of studies and referencing of qualifications are being considered very substantively. Currently though, academic undertaking or studies are not enough to automatically enable an individual to practice a regulated profession.

WT/TPR/G/368 – Government Report

2.1 Domestic Policies and Initiatives

2.2.1 Trade Facilitation

Paragraph 2.11 page 6

The Philippines refers to the adoption of the Customs Modernization and Tariff Act and mentions that good work is ongoing with regard to drafting implementing regulations. The EU appreciates being invited to some of the consultations on these. The Philippines made statements about starting implementing its national single window in 2018.

EU question No 40: Could the Philippines provide more details on the implementation of its Single Window, also in view of its ASEAN commitments?

Response:

The Philippines is currently in the process of improving its automated system for processing import clearances in line with the national program to enhance the National Single Window and consistent with its ASEAN commitments. The TradeNet system is being prepared for live operation by the middle of 2018. This will allow parties involved in trade to lodge information and documents to fulfill all import, export and transit- related regulatory requirements.

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TradeNet is an automated licensing, permit, clearance, and certification system integrated into one platform for regulatory agencies. It is a cloud-based single entry point where trade customers and stakeholders can submit information and documents to government agencies in order to comply with import/export requirements. The TradeNet system will cover all the functions of the current National Single Window.

The Philippines’ Bureau of Customs is still finalizing its procurement process for the new customs system with an integrated National Single Window.

The Philippine Customs request for technical assistance on ASEAN Single Window (ASW) readiness/assessment from US-ASEAN Connectivity through Trade and Investment (US- ACTI) will commence on April 17, 2017. Target Go Live will be on 2nd Quarter of 2018.

The Philippines’ Department of Finance and the Department of Information and Communications Technology has started on the development of the Philippine Trade Net. This is a system which will provide common platform to all Philippine Government agencies involved in trade clearance. Currently discussions are being undertaken with the Customs and Agriculture Department for the immediate implementation of requirements in order to comply with our commitment to the ASW. TRADENET will possibly provide the National Single Window solutions for the Philippines.

Philippines will join the Electronic ATIGA Form D Live Operation by 2Q 2018. End-to-end testing with the exchange ready member states will start third week of March 2018.

The Philippines is coordinating and developing the e-Phyto and e-Animal Health Certificate with its concerned agencies. But will defer to the ASEAN SPS Contact Points (ASCP) with regard to its readiness to join the initial testing.

2.3 Manufacturing resurgence

Paragraph 2.16, page 7

In 2014, the Philippines launched a new industrial strategy focused on upgrading and transforming the country's manufacturing sector, including on automotive. The Philippines' incentives under its "CARS" programme (EO 182 of 29 May 2015) seem however to mostly benefit larger operators already present in the country.

EU question No 41: Does the Philippines intend to revise the eligible criteria of the CARS programme allowing new investors to benefit of the scheme and, ultimately, helping diversifying the economy?

Response:

All automotive brand principals, whether or not present in the Philippines at the time the application period was opened in January 2016, were invited to participate in the Program. The applications were approved based on the criteria and qualifications set by EO 182.

The Program was designed to accommodate three models of four-wheeled vehicles. To date, however, only two slots were taken. The third slot has now been allocated to the eco-Public Utility Vehicle (eco-PUV) Modernization Program, which will be a subject of another Executive Order. In this regard, there is no more slot available that can be opened to new investors.

Section 2.4 Services

Page 7

The report mentions that Information Technology-Business Process Management (IT-BPM) industry employs one of the highest percentages of female workers, registering an estimated 53% of all employees. This percentage is significantly higher than the national figure which stands at 39.6%.

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EU question No 42: Is the Philippines taking specific measures to promote female employment in Information Technology-Business Process Management (IT-BPM) industry and to maximise positive impacts of increased women participation in international trade for businesswomen and female workers in general?

Response:

The Philippines has initiated numerous measures not just to promote female employment in the IT-BPM Industry but of female workers across all sectors. These measures also ensure the protection of their rights and encourage women participation particularly in occupations usually dominated by male.

The Philippines has enacted Republic Act 10151 (RA) in July 2010 or an Act Allowing the Employment of Night Workers, thereby repealing Articles 130 and 131 of Presidential Decree Number 402, as amended, otherwise known as the Labor Code of the Philippines. It allows women to work at night which promotes gender equality and provided employment opportunities for women.

To implement RA 10151, the Department of Labor and Employment (DOLE), issued Department Order No. 119, Series of 2012, which provides for the mandatory facilities for women such as lactation station in pursuant to Republic Act 10028 or the Expanded Breastfeeding Promotion Act of 2009, facilities for transportation and properly ventilated sleeping or resting quarters and separate toilet facilities for men and women.

Senate Bill No. 1363 or the Telecommuting Act of 2017, has been passed in the third and final reading in the Senate of the Philippines on May 2017. The said Bill seeks an alternative way for the IT-BPM industry wherein employees can work from home given that the employees are provided with the same treatment with other employees at the workplace.

The DOLE issued Department Order No. 102 series of 2010, which provides for the guidelines on the implementation of Human Immunodeficiency Virus (HIV) and Acquired Immunodeficiency Syndrome (AIDS) that provides for the mandatory formulation of workplace policy and programs on HIV and AIDS, advocacy and information campaign on the basic information on HIV and AIDS and such as social policies on non- discriminatory policies, confidentiality and work accommodation and arrangement.

The DOLE and IT and Business Process Association of the Philippines (IBPAP) signed a Memorandum of Agreement (MOA) in 2014 to foster voluntary compliance with Occupational Safety and Health (OSH) and general labour standards. The MOA is monitored by DOLE.

Senate Bill No. 1305 or Expanded Maternity Leave Law of 2017 has been passed in the third and final reading in the Senate of the Philippines in March 2017. The bill will increase the maternity period from sixty (60) to seventy-eight (78) days to one hundred twenty (120) days for female workers in the government service and the private sector with an option to extend for an additional thirty (30) days without pay, providing a parental leave period for adoptive parents and granting an additional thirty (30) days for solo mothers. The counterpart bill of Senate Bill 1305 in the House of Representatives, House Bill 4113, still needs to be passed by the Lower House.

Other issues

Legalisation of official documents

The Philippines does not recognize the legalization of official documents by Hague Apostille since it is not part of the Hague Convention. Although the Government has formally expressed its interest in acceding to this Agreement, implementation has been delayed indefinitely. This situation implies that the legalization of official documents is necessary, for example, for the registration of a large number of products in the Philippines, or for public tenders, involves a long, cumbersome and costly administrative procedure.

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EU question No 43: Is the Philippines planning to take any action to accelerate the implementation of the Hague Convention?

Response:

While the internal legal procedures for the Philippines’ accession to the Apostille Convention has been ongoing, the Department of Foreign Affairs (DFA), as competent authority, established in 2014 a component of the electronic Apostille system (e-APP) through the e-Register. The e-Register has two elements:

 First, the Document Management System - Encoding, Masterlisting, Reporting (DMS-EMR) which streamlines the repetitive backend operation processes to cut down turn-around time and optimize manpower resources.

 Second, the Authentication Verification System (AVS) which provides the public with a convenient method of verifying the authenticity of documents issued by the Department online and in real time, and stores an online secure database of digitized copies of the updated list of specimen signatures of authorized officials.

Following the Philippines’ consultations with the representatives of the Hague Conference on Private International Law (HCCH) , tit was confirmed that accession to the Convention only requires ratification by the President of the Philippines and does not need concurrence by the Philippine Senate.

The DFA submitted in October 2017 a new set of ratification papers for approval by the President.

NORWAY

1. Does the Government of the Philippines envision a liberalization of the Cargo Reservation Law, which requires that cargoes owned by the government or controlled by state owned corporations shall be shipped on board Philippine flag vessels?

Response:

An amendment of the law is seen as needed since most cargo reservations have disappeared over the past decades and the relevance of cargo sharing agreements is declining. PD 1466 is also not enforceable as the Freight Booking and Cargo Consolidation Center under the Philippine Shippers’ Bureau is no longer existing.

2. According to the Secretariat report paragraph 4.101, telecoms services are regarded as a public utility. Foreign equity in telecoms companies is limited, by the Constitution as well as the Public Service Act, to 40 percent. Foreigners may not become executives or managers of telecoms firms, and the number of foreign directors must be proportionate to the firm's aggregate share of foreign capital. What are the reasons for these limits and are there any processes underway which may lead to reform?

Response:

The reasons for the above-stated limitations on “Foreigners may not become executives or managers of telecoms firms, and the number of foreign directors must be proportionate to the firm's aggregate share of foreign capital” is due to the concept that telecommunication service is considered a public utility. The restrictions existing under telecommunications and public utilities, among others, are specified in the Constitution and, as such, cannot be amended by legislation.

A Consultative Committee has been established to prepare recommendations and proposals for amending the 1987 Constitution.

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3. According to paragraph 1.19 in the Secretariat report, the poverty rate declined from 25.2% in 2012 to 21.6% in 2015. However, according to the same report’s paragraph 1.3, 26.3% of the population are under the poverty line. It would be useful to have an explanation as to why these figures differ, as well as explanation of which measures the government is taking to promote poverty reduction and a more equal income distribution.

Response:

The figures mentioned in the report refer to the 2009, 2012 and 2015 full-year poverty incidence among population.

Table 1. Poverty Incidence among Population and Magnitude of the Poor- PHILIPPINES

Magnitude of Poor Poverty Incidence Year Population among Population (%) (million people) 1991 34.4 21.7 2006 26.6 22.6 2009 26.3 23.3 2012 25.2 23.7 2015 21.6 21.9

Source: https://psa.gov.ph/content/poverty-incidence-among-filipinos-regsietered-216-2015-psa.

 To reduce poverty and create mpre equal income distribution, the government is dealing the issues at the macroeconomic and microeconomic levels.

 In particular, Package 1 of Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) was passed. Inflation remains manageable demonstrating monetary policy credibility.

 To spur more economic activities, business climate is being improved through various reforms such as the continuation of Project Repeal, enactment of the Expanded Anti-Red Tape Act, expansion of the coverage of TradeNet, pilot-testing of the the On- line Unified Business Permit Application Form, creation of the Credit Information System, and the implementation of the Company Registration System. Support to entrepreneurship is also a policy priority.

 Issues on the labor market are also being addressed such as youth unemployment and underutilization, labor market information facilitation, domestic talent gaps, and female participation in the labor force.

 On the legislative agenda, the Legislative-Executive-Development Advisory Council (LEDAC) is regularly convened to fast-track the passage of priority legislative agenda.

4. Norway views with interest the amendments made to the Fisheries Code in 2015, and commend efforts by the Government of the Philippines to combat illegal, unreported and unregulated fishing. Does the Government have plans to introduce further measures, including legislative changes, to eliminate illegal, unreported and unregulated fishing?

Response:

As of now, the Philippine government is putting in place mechanisms to combat IUU fishing based on existing domestic laws.

PERU

1. Is there a single regulation on public procurement or are there different regulations for special cases? In that sense, does the rule on public procurement apply at the national level or is it applied by government levels?

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Response: The Philippines has one law that governs public procurement, which is Republic Act (RA) No. 9184 or the Government Procurement Reform Act, and its Implementing Rules and Regulations (IRR). This applies to the entire government, both national and local.

2. Are state companies subject to the provisions of the public contracting regulations of the Philippines, or they are governed by a special regime?

Response: State companies or what the Philippines refers to as government-owned and/or controlled corporations are likewise subject to RA 9184 and its revised IRR (IRR).

3. Do the rules of public procurement establish a classification on national and international tenders?

Response: The rules do not establish specific classification on national and international tenders although there are instances wherein foreign participation is allowed by the rules.

4. In relation to the PhilGEPS electronic platform, please provide more details in relation to 1) the degree of implementation; and 2) whether the platform only allows the publication of information or it is also possible to carry out transactions online?

Response: The current system allows the publication of notice, award and notice to proceed. Electronic bidding was previously pilot tested in two agencies, however, was put on hold in 2015 when the plans for the modernization of the PhilGEPS were rolled out. The electronic bidding platform that was pilot tested included publication of notice, bid submission, bid opening, evaluation, post-qualification, award and notice to proceed.

5. Does the Philippines plan to implement an administrative tribunal to resolve supplier challenges?

Response: The Philippines is reviewing the possibility of establishing an administrative tribunal to resolve protests.

6. Once an appeal for reconsideration is filed, is the bidding process suspended?

Response: The bidding process is not suspended. The law provides that in no case shall any protest taken from any decision stay or delay the bidding process. However, protests must first be resolved before any award is made.

7. Is some type of guarantee needed when filing a challenge appeal?

Response: Protests filed must be accompanied by the payment of a non-refundable protest fee, which shall be paid in cash in accordance with a prescribed schedule of protest fees based on the range of the approved budget for the contract.

8. Does the Philippines have any specific regulations that favor MSMEs in relation to public procurement?

Response:

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There are specific public procurement regulations that favor MSME. Under Section 4 of Republic Act No 9501 or the Magna Carta for MSMEs, eligible MSMEs shall be entitled to a share of at least 10 percent (10%) of total procurement value of goods and services supplied to the Government, its bureaus, offices and agencies annually. The Department of Budget and Management shall monitor the compliance of government agencies on the required procurement for MSMEs and submit its report to the MSMED Council on a semestral basis and to the Congress of the Philippines through its appropriate committees on a yearly basis.

9. Can foreign companies participate without limitations in any tenders?

Response: Foreign companies may participate in the procurement of goods, civil works or infrastructure projects or consulting services.

In the procurement of goods, foreign bidders may be eligible to participate under any of the following circumstances: (a) When provided for under any Treaty or International or Executive Agreement as provided in Section 4 of the RA 9184 and its IRR; (b) When the foreign supplier is a citizen, corporation or association of a country, which grant reciprocal rights or privileges to citizens, corporations or associations of the Philippines; (c) When the goods sought to be procured are not available from local suppliers; or d) When there is a need to prevent situations that defeat competition or restrain trade.

In the procurement of civil works or infrastructure projects, foreign bidders may be eligible to participate when provided for under any Treaty or International or Executive Agreement as provided in Section 4 of the RA 9184 and its IRR. Likewise, joint ventures/consortia in which Filipino ownership or interest is less than seventy-five percent (75%) may be eligible where the structures to be built require the application of techniques and/or technologies which are not adequately possessed by Filipinos and that Filipino ownership or interest shall not be less than twenty-five percent (25%).

In the procurement of consulting services, foreign consultants may be hired in the event Filipino consultants do not have the sufficient expertise and capability to render the services required under the project, as determined by the Head of the Procuring Entity. Foreign consultants may be eligible to participate in the procurement of consulting services, subject to the following qualifications: (a) must be registered with the Securities and Exchange Commission (SEC) and/or any agency authorized by the laws of the Philippines; and (b) when the types and fields of consulting services in which the foreign consultant wishes to engage involve the practice of regulated professions, the foreign consultant must be authorized by the appropriate GOP professional regulatory body to engage in the practice of those professions and allied professions: Provided, however, that the limits of such authority shall be strictly observed.

10. Does the Philippines own any compensation mechanisms as set out in the revised GPA, even if they are not part of said Accord?

Response: RA 9184 does not have a provision for compensation arising from domestic review procedures similar to that provided in the 2012 Revised WTO-GPA. However, damages may be awarded by any court of competent jurisdiction.

11. Does a Green Procurement policy exist? If so, how is it implemented?

Response: The Philippines has a green procurement policy. It is being implemented using existing legal framework. First sets of common use supplies and equipment and non-common use supplies and equipment have been identified and prioritized, the green criteria for which have been developed for use of procuring entities. Part of the implementation is communication and awareness for the GPPB program and monitoring.

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12. Is it possible to register suppliers from abroad?

Response:

Yes. The PhilGEPS includes features for the registration of foreign bidders.

SINGAPORE

3.3 Measures Affecting Production and Trade

1. We note that the Secretariat included an overview of incentives in its report for the Philippines’ last TPR in 2012. However, the present report does not have a section addressing “incentives”. Has there been a change in the Philippines’ use of incentives to facilitate production and trade?

Response:

There has been no change since the 2012 Philippines’ TPR. The Fiscal Incentives Rationalization Bill mentioned in the last TPR was not passed by Congress. There is currently a bill on Tax Reform for Acceleration and Inclusion (TRAIN) 2 where outdated provisions on incentives and incentives administration in the existing investments laws will be or amended eliminated taking into consideration the current business models and engagements in free trade arrangements. Once the law is passed, we will notify as appropriate.

4.5.3.1 – Aviation

Paragraph 4.114 (Page 79)

2. The report notes that the Philippines requires the dual approval of tariffs in all its air services agreements. Does the Philippines have any plans to ease such requirements to grant airlines more operational flexibility?

Response:

There are currently no plans by the Philippines to remove the requirement of dual approval of tariffs in its air services agreements. The Philippines, through the Civil Aeronautics Board (CAB), requires all tariffs for commercial air services to be approved, as provided for under its charter, although there may already be an approval issued by an airlines’ own state with respect to their tariff fares and other charges.

While Executive Order (EO)219 liberalized the airline industry, such policy remains consistent with Republic Act (RA) 776 which mandates the CAB to determine and fix fares or adopt and approve fares proposed by an airline, if the Board finds that the proposed fare or rate is not unduly discriminatory, unduly preferential, and unreasonable.

THAILAND

PART I: QUESTIONS REGARDING THE SECRETARIAT REPORT

3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Measures Directly Affecting Imports

3.1.1 Customs procedures, valuation, and requirements

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Paragraph 3.3 “Bureau of Customs' administrative order (AO) No. 243 of January 2010 makes pre- shipment inspection (PSI) mandatory for all bulk or break bulk cargo. PSI covers quantity, quality, and tariff classification. Six companies have been approved by the Bureau of Customs to provide this service. For other goods, no PSI is required”

Since the Philippines is a member of World Trade Organization (WTO) and has been 95th country that already ratified Trade Facilitation Agreement (TFA) under WTO, which specify in Article 10 FORMALITIES CONNECTED WITH IMPORTATION, EXPORTATION AND TRANSIT; sub-article 5.1 “Member shall not require the use of pre-shipment inspection in relation to tariff classification and customs valuation”, and sub-article 5.2 “Without prejudice to the rights of Members to use other type of pre-shipment inspection not covered by paragraph 5.1, Member are encouraged not to introduce or apply regarding their use”

Could Philippines please clarify the reason to introduce pre-shipment inspection measure on all bulk or break bulk cargo? Is this measure consistence to TFA principle?

Response:

The Philippines considers Administrative Order No. 243 as implemented by CMO No. 18- 2010 to be consistent with the provisions of the Trade Facilitation Agreement, specifically Article 10 Sub-article 5.1. The requirement of a load port survey (LPS), is not for the purpose of determining the actual value and classification of the goods. Instead, the LPS is only for the purpose of accurately ascertaining the actual quantity and quality of the bulk or break-bulk cargo that it covers.

3.1.3 Tariffs

3.1.3.2 Tariff quotas

Paragraph 3.18. “In 2005, the Philippines was granted by the Committee on Market Access a seven-year extension, until 30 June 2012, to maintain a quota on rice imports.8 In 2012, the Philippines was granted another five-year extension until 30 June 2017.9 As at November 2017, the situation relating to rice imports was governed by Executive Order 23 of 24 May 2017 which extended the rice waiver until 30 June 2020 or until an amendment of the provisions governing rice tariffication is enacted.”

As at November 2017, the Philippines extended the Minimum Access volume of rice until 30 June 2020 or until an amendment of the provision governing rice tariffication is enacted. In this regard, when will the Philippines inform the extension of such rice waiver to WTO members and the details of the agreement for such waiver?

Response:

The Philippines will inform members of the tariffication of rice as soon as the law is enacted. Currently, the proposed amendments are undergoing the legislative process at both the Lower and Upper House of Congress.

3.1.5 Import prohibitions, restrictions, and licensing

Paragraph 3.31. “The Philippines prohibits the importation of certain goods under the Tariff and Customs Code and various other laws (Box 3.1). The list of products subject to an import prohibition has remained largely unchanged since the Philippines last TPR. The Philippines notified its import prohibitions to the WTO”

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Could the Philippines explain the changes of import prohibition in the list of products? (Box 3.1)

Response:

Thailand may note that as indicated in the Secretariat Report, there are no changes in the import prohibition in the list of products.

Paragraph 3.32. “A vast range of goods is subject to licences or permits when imported. For certain products, multiple permits or licences are required, and informal payments have been reported by the business community. The import licensing regime is regulated mainly by the Customs Modernization and Tariff Act of 30 May 2016. Import licensing is intended, inter alia, to safeguard public health, national security and welfare, and to meet international treaty obligations regulating certain products. Costs for the licence or permit depend on its validity period, the product, and import quantities; additional inspection fees may also apply”

Could the Philippines define and give an example of informal payments?

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Response:

The Philippines does not authorize the collection of informal payments in all its agencies. All fees and payments made must be pursuant to a valid assessment and evidenced by an official receipt.

Could the Philippines describe import licensing procedures for used motor vehicles and other related products?

Response:

Executive Order No. 156 prohibits the importation of used vehicles, subject to certain exemptions, such as importations made by returning residents, diplomats, consuls, and those that may be authorized by the Department of Trade and Industry (DTI) such as trucks and motor vehicles for industrial use. Prior authority can be obtained from the Bureau of Import Services-DTI after the filing of the application form and requirements to demonstrate the conditions as stated above.

Please provide further information on the Customs Modernization and Tariff Act, what products are subjected to the regulation and what are the requirements?

Response:

Under Section 119, the following are considered restricted importation and exportation:

a) Dynamite, gunpowder, ammunitions and other explosives, firearms and weapons of war, or parts thereof;

b) Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical devices used in gambling or the distribution of money, cigars, cigarettes or other goods when such distribution is dependent on chance, including jackpot and pinball machines or similar contrivances, or parts thereof;

c) Lottery and sweepstakes tickets, except advertisements thereof and lists of drawing therein;

d) Marijuana, opium, poppies, coca leaves, heroin or other narcotics or synthetic drugs which are or may hereafter be declared habit forming by the President of the Philippines, or any compound, manufactured salt, derivative, or preparation thereof, except when imported by the government of the Philippines or any person duly authorized by the Dangerous Drugs Board, for medicinal purposes;

e) Opium pipes or parts thereof, of whatever material; and

f) Any other goods whose importation and exportation are restricted.

The requirements for the issuance of an import license for a regulated product is determined by the regulating agency as indicated in the Philippines’ notification, namely WTO document G/LIC/N/3/PHL/12.

According to the phrase “Cost for the licence and permit depend on its validity period, the product, and import quantities; additional inspection fees may also apply”. Please provide further clarification of the additional inspection that might be required.

Response:

The additional inspection fees are indicated in the WTO document G/LIC/N/3/PHL/12 dated 19 October 2016 (Replies To Questionnaire On Import Licensing Procedures - Notification Under Article 7.3 Of The Agreement On Import Licensing Procedures – 2016)

3.3 Measures Affecting Production and Trade

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3.3.7 Other measures

Paragraph 3.116. “The Biofuels Act of 2006 (RA 9367) establishes local content requirements for gasoline, which must have a minimum content of locally produced biofuel and biodiesel.”

The biofuels Act of 2006 established local content requirements for gasoline, which must have a minimum content of locally produced biofuel and biodiesel. We would like to ask Philippines to elaborate more details of this measure.

Response:

Republic Act (RA) No. 9367 or the Biofuels Act of 2006 was implemented to increase the contribution of biofuels in the country’s energy mix thereby reducing its dependence on imported fossil-based fuels, enhance the quality of the environment, and create opportunities for countryside socio-economic development.

From the medium to long-term, the Department of Energy together with the National Biofuels Board will embark on revisiting/re-evaluating the blending requirement.

4 TRADE POLICIES BY SECTOR

4.1 Agriculture

4.1.3 Domestic support

According to the table 4.1, showed the price support expenditures of Philippines to agriculture product (rice, pig meat and poultry meat) were more than 10% of value of production as shown in the same table. Could Philippines explain more details about method of price support scheme?

Response:

This is an issue of different methodologies for calculating subsidies/supports by the OECD and the WTO. The OECD defines Producer Support Estimate (PSE) as the

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With respect to the calculation of market price support (MPS), the OECD calculation is based on the most recent reference period while the WTO calculation is based on the 1986-88 reference period or as indicated in the WTO accession of a Member.

Thus, the aforementioned fundamental differences strongly suggest that the OECD method cannot be an accurate representative of the WTO method, and vice versa.

As far as the WTO is concerned, the Philippines ONLY provided public stockholding- related market price support to rice covering no more than 2% of the annual production in 2012-2016, and this level was less than the 10% of the annual value of production of paddy in the same period (please refer to the ST DS:4 and DS:5 notifications of the Philippines).

4.1.5 Rice

Paragraph 4.15. “As a result of the Uruguay Round, the Philippines obtained the right to defer temporarily the tariffication of its import restrictions on rice (Special Treatment – Annex 5 of the Agreement on Agriculture). This exception allowed the Philippines to maintain quantitative restrictions (QRs) on rice imports for 10 years until 30 June 2005, together with a bound minimum access quota for rice; the out-of-quota tariff remained unbound. The special treatment was extended until 30 June 2012, and subsequently the WTO General Council granted, upon request by the Philippines, a further extension until 30 June 2017.21 The Philippines agreed to tariffy the quantitative restrictions on rice upon the expiry of the waiver. According to the authorities, the House of Representatives is currently [October 2017] reviewing a consolidated bill that would allow for tariffication of the QR on rice, and the Philippine executive branch is working closely with both Houses of Congress in the finalization of the bill, as the President ordered the passage of the rice tariffication law to be expedited.”

Response:

Could Philippine please inform the progress and method of tariffication of its import restrictions on rice?

At the Lower House of Congress, the bill to amend RA 8178 is under deliberation by the Committee on Appropriations before being submitted to the Plenary for approval. At the Upper House of Congress, a version of the bill is being deliberated by the Senate Committee on Agriculture and Food. Both Houses will transmit the bill to the Bicameral Conference Committee for a final bill to be approved.

4.3 Energy

4.3.2 Electricity

The National Tourism Development Plan of the Government of the Republic of the Philippines attaches importance to tourism with the view to promote social and economic development.

At the meetings between the Leaders of Thailand and the Philippines, both sides have agreed to promote joint tourist destinations and cruise tourism between Thailand and the Philippines. However, these ideas have not yet been translated into concrete outcome.

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The Thai side would appreciate the Philippines side informing whether the National Tourism Development Plan has included plans on tourism cooperation with external countries in areas such as joint tourist destination and cruise tourism.

Response:

Cruise and nautical tourism has been identified as of the nine (9) tourism product portfolio under the National Tourism Development Plan (NTDP) 2016 – 2022.

In accordance with the NTDP, the Department of Tourism developed a National Cruise Tourism Development Strategy and Action Plan 2016 – 2022. The strategy aims to provide direction to both government and the private sector to build the number of cruise ship calls to ports and islands of the Philippines, create excellent guest experience, increase economic benefits and promote sustainable tourism.

The strategy has highlighted that in cruise tourism, itineraries that combine neighboring countries work best. The Philippines and certain close neighbors will be stronger if they work together than by working alone. As stated in the strategy, the Philippines may cooperate with countries from North and Southeast Asia to create cruise tourism itineraries.

4.4 Manufacturing

Paragraph 4.64. “A variety of incentives are offered to assist manufacturing industries. According to a number of industrial censuses and surveys by the Philippine Statistics Authority (PSA), the top industries in terms of utilizing the incentive measures provided by the Government, such as special grants, tax exemptions, and tax privileges, are parts and accessories for motor vehicles and their engines, electronic components, and textiles.”

Could the Philippines clarify the incentive measures such as special grants, tax exemptions, and tax privileges? Moreover, please identify the rules and regulations which apply to those incentive measures.

Response:

In the Census of Philippine Business and Industry (CPBI) conducted by the Philippine Statistics Authority, the incentive measures enumerated in the survey form were not clearly defined as well as the regulations covering the enumerated measures. This portion of the survey is to be reviewed with the relevant government agencies.

4.5 Services

4.5.2 Telecommunications

Paragraph 4.101 “Telecoms services are regarded as a public utility, and foreign equity in telecoms companies (both public (i.e. basic) and value added) is limited, by the Constitution as well as the Public Service Act, to 40%. The authorities indicated that, according to a Department of Justice opinion, if the service is not provided directly to consumers or the public, then the 40% limit does not apply….”

Does the Philippines has any plan to increase the foreign equity participation in telecommunications services to be higher than 40%? Response: The Philippines can confirm the legislative initiative to increase the foreign equity participation in the telecommunications services to be higher than 40%. The Congress adopted House Bill 5828 in 2017, amending the Public Services Act which will provide a more precise definition of what constitute a public utility and should allow for greater foreign participation in sectors such as transport and telecommunication. Hearings are also being conducted in the Senate on the bill amending the Public Service Act.

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Paragraph 4.108 “The NTC sets tariffs for telecoms providers. However, if a service has sufficient competition to ensure fair and reasonable rates or tariffs, the NTC may exempt the service from its rate or tariff regulations. The authorities did not clarify the criteria used to determine “sufficient competition”, or which providers’ tariffs are currently regulated.” Since the report states that “The authorities did not clarify the criteria used to determine “sufficient competition. How does the Philippines guarantee that the regulations on tariff are non- discrimination?

Response: The NTC acts to establish rates and tariffs which are fair and reasonable and which provides for the economic viability of public telecommunications entities and a fair return on their investments considering the prevailing cost of capital in the domestic and international markets. It has residual power to regulate rates and tariff when ruinous competition results or when a monopoly or cartel or combination in restraint of free competition exists. The NTC may either establish a floor or a ceiling on the rates or tariffs. It has set rates ceiling for most of the services. Rates for all value added services are deregulated. 4.5 Services

4.5.4 Tourism

Thailand welcomes the electricity liberalization policy of the Philippines. The Thai private sectors have invested in the electricity sectors of the Philippines such as in Quezon province. Some companies have experienced difficulties in investing in the region.

The Thai side would appreciate the Philippines side informing on the coordination with and the enforcement of the national electricity liberalization policy on the local government.

Response: The President issued Executive Order (EO) No. 30 signed on 28 June 2017, classifying energy projects to be of national significance, and thus, processes of licensing and permitting on their implementations shall be harmonized and streamlined. One of the most salient provisions of the EO sets for the creation of an Energy Investment Coordinating Council (EICC) that will spearhead and coordinate national government efforts to harmonize, integrate and streamline regulatory processes, requirements and forms relevant to the development of energy investments in the country. EO 30, may address the concerns of Thai investors pertaining to the tedious process of securing permits and approvals. As mandated in the Electric Power Industry Reform Act of 2001 (EPIRA), the Department of Energy has continuing activities on Information, Education and Communication (IEC) Campaign on the EPIRA implementation. All the policy issuances are also being subjected to public consultations. In these activities, the Local Government Units (LGUs) are being invited to participate and provide their inputs/recommendations and be informed of the national policies particularly on power sector development.

PART II: QUESTIONS REGARDING THE GOVERNMENT REPORT

Structural Reforms (Page 5)

Paragraph 2.5. In line with the infrastructure investment agenda, the Build Build Build (BBB) Program was launched in 2016 to accelerate infrastructure development and investment to support economic and social growth. The BBB identified high impact projects to be implemented within and outside the National Capital Region such as railways, urban mass transport, airports and seaports, roads and bridges, among others. The programme is set to roll until 2022 envisioning the increase of productive capacity of the economy, create jobs, increase incomes, and strengthen the investment climate leading to sustained inclusive growth.

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According to paragraph 2.5., since the BBB program is considered a long-term project which may require a national budget for the period of at least 2-3 years, please clarify the approach of BBB project which the Philippines intend to be a government investment project or allow participation from private sectors to invest as a PPP (Public Private Partnership) project? And if it possible for private participation, would it be possible for foreign companies to participate in tender?

Response:

The Constitution does not prohibit the entry and participation of foreign corporations in the Philippine economy. In the procurement of government infrastructure projects under RA 9184 or the Government Procurement Reform Act (GPRA), the Law allows the participation of the following persons/entities in the bidding of infrastructure projects:

 Duly licensed Filipino citizens/sole proprietorships;  Partnerships duly organized under the laws of the Philippines and of which at least seventy-five percent (75%) of the interest belongs to citizens of the Philippines;  Corporations duly organized under the laws of the Philippines, and of which at least seventy-five percent (75%) of the outstanding capital stock belongs to citizens of the Philippines;  Cooperatives duly organized under the laws of the Philippines; or  Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract: Provided, however, That in accordance with Letter of Instructions No. 630 (LOI 630), Filipino ownership or interest of the joint venture concerned shall be at least seventy-five percent (75%): Provided, further, That joint ventures in which Filipino ownership or interest is less than seventy-five percent (75%) may be eligible where the structures to be built require the application of techniques and/or technologies which are not adequately possessed by a person/entity meeting the seventy- five percent (75%) Filipino ownership requirement: Provided, finally, That in the latter case, Filipino ownership or interest shall not be less than twenty-five percent (25%). For this purpose, Filipino ownership or interest shall be based on the contributions of each of the members of the joint venture as specified in their JVA.

In the procurement of infrastructure or development projects covered under the Build- Operate-Transfer (BOT) Law, or RA 6957 (as amended by RA 7718), the Law provides that any individual, partnership, corporation or firm, whether local or foreign, including consortia of local, foreign or local and foreign firms, may participate or apply for pre- or simultaneous qualification for projects covered under the provisions of the Act and its Revised IRR, subject to the f legal requirements.

For projects to be implemented through a contractual arrangement requiring a public utility Franchise for its operation but where the Project Proponent and Facility Operator may be two separate and independent entities, the Facility Operator must be a Filipino or, if a corporation, must be duly registered with the Securities and Exchange Commission (SEC) and owned up to at least sixty percent (60%) by Filipinos.

According to paragraph 2.5., how many projects that the Philippines has already implemented since the BBB program has launched in 2016? And how much does it cost to implement each project?

Response:

Below are the projects and the corresponding estimated cost implemented under the BBB Program. Other details can be accessed from the BBB Program website (www.build.gov.ph/Home/Project).

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Implementing Project Name Sector Budget Start Date Agency 1. Central Luzon Links DPWH Roads and Bridges P14,940,000,000 2016/05/01 Expressway 2. Laguna Lake DPWH Roads and Bridges P418,000,000 2016/01/04 Highway 3. Cavite Barge DOTr Seaports US$30,000,000 2017/04/21 Gateway Terminal 4. Bacolod Economic DPWH Roads and Bridges P5792,090.037 2017/02/09 Highway 5. Pigalo Bridge DPWH Roads and Bridges P437,067,224 2017/04/01 6. Davao City By-pass DPWH Roads and Bridges P19,810,000,000 2018/01/01

Enhancing Competition Policy and the Regulatory Environment (Page 6)

Paragraph 2.9. To promote foreign participation in the banking and financial sectors, Republic Act 10641 (an Act Allowing the Full Entry of Foreign Banks in the Philippines) was signed into law on July 2014, amending provisions of Republic Act 7721 (an its establishment, the Philippines has approved the entry of foreign banks from Japan, the Republic Act of Liberalizing the Entry and Scope of Operations of Foreign Bank in the Philippines) signed in 1994. The law further opened up the banking sector to more offshore players. Since of Korea, Chinese Taipei and Singapore.

According to paragraph 2.9., it is understood that the Philippines aimed to promote foreign participation in banking and financial sectors by allowing the entry of foreign banks in the Philippines. In this regard, does this effort affect the financial stability of the Philippines after this act allow foreign persons to own 100% locally incorporated subsidiaries and abolishes restrictions on the licensing of branches of foreign banks with respect to the entry period, total number of entrants, and location of sub-branches? And how the Philippines manage its domestic financial system to prevent the emergence of financial turmoil?

Response:

The Philippines, through the Bangko Sentral ng Pilipinas (BSP), remains mindful that banking integration carries the risk of contagion and financial instability. Rapid credit growth, financial innovation and development when poorly supervised or unregulated can, in some cases, negatively affect macroeconomic stability. Poor risk management, overexposure to cyclical economic activities, weak governance, and directed and connected lending are also some of the other potential financial stability risks.

To address these, the BSP instituted a comprehensive policy reform agenda to timely identify and mitigate the buildup of systemic risks. This agenda consists of corporate governance reforms, periodic review of the BSP’s risk management guidelines to align with international standards, and adopting the Basel III Reform package taking into account local market conditions. In addition, in order to reap the opportunities and benefits of an increasingly integrated financial market, the BSP is working with counterpart regulators on complementary initiatives to strengthen the stability of the banking system. These are in the areas of capital and foreign exchange markets and financial activities of nonbanks.

According to aforementioned act., does the Philippines allow more labour mobility such as professional banker which will enter to the Philippines after this act has launched ?

Response:

The Philippines can confirm that the Act allows more labour mobility for professional bankers. Article 40 of the Labor Code (Presidential Decree No. 442, as amended) requires all aliens/foreign nationals seeking admission to the Philippines for employment purposes and all domestic or foreign employers who desire to engage a foreign national for employment in the Philippines to obtain an employment an Alien Employment Permit (AEP) from the Department of Labor and Employment (DOLE).

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One of the requirements for the issuance of an AEP under DOLE Department Order No. 146-15 is the submission of a copy of the bank’s understudy training program (UTP) to be conducted by the applicant foreign national to transfer knowledge and/or skills to the Filipino worker. The UTP is no longer required for the banking sector. This exemption has allowed professional bankers to enter the Philippines.

UKRAINE

2 TRADE AND INVESTMENT REGIMES

2.4 Investment Regime

Page 27 (Para 2.27)

The Report says that “The Philippines continues to restrict foreign investment in a number of activities including agriculture, fisheries, telecom services, and public utilities, but it has also taken some liberalizing steps.”

Could the Philippines please clarify what liberalizing steps the Government has taken to open economic sectors for attracting foreign direct investment (FDI)?

Response:

The President provided guidance through Memorandum Order No. 16, s. 2017, on the priority investment areas or activities where current equity restrictions will be reviewed. These include the following:

1. Private recruitment, whether for local or overseas employment; 2. Practice of particular professions, where allowing foreign participation will redound to the public benefit; 3. Contracts for the construction and repair of locally-funded public works; 4. Public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system; 5. Culture, production, milling, processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and the by- products thereof; 6. Teaching at higher education levels; 7. Retail trade enterprises; and 8. Domestic market enterprise.

There is an ongoing review of the 1987 Constitution by a 25-member Committee created by the President through Executive Order No. 10. The Committee is expected to complete its review in six months or until June this year. It will submit its recommendations and proposals to the President, who will transmit these to Congress.

Page 27 (Para 2.28)

According to the Report the “regular” Foreign Investment Negative List (FINL) of areas/activities, where FDI is limited, is subject to review every two years to reflect any new legislation amending or repealing laws affecting investment. The authorities expected the eleventh FINL to be issued in 2017.

 Would the Philippines elaborate on the state of play as regards of the eleventh FINL?

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 In which areas/activities is FDI limited at the present time according to the List A and the List B of the FINL?

 Does the Philippines have any plans to reduce the existing restrictions to foreign investments in any areas/activities?

Response:

The draft 11th Regular Foreign Investment Negative List is under consideration and awaiting approval by the NEDA Board.

Until such time that the 11th RFINL is approved and issued, Executive Order no. 184 series of 2015 promulgating the 10th RFINL will still prevail.

The Philippines can confirm plans to reduce the existing restrictions to foreign investments in specific areas and activities. Kindly refer to the response above related to the Secretariat Report Paragraph 2.27 for these areas and activities.

3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Measures Directly Affecting Imports

3.1.1 Customs procedures, valuation, and requirements

Page 30 (Para 3.2)

The Report states that “All imports with a dutiable value above PHP 10,000 must be declared electronically. However, hardcopies of import documents and attachments must be submitted to the Entry Processing Unit for verification. The customs entry declaration form, which was changed to Single Administrative Documents (SAD) under Customs Memorandum Order (CMO) 29-2015, must be accompanied by: the commercial invoice; a bill of lading or air waybill; a packing list; and a certificate of origin if applicable. Depending on the product, an import licence (Section 3.1.5) or SPS or TBT certificate (Section 3.3.2) may also be required.”

 Would the Philippines kindly inform if it intends to eliminate the requirement concerning submission of hardcopies of import documents and attachments for verification?

 What possible measures does the Philippines implement to allow electronic submissions of needed documents by importers?

Response:

The Philippines is working towards a paperless environment in customs procedures. Through the Bureau of Customs, it is mandated under Section 109 of the Customs Modernization and Tariff Act to utilize information and communications technology (ICT) to enhance customs control and to support a cost-effective and efficient customs operations geared towards a paperless environment. For purposes of customs procedures, electronic documents, permits, licenses or certificate shall be acceptable and shall have the legal effect, validity or enforceability as any other document or legal writing.

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Registration (CPR), a pre-market approval certificate, needs to be obtained for each and every product prior to importation. The electronic system for the processing of import authorization can be accessed through the FDA website (https://www.fda.gov.ph) e-portal.

Page 30 (Para 3.5)

The Report notes that “Shipments are classified according to risk. Risk criteria include country of origin and frequency of imports. Goods in the high risk “red lane” are subject to physical examination and documentary review; this requires an average of 1-2 days for clearance. The moderate risk “yellow lane” (documentary review only) requires an average of four hours for clearance. The BOC also uses a “blue lane” (SGL) for qualified importers to provide immediate clearance. According to the BOC, in 2017 about 50% of all consignments were classified as red, followed by yellow (30%), and blue (20%).”

Could the Philippines kindly elaborate more on risk criteria, according to which shipments are classified into “red, yellow and green lane” categories?

Response:

The risk criteria or parameters are confidential in nature as it is in an integral part of the Bureau of Customs’ over-all strategic and operational policies and practices. The Risk Management Office is tasked to continuously update the risk criteria or parameters based largely on seizure cases, registration of new consignees and other relevant information.

The Bureau of Customs utilizes a selectivity system with risk profiles established from risk analysis and assessment. The risk profiles encompass various indicators such as type of goods, compliance record of traders, values of goods and applicable duties, destination and countries of origin, mode of transport, routes of transport based on characteristics displayed by unlawful consignments and offenders.

3.3 Measures Affecting Production and Trade

3.3.2 Sanitary and phytosanitary requirements

Page 48 (Para 3.73 b)

The Report notes that “Import consignments of food (other than processed and pre-packaged) require a permit (“SPS import clearance”) issued by the Department of Agriculture. Prior to arrival, an Import Notification Document is required, on the basis of which the need for inspections, including lab testing, is determined by the DA or the DoH.”

 Ukraine would appreciate if the Philippines could elaborate on the recent developments in procedures for testing of domestically produced meat.

 Could the Philippines also inform on relevant administrative orders which provide for testing of domestic and imports products (please, shortly describe provisions of appropriate orders)?

Response:

The assessment of the microbiological identification for both locally produced and imported meat is guided by National Meat Inspection Service's (NMIS) Memorandum Circular No.9-2008-5 Series of 2008 “Guidelines on the Assessment of Microbiological Quality of Fresh, Chilled and Frozen Meat”.

For local meat surveillance, the applicable guideline is the Department of Agriculture's Administrative Order No. 24, Series of 2009 “Implementing Guidelines on the National Veterinary Drug Residues Control Program in Foods pursuant to AO No. 14 Series of 2006”.

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For imported meat surveillance, the applicable guideline is the NMIS' Memorandum Circular No. 05-2017-009 “Surveillance Program for Imported Meat” on the creation of a surveillance program for imported meat. The laboratory examination of imported meat shall include (but not limited to) Microbial Analysis, Screening of Antimicrobials and Meat Species Identification.

4 TRADE POLICIES BY SECTOR

4.5 Services

4.5.1 Financial services

4.5.1.1 Banking

Pages 72 - 75 (paragraphs 4.69 - 4.86)

The Report describes particularities of the Philippines' banking sector and the state of its development.

 Would the Philippines kindly share information concerning assessment of the ownership structure, business reputation and financial condition of a bank by the Bangko Sentral ng Pilipinas (hereinafter - BSP), in particular relating to requirements to transfer of significant ownership/control in the regulated entities; indicators of non-transparency of the ownership structure?

 Could the Philippines further elaborate on procedures for authorization of both universal and commercial banks and also rural and cooperative banks in the Philippines, including key requirements to applicants and approval procedures?

Response:

The Philippines, through the Bangko Sentral ng Pilipinas (BSP), identifies and determines the suitability of major shareholders, including ultimate beneficial shareholders as well as other persons or entities that may exert significant influence4 on a bank, pursuant to Section 8 of R.A. No. 8791, The General Banking Law of 2000. Section 8 incorporates into the bank licensing process an assessment of the bank's ownership structure, directors and senior management, its operating plan, internal controls as well as projected financial condition and capital base.

The BSP also looks into compliance by a bank with the prescribed ownership ceilings and subjects to prior Monetary Board (the governing body of the BSP) approval of any transaction which will result in ownership or control by any person of more than twenty percent (20%) of voting shares of stock of a bank, or effect a change in the majority ownership or control of the voting shares of stock of the bank from one (1) group to another. In the process of evaluation, supervisors make use of their knowledge and all available information about the investor to determine transparency and appropriateness of information disclosed. Administrative sanctions, notwithstanding criminal charges, may be filed against a Corporate Secretary who willfully discloses false or misleading statements of the list of stockholders and their stockholdings in the ultimate beneficial owners of bank shares held in the name of Philippine Central Depository (PCD) Nominee Corporation.

Under R.A. No. 10641, foreign banks may operate in the Philippines through any one (1) of the following modes of entry:  Mode 1: By acquiring, purchasing or owning up to 100 percent of the voting stock of an existing domestic bank;

 Mode 2: By investing in up to 100 percent of the voting stock of a new banking subsidiary incorporated in the Philippines;

4 Number 6 of Essential Criteria, Principle 3 of the Basel Core Principles for Effective Banking Supervision

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 Mode 3: By establishing branches with full banking authority

Foreign bank applicants undergo a two-stage process, namely that of pre-approval and post-approval. The pre-approval stage covers the submission of documentary requirements of the foreign bank’s corporate profile as well as business plan and model to be carried out in the Philippines. The pre-approval stage is applicable to the three modes of entry regardless whether the foreign bank is applying for a universal, commercial, thrift or rural banking license. The post-approval stage covers the completion of the following pre-operating requirements by the foreign bank:

1. Payment of the license fee of PhP 24.5 million; 2. Inward remittance of the minimum capital5 depending on the banking license applied for; 3. Registration with the Securities and Exchange Commission of the Articles of Incorporation/By-Laws in the case of a foreign bank subsidiary (Mode 2) or license to transact in the Philippines in the case of a foreign bank branch (Mode 3); 4. Confirmation of relevant directors and/or officers; 5. Completion of the proposed bank premises; and 6. Submission of other documentary requirements necessary for the issuance of the Certificate of Authority to Operate the bank in the Philippines.

The second stage process is not applicable if the foreign bank applicant opts to utilize the first mode of entry, except if the entry will incidentally cause changes in directorship/officership, and in that case, confirmation of newly elected/appointed directors/officers shall apply. For a more detailed process, the foreign bank applicant may refer to the application guide posted on the BSP website following this link: www.bsp.gov.ph/downloads/Regulations/guidelines/Application%20Guide%20for%20Foreign%20B anks.pdf

Ukraine would also appreciate if the Philippines could inform on procedure of authorization of micro-banking offices by BSP and clarify differences as compared with bank branches.

Response:

Banks operating in the Philippines are allowed to establish a branch or a branch-lite unit (previously referred to micro-banking office, other banking office, and extension office) subject to approval of the Monetary Board. The applicant bank must comply with the pre-qualification criteria which include, among others, no major supervisory concerns in the areas of (1) corporate governance; (2) risk management system; (3) internal control structure; and (4) compliance system, including compliance with the required minimum capital ratios and minimum capitalization.

In terms of licensing, branch and branch-lite units are similar in terms of pre-requisites, documentary requirements and approving authority. They differ on the processing fee and special licensing fee. There are no differences on location. In terms of functions, branch and branch-lite differ on the product or services offered and the maintenance of book of accounts, whereby a branch-lite unit does not maintain a complete set of books. Instead, transactions are recorded in the books of the head office/branch to which it is annexed.

What are the requirements concerning authorization of non-banking financial institutions in the Philippines (including quasi-banks), in particular relating to types of activities, key requirements to applicants, approval procedure; verifying sources of funds for the formation of capital?

Response:

5 Banks to be established are required to comply with the minimum capital prescribed under Subsection X111.1 of the MORB. The BSP’s minimum capitalization of banks is tiered based on network size as indicated in the number of branches (including head offices).

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Existing regulations require investment houses or finance companies (IH/FC) that intend to perform quasi-banking functions to obtain a Certificate of Authority to engage in quasi-banking functions by filing an application with the appropriate supervising and examining department of the BSP. Along with other documentary requirements, the application shall include a certificate signed by the President/ Officer of equivalent rank that the IH/FC complies with: capital requirements, accounting systems and procedures, reconciliation of float items, credit standing, fit and proper rule for qualification requirements for directors/officers and number of independent directors. Applicants must also have a comprehensive risk management system and should comply with other requirements. The general procedure is similar to the licensing of domestic banks, which covers the filing of an application and submission of documentary requirements, and evaluation of the entity’s financial capacity and integrity of the personalities that shall manage the FI. Moreover, since the operation of a quasi-bank mainly consists of borrowing and investments, a borrowing and investment program for one year is required to be submitted. The program should list down the planned distribution of asset/investment portfolios and expected source of funds to support the investment program.

Would the Philippines please describe procedures for approving payment system operators and issuers of payment instruments and electronic money in the Philippines, including key requirements to applicants and basic rules of payment systems?

Response:

The Bangko Sentral ng Pilipinas’ (BSP) Payments and Settlements Office (PSO) is the payment system operator responsible for the operation and maintenance of the Philippine real time gross settlement system known as PhilPaSS and its critical components. It ensures that the operation of PhilPaSS is continuous, safe and efficient so that time-critical payments are completed as expected to facilitate and enhance economic processes, manage risks, and absorb shocks in order to promote financial stability. Non-bank financial institutions (NBFIs) providing payment services through the utilization of electronic-based media that are interested in participating in the PhilPaSS as Third-Party Payment Systems Providers are required to register and comply with the guidelines provided by the PSO. A copy of the guidelines may be found in this link: http://www.bsp.gov.ph/downloads/Forms/PhilPaSS/Philpass-tppsp.pdf.

The Agreement for the Philippine Payments System as well as the corresponding PhilPaSS Rules and Regulations govern the use and operations of the system. More information may be found in this link: http://www.bsp.gov.ph/financial/payments/PhilPaSS.pdf For retail payments, the automated clearing houses (ACHs) under the National Retail Payment System (NRPS) define their own rules and agreements governing clearing and settlement. Currently, PESONet is the first and only ACH under the NRPS. a. With prior approval of the BSP, banks may offer checking accounts to their clients. Banks and their subsidiary or affiliate credit card companies may likewise issue credit cards upon prior approval by the BSP. b. Banks and NBFIs planning to be an electronic money issuer (EMI) shall apply in accordance with the guidelines on electronic banking services and outsourcing of banking functions, when applicable. Non-bank institutions planning to be an EMI shall register with the BSP as a money transfer agent. In case the non-bank institution is already registered with the BSP as a money transfer agent, it is required to meet the additional requirements to qualify as an EMI. The application shall demonstrate compliance with the provisions of the regulations described below, by presenting appropriate documentation. c. Bank Applicants - Banks planning to offer e-money shall have an adequate risk management process to assess, control, monitor and respond to potential risks arising from the proposed electronic banking activities. They should also put in place security controls to address data security issues on: authentication, non- repudiation, authorization, integrity, and confidentiality.

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- 79 - d. Non-Bank Applicants – EMI-Others - If the applicant is a non-bank, it shall comply with the provisions for all EMIs. In addition, the following additional provisions to “EMI-others” apply:

 It shall be a stock corporation with a minimum paid-up capital of P100 million;  It shall engage only in the business of e-money and other activities related or incidental to the business of e-money, such as money transfer/remittance;  It shall not engage in the extension of credit, unless a quasi-banking license is obtained;  It should have sufficient liquid assets equal to the amount of outstanding e- money issued to protect e-money holders and ensure that redemptions are met;  It shall allow BSP access to review the e-money systems and databases and shall extend to the agents, partners, service providers or outsourced entities of the EMI-Others in view of their participation in the e-money business;  It shall periodically submit audited financial statements (AFS) to BSP within set deadlines.

The detailed registration procedures are set out under Circular No. 6496. EMI-NBFls and EMI-Others that engage in lending activities must secure a quasi-banking license from the BSP.

Could the Philippines also kindly provide information regarding requirements to participants and organizational structure of payment systems in the Philippines?

Response:

The BSP’s Payments and Settlements Office owns and operates the Philippine Payments and Settlements System or PhilPaSS. It is the RTGS system of the country where both processing and final settlement of fund transfer instructions can take place continuously (i.e. in real time). As a gross settlement system, it enables individual settlement of payment instructions, that is, without netting debits against credits. The system effects final settlement continuously rather than periodically at pre-specified times provided that a sending banks have sufficient balances in their demand deposit accounts (DDA) maintained with the BSP. The participants to the Philpass include the BSP, banks, and non-bank financial institutions. Requirements for participation include: a. An applicant bank or non-bank with quasi-banking function shall have a Demand Deposit Account (DDA) maintained with BSP. b. An applicant bank shall submit an application for Participation in PhilPaSS and a certification of good membership standing from the association where the institution is affiliated with, such as Bankers Association of the Philippines, Chamber of Thrift Banks, Rural Bankers Association of the Philippines, et al as applicable.

What are the most popular payment instruments in the Philippines? Please, describe BSP requirements for such payment tools.

Response:

Aside from cash, the following are the most popular payment instruments in the Philippines: a. Check – These are commonly used by consumers for bills and small value payments and for businesses for their regular payments such as purchase of goods and services. b. Credit Cards - In the Philippines, credit cards are usually issued by the banks which have formed part of their marketing strategy to increase the number of their customer base and improve income that can be generated from retail and

6 http://www.bsp.gov.ph/downloads/Regulations/attachments/2009/c649.pdf

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consumer business. The most common credit cards being used are the Visa, MasterCard, BanKard, JCB, Diners Card, and American Express Card. c. Debit Cards - The existing automated teller machine (ATM) networks (BancNet, MegaLink, ExpressNet, Nationlink and Encash) have developed their own Point-of- Sale (POS) System to allow their depositors to pay for their purchases electronically through their ATMs for credit to the retailer’s account. d. Stored Value Cards (also called an electronic purse) – These are prepaid cards in which the record of funds can be increased as well as decreased. e. Electronic Money (e-money) - This is a value stored electronically in a device such as a chip card or a hard drive in a personal computer. The BSP classifies e-money further as monetary value stored electronically in an instrument or device which can be converted back to cash, and if issued by a bank, shall not be considered as deposit.

For more details, visit this link: www.bsp.gov.ph/financial/payments/PhilPaSS.pdf

Ukraine would also appreciate if the Philippines could share its positive and negative experience of the "regulatory sandbox" application and describe specific features of risk-based and proportionate regulation by BSP.

Response:

The BSP’s “regulatory sandbox,” or test and learn approach, has been proven to be useful in dealing with increasing digital innovations in the market and promoting development and innovation within the financial services industry. This approach provides an opportunity for innovators to connect to banks and other financial system players with clear authority from the regulators. The ultimate objective is to be aware of the risks, employ mitigating actions, as needed, but in a manner that also allows benefits leveraging on these new technologies. The BSP regulatory approach towards fintech innovation is shaped by three (3) core principles:

a. Regulation must be risk-based, proportionate and fair.

b. There is a need to maintain active multi-stakeholder collaboration.

c. Regulations must ensure consumer protection.

With the three (3) principles in mind, the BSP’s approach is proactive with continuous surveillance of fintech developments and innovations. Thus, in carrying out its mandate, the BSP undertakes the following:

 Practices Proportionality. The BSP adopts a differentiated and proportionate application of prudential principles. It conducts effective supervision to maximize the benefits of financial inclusion, without compromising financial system stability, integrity and consumer protection.

 Monitors the effects of fintech innovations and the reaction of banks. The BSP monitors whether risks such as disintermediation could materialize. In doing so, it was observed that most banks/FIs are adopting innovations, or are partnering with fintech firms to cope with the increasing competition and customer demands.  Recognizes and monitors the participation of non-banks in fintech. The BSP is cognizant that the participation of non-bank institutions as service providers, aggregators and/or key players in multi-player ecosystems is increasing. Non-banks and fintech firms need to be uncovered and fully understood by regulators to ensure the relevance and appropriateness of regulatory and supervisory frameworks.

 Coordinates and cooperates with other regulators. FinTech firms are often outside the oversight of central banks and other financial sector regulators but their

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activities can have effects that interact and affect a number of players within the financial system.7

What are specific features of authorization and regulation of third party cash agents in the Philippines?

Response:

Banks may use third party cash agents as a cost-efficient service delivery channel. These third party service providers may be authorized by customers to perform cash/check pick-up and/or cash delivery services on their behalf or accept and disburse cash on the bank’s behalf in order to promote operational efficiency, more expanded service delivery channels, and greater convenience of banking customers. Once given such approval, a bank may continuously undertake these activities unless otherwise ordered by the BSP. In the use of third party entities as cash agents subject to existing rules on outsourcing, banks are required to comply with the following conditions:

a. The bank shall have an electronic banking solution to implement its cash agent operations.

b. Cash agents shall be allowed to accept and disburse cash on bank’s behalf in connection with the following self-service transactions of customers, including Deposit and withdrawal transactions performed by the customer on his bank account.

The bank assumes full responsibility and liability for all acts and omissions of its cash agents on bank-related services.

Would the Philippines kindly describe the procedure of interaction between the regulator of the banking/non-banking financial sector and the financial sector in the ASEAN Economic Community?

Response:

Financial and banking regulators of all the ASEAN member states, comprising the ASEAN sectoral ministerial body on finance formed under the ASEAN Charter, regularly engages with financial sector representatives and business organizations, such as the ASEAN Bankers Association (ABA), ASEAN Insurance Council (AIC), ASEAN Business Advisory Council (ASEAN-BAC), among others, to discuss issues and matters of common interest. These meetings and dialogues are often held at the sidelines of the Finance Minister and Central Bank Governors’ meetings (held once a year) as well as the ASEAN Summits which are held twice a year. An annual dialogue between central bank governors and chief executive officers of various banks is likewise held to discuss, among others, recent economic and financial market developments; progress of work of the Working Committees and other developments in the implementation of the ASEAN Economic Community 2025. It is likewise customary in ASEAN for regulators to regularly consult with representatives of the financial sector prior to making important decisions or commitments regarding financial integration and other cooperation initiatives.

What are the requirements concerning procedure for coordinating the activities of a foreign bank in the Philippine banking system?

Response:

The Philippines subscribes to Principle 13 (Home-Host Relationships) of the Basel Core Principles for Effective Banking Supervision which requires that arrangements (such as Memoranda of Understanding [MOUs]) be put in place between home and host supervisors/authorities to enable the exchange of confidential information and

7 Examples are equity crowd-funding in the financial or securities markets; debt crowd-funding in credit markets. There is impact of fintech too in the non-financial sector with fintechs accessing telco or social media data.

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- 82 - cooperation for better supervision of cross-border banking groups, including effective handling of crisis situations. The BSP currently has MOU arrangements with six (6) regulatory authorities, and is a party to a Multilateral MOU, from various countries on home-host supervisory coordination. The BSP also ensures close coordination with its counterpart regulators with respect to the supervision of cross-border activities of domestic banks and of foreign banks that are operating in the Philippines in supervisory college meetings and responds to requests for exchange of information involving these banks, subject to laws, rules on confidentiality.

Could the Philippines also describe BSP requirements for the acquisition, including acquisition of existing Philippine Banks?

Response:

Of the three modes of entry for foreign bank previously mentioned, this query applies to the acquisition purchase or ownership of up to 100 percent of the voting stock of an existing domestic bank. The procedures enumerated in the response for Query No. 2 of Ukraine also apply to this query. In addition, the following factors shall be considered in selecting the foreign banks which will be allowed to enter the Philippine banking system through R.A. No. 7721, as amended by R.A. No. 10641 (Subsection X105.3, MORB):

(a) Geographic representation and complementation.

(b) Strategic trade and investment relationships between the Philippines and the home country of the foreign bank.

(c) Relationship between the applicant bank and the Philippines. Consideration shall be given to the capability of the foreign bank to promote trade with, and to bring foreign investments into, the Philippines.

(d) Demonstrated capacity, global reputation for financial innovations and stability in a competitive environment of the applicant bank.

(e) Reciprocity rights enjoyed by Philippine banks in the applicant's country. Subject to the host country's rules and regulations of general application, Philippine banks should have the opportunity to establish operations in the foreign bank applicant's home country.

(f) Willingness to fully share banking technology.

A foreign bank acquiring a domestic bank in the Philippines should also be (Subsection X105.2, MORB):

(a) Widely-owned and publicly-listed in the country of origin, unless the foreign bank applicant is owned and controlled by the government of its country of origin.

(b) Established, reputable and financially sound.

Any foreign individual or non-bank corporation may each own or control up to forty percent (40%) only of the voting stock of a universal, commercial or thrift bank: Provided, That the aggregate foreign-owned voting stock owned by foreign individuals and non-bank corporations shall not exceed forty percent (40%) of the voting stock of the UB/KB, and sixty percent (60%) in the case of thrift banks. For Rural Banks, non-Filipino citizens, excluding foreign banks, may each or in the aggregate, own, acquire or purchase, up to sixty percent (60%) of the voting stock in a rural bank. The percentage of foreign-owned voting stock in a bank shall be determined by the citizenship of the individual or corporate stockholders in that bank.

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4.5.4 Tourism

Page 81 (Para 4.130)

The Report notes that “Since 9 November 2014, the Philippines has offered 30-day tourist visa waivers to nationals from 157 countries.”

Does the Philippines have any plans to include in the list, approved by Executive Order 408, nationals of other countries, for example Ukrainians to enter the Philippines for tourism purposes without a visa?

Response:

The Philippines is undertaking a comprehensive review of the list of countries whose nationals can enter the Philippines on short-term visits without visa.. The Philippines also notes that while it offers visa-free entry to 157 nationals, Philippine nationals are able to enter only to 32 countries without a visa.

The comprehensive review takes into account factors such as national security, contribution to Philippine economic development and reciprocal visa treatment of Philippine nationals.

Government Report

Page 6 (Para 2.10)

The Report states that “To identify and eliminate regulations and laws that hamper doing business in the country, the Philippines rolled out “Project Repeal” in June 2016 to cut red tape and streamline business transactions and processes. The project supports the Government’s policy of eliminating laws that place a heavy regulatory burden on businesses and improve the country’s overall competitiveness. Improvements are planned in more complex areas of competitiveness such as in infrastructure, government bureaucracy, tax rates and tax regulations, including education, research and development, and disaster response.”

Could the Philippines please provide more information regarding the measures of this “Project Repeal” and possible achievements of its implementation to ease doing business in the country?

Response:

Project Repeal is a collaboration of 88 government agencies where an aggregate of 4,837 policy issuances were reviewed with a view to repeal outdated rules and reduce the cost of business.

Project Repeal has collaborated with the Commission on Higher Education (CHED) and signed a Memorandum of Agreement (MoA) in June 2017 to engage faculty members from Jose Rizal University who will provide technical support through policy research. Moreover, a MoA will be signed between the National Competitiveness Council, Department of Trade and Industry and the University of the Philippines Law Center- Office of National Administrative Register (UP Law Center-ONAR). All repealed, amended, and consolidated regulations will be filed with ONAR to complete the repeal process.

Page 6 (Para 2.11)

The Report mentions the Customs Modernization and Tariff Act which amended the Tariff and Customs Code of the Philippines to simplify, modernize customs rules and procedures, as well as import clearances and valuations procedures, and align these with international best practices.

 Could the Philippines describe some provisions of the Customs Modernization and Tariff Act, implementation of which intends to substantially simplify customs processes and to remove unnecessary administrative costs for importers?

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 Has appropriate provisions of that Act been in force or does its implementation need some additional steps of legislative process?

 What requirements will be included in the Implementing Rules and Regulations of the said Act, which is drafted by the Bureau of Customs at the present time?

Response:

There are provisions in the Customs Modernization and Tariff Act (CMTA) which call for the adoption of clear and transparent customs rules, regulations, policies and procedures consistent with international standards and customs best practices. The CMTA also provides for the use of modern practices in customs administration and the use of information and communications technology in the implementation of customs functions. For importations related to passenger baggage, postal item or mail and express shipments, simplified clearance procedures will be implemented. Kindly refer to the reply below for details.

The Philippines, through the Bureau of Customs, is currently drafting the implementing rules and regulations in the form of customs administrative orders (CAO) on a per topic basis to be approved by the Secretary of Finance. There is no additional legislative process involved.

To date, the CAOs which are in effect involve the establishment of the Authorized Economic Operators Program (CAO 5-2017); the clearance of postal items (CAO 3- 2017); customs clearance of accompanied and unaccompanied baggage of travelers and crew (CAO 01-2017); conditionally tax- and/or duty-exempt importation of returning residents and overseas Filipino workers (CAO 06-2016); consolidated shipment of duty- and tax-free ‘balikbayan’ boxes (CAO 05-2016); establishment of an advance ruling system for valuation and rules of origin (CAO-03-2016); and imported gods with de minimis value and not subject to duties and taxes (CAO 02-2016).

The draft CAOs can be accessed in the CMTA microsite (www.dof.gov.ph/cmta_irr). The requirements will depend per topic or issue. The draft CAOs can be accessed in the CMTA microsite (www.dof.gov.ph/cmta_irr). Page 6 (Para 2.14)

Under the Report “In pursuit of a simpler, more efficient, and more equitable tax system to finance and implement the 10-point socioeconomic agenda, an effort to redesign the current tax system is currently undergoing the legislative process. The Tax Reform for Acceleration and Inclusion, or TRAIN, will consist of low rates and a broad base to promote investments, job creation, higher and sustained growth, and poverty reduction. TRAIN will propose amendments on several provisions of the 1997 National Internal Revenue Code (Tax Code) specifically on lowering of personal income tax, simplifying estate and donor’s tax, expanding the value-added tax (VAT), increasing the excise tax on petroleum products, vehicles and sugar-sweetened beverages and certain administrative procedures.”

Could the Philippines provide more information regarding the tax reform incentives including possible policy changes in VAT exemptions and VAT refunds for exported agricultural products?

Response:

According to the general principles of the rationalization of fiscal incentives under the proposed Package II of the TRAIN, the granting of incentives will be based on the following key principles:

 Performance-based. Granting of a tax incentive to a corporation should satisfy objectives such as job creation, achievement of export targets, achievement of country-side development, use of modern technology or extent of research and development (R&D; such as 5% of employment in R&D). The Fiscal Incentive Regulatory Board (FIRB), an independent body, will measure the performance.

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 Time-bound. Five (5) years of incentives can be granted without extension, except for customs duty of capital equipment.

 Targeted. The target sectors are based on a three-year Strategic Investment Priority Plan, which can cover both foreign and domestic firms (no nationality bias) and both exports and domestic market.

 Transparent. The monitoring of tax incentives will be institutionalized and reported to the Government to provide a better understanding and its costs and benefits to the economy.

On the VAT exemption, the VAT will no longer be used as an incentive and cannot be used in the separate customs territory argument, especially for vertical zones (i.e. buildings, hotels, and hospitals). Firms will pay VAT, however input VAT of goods exported will be subject to a refund.

Page 7 (Para 2.17)

It is stated in the Report that “…the Philippine Development Plan and Investment Priorities Plan aim to expand economic opportunities in the industry and services sectors and to encourage investments in targeted areas to provide inclusive growth and spread economic opportunities to a broader segment of the population, especially micro, small and medium enterprises (MSMEs), women, youth and vulnerable groups.”

Could the Philippines kindly describe key measures set out in the Philippine Development Plan and Investment Priorities Plan for improvement of investment climate?

Response:

The Philippine Development Plan (PDP) 2017-2022 spells out the strategies for the improvement of the business climate in order to increase local and foreign direct investments. These include: a. Strengthen value and supply linkages through:

o Implementing the comprehensive national industrial strategy; o Adopting a holistic market-driven perspective; o Improving backbone services such as financial, telecommunications, distribution, transport, and logistics services; o Enhancing business services such as legal and accounting, research and development, and packaging; and o Implementing the new medium-term National Tourism Development Plan. b. Remove restrictions, provide incentives, and promote job-creating investments through:

o Amending restrictive economic provisions in the Constitution; o Modernizing the incentive system to remove nationality and export biases; o Implementing aggressive investment promotion programs; o Addressing cross-cutting issues; and o Supporting the development of the services subsectors outside value

c. Accelerate the implementation of infrastructure programs and projects

Under the Investment Priorities Plan, the strategies mainly include the implementation of industry competitiveness enhancement programs under the Manufacturing Resurgence Program and the broader I3S. These include addressing binding constraints to industry growth such as supply chain gaps, logistics, infrastructure and support facilities gaps. By addressing the gaps, barriers to entry of new industry players would be reduced and thereby encourage more investments in the country.

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Could the Philippines kindly inform when it plans to accept the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled, which was adopted on June 28, 2013 and entered into force on September 30, 2016?

Response:

The Philippines is in the process of completing the domestic procedures required for the country’s formal accession to the Marrakesh Treaty. Nevertheless, the substantive provisions of the Treaty have already been incorporated in the national IP legislation under the latest amendments to the IP Code.8 Under Section 184 (l) of the IP Code, the following shall not constitute infringement of copyright: “the reproduction or distribution of published articles or materials in a specialized format exclusively for the use of the blind, visually- and reading-impaired persons: Provided, That such copies and distribution shall be made on a nonprofit basis and shall indicate the copyright owner and the date of the original publication”.

In 2015, the National Council on Disability Affairs has sent a letter to IPOPHL supporting the accession of the Philippines to the Marrakesh Treaty as it is consistent with the UN Convention on the Rights of Persons with Disabilities. IPOPHL has sent recommendations and awaiting feedback of the Executive Department regarding the acceptance of the treaty.

With respect to the Beijing Treaty on Audiovisual Performances (this Treaty is not yet in force), adopted on June 26, 2012, what are Philippines' intentions to join this instrument?

Response:

The Philippines intends to formally accede to the Beijing Treaty, and consultations have been conducted with the relevant stakeholders as part of its pre-accession preparations. Nevertheless, the substantive provisions of the Treaty have already been incorporated in the national IP legislation under the latest amendments to the IP Code.9 Under Sections 203 and 204 of the IP Code, performers of audiovisual works are granted the same economic and moral rights as performers of sound recordings.

UNITED STATES

Questions based on the Secretariat Report (WT/TPR/S/368)

2 TRADE AND INVESTMENT REGIMES

2.4 Investment Regime

Page 27, Paragraph 2.28 The Secretariat Report notes that the Philippines expected to issue the 11th FINL in late 2017.  Can the Philippines provide an update on the status of the 11th FINL?  Has the FINL been issued?  What were the major changes from the 10th FINL? Response:

The draft of the 11th RFINL is for consideration and approval by the National Economic and Development Authority (NEDA) Board, thus, has not been issued.

The details of the major changes from the 10th FINL cannot be provided at the moment as the list is yet to be approved by the NEDA Board.

Page 27, Paragraph 2.30

8 Pursuant to Republic Act No. 10372, amending Republic Act No. 8293 or the Intellectual Property Code of the Philippines. 9 Pursuant to Republic Act No. 10372, amending Republic Act No. 8293 or the Intellectual Property Code of the Philippines.

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We understand that the Philippines’ Congress is working on legislation that would curtail foreign investment restrictions in the Philippines. Can the Philippines provide an update of those efforts?

Response:

There is an ongoing review of the 1987 Constitution by a 25-member Committee created by the President through Executive Order No. 10, issued in December 2016. The Committee is expected to complete its review in six months or until June this year. It will submit its recommendations and proposals to the President, who will transmit these to Congress.

The President provided guidance through Memorandum Order No. 16, issued in November 2017, on the priority investment areas or activities where current equity restrictions will be reviewed. These include the following:

3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Measures Directly Affecting Imports

3.1.1 Customs procedures, valuation, and requirements

Page 30, Paragraph 3.7

We have received reports that Philippine Customs has used reference prices for particular agricultural goods. What steps is the Philippines taking to rectify this practice?

Response:

The Philippines, through the Bureau of Customs (BOC), employs transaction value as the primary method for computation of duties and taxes and only refers to reference prices provided by the Department of Agriculture (DA), which are based on USDA FAS Global Agricultural Trade System (GATS) online data. BOC resorts to further verification when in doubt of the authenticity of declared values or when the differences between the transaction value and reference prices are substantially out of range. In a meeting arranged by the Department of Trade and Industry (DTI) and relevant agencies, it was agreed with USDA and Canada that should BOC doubt the declared values, it can request commercial and agricultural attaches to verify the declared values.

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3.1.5 Import prohibitions, restrictions, and licensing

Page 39, Paragraph 3.31, Box 3.1

How are infringing goods defined in Section G: Infringing goods as defined under the Intellectual Property Code and related laws? What are the other “related laws” that customs can use to prohibit the importation of infringing goods?

Response:

Goods or materials found to be infringing are those which relate to a violation of the rights of the IPR owner, as provided under the IP Code. This includes goods found to be infringing under Section 76 (Civil Action for [Patent] Infringement), Section 84 (Criminal Action for Repetition of Infringement), Section 155 (Remedies; [Trademark] Infringement), and Section 216 ([Copyright] Infringement) of the IP Code.

Page 39-40, 3.31, Box 3.1 Prohibited imports 2017 and Table 3.6 Goods subject to import permits or licensing

Please explain why the Philippines prohibits the import of used clothing and rags.

Response:

Republic Act No. 46653 (An Act to Safeguard the Health of the People and Maintain the Dignity of the Nation by Declaring it a National Policy to Prohibit the Commercial Importation of Textile Articles Commonly Known as Used Clothing and Rags) has not been revoked since its enactment by the Philippine Congress.

Page 39-40, 3.31, Box 1 and Table 3.6 Please clarify whether used motorcycle parts except engines are prohibited or subject to import licensing or permits.  If used motorcycle parts are prohibited, please explain why certain used motorcycle parts are prohibited when it appears that imports of other vehicle parts are allowed, subject to import licensing or permitting. Response:

Pursuant to Executive Order 877-A, the importation of used motor vehicle parts for all motor vehicles, including motorcycles, is allowed. Interested importers are required to secure prior import permit from the Fair Trade and Enforcement Bureau of the Department of Trade and Industry.

3.2 Measures Directly Affecting Exports

3.2.6 Export processing zones

Page 45, Paragraph 3.54

We would like to thank the Philippines for submitting an updated subsidies notification in November 2017. However, some of the programs identified in the Secretariat Report were not included in that notification. Specifically, we noticed that the “Omnibus Investments Code of 1987 (OIC)” was not included. We ask the Philippines to update its subsidies notification to include this program.  Can the Philippines provide more information on the incentives offered under this program? In addition, could the Philippines explain why this program was not included in its most recent subsidies notification? Response:

The Omnibus Investments Code of 1987 is part of the latest subsidies notification of the Philippines (under Investment Promotion Program).

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 We recognize that certain incentives under the Export Development Act (RA No. 7844) have expired. However, it appears that other incentives offered under Section 16(a), which offers tax credits for companies that increase their annual export revenue, and Section (d) may still be in place. Is our understanding correct? If so, why were these incentives not notified? Response:

The incentives provisions of the Export Development Act (EDA) have already lapsed on 31 December 1999. Moreover, Sec. 16 of EDA on Incentives was never implemented due to constraints by the implementing authorities.

 We recognize that the 2017 Investment Priorities Plan was enacted after the period covered in the Philippines notification, but can the Philippines provide more information on the incentives offered under this program? Response:

Given the current deficiencies in market conditions such as infrastructure support and high cost of factor inputs, the Philippines provides incentives to industries, which contribute to the poverty reduction and inclusive growth goals of the country. The incentives are no more than those provided by other countries to similar activities.

3.2.7 Export finance, insurance, and guarantees

Page 45, Paragraphs 3.56-3.58

According to the Secretariat Report, the Philippine Export-Import Credit Agency (PhilEXIM) provides loans, guarantees, and insurance to exporters with a minimum export volume of US$100,000 within the last 6 months.  Can the Philippines provide more information on the incentives offered under these programs? Response:

PhilExIm has two programs. The first is the Wholesale Guarantee for SMEs Program which provides guarantees on existing loan portfolios to direct and indirect SME exporters. The second is the Guaranteed Programs for SMEs which provides guarantees on short term loans to direct and indirect exporters, firms involved in priority projects of the government and import substitution industries.

Page 45, Paragraphs 3.56-3.58 The Secretariat Report states that PhilEXIM is a public export credit and insurance agency that provides loans, guarantees, and insurance programs to Filipino-owned companies, including a special program for SMEs.  Can the Philippines provide the name of the programs that cover exports of agricultural products? Response:

The guarantee facilities of PhilEXIM include the Guarantee Program for Large Accounts, the Guarantee Program for SMEs and the Portfolio Guarantee Program. Page 45, Paragraph 3.57

In addition to domestic loans for working capital, does PhilEXIM also offer medium- and long-term direct loans or loan guarantees to finance the foreign purchase of Philippine exports?

Response:

PhilEXIM does not provide direct loans to finance the foreign purchase of Philippine exports, only guarantees.

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3.2.8 Export performance requirements

Page 46, Paragraph 3.59

The Secretariat Report notes that certain tax incentives under the Omnibus Investment Code are contingent on export performance at 50% of production for Philippine-owned companies and at 70% of production for foreign-owned enterprises.  Can the Philippines provide additional information on the export performance requirements, and how they are consistent with WTO obligations? Response:

These measures are currently being revisited in line with the review of the Philippines’ overall tax and incentive scheme. Under the proposed Tax Reform for Acceleration and Inclusion (TRAIN) 2, outdated provisions of existing investments laws will be eliminated taking into consideration the current business models and engagements in free trade arrangements. In this regard, there is not much difference between domestic and export markets since both are equally contestable.

 In addition, we ask the Philippines to update its subsidies notification with these additional programs. Response:

This measure is part of the Omnibus Investments Code, which is part of the latest subsidies notification of the Philippines (under Investment Promotion Program).

3.3 Measures Affecting Production and Trade

3.3.2 Sanitary and phytosanitary requirements

Page 48-49, Paragraph 3.76

We appreciate that the Philippines has taken steps to improve the scientific basis of its food safety regime (Paragraph 3.69). However, our exporters continue to face certain measures that do not appear to be based on science, such as the two-tiered system for meat handling. Will the Philippines amend its meat-handling regime to remove the two-tiered system? Response:

The Philippines does not implement a two-tiered system. However, there is a separate protocol for handling frozen meat particularly if intended to be thawed and sold in the wet markets and for freshly slaughtered and chilled meat.

3.3.5 State trading, state-owned enterprises and privatization

Page 51, Paragraph 3.93

According to footnote 74 of the Secretariat Report, the Philippines last made a notification to the Working Party on State Trading Enterprises in 2002.  During this review, please provide an update on the current operations of State Trading Enterprises in the Philippines. Response:

The National Food Authority (NFA) remains as the sole state-trading enterprise in the Philippines. It is mandated under Presidential Decree No. 4 (as amended by Republic Act No. 8178) to import rice. PD 4 allows NFA to undertake direct importation of rice, or it may allocate import quotas to certified and licensed importers. Importation is deemed required by NFA when supply shortfalls occur due to natural calamities and/or to avert market distortions due to speculations that result in hoarding.

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 Will the Philippines make a notification for the period 2003-2016?

Response:

The Philippines remains committed to abide by the rules and procedures being followed under WTO, one of which is the conduct of WTO notification process for the required period in review.

3.3.6 Government procurement

Page 52, Paragraph 3.99

The Secretariat Report notes that government procurement in the Philippines accounts for about 10% to 11% of GDP. Does the Philippines collect statistics or estimates on the number and value of government procurement contracts awarded? If so, can the Philippines provide this data for the years since the last report?

Response:

There is data that can be generated through the posting of Contract Award in the PhilGEPS. However, the data captured may not be accurate to show the exact number and value of government contracts awarded since there is varying compliance by Procuring Entities in the registration and posting requirements.

Page 52, Paragraph 3.99

The Secretariat Report notes that the Philippines is not yet a party or observer of the WTO Agreement on Government Procurement (GPA). Is the Philippines still considering observer status?

Response:

Page 53, Paragraph 3.105

The Secretariat Report notes that in 2016, 52% of the total value of contracts was procured through open bidding. Can the Philippines provide figures on what percentage of the total value of contracts was procured through each of the alternative methods listed in the Secretariat Report?

Response:

The figures are not currently available. The Philippines will endeavor to provide data on percentages of contracts procured through the other alternative methods.

Page 53, Paragraph 3.106

The Secretariat Report notes that limited source bidding can be used for procurement of highly specialized types of goods and consulting services where only a few suppliers or consultants are known to be available.

 What is the process to determine this pre-selected list of suppliers and consultants?

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Response:

For the pre-selection of suppliers or consultants in the use of Limited Source Bidding, as an alternative method of procurement of goods and consulting services, the GPPB issued Resolution No. 06-2012, dated 30 March 2012, prescribing the amended “Guidelines on the Pre-Selection Procedure in the Conduct of Limited Source Bidding”. The Guidelines can be accessed at http://www.gppb.gov.ph/issuances/Resolutions/06-2012.pdf.

In general, the procuring entity shall prepare a list of pre-selected suppliers or consultants which shall be those appearing in a list that is maintained updated by the relevant government authority with expertise in the type of procurement concerned or self-generate such list if it represents itself as the relevant government authority. In preparing the pre-selected list, the following criteria shall be considered, thus:

1. Capability and resources to perform the contract taking into account their experience and past performance on similar contracts; 2. Capabilities with respect to personnel, equipment, or manufacturing facilities; and 3. Financial position.

 Does the Philippines have a process to make procuring entities aware of new suppliers or consultants that may qualify to participate in a limited source bid? If so, can the Philippines explain this process? Response:

The pre-selected list is then submitted to the GPPB. The GPPB-TSO shall acknowledge receipt of the said list and post the same in the GPPB or PhilGEPS website for transparency.

Concerns on the propriety of the self-generated or pre-selected list shall be directed to the procuring entity that issued/adopted the list for a particular procurement activity in accordance with the protest mechanism in the IRR of RA 9184.

The Guidelines can be accessed at http://www.gppb.gov.ph/issuances/Resolutions/06- 2012.pdf.

Page 53, Paragraph 3.108

Can the Philippines confirm if there is an established limit on the number of times a procuring entity can use the repeat order method under a single contract?

Response:

Under Section 51 of RA 9184 and its 2016 IRR, the following are the limitations in resorting to Repeat Order as an alternative method of procurement, thus:

a) Unit prices of the repeat order must be the same as or lower than those in the original contract: Provided, That such prices are still the most advantageous to the Government of the Philippine after price verification;

b) The repeat order will not result in splitting of contracts, requisitions, or purchase orders, as provided for in Section 54.1 of the IRR;

c) Except in cases duly approved by the GPPB, the repeat orders shall be availed of only within six (6) months from the date of the Notice to Proceed arising from the original contract: Provided, That there has been a partial delivery, inspection and acceptance of the goods within the same 6-month period; and

d) Repeat orders shall not exceed twenty-five percent (25%) of the quantity of each item in the original contract. In order not to exceed the 25% threshold, the goods under the original contract must be:

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i. Quantifiable ii. Divisible; and iii. Consisting of at least four (4) units per item.

There is no limitation on the number of Repeat Orders but based on the fourth condition, procuring entities are indirectly limited on the number of times to resort to Repeat Order by the cumulative 25% ceiling on the quantity of items that can subject of Repeat Order.

Page 54, Paragraph 3.111

The Secretariat Report notes that 0.05% of contract awards between 2012 and 2016 were awarded to foreign suppliers.

 Can the Philippines provide statistics or estimates on the number of government procurement contracts and the value of contracts awarded to foreign suppliers by country of origin? Response:

Of the 524 contracts awarded, the countries which received the most number of shares and percentages are: United States (144; 27%); Korea (56; 10%); France (29; 6%); Singapore (26; 5%); Germany (21; 4%); Brazil (20; 4%); United Kingdom (18; 3%); Indonesia (16; 3%); India (15; 3%); Hong Kong (14; 3%) and Canada (14; 3%). The Philippines will endeavor to provide the values as soon as available.

Page 54, Paragraph 3.112 The Secretariat Report notes that the Philippine Government has mandated the use of electronic procurement. However, in Paragraph 3.105, the Secretariat Report notes that the GPRA requires publication of open bidding opportunities in at least one newspaper.  How has the Philippines mandated the use of electronic procurement? Is it through a change to the GPRA or through another action? Response:

Section 8 of RA 9184 provides that to promote transparency and efficiency, information and communications technology shall be utilized in the conduct of procurement procedures. Accordingly, under Section 8.3.1, all procuring entities are mandated to fully use the PhilGEPS in accordance with the policies, rules and regulations, and procedures adopted by the GPPB and embodied in the IRR.

Currently, the rules prescribe partial implementation of electronic procurement. In the existing rules, electronic submission of bids is only an option, and other bidders may still opt to submit bids manually. For more details, the Guidelines on Electronic Bidding can be accessed at http://www.gppb.gov.ph/issuances/Resolutions/23-2013.pdf. The Philippines is still to implement a complete electronic procurement whereby there will be no manual submission of bids. It bears stressing, however, that Section 8 of RA 9184 and its IRR authorizes the GPPB to approve changes in the procurement process to adopt to improvements in modern technology, provided that such modifications are consistent with the governing principles of RA 9184.

As regards newspaper advertisement, Section 21 of RA 9184 provides that in line with the principle of transparency and competitiveness, all Invitations to Bid contracts under Competitive Bidding shall be advertised by the Procuring Entity in such manner and for such length of time as may be necessary under the circumstances, in order to ensure the widest possible dissemination thereof, such as but not limited to, posting in the Procuring Entity’s premises, in newspapers of general circulation, the Government Electronic Procurement System and the website of the Procuring Entity, if available.

For increased transparency, procurement opportunities for Competitive Bidding are advertised in newspaper, except those with a budget below the threshold, and posted in the PhilGEPS website. Procuring entities are mandated to utilize the Electronic Bulletin

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Board facility of the PhilGEPS. Thus, under Section 8.2.1(a) of the 2016 IRR of RA 9184, all procuring entities are required to post all procurement opportunities, results of bidding and related information in the PhilGEPS bulletin board.

Page 54, Paragraph 3.115 The Secretariat Report notes that the Asian Development Bank found that the bid challenge procedures are neither independent nor objective, and made recommendations for improvement.  Has the Philippines adopted any of the recommendations made by the Asian Development Bank, or are there any plans to alter the bid challenge procedure to address Asian Development Bank concerns?

Response:

Although the proposal to establish an independent review panel is yet to be considered, the 2016 IRR introduced reforms on bid protest mechanisms. Accordingly, eligible bidders may now file a request for reconsideration to the BAC once they are notified that a recommendation to award a contract has already been made. Likewise, request for reconsideration can be filed directly to the Head of the Procuring Entity in case of disapproval of the recommendation to award the contract.

3.3.8 Intellectual property rights

3.3.8.4 Trademarks Page 57, Paragraph 3.130 The Secretariat Report notes that the Anti-Camcording Act (RA No. 10088 of 2010) prohibits the use of audiovisual recording devices for the unauthorized recording of films or their soundtracks in an exhibition facility. Please provide additional information on this act, including:  Have there been any cases in the Philippines applying the Anti-Camcording Act? If so, what was the outcome? Response:

Since its enactment, the Anti-Camcording Act has proven to be a positive deterrent against the unauthorized recording of cinematographic films. According to the Motion Picture Anti-Film Piracy Council (MPAFPC), there were 44 illegal camcorders arrested in 2012, 16 in 2013, and at least 27 in 2014. Moreover, in 2017 Cinema Monitoring Enforcement Activities were conducted by the Optical Media Board of the Philippines, with over 1,000 agents, volunteers and partner agencies collaborating in the effort to prevent movies from being illegally recorded and pirated.

Initiatives to promote vigilance and awareness of the law by the public and security personnel of cinemas are also complemented by continued enforcement operations to ensure the strict implementation of the law. In fact, the National Committee on Intellectual Property Rights (NCIPR) member agencies’ seizure of counterfeit and pirated items from January to December 2017 amounted to Php 8.2 billion or equivalent to more than USD 157 Million as a result of the relentless enforcement efforts of the member agencies of the NCIPR.

3.3.8.7 IP registration and enforcement Page 57, Paragraph. 3.136 The Secretariat Report states that the National Committee on Intellectual Property Rights (NCIPR) coordinates enforcement efforts of the various institutions involved, including “the DTI as Chair, IPOPHL as Vice-Chair, and members from various other public institutions.” What are the public institutions that have been involved? Response:

Under Executive Order No, 736 dated 21 June 2008, establishing the NCIPR, the other national agencies that are members of the National Committee are as follows:

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1. Department of Justice (DOJ); 2. Department of the Interior and Local Government (DILG); 3. Bureau of Customs (BOC); 4. National Telecommunications Commission (NTC); 5. National Bureau of Investigation (NBI); 6. Philippine National Police (PNP); 7. Optical Media Board (OMB); 8. National Book Development Board (NBDB) 9. Food and Drug Administration (FDA); and 10. Office of Special Envoy on Transnational Crime

Page 57, Paragraph. 3.137 The Secretariat Report states that “(iii) for copyrights, fines and imprisonment depend upon the number of times the offence is committed.”  How are the fines per each offence calculated?  What are the minimum and maximum amounts that can be imposed?

Response:

Under Section 217 of the IP Code, as amended, the penalties for copyright infringement are provided as follows:

“SEC. 217. Criminal Penalties. - 217.1. Any person infringing any right secured by provisions of Part IV of this Act or aiding or abetting such infringement shall be guilty of a crime punishable by:

(a) Imprisonment of one (1) year to three (3) years plus a fine ranging from Fifty thousand pesos (P50,000) to One hundred fifty thousand pesos (P150,000) for the first offense.

(b) Imprisonment of three (3) years and one (1) day to six (6) years plus a fine ranging from One hundred fifty thousand pesos (P150,000) to Five hundred thousand pesos (P500,000) for the second offense.

(c) Imprisonment of six (6) years and one (1) day to nine (9) years plus a fine ranging from Five hundred thousand pesos (P500,000) to One million five hundred thousand pesos (P1,500,000) for the third and subsequent offenses.

(d) In all cases, subsidiary imprisonment in cases of insolvency.

217.2. In determining the number of years of imprisonment and the amount of fine, the court shall consider the value of the infringing materials that the defendant has produced or manufactured and the damage that the copyright owner has suffered by reason of the infringement: Provided, That the respective maximum penalty stated in Section 217.1. (a), (b) and (c) herein for the first, second, third and subsequent offense, shall be imposed when the infringement is committed by:

(a) The circumvention of effective technological measures;

(b) The removal or alteration of any electronic rights management information from a copy of a work, sound recording, or fixation of a performance, by a person, knowingly and without authority; or

(c) The distribution, importation for distribution, broadcast, or communication to the public of works or copies of works, by a person without authority, knowing that electronic rights management information has been removed or altered without authority.”

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Page 57, Paragraph. 3.138 The Secretariat’s Report states that the “total market value of seized counterfeited and pirated goods between 2011 and October 2017 amounted to more than PHP 45 billion.” What is the trend in the value of annual seizures during this period? Has there been a steady increase? Response:

There is no trend in the value of annual seizures during the periods from 2011-2017. The value of the seizure for each year depends on the kind of commodities/products that were seized for that year, and the market value of the original goods in the formal economy. In 2017, according to data from the NCIPR, the most common counterfeit products seized were electronics, optical media, and pharmaceutical and personal care products. In 2016, enforcement data showed that jewellery and watches were the top counterfeit items seized, followed by cigarettes and alcohol, and then optical media. In 2015, the most seized items were watches and jewellery, followed by optical media, then hand bags and wallets Page 57, Paragraph. 3.139 The Secretariat Report states that “[upon] reasonable cause, enforcement authorities may examine and search all types of consignment.” Is there guidance as to what constitutes a “reasonable cause”?

Response:

Reasonable Cause would mean grounds to believe that there is a violation under the Customs Modernization and Tariff Act or if there is a violation of any valid Customs Memorandum Order or Customs Administrative Order.

Page 57, Paragraph. 3.140

The Secretariat Report states that RA No. 10372 of 28 February 2013 “strengthens IPOPHL’s enforcement powers with regard to visits to businesses engaging in IP violations.” How are enforcement powers with regard to business visits actually strengthened by this amendment?

Response:

Prior to the amendments to the IP Code under RA No. 10372, Section 5 of the IP Code mandated IPOPHL to “[c]oordinate with other government agencies and the private sector efforts to formulate and implement plans and policies to strengthen the protection of intellectual property rights in the country.” On the basis of Executive Order No. 736, issued by the President on 21 June 2008, inter-agency coordination efforts to promote, protect, and enforce intellectual property rights were undertaken through the National Committee on Intellectual Property Rights (NCIPR).

Through the amendments under RA No. 10372, IPOPHL’s enforcement functions were strengthened through the grant of the specific mandate to “[c]onduct visits during reasonable hours to establishments and businesses engaging in activities violating intellectual property rights and provisions of this Act based on report, information or complaint received by the office”.

Pursuant to such mandate, the Intellectual Property Rights Enforcement Office (IEO) of IPOPHL was established to provide IP owners or right holders with an alternative administrative remedy to enforce their right. On the basis of a verified complaint, IPOPHL may conduct visits to establishments alleged to be committing acts in violation of IP rights. Upon the IEO Enforcement/Evaluation Officer’s validation that the establishment is distributing, trading, offering for sale or selling counterfeit or pirated items, IPOPHL may issue a Compliance Order to the said establishment. In case of non- compliance, IPOPHL may file a case with the Department of Trade of Industry for cancellation of the establishment’s business name registration, or with the local government unit concerned for the cancellation of the establishment’s Business/Mayor's Permit, so that it shall cease to operate or conduct business.

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Page 59, Paragraph 3.135 The IP Code does not expressly prohibit or allow parallel imports of goods and services containing any form of IPRs. Nonetheless, parallel importation of patented drugs and medicines is allowed.  Can the Philippines provide the policy on prohibiting or allowing parallel imports of goods and services containing any form of IPRs?  Has the policy been recently updated? Response:

The Intellectual Property Code of the Philippines (IP Code) is the primary law establishing the intellectual property rights regime in the country, and therefore provides the basis for the policies prohibiting or allowing parallel imports of goods and services containing any form of IPRs. Aside from the express allowance of parallel importation for patented drugs and medicines under Republic Act No. 9502 or the Quality and Affordable Medicines Act, there are no other recent amendments to the IP Code pertaining to the policies on prohibiting or allowing parallel imports of goods and services containing any form of IPRs.

4 TRADE POLICIES BY SECTOR

4.1 Agriculture

4.1.3 Domestic support Page 60, Paragraph 4.9: The Secretariat Report indicates that the Philippines has not provided up-to-date domestic support notification since 2010. What is the status of the Philippines domestic support notice? Response:

The Philippines has submitted its domestic support notification to the WTO for the years 2011-2015 last 15 February 2018 which are circulated as document G/AG/N/PHL/48- 52. 4.1.5 Rice Page 62, Paragraph 4.15 and 4.16

The Secretariat Report states, “as a result of the Uruguay Round, the Philippines obtained the right to defer temporarily the tariffication of its import restrictions on rice (Special Treatment – Annex 5 of the Agreement on Agriculture).”

This exception allowed the Philippines to maintain quantitative restrictions (QRs) on rice imports for 10 years until 30 June 2005, together with a bound minimum access quota for rice; the out-of- quota tariff remained unbound. The special treatment was extended until 30 June 2012, and subsequently the WTO General Council granted, upon request by the Philippines, a further extension until 30 June 2017. The Philippines agreed to convert QRs on rice to tariffs upon the expiry of the waiver. According to the authorities, “the House of Representatives is currently [October 2017] reviewing a consolidated bill that would allow for tariffication of the QRs on rice, and the Philippine executive branch is working closely with both Houses of Congress in the finalization of the bill, as the President ordered the passage of the rice tariffication law to be expedited.”

The Secretariat Report goes on to state that under the 2012 WTO Waiver, a number of concessions were agreed upon in exchange for the extension of special treatment for rice, including tariff concessions on several agricultural products, including butter, buttermilk, cheese, poultry meat, and oilseeds and notes that “Executive Order 23 of 22 May 2017 extended these concessions until 30 June 2020, or until such time as a law relating to rice tariffication has been enacted, whichever comes first. Thus, as of October 2017, the Philippines rice import regime is governed by the status quo.”  When does the Philippines expect to pass legislation that would abolish the quantitative restrictions on rice and provide the authority to establish tariffs?

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 What additional steps must the government take to set the tariff rates and how long does the Philippines anticipate that this process will take?

 Can the Philippines clarify the trigger for the reversion of the concessions to prior tariff rates on agricultural products listed in Executive Order 23? Response:

The bill to provide for the tariffication of rice imports is currently at the House of Representatives (HOR) subject to plenary hearings. Upon its passage on the third reading in the HOR plenary, the adopted bill will be transmitted to the Philippine Senate and shall undergo the same process. The approved version of the bill will then be transmitted to the Office of the President for approval.

In view of the independence of the three (3) branches of Government, the Legislative Branch will have their own timelines. Note that the leadership of both houses have given priority to this proposed legislation.

Executive Order No. 23 dated 22 May 2017extends the concessions granted by the Philippines to interested trading partners for another three years (2018-2020) or until the enactment of a law amending Republic Act (RA) 8178, whichever comes first. In the meantime, the MFN tariff rates remain at 35% for the in-quota rate and 50% for the out-quota rate.

4.4 Manufacturing

Page 71, Paragraph 4.67

The Secretariat Report provides information about the Motor Vehicle Development Programme (MVDP) regarding tariff rates for both motor vehicle components and finished vehicles, noting that tariff rates for finished vehicles are much higher than those for components. We understand that the Philippines, through various FTAs including those with ASEAN and Japan, has lowered the tariffs rates for finished vehicles from those preferential rates.

 Has the Philippines considered reducing the rates on a MFN basis for finished automobiles and motorcycles?

Response:

The Philippines has recently completed the comprehensive tariff review with the issuance of Executive Order No. 20, s. 2017. In the said EO, the MFN rates for finished automobiles and motorcycles were maintained.

Questions based on the Government Report by The Philippines (WT/TPR/G/368)

2 DOMESTIC POLICIES AND INITIATIVES TO SUSTAIN LONG-TERM GROWTH AND IMPROVE THE BUSINESS ENVIRONMENT FOR INCLUSIVE GROWTH

2.2 Enhancing Competition Policy and the Regulatory Environment

Page 6, Paragraph 2.10 We understand that the President has issued Memorandum 16 in November 2017 encouraging the National Economic Development Authority to reduce restrictions on foreign investment. Can the Philippines please provide an update on the Memorandum’s effect on reducing foreign investment restrictions?’ Response:

The issuance of Memorandum Order No. 16 in November 21, 2017 is directed not only to the National Economic and Development Authority (NEDA) but to all the member

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- 99 - agencies of the NEDA Board10. There are now bills that have been filed covering most of the following investment areas/activities identified in Memorandum Order No. 16:

 practice of particular profession;

 public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system;

 culture, production, milling processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and the by-products thereof; and retail trade enterprises.

3 INDUSTRY AND TRADE POLICY DEVELOPMENTS

3.2 Participation in the Doha Development Agenda (DDA) Negotiations

3.2.3 Intellectual Property Page 13, Paragraph. 3.16 The Government Report notes that the Republic Act No. 10372, which took effect in March 2013, established a Bureau of Copyright and Other Related Rights within the Intellectual Property Office of the Philippines. Can the Philippines provide additional information regarding the Bureau of Copyright and Other Related Rights, including:  Has the Bureau of Copyright and Other Related Rights been fully staffed?

 If not, what is the anticipated timeline for fully staffing the Bureau of Copyright and Other Related Rights?

Response:

Currently, the administrative procedures for the full staffing of the Bureau have not been completed, and IPOPHL is still in the process of hiring all the necessary personnel required. Nevertheless, designated IPOPHL personnel are already performing the functions of the Bureau, and it is envisioned that the Bureau will be fully staffed in 2018.

Page 13, Paragraph. 3.16 The Government Report notes that the Bureau of Copyright and Other Related Rights shall have responsibility for the accreditation of collective management organizations or societies.  Have any such collective management organizations or societies been accredited since the creation of the Bureau of Copyright and Other Related Rights?

 If so, how many have been accredited?

 Does the Bureau of Copyrights and Other Related Rights have any other significant responsibilities with respect to managing the copyright regime in the Philippines? If so, please enumerate such responsibilities.

Response:

The Philippines confirms that since the establishment of the Bureau of Copyright and Other Related Rights under RA No. 10372, four (4) collective management organizations have been accredited, as follows:

10 President (Chair), National Economic and Development Authority (Vice-Chair), Members: Executive Secretary Cabinet Secretary, Department of Budget and Management, Department of Energy Department of Finance, Department of Public Works and Highways, Department of Transportation, Department of Trade and Industry, Mindanao Development Authority, Bangko Sentral ng Pilipinas

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a. Filipino Society of Composers, Authors and Publishers, Inc. (FILSCAP), in representation of composers, lyricists, music publishers and other music copyright owners;

b. Filipinas Copyright Licensing Society, Inc. (FILCOLS), in representation of authors, publishers and other right holders in the text and image sector;

c. Performers Rights Society of the Philippines, Inc. (PRSP) in representation of performers; and

d. Sound Recording Rights Society of the Philippines (SOUNDSRIGHT) in representation of sound recording producers.

Pursuant to RA No. 10372, aside from the accreditation of collective management organizations or similar entities, the functions of the Bureau are as follows:

(1) Exercise original jurisdiction to resolve disputes relating to the terms of a license involving the author’s right to public performance or other communication of his work;

(2) Conduct studies and researches in the field of copyright and related rights; and

(3) Provide other copyright and related rights services. To date, this has included accepting copyright deposits pursuant to a Memorandum of Agreement with the National Library of the Philippines in January 2011, and implementing projects to benefit copyright stakeholders, both copyright owners and users of copyrighted works, which involve information dissemination and general legal advisory.

Page 13, Paragraph 3.16

The Government Report notes that the Republic Act No. 10372, which took effect in March 2013, granted related rights for performances fixed in audiovisual works or fixations. Can the Philippines describe the nature of such related rights, including whether such rights are exclusive rights, and if so, what activities are reserved to the holder of the rights.

Response:

Under Sections 203 and 204 of the IP Code, the economic and moral rights of performers of audiovisual works or fixations are provided as follows:

“SEC. 203. Scope of Performers' Rights. - Subject to the provisions of Section 212, performers shall enjoy the following exclusive rights:

203.1. As regards their performances, the right of authorizing: (a) The broadcasting and other communication to the public of their performance; and (b) The fixation of their unfixed performance.

203.2. The right of authorizing the direct or indirect reproduction of their performances fixed in sound recordings or audiovisual works or fixations in any manner or form;

203.3. Subject to the provisions of Section 206, the right of authorizing the first public distribution of the original and copies of their performance fixed in the sound recordings or audiovisual works or fixations through sale or rental or other forms of transfer of ownership;

203.4. The right of authorizing the commercial rental to the public of the original and copies of their performances fixed in sound recordings or audiovisual works or fixations, even after distribution of them by, or pursuant to the authorization by the performer; and

203.5. The right of authorizing the making available to the public of their performances fixed in sound recordings or audiovisual works or fixations, by wire or wireless means,

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- 101 - in such a way that members of the public may access them from a place and time individually chosen by them.

SEC. 204. Moral Rights of Performers. - 204.1. Independently of a performer's economic rights, the performer, shall, as regards his live aural performances or performances fixed in sound recordings or in audiovisual works or fixations, have the right to claim to be identified as the performer of his performances, except where the omission is dictated by the manner of the use of the performance, and to object to any distortion, mutilation or other modification of his performances that would be prejudicial to his reputation. XXX”

Page 13, Paragraph 3.16 The Government Report notes that the Republic Act No. 10372, which took effect in March 2013, included a copyright limitation in favor of blind and visually- and reading-impaired persons. Can the Philippines provide additional information about this limitation, including:  What is the category of beneficiary persons?

 What categories of works are subject to the limitation?

 What exclusive rights are subject to the limitation?

 What requirements are placed on beneficiary persons or authorized entities to exercise the limitation? Response:

Under Section 184.1(l) of the IP Code on the limitations to copyright, the following act does not constitute infringement of copyright: “[t]he reproduction or distribution of published articles or materials in a specialized format exclusively for the use of the blind, visually- and reading-impaired persons: Provided, That such copies and distribution shall be made on a nonprofit basis and shall indicate the copyright owner and the date of the original publication.”

Pursuant to the above provision, the beneficiary persons of the copyright limitation are exclusively “the blind, visually- and reading-impaired persons”, and the categories of works that are subject to the limitation are “published articles or materials”.

Meanwhile, the exclusive rights that are subject to the limitation are the rights of reproduction and distribution, and the requirements that are placed on beneficiary persons or authorized entities to exercise the limitation are that the copies and distribution “shall be made on a nonprofit basis and shall indicate the copyright owner and the date of the original publication”.

Page 13, Paragraph 3.16: The Government Report notes that the Republic Act No. 10372, which took effect in March 2013, enacted a change in the copyright law to the effect that “acts constituting copyright infringement to also include those benefiting from the infringing activity of another person, with notice of the infringing activity and the right and ability to control the activities of the infringer, and those who knowingly induce, cause or materially contribute to the infringing conduct of another.” Can the Philippines provide additional information on this change, including:  Have there been any cases in the Philippines applying this new basis for liability? If so, what was the outcome?

 What types of evidence are sufficient to demonstrate liability? Response: The amendments to Section 216 of the IP Code were intended to establish the persons liable for copyright infringement, including those that may be secondarily liable therefor.

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As of 28 February 2018, no administrative case before IPOPHL has been filed on the basis of the above-cited amendments of the IP Code.

On the other hand, in order to address alleged copyright violations in the internet, IPOPHL’s Enforcement Office (IEO) has issued warning letters or compliance letters to Internet Service Providers (ISPs) on the basis of such provisions on secondary liability. In compliance with such issuances, the subject ISPs have caused either the removal or blocking of the relevant accounts that offer infringing content such as movies, books, and music. In compliance with another warning letter issued by the IEO, a local electronic payment facility also effected the immediate termination of the account which was using the said platform as a payment facility for a website offering infringing content.

Under the Revised Rules on Evidence as promulgated by the Supreme Court of the Philippines, the types of evidence that may be admissible are those that constitute object or real evidence, documentary evidence, and testimonial evidence.11 To be sufficient as evidence, the same should prove every element of liability as provided under the relevant paragraph of Section 216, and should satisfy the quantum of evidence required to establish the administrative, civil and/or criminal liability of one who shall be secondarily liable.

Page 13, Paragraph 3.16 The Government Report notes that the Republic Act No. 10372, which took effect in March 2013, enacted a change in the law to provide for the award of “double the amount of damages and imposition of the maximum penalty for copyright infringement committed through the circumvention of technological protection measures or the alteration of rights management information.” Can the Philippines provide additional information on this change, including:  Is an act of copyright infringement a necessary predicate to damages for circumvention of technological protection measures or the alteration of rights management infringement?

 Have any cases to date awarded such damages? If so, in what amounts? Response: The Philippines can confirm that under the amendments to the IP Code, an act of copyright infringement is a necessary predicate to award double the amount of damages and impose the maximum penalty for copyright infringement committed through the circumvention of technological protection measures or the alteration of rights management information. Sub-section 216.1 of the IP Code provides as follows:

“216.1 Remedies for Infringement - Any person infringing a right protected under this law shall be liable: XXX (b) To pay to the copyright proprietor or his assigns or heirs such actual damages, including legal costs and other expenses, as he may have incurred due to the infringement as well as the profits the infringer may have made due to such infringement, and in proving profits the plaintiff shall be required to prove sales only and the defendant shall be required to prove every element of cost which he claims, or, in lieu of actual damages and profits, such damages which to the court shall appear to be just and shall not be regarded as penalty: Provided, That the amount of damages to be awarded shall be doubled against any person who:

(i) Circumvents effective technological measures; or

11 As provided under Rule 130 of the Revised Rules on Evidence, as amended per Supreme Court of the Philippines Resolution adopted on 14 March 1989.

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(ii) Having reasonable grounds to know that it will induce, enable, facilitate or conceal the infringement, remove or alter any electronic rights management information from a copy of a work, sound recording, or fixation of a performance, or distribute, import for distribution, broadcast, or communicate to the public works or copies of works without authority, knowing that electronic rights management information has been removed or altered without authority. XXX

The copyright owner may elect, at any time before final judgment is rendered, to recover instead of actual damages and profits, an award of statutory damages for all infringements involved in an action in a sum equivalent to the filing fee of the infringement action but not less than Fifty thousand pesos (Php50,000.00). In awarding statutory damages, the court may consider the following factors:

(1) The nature and purpose of the infringing act;

(2) The flagrancy of the infringement;

(3) Whether the defendant acted in bad faith;

(4) The need for deterrence;

(5) Any loss that the plaintiff has suffered or is likely to suffer by reason of the infringement; and

(6) Any benefit shown to have accrued to the defendant by reason of the infringement.

In case the infringer was not aware and had no reason to believe that his acts constitute and infringement of copyright, the court in its discretion may reduce the award of statutory damages to a sum of not more than Ten thousand pesos (Php10,000.00): Provided, That the amount of damages to be awarded shall be doubled against any person who:

(i) Circumvents effective technological measures; or

As of 28 February 2018, no administrative case before IPOPHL has been filed on the basis of the above-cited amendments of the IP Code.

Page 13, Paragraph 3.17 The Government Report notes that the Republic Act No. 10515 (the Anti-Cable TV & Cable Internet Tapping Act of 2013) prohibits the theft of cable TV and cable internet signals. Can the Philippines provide additional information on this act, including:  What is the prescribed penalty for the theft of cable TV and cable internet signals? Response:

Section 5 of RA 10515 provides that the penalties shall be imprisonment of not less than two (2) years but not more than five (5) years or a fine of not less than PhP 50,000.00 nor more than PhP 100,000.00 or both, at the discretion of the Court. If the offender is a corporation or association, the president, manager, managing partner or any officer of the corporation or partnership who directly participated in the violation of the law shall be held liable.

 Have any cases been brought under this act? If so, what was the outcome?

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Response:

Information on the status of cases, if any, are being requested from relevant police and investigative agencies.

Page, 13, Paragraph 3.17 The Government Report notes that the Republic Act No. 10863 (the Customs Modernization and Tariff Act of 2016) prohibits the importation and exportation of IPR infringing goods and provides power for the Bureau of Customs to effect seizures of infringing goods. Can the Philippines provide additional information on this act, including:  Whether copyright infringement is a covered IPR? Response:

Under Republic Act No. 10863, or the Customs Modernization and Tariff Act (CMTA), the prohibition against the importation and exportation of infringing goods may include copyright infringement. However, in the exercise of such authority, the Bureau of Customs of the Philippines is assisted by the Intellectual Property Office of the Philippines (IPOPHL) in the technical determination of whether the said goods are infringing. The Bureau may also be guided by the decisions of the Courts in the case of judicial proceedings, and the IPOPHL in administrative cases, on the determination of whether certain goods infringe upon IP rights under the IP Code.

 Whether IPR owners must register their rights with the Bureau of Customs to benefit from such seizures? If so, how is such registration accomplished? Response:

IPR owners may or may not register with the Intellectual Property Rights Division (IPRD) of the Bureau of Customs (BOC). However, once their IPR is recorded with the IPRD-BOC registration, their products will be included in the database / reference material used for the verification of authenticity of consumer products being imported in the Philippines. Recordation with the BOC-IPRD is valid for two (2) years and serves as a continuing complaint against any and all counterfeit and infringing goods. On the other hand, IPR holders that do not record their IPR and product with the IPRD-BOC may file a written complaint against importers suspected of bringing in counterfeit and infringing goods into the country. Complaint letters may be submitted to the IPRD-BOC or to the Office of the Commissioner of Customs or to the Concerned District Collector of Customs. However, a complaint letter is valid only for a particular shipment and does not constitute as a continuing complaint.

 Whether the Bureau of Customs has utilized this power to effect seizures of IPR infringing goods? If so, how many goods have been seized, and how has the Bureau of Customs disposed of such goods? Response:

The Philippines confirms that for the year 2017, BOC was able to apprehend a total of PhP5,925,272,260.00 worth of counterfeit goods from various operations conducted.

Page 13, Paragraph. 3.17 The Government Report outlines the various laws that were recently passed to complement the IP Code. We understand that regulations are currently being drafted specific to Geographical Indications (“GI”).  Can the Philippines please provide a status update on when these regulations will be finalized? Can the Philippines please provide a copy?

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Response:

 Under these regulations, will it be made clear that all GI applications, even those contemplated through trade agreements, will be examined and subject to third party opposition on the basis of likelihood of confusion with prior trademark rights and to determine whether the terms are generic in the Philippines? Response:

These issues are being carefully considered in developing the appropriate measures to be adopted as part of the enhancement of the current GI protection system of the Philippines.  Will the Philippines identify generic components of GIs comprising compound terms, such as by a disclaimer, so that third parties may better evaluate whether to oppose? Response:

These issues are being carefully considered in developing the appropriate measures to be adopted as part of the enhancement of the current GI protection system of the Philippines.

3.2.5 Trade Facilitation Page 14, Paragraph 3.22 When will the Philippines submit its indicative Category B and C notification? Response:

The Philippines submitted its notification on Categories A, B and C on 30 January 2018.

CHILE

SUMMARY

Paragraph 22

Paragraph 22 of the summary indicates that the services sector in the Philippines contributes some 51% of the GDP during the review period. Regarding this subject, Chile would be thankful if The Philippines could inform if it considers- in their future trade strategy- measures or plans for enhance the contribution of this sector to the economy, or if exist another sector or sectors that are of interest to strengthen internally.

Response:

The Philippine Development Plan 2017-2022 contains strategies directed at enhancing the contribution of services in the economy. These include efforts to relax restrictive economic provisions in the Constitution as well as burdensome laws, rules, and regulations that limit foreign participation in certain sectors. The proposed amendment to the Public Service Act, i.e., defining public utilities would allow for more foreign equity participation in sectors such as telecommunications and transportation, among others.

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Paragraph 23

Paragraph 23 expresses that cabotage is reserved for national carriers in both in aviation and maritime transport. Regarding the fact that cabotage is reserved for domestic companies, both in air transport and in maritime transport, Chile would be grateful if the Philippines could indicate more details about its definition of "cabotage", together with informing how this relates to the authorizations for foreign ships to carry goods destined for international trade, between national ports from one island to another.

Response:

Cabotage is defined in Republic Act (RA) No. 10668 or “An Act allowing Foreign Vessels to Transport and Co-Load Foreign Cargoes for Domestic Transshipment and for other Purposes”. RA 10668 allows foreign vessels to dock and co-load in multiple ports goods that are intended for export and import.

Paragraph 24

Paragraph 24 indicates that Philippines’ telecommunications sector is private-sector driven and dominated by two companies. Chile would be thankful if The Philippines would inform their percentages of participation, if they are foreign or national.

Response:

PLDT and Globe Telecom are the two dominant companies. Based on the latest Annual Report submitted by the two companies, the foreign equity of Globe is 25.56% (common share). Smart it is owned by PLDT (100%); for PLDT, its foreign partner equity is 15.5%.

1.3.2 Trends and structure of direct foreign investment

Paragraph 1.48

Paragraph 1.48 indicates that a problem for attracting more Foreign Direct Investment (FDI) is lack of good infrastructure. Chile would thank The Philippines to provide more detail on what particular infrastructure should be improved, in order to attract more FDI.

Response:

An accelerated infrastructure development program has been initiated . The NEDA Board Committee on Infrastructure and the Investment Coordinating Committee have identified 75 flagship projects that are expected to promote inclusive growth. Of the total, 45 projects are located in Luzon, 10 projects in the Visayas and 17 projects in Mindanao. Two projects are intended to enhance inter-island connectivity while one project is nationwide in scope. As of 15 January 2018, 66 projects are already with determined cost totalling Php2.29 trillion.The main proponents are the Department of Public Works and Highways with 31 projects amounting to Php0.88 trillion; and the Department of Transportation with 14 projects amounting to Php1.13 trillion. Some 34 projects are expected to commence this year.

The following are some of the flagship infrastructure projects:

1. 12 Pasig River, Marikina River, and Manggahan Floodway Bridges. Construction of additional fixed links or bridges and alternate routes to improve road transport network capacity and efficiency in Metro Manila, as well as to alleviate traffic congestion.

2. Panguil Bay Bridge Project. Project worth 4.86 billion that will connect the City of Tangub, Misamis Occidental and municipality of Tubod, Lanao del Norte.

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3. New Bohol International Airport. Improvements of the airport and provision of additional facilities to enhance safety, security, access, passenger and cargo movement efficiency. Project cost is PHP 4.57 billion.

4. Mindanao Rail Project (Phase 1). Construction of a 102 km rail network, worth PHP 35.26 billion, that will run through Tagum, Davao City, and Digos in Region 11.

5. Metro Manila Subway Project. A 25.3-km underground rail, costing PHP 355.59 billion, which serves as a north-south rail backbone for the Greater Capital Region from Mindanao Avenue in Quezon City in the North to Ninoy Aquino International Airport in the South.

6. MRT-LRT Common Station Project. A concourse area of 13,700 square meters which connects the LRT Line 1 North Extension, MRT 3, MRT 7 on the corner of North Avenue and EDSA. Project cost is PHP 2.80 billion.

7. Philippine National Railway (PNR) North 2. A PHP 211.43 billion project that will construct a 69.5-km extension of the PNR North 1 from Malolos, Bulacan, to Clark International Airport and Clark Green City in Pampanga.

8. PNR South Long-haul. Construction of a 639-km rail, worth PHP 175.30 billion, that consists of Los Banos – Legaspi (406 km), Legazpi – Matnog in Sorsogon (117 km), Calamba – Batangas (58 km), and Manila – Los Banos segments (58 km)

2 COMMERCE AND INVESTMENT REGIMES

2.2 Formulation and objectives of the commercial policy

Paragraph 2.5, letter (e)

Paragraph 2.5 letter (e) indicates that The Philippines’ has an Interagency Committee on Trade in Services (IAC.-TS). Chile would thank The Philippines to give more details on the functions and attributions of this Committee, and on how it is conformed.

Response:

The Interagency Committee on Trade in Services (IAC-TS) is one of the working groups supporting the Technical Committee on WTO Matters (TCWM).12 It coordinates the preparation and recommends Philippine positions on matters relating to trade in services in bilateral, regional, and multilateral trading arrangements. The members of the committee are representatives from government agencies that have oversight and regulatory functions in business services, professional services, computer-related services, communications services including postal, courier, and telecommunications, audio-visual, distribution, education, environmental, financial, health tourism and travel-related, transport (maritime, air, road, rail), and energy-related, among others. The IAC-TS is chaired by the National Economic Development Authority and also serves as its secretariat. Decisions are generally reached through consensus. Member agencies undertake their own stakeholder consultation.

3.2.3 Taxes, charges and charges for export

Paragraph 3.45

With regard to what is indicated in the paragraph, Chile would be grateful if the Philippines would indicate the objectives to be achieved when imposing this tax on the export of plantation trunks,

12 The Technical Committee on WTO Matters is one of two technical committees created under the NEDA Board Committee on Tariff and Related Matters pursuant to NEDA Board Resolution No. 10 series of 1999. The TCWM discusses and recommends Philippine positions and strategies on issues relevant to the country’s implementation of its WTO commitment and the continuing participation in the multilateral trading system.

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Response:

Pursuant to Executive Order No. 26, s. 1986, an export duty on logs was imposed at twenty (20%) percent of the gross FOB value at the time of shipment based on the prevailing rate of exchange. This is to secure the domestic supply of logs and incentivize further processing for eventual export as a higher-valued manufactured product.

The duty was imposed given the decline in log production in the 1980s due to the cancellation of erring and non-renewal of expiring Timber License Agreements operating in natural forests, as part of the government’s conservation efforts. The policy environment remains the same with the more recent Executive Order No. 23, s. 2011, which declares a moratorium on the cutting and harvesting of timber in the natural and residual forests.

3.3 Measures affecting production and trade

3.3.1 Standards and other technical requirements

Paragraph 3.61

Regarding what is stated in the above paragraph about the methods of elaboration of standards, Chile would be grateful if the Philippines would indicate if it has a mechanism so that third parties, whether Filipino or foreign nationals, can access the background of the technical standards that are being carried out, together with informing if the BPS elaborates reports of economic, environmental, comments and arguments to carry out the regulation.

Response:

Requests to access the background of technical standards are processed in accordance to existing rules or policies.

Paragraph 3.72

Chile would like to thank the Philippines for reporting the levels of risk perceived by his Rapid Alert System, along with commenting on the specific actions involved in risk detection.

Response:

The Philippines acknowledges Chile’s comments.

Chile would be grateful to the Philippines if the exporter is allowed to correct the detected fault, depending on the requirement violated, and if so, how much time is left to the exporter to correct it.

Response:

The Food and Drug Administration (FDA) is the National Contact Point for the Philippine Rapid Alert System for Food and Feed (PhilRASFF). It is committed to share information regarding products that have safety issues. The FDA recognizes that there are product quality issues, including labelling. The FDA acts and provides timelines on cases based on the severity of the product non-conformity detected and the risk of the product.

Chile would be grateful if the Philippines would indicate if there is a channel to communicate the failure detected to the exporter and to the sanitary authorities of the countries.

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Response:

Those responsible for placing the products in the market, the exporter and FDA-licensed distributor-importer are informed by PhilRASFF. Queries can be addressed through its website (http://philrasff.org/).

Paragraph 3.76

Regarding the requirements for the importation of meat, the cited paragraph indicates that the shipments of imported meat must come from a foreign meat establishment that is recognized by the Veterinary Administration and accredited in the Philippines. In this regard, Chile would like the Philippines to indicate more information on the procedure to achieve the aforementioned recognition by the Veterinary Administration, along with indicating whether a ranking of priority - or preference among suppliers - for the recognition of foreign meat establishments is presented.

 If so, Chile would also appreciate commenting on the aspects or factors that the Philippines considers when establishing said ranking or preference.

 Chile would appreciate the Philippines sharing statistical data on surveys and accreditations made by Veterinary Administration inspectors to meat establishments abroad.

Response:

The Philippines would like to know what statistical data Chile is referring to and would appreciate if Chile will be able to share its own statistical data similar to this.

Please refer to the following link for the list of updated list of accredited foreign meat establishment: http://nmis.gov.ph/attachments/article/411/161020-2228.pdf

3.3.8.2 Patents

3.3.8.3 Copyright and related rights

Paragraph 3.129

Regarding the role of the Copyright Office indicated in the paragraph, Chile would be grateful if the Philippines would share more information about the operation of that office in the framework of its dependence on the IPO, together with information on whether there is other functions exercised by the Copyright Office in addition to that indicated in the aforementioned paragraph.

Response:

Section 6 of the IP Code, as amended by RA 10372, includes the Bureau of Copyright and Other Related Rights as one of the bureaus comprising the IPOPHL. Under Section 7(b) of the IP Code as amended, the decisions of the Bureau are also appealable to the IPOPHL Director General, in the same manner as the decisions of the other IPOPHL Bureaus.

Section 9A of the IP Code, as amended, also provides for the other functions of the Bureau, as follows:

i. Exercise original jurisdiction to resolve disputes relating to the terms of a license involving the author’s right to public performance or other communication of his work; ii. Accept, review and decide on applications for the accreditation of collective management organizations or similar entities; iii. Conduct studies and researches in the field of copyright and related rights; and iv. Provide other copyright and related rights service and charge reasonable fees therefor.

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Paragraph 3.130

Regarding the Prevention Law indicated in the above paragraph, Chile would be grateful to the Philippines to inform about how the criminalization is controlled and the use of audiovisual recording devices is prohibited.

Response:

Under the Anti-Camcording Act, the PNP, in coordination with the NBI, OMB, operators of the cinemas, theaters, or exhibition facilities and owners of cinematographic films or audiovisual works and other soundtracks, may without a warrant, and without payment of any admission fee or other charge, enter an exhibition facility and:

(a) search any person if the person subject of the search has in his/her actual possession, any audiovisual recording device;

(b) seize, remove or detain any audiovisual recording device or other object which appears to contain, or likely to contain evidence of an offense committed under the Anti-Camcording Act;

(c) use reasonable force to remove any person or object obstructing the authorized person in the exercise of any power conferred upon him/her by the Anti- Camcording Act;

(d) detain any person, within a reasonable time not exceeding eighteen (18) hours, found in any place which the authorized person is empowered to enter and search if, after inquiry made, said authorized person has reasonable ground to believe that the person subject of the search is connected with the subject matter of the search and it is considered necessary to detain the person subject of the search to be able to adequately perform the search; and

(e) require the operator of an exhibition facility or any other person who appears to be at the time responsible for the control or management of the exhibition facility to give information or render assistance that may be necessary to enable the authorized person to carry out the functions under the law.

3.3.8.6 Plant varieties

Paragraph 3.134

Regarding the topic of plant variety protection mentioned in the document, Chile would be grateful if the Philippines would comment on the current status of its process of accession to the UPOV Convention.

Response:

At present, the Philippines is not considering to become a member of UPOV 1991. Nevertheless, plant varieties that are new, distinct, uniform, and stable are protected under a sui generis system pursuant to Republic Act No. 9168 or the Plant Variety Protection Act of the Philippines.

3.3.8.7 IP registration and enforcement

Paragraph 3.138

Regarding enforcement efforts made, Chile would appreciate the Philippines sharing more information on the aforementioned Action Plan on Enforcement, in particular, indicating more details on its operation and application.

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Response:

The 2017-2022 Philippine IPR Action Plan serves as a roadmap to carry out synchronized efforts of all government agencies to fight counterfeiting and piracy. Under this Action Plan, the Philippines will continue to implement a holistic approach to IPR enforcement, as well as pursue an aggressive IP education program that cuts across various players in the IP community. The Action Plan has seven (7) strategic initiatives, namely:

1. Mainstream IP policy in the government; 2. Scale up the promotion, protection and enforcement of IPR through the NCIPR; 3. Ensure a speedy and quality disposition of IPR cases; 4. Strengthen the legal infrastructure on IP; 5. Enhance the capabilities of enforcement agencies and personnel involved in IPR enforcement; 6. Intensify IP education initiatives; and 7. Establish strong presence in international fora.

4.5.2 Telecommunications

Paragraph 4.100

Paragraph 4.100, about telecommunications services in The Philippines, indicates that the fixed- line penetration has remained largely stable. Regarding this subject, Chile would be thankful if The Philippines could point out the evolution of the penetration rate of fixed telephone services in the country, from 2012 to the present.

Response:

From year 2012 to 2013, installed fixed line density were 6.93 and 6.718 respectively. For year 2014 to 2016, the teledensity has decreased to 5.87, 5.72 and 5.66 respectively. The decline could be attributed to the availability of mobile phone services as subscribers prefer mobile phone service than fixed telephone service.

Paragraph 4.102

Paragraph 4.102 indicates that basic telecoms services providers must obtain prior approval from both Houses of Congress to become a “Congressional Franchise”. Chile would thank The Philippines to further explain on the concept of “congressional franchise”. For example, what are the requirements, the fees and how is the process to obtain it.

Response:

Republic Act 7925 (Public Telecom Policy Act) Article VI, Sec. 16. States that no person shall commence or conduct the business of being a public telecommunications entity without first obtaining a franchise. The Legislative Franchise being issued by the Congress of the Philippines is required for public utility service providers.

It is an authorization granted for the provision of any public utility service in the country. Among the requirement by the congress is a five-year technical and feasibility study and of the service being applied and proof of legal capacity.

There are two tier requirement for the provision of telecom network facility services: Legislative Franchise and authorization from the telecom regulator, the NTC. A grantee of a franchise can apply for authorization for a particular telecom service from the National Telecommunications Commission.

The applicant shall prove to the Commission that it has the Legal, Technical, and Financial capacity to provide the service. All applications except applications for the provision of value added services undergo quasi-judicial process. The following should be provided:

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 Proof of Legal Capacity : Franchise from Congress;  Proof of Financial Capacity : Debt-to-Equity Ratio of 70/30;  Proof of Technical Capacity : Technical Staff with experience in the provision of public Telecommunication services

Paragraph 4.108

Paragraph 4.108 specifies that if a service has sufficient competition to ensure a fair and reasonable rates or tariffs, the NTC may exempt the service from its rate or tariff regulation. But the authorities did not clarify the criteria to define “sufficient competition”. Chile would be thankful if The Philippines would clarify the criteria that it uses to define “sufficient competition” in telecoms services rates or tariffs.

Response:

In general, competition in a relevant market is regarded as sufficient if no entity holds the ability to profitably sustain prices above competitive levels, or restrict output, variety, quality or innovation below competitive levels. Thus, the notion of sufficient competition is related to the ability of the entity to behave independently of the actions and reactions of its competitors, customers, suppliers, or consumers. If there is sufficient competition, competitive pressure is sufficiently strong to constrain any entity from harming the process of competition and, ultimately, market outcomes.

With respect to telecommunications services, assessing whether there is sufficient competition is therefore tantamount to considering the extent to which there are constraints on the players’ ability to profitably sustain rates and tariffs above competitive levels. Such constraints may come from the market position of current players, credible threat of future expansion by actual players or entry by potential players, the bargaining power of the customers, and the overall regulatory environment.

4.5.3 Transport

4.5.3.1 Aviation

Paragraph 4.114

Paragraph 4.114 says that Executive Order 29 or 2011 authorizes Philippines’ negotiators to offer in a bilateral air services agreement (ASA) up to the fifth freedom rights, but most of the ASAs in force are restrictive, covering only the third and fourth freedom. Chile would thank The Philippines to further comment in the effects of the Executive Order 29 by sharing the percentages of ASAs that include the fifth freedom and the ones up to the third and fourth freedom.

Response:

Under the records of the Philippine Civil Aeronautics Board, there is a total of 66 ASAs between the Philippines and other sovereign countries. A total of 26 AS’s allow fifth freedom traffic rights or 39.3% of all ASA’s.

However, some of these agreements only allow 5th freedom rights once the designated airlines of both parties execute commercial agreements between them.

4.5.4 Tourism

Paragraph 134

Paragraph 4.134 indicates that applications for designation must be made to the Tourism Infrastructure and Enterprise Authority (TIEZA) and the minimum required investment in order to benefit from incentives is US$ 5 million, but exemptions may be granted.

Chile would thank The Philippines to further comment on what are those exemptions. What are the requirement to apply to be exempt from the 5 US$ million minimum required?

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Response:

Exemption from USD 5 million investment requirement is on “extremely meritorious cases” as may be determined and decided by TIEZA Board and in the development of Ecotourism TEZs and historical/cultural/heritage TEZs.

Paragraph 4.135

Paragraph 4.135 says that during the review period, the Department of Tourism took steps to enhance the business environment of the Tourism sector. One of the initiatives to do that included cutting the regulatory red tape through the Regulatory Impact Assessment Programme. Chile would thanks the Philippines to share some examples of regulatory red tape that was cut. For example, what certificates or forms were eliminated.

Response:

The Department of Tourism is one of the pilot agencies implementing RIA program in the country. The DOT’s objective is to use RIA to create a business-friendly environment where regulations are transparent, consistent and unnecessary rules are removed.

Following are major accomplishments of the DOT’s RIA project:

 Completion of ten (10) Regulatory Impact Statements;  Amendment in the sections of the Puerto Princesa City Local Ordinance – Tourism code that imposes an excessive cost to travel and tour agency, tourist transport, and tour guides.  Technical assistance to Local Government Units in developing Red Tape Reduction Strategy; and  Extension of the accreditation validity of primary tourism enterprises from 1 year to 2 years to lessen administrative costs.

GOVERNMENT REPORT

3.2.3 Intellectual property

Paragraph 3.18

Bearing in mind the position of the Philippines, mentioned in the paragraph, in the sense that participation in a future multilateral system of notification and registration of geographical indications (GIs) for wines and spirits should be voluntary, Chile would appreciate Philippines indicate whether there is a defined national regulation for its GI records.

Response:

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2.4 Services

2.4.1 Information Technology-Business Process Management (IT-BPM)

Paragraph 2.19

Paragraph 2.4.1 indicates that the Information Technology -Business Process Management (IT- BPM)- is one of the country’s best-performing and employment-generating service industries over the past several years. Chile would thankful if The Philippines further explains, the reasons observed for this success, especially concerning governmental policies that helped this development and the higher participation of women.

Response:

Advances in information and communication technology (ICT) have facilitated growth in the business process outsourcing (BPO) sector, making the Philippines among the world’s major BPO destinations. The sector’s economic influence in the country has tripled in the last ten years. Low labour costs, a highly skilled workforce and competitive ICT infrastructure have provided the major drivers of this growth. While contact centres represent the most important subsector in terms of revenue and employment, higher value added subsectors are also growing.

IT-BPM enterprises benefit from streamlined business registration and better coordination procedures with government. Policies were put in place to support the industry’s growth and development. These policies include, among others: 1) the addition of BPO/IT-BPM in the priority areas for investment; 2) declaring IT buildings as vertical economic zones; and 3) allowing women to work night shifts, which was previously prohibited under the Philippines’ Labor Code.

According to estimates from the Philippines Statistics Authority more than 55 per cent of workers in the BPO sector are women. Women were present in medical transcription industries, data processing and call centre activities. Formerly, Philippine labour law prohibited women from working night shifts (between 10 p.m. and 6 a.m.). In 2011, however, due to the growing contribution of the BPO sector to the national economy and since most BPO employees were women serving customers in different time zones, employers successfully lobbied for the repeal of this provision.

Subsequently, new requirements for employers were established, including sleeping/resting quarters, mandatory transport services for women doing night shifts and other social services, catering in particular to those with children.13 Republic Act No. 10028 (also known as the Expanded Breastfeeding Promotion Act of 2009) mandates workplaces to have a lactation station for nursing mothers, not less than 40 minutes of lactation break for women and inclusion of breastfeeding programs as part of development program of companies.

Paragraph 2.20

Paragraph 2.20 indicates future statistics development to support Philippine’s priority in IT-BPM services. Chile would be thankful if The Philippines would give more detail on what statistics and data will they work on in order to support their IT-BPM services industry.

Response:

Lack of services statistics including in IT-BPM is acknowledged in the current Philippine Development Plan and will be addressed. Timely, relevant, and quality official statistics are needed to track the performance of the sectors to serve as basis for strategic planning. Data on the IT-BPM sector such as employment and revenue are being sourced from the IT and Business Process Association of the Philippines. The Philippine Statistics Authority, meanwhile, published in 2017, the 2014 Annual Survey of Philippines

13 ILO Asia-Pacific Working Paper Series, Business Process Outsourcing in the Philippines: Challenges for Decent Work Lorenza Errighi, Charles Bodwell and Sameer Khatiwada December 2016

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Business and Industry for IT-BPM activities, covering industry data on sub-class, jobs, income generated, labor productivity, capital expenditures, among others. Data on “gig economy” such as the number of people earning on outsourcing platforms is yet to be determined and methodology on how to gather this information is yet to be developed.

3.2.2 Services

Paragraph 3.14

Paragraph 3.2.2 indicates that Philippines is committed to according appropriate consideration to the needs of MSME service suppliers. Chile would be thankful if The Philippines would inform in which areas of their services sector MSMEs play a fundamental role, and how they equilibrate the protection and consideration policies with the ASEAN agreement entering into force.

Response:

Micro, small and medium enterprises accounted for 99. 57% (911,768) of the total establishments in the country. Micro-enterprises took the largest share with 89.63% followed by small enterprises with 9.50% and medium enterprises (0.44%).14 Almost 70% of the total MSMEs are services related subsectors.15

The Philippine Development Plan 2017-2022 includes strategies that will enable micro and small services oriented enterprises to improve production networks by supporting linkages between MSMEs and large corporations as well as develop more inclusive business models and social enterprises. Access to finance will be improved by streamlining and simplifying loan processes and providing literacy trainings. Productivity, efficiency and resilience will be enhanced through increased access to technology and through entrepreneurship programs.

NEW ZEALAND

SECTION: SUMMARY

WT/TPR/S/368, summary, page 7, para 10

“…. Pre-shipment inspection is mandatory for all bulk or break bulk cargo. All shipments are classified according to risk. Customs clearance times for high risk consignments (about 50% of all consignments) are between one and two days, while moderate risk consignments require about four hours for clearance. The Philippines accepted the WTO Trade Facilitation Agreement on 27 October 2016; it has also submitted a notification regarding its Category A commitments.”

SECTION 3: TRADE POLICIES AND PRACTICES BY MEASURE

3.1: Measures Directly Affecting Imports

WT/TPR/S/368, section 3, page 30, para 3.3 and para 3.8

“Bureau of Customs' administrative order (AO) No. 243 of January 2010 makes pre-shipment inspection (PSI) mandatory for all bulk or break bulk cargo. PSI covers quantity, quality, and tariff classification. Six companies have been approved by the Bureau of Customs to provide this service. For other goods, no PSI is required.”

Further Section 3, paragraph 3.8 states:

“The Philippines accepted the Trade Facilitation Agreement on 27 October 2016….” Question

14 Based on the 2016 List of Establishments Census of the Philippine Statistical Authority. 15 In terms of sectoral distribution, (% of total MSMEs) - Wholesale and Retail Trade: Repair of Motor Vehicles and Motorcycles (46.13%); 2) Accommodation and Food Service Activities (13.13%); (3) Manufacturing (12.69%); (4) Other Service Activities (6.19%); and (5) Financial and Insurance Activities establishments (4.35%). Classification is based on the Philippine National Accounts and may not be compatible with the W120 Services Sectoral Classification List.

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 Could the Philippines outline the reason for Bureau of Customs' administrative order (AO) No. 243 of January 2010 making the pre-shipment inspection mandatory for all bulk or break bulk cargo?

Response:

This is an advance clearance system for bulk and break-bulk, so the purpose is to facilitate trade, in compliance with the Revised Kyoto Convention.

There is a need to obtain and secure critical information for the proper examination, classification, and valuation of bulk and break-bulk cargoes using measures compliant with customs international best practices and global trade standards. Revenue collection will be protected and maximized by ensuring the determination of the correct weight, quantity, quality and description of bulk and break-bulk cargoes and the correct assessment of duties thereon.

While AO No. 243 provides for the inspection at the port of origin of the bulk and break- bulk cargoes. , The required information does not include the value of the shipment and tariff classification. Only information on the description, quality, quantity, port of loading, shipper, among others. are required. The value and tariff classification are information that are still being provided by the importer themselves, not by the surveyor or inspector. Thus, AO 243 is compliant with the WTO TFA.

The Bulk and Break-bulk enhancement program of the Bureau of Customs is lodged to harmonize the objectives of the Revised Kyoto Convention. It was implemented to ensure transparency and to protect and enhance revenue collection due to rampant smuggling and unscrupulous schemes of smugglers. Bulk and break-bulk cargoes are shipments that are not containerized and due to the nature of such, smuggling has been a major concern.

It appears that AO 243 is contrary to the pre-shipment inspection provision of the WTO Trade Facilitation Agreement (WTO-TFA). Paragraph 5 (Pre-shipment Inspection) of Article 10 Formalities Connected with Importation and Exportation and Transit) of the WTO-TFA states:

“5.1. Members shall not require the use of pre-shipment inspections in relation to tariff classification and customs valuation”

3.1: Measures Directly Affecting Imports

WT/TPR/S/368, section 3.3.6, page 54, para 3.111

“The nationality requirement of bidders continues to restrict wholly-owned foreign entities from participating in public procurement. For procurement of goods and consulting services, it requires that at least 60% of the interest of partnerships or the outstanding capital of corporations belong to citizens of the Philippines. For infrastructure projects, it requires 75% Filipino ownership. Foreign bidders are only eligible to participate (i) when allowed under any treaty or international or executive agreement; (ii) when the foreign bidder is a citizen, corporation or association of a country whose laws or regulations grant reciprocal rights to citizens, corporations, or associations of the Philippines; (iii) when the goods sought to be procured are not available from local suppliers; or (iv) when there is a need to prevent situations that defeat competition or restrain trade. Of the 930,557 award notices issued between 2012 and 2016, 524 contracts (0.05 per cent) were awarded to foreign suppliers.”

Questions

 Of the 524 contracts awarded to foreign suppliers between 2012 and 2016, how many of these were awarded through the third exception that allows for foreign participation: “when the goods sought to be procured are not available from local suppliers”?

Response:

It cannot be determined how many of the 524 contracts awarded to the foreign suppliers from 2012 to 2016 involve goods that are not available from local suppliers

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- 117 - based on the Philippine Government Electronic Procurement System (PhilGEPS)- generated report. More particularly, there is no facility/platform where it can be verified whether:

 the head of the procuring entity or his duly authorized representative of the procuring entities involved in the said 524 contracts has issued a certification that, after diligent market research conducted by the procuring entity, the goods sought to be procured are not available from Local Suppliers; or

 the procuring entity has secured a certification from the appropriate Government regulatory body, that based on its available records, the goods sought to be procured are not available from Local Suppliers, when applicable,

It is necessary to check Clause 5.2 of the Instructions to Bidders and the Bid Data Sheet of each bidding documents associated with the 524 contracts awarded to foreign suppliers.

 Does the Philippines have any plans to amend the nationality requirements in its public procurement legislation that restrict foreign-owned entities from participating in public procurement?

Response:

The President of the Philippines issued Memorandum Order No. 16, dated 17 November 2017 directing NEDA and its member agencies to exert utmost efforts to lift or ease restrictions on certain investment areas or activities with limited foreign participation, which include, among others, practice of particular professions, where allowing foreign participation will redound to the public benefit; and contracts for the construction and repair of locally-funded public works.

Moreover, the preference for “domestic entities” in the Procurement of Goods has been repealed by Republic Act No. 10667 or the Philippine Competition Act.

 How do foreign suppliers know which procurement opportunities they are able to participate in?

Response:

If the foreign supplier is registered in the PhilGEPS, it will be automatically notified of procurement opportunities through the Electronic Bulletin Board feature of the PhilGEPS

If the foreign supplier is not registered in the PhilGEPS, it has to research on procurement opportunities which are required to be:

 Posted in the PhilGEPS website, website of the Procuring Entity’s website, if available, and any conspicuous place in the premises of the Procuring Entity concerned.  Advertised at least once in one (1) newspaper of general nationwide circulation which has been regularly published for at least two (2) years before the date of issue of the advertisement.

However, advertisement shall not be required for contracts to be bid with an Approved Budget of the Contract (ABC) as follows:

 For goods, ABC of PhP 10 million and below;  For infrastructure projects: APC of PhP 15 million and below; and  For consulting services; ABC of PhP 5 million and below.

SECTION 4: TRADE POLICIES BY SECTOR

4.1: Agriculture

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WT/TPR/S/368, section 4.1.3, page 60, para 4.7, para 4.10 and para 4.11

The Secretariat report points to a decline in the size and economic contribution of the agriculture sector over the reporting period (e.g. table 1.1). It explains that agricultural policy remained geared towards ensuring food security, in particular towards achieving self-sufficiency in rice, sugar and maize (para 4.7).

In the case of rice however, it reports that ‘about one third of all rice-producing households and well over two thirds of all households were net buyers of rice, according to the Survey of Food Demand for Agricultural Commodities 2012; these farmers and households are unlikely to benefit from the high level of tariff protection and price support for rice’ while ‘about a quarter of farmers' revenues were due to support policies’ (para 4.10-4.11).

Question

 What reform plans does the Philippines have for the agriculture sector and in particular the rice sector, so that it meets its government’s objectives to make a positive contribution to its economy?

Response:

The reform plan hinges on the passage of the Rice Tariffication Act. Agriculture has been under-supported historically and the reform being envisaged is one that will support the sector that it will become more competitive, either on the border or the export markets. This includes improving infrastructure, the value chain and other elements.

4.2: Fisheries

WT/TPR/S/368, section 4.2, page 67, para 4.37

Secretariat report (para) 4.37 notes that ‘… Duty and tax rebates on fuel (as per Executive Order 209) have … expired.’ Philippines ASCM notification (G/SCM/N/38/PHL) similarly notes that ‘duty and tax rebates on fuel consumption for commercial fishing operators of Philippine registry in the high seas as provided in Section 35, paragraph c were not implemented by the Department of Agriculture since funds were not appropriated to the Department for the afore-mentioned purpose.’

Question

 Can the Philippines confirm that it no longer has any programmes establishing duty or tax rebates for fuel used in fishing operations?

Response:

It should be clarified in the Secretariat Report that EO 209 on duty and tax rebates on fuel did not expire. At the same time, the Philippines can confirm that there were no availments made under this program.

WT/TPR/S/368, section 4.2, page 66, para 4.31-4.35

The Philippines and Secretariat reports do not elaborate on the Fisheries Industry Support Programs notified by the Philippines in ASCM notification (G/SCM/N/38/PHL), which has the stated objective of ‘To encourage commercial fishing vessel operators to fish farther in the Exclusive Economic Zone and beyond’.

Question

 To what extent has this objective been met and how does the Philippines ensure that these programmes do not contribute to IUU fishing or overfishing and overcapacity?

Response:

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Providing incentive for tax and rebate on fuel consumption under EO 209 was limited to commercial fishing operators of Philippine registry to encourage them to fish farther in the exclusive economic zone and beyond. The availment of the incentive by the four (4) fishing companies/enterprises out of the 57 eligible enterprises (2005-2010) made no significant impact.

To prevent IUU fishing or overfishing and overcapacity, the Philippines has in place fisheries conservation and management measures, fisheries licensing system and other regulatory requirements (for example, International Fishing Permit and Certificate of Clearance, catch logsheet).

4.3: Energy

WT/TPR/S/368, section 4.3.1, page 67, para 4.39 and para 4.52

The Secretariat report highlights the Philippine Energy Plan (PEP) 2017-40 which establishes ‘a roadmap to ensuring sustainable, secure, sufficient and accessible energy’ and para 4.52 outlines the National Renewable Energy Programme (NREP) to expand and diversify renewable energy.

However, the report does not comment on the level of energy access in the Philippines. According to Asian Development Bank 2016 report ‘Fossil Fuel Subsidies in Asia, Trends, Impacts and Reforms’ almost a third of the population in the Philippines have no access to electricity.

Question

 New Zealand commends Philippines’s early actions to remove subsidies on fossil fuels and targets to expand renewable energy. Given the benefits of fossil fuel subsidy reform and development of renewable energy, is the Philippines considering further measures to increase access to basic energy services for those in need?

Response:

The Philippine Development Plan 2017-2022 identified the following strategies to continue the development of the energy sector as follows:

 Support the required massive investments and fast track the implementation of infrastructure projects to improve power generation;  Encourage competition to drive down electricity costs;  Pursue the development of national gas industry;  Ensure that the needed transmission facilities are implemented on time to efficiently transmit electricity to various load centers and interconnect the entire grid;  Prioritize the provision of electricity services to the remaining unelectrified off- grid, island, remote, and last-mile communities to achieve total household electrification by 2022.

INDONESIA

SECRETARIAT REPORT

Summary

Page 6 Para 8

“Nevertheless, some notifications remain outstanding, notably in the area of agriculture.”

Question:

1. Would the Government of the Philippines give clarification on this matter?

Response:

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The Philippines has submitted its domestic support notification to the WTO for the years 2011-2015 last 15 February 2018 which are circulated as document G/AG/N/PHL/48- 52.

Page 7 Para 14

“Exports of rice, corn, and sugar remain restricted and may be exported only if there is a surplus.”

Question:

2. Would the Government of the Philippines give clarification on this matter?

Response:

The Philippines can opt not to export products depending on the current domestic situation since there is no discipline for this. However, notifications should be made.

Page 7 Para 16

“A new Food Safety Act was promulgated in 2013; its implementing legislation entered into force in 2015. However, the Philippines' SPS-related import requirements for food, which appear to be complex, remain largely unchanged.”

Question:

3. Would the Government of the Philippines clarify about the complexity of its SPS-related import requirements for food as mentioned above?

Response:

The Philippines does not consider its SPS-related import requirements for food under the Food Safety Act as ‘complex’. The competent authority for raw and unprocessed food products is the Department of Agriculture while the Food and Drug Administration is the competent authority for processed food.

Page 8 Para 19

“The WTO waiver allowing the Philippines to defer the tariffication of its quantitative restrictions (QRs) on rice expired in June 2017. A bill on tariffication of the QRs is pending in parliament as at December 2017. In the meantime, the Philippines has extended its WTO waiver-related tariff concessions on rice and other commodities. Thus, as at December 2017, the Philippine rice import regime remains under the status quo.”

Question:

4. Would the Government of the Philippines give recent updates on the development of this issue?

Response:

Page 8 Para 20

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“Local content requirements are applied to bioethanol: production must first exhaust domestic feedstock sources before using any imported equivalent.”

Question:

5. Would the Government of the Philippines give clarification on this matter?

Response:

From the medium to long-term, the Department of Energy together with the National Biofuels Board will embark on revisiting/re-evaluating the blending requirement.

3 TRADE POLICIES AND PRACTICES BY MEASURE

3.1 Measures Directly Affecting Imports

3.1.1 Customs procedures, valuation, and requirements

Page 30 Para 3.3

Question:

6. Would the Government of the Philippines give clarification on why its mandatory PSI also covers tariff classification? How can the Government of the Philippines make sure that this policy is consistent with the Article 10.5.1 of Trade Facilitation Agreement?

Response:

3.3 Measures Affecting Production and Trade

3.3.1 Standards and other technical requirements

Page 46 Para 3.62

“As of October 2017, there were 10,091 PNSs; the share aligned with international standards was 79.9%, up from 78.5% in October 2011. Where PNSs are not aligned with international standards, this is due mainly to long standing business practices, climatic conditions, the absence of specific international standards, and the need for higher requirements than international standards. The authorities underlined their objective to strongly increase the share of internationally aligned standards by 2022.”

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Question:

7. Would the Government of the Philippines share their experience on its mechanism in order to enhance it standards to be aligned with international standards?

Response:

The Bureau of Philippine Standards (BPS) formulates Philippine National Standards (PNS) through its Technical Committee Method and Fast Track Method.

Through the Technical Committee Method, Technical Committees (TC) are established composed of representatives from the academia, trade/ industry, consumer, professional groups, research institution/s, government agencies, and testing institutions. The draft standards undergo a series of deliberation; the draft is circulated for two months to all sectors to seek technical views and comments.

Meanwhile, the fast track method allows the BPS to circulate the international standards without modifications for comments prior to adoption. The draft standards are circulated for at least sixty (60) days before adopting said standards as PNS.

Further, the BPS is guided by the ISO IEC Guide 21 parts 1 and 2 on regional or national adoption of International Standards and other International Deliverables in aligning its standards to international standards.

MALAYSIA

Para 14, p. 7

Registration and documentation requirements for exporters are similar to those for importers. Only registered companies are allowed to export. No export taxes are levied in the Philippines, apart from exports of plantation logs which are subject to a tax of 20%. Minimum export prices for corn and rice are no longer applied. Export licences are required for a wide range of products. Exports of rice, corn, and sugar remain restricted and may be exported only if there is a surplus. Some tax incentives are contingent on export performance.

Pursuant to paragraph 14, some tax incentives are contingent on export performance. Can the Philippines elaborate on these incentives? Please clarify how the measure is consistent with the commitments on the prohibition of export subsidies.

Response:

These measures are currently being revisited in line with the review of the Philippines’ overall tax and incentive scheme. Under the proposed Tax Reform for Acceleration and Inclusion (TRAIN) 2, outdated provisions of existing investments laws will be eliminated taking into consideration the current business models and engagements in free trade arrangements. It is noted that presently, there is not much difference between the domestic and export markets since both are equally contestable.

Once the law is passed, we will notify as appropriate.

2 TRADE AND INVESTMENT REGIMES

2.3.2.3 EFTA

Para 2.17, page 25

EFTA and the Philippines launched free trade negotiations in March 2015. The Philippines–EFTA FTA was signed on 28 April 2016 in Bern.18 Ratification is still pending in the Philippines and Iceland, according to the authorities.

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Can the Philippines provide an update on the ratification process and when the agreement can enter into force? What are the laws that had to be amended, if any, for the agreement to come into effect?

Response:

The President signed the instrument of ratification for the PH-EFTA FTA last 8 December 2017 and the Senate ratified the on 5 March 2018. In accordance with the provisions of the Agreement, the FTA will enter into force on the first day of the third month following the Philippines’ deposit of its instrument of ratification. The instrument of notification was deposited on 16 March at the Norwegian Embassy in Manila.

The Philippines negotiated the PH-EFTA FTA within the parameters of its existing laws, rules, and regulations. As such and taking into account the independence of the executive and legislative processes, all provisions of the Agreement are in accordance with Philippine laws and existing international commitments such as those undertaken under the WTO.

2.4 Investment Regime

Para 2.26, p. 26

The foreign investment regime of the Philippines is governed, inter alia, by the 1987 Constitution and the Foreign Investments Act of 199126, which regulate the entry and establishment of foreign investors, and Executive Order No. 226 (or Omnibus Investment Code (OIC) of 1987), which stipulates investors' (national and foreign) eligibility for incentives.

Foreign Investments Act covers all activities, except banking and other financial services. It provides for the establishment of a "regular" Foreign Investment Negative List (FINL) of areas/activities where FDI is limited (Annex A2[fdi]):

a. List A – foreign ownership is prohibited or limited (in terms of foreign ownership caps) by mandate of the Constitution and specific laws; and

b. List B – foreign ownership is limited for reasons of security, defence, risk to health and morals, and protection of SMEs.

 Can the Philippines explain further on the areas of activities and the extent of the Constitution mandate and specific laws under List A?

 Based on paragraph 2.26, does safeguarding SMEs afford protection to domestic production?

Response:

Please refer to the 10th RFINL which could be accessed at http://www.neda.gov.ph/wp-content/uploads/2014/04/EO98withannex.pdf.

The “protection of SMEs” under List B of the FINL refers to the limitation on foreign equity of up to 40% only. It does not afford protection to domestic production.

Para 2.31, page 28

The Philippines continues to encourage investment in targeted areas, which are listed in the Philippine Investment Priorities Plan (a three-year rolling plan), including manufacturing and agriculture. Incentives include duty-free importation of capital goods and a four-year tax holiday. The 2017 plan reflects the Government's objective to spread economic growth opportunities domestically and encourage especially micro, small and medium enterprises (MSMEs) to benefit from local and global value chains. The ten priority investment areas under the 2017 plan are based on the President’s "Zero to 10-point" Socio-Economic Agenda, AmBisyon Natin 2040, and the Philippine Development Plan 2017-2022, and focus on competitiveness, skills development,

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- 124 - technology upgrading, infrastructure modernization, and improvements in the overall business environment. With the theme, "Scaling-Up and Dispersing Opportunities,” the Plan includes more inclusive and innovation-driven activities. One of the strategies is through the Inclusive Business (IB) Model project wherein medium and large agribusiness and tourism enterprises are encouraged to engage micro and small enterprises as raw material suppliers or service providers. The BOI provides full assistance from pre- to post-establishment of investment activities in the country.

 Can the Philippines provide further details regarding the Investment Priorities Plan? Is this rolling plan updated every 3 years to include more areas or are they confined to the ten priority investment areas highlighted in the Report? Are details on this Plan available online?

Response:

The Investment Priorities Plan (IPP) contains the list of investment activities being encouraged by the government to achieve the poverty reduction and inclusive growth goals of the country.

While the IPP is a three-year rolling plan, it is reviewed annually.

Further details on the 2017 IPP are available at the website of the Philippine Board of Investments (www.boi.gov.ph).

3.1 Measures Directly Affecting Imports

3.1.1 Customs procedures, valuation, and requirements

Para 2.27, p. 27 (ASEAN) The Philippines continues to restrict foreign investment in a number of activities including agriculture, fisheries, telecom services, and public utilities, but it has also taken some liberalizing steps. In the area of professional services, the FDI restrictions in place at the time of the last Review have been eliminated (subject to certain exceptions and reciprocity). The Philippines has also liberalized banking services.28 The remaining FDI restrictions are made public in a transparent manner through a consolidated negative list.

 What is the rationale behind the continuous restriction in sectors such as telecom services and public utilities?

Response:

This is a limitation provided in the Philippine Constitution. Kindly refer further to the reply on Malaysia’s questions on the Government report on plans to further liberalize the services sectors which cites initiatives to amend the Public Service Act and issuance of Memorandum Order No 16, among others.

Para 2.28, p. 27 (ASEAN) The FINL is subject to review every two years to reflect any new legislation amending or repealing laws affecting investment. Following the last TPR (March 2012), the ninth FINL was promulgated on 29 October 2012 (Executive Order No. 98); it entered into force on 13 November 2012.29 The most recent (tenth) FINL was issued on 29 May 2015 by Executive Order No. 184 and entered into force on 13 June 2015.30 The authorities expect the eleventh FINL to be issued in 2017.

 What is the current status on the 11th FINL?

Response:

The draft of the 11th RFINL is for consideration and approval by the National Economic and Development Authority (NEDA) Board, thus, has not been issued.

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Other (ASEAN)

The passing of the Philippines Halal Export Development and Promotion Program under the Halal Act by the Philippines Congress on 16 May 2016 will pave the way for the Philippines to establish a comprehensive program for the development of their Halal ecosystem and promote halal exports. It will be formulated to cover the entire value chain for food, products and services, agricultural production, manufacturing, export and marketing assistance and application of Halal certification standards.

 What are the conditions set by the body for the export and trade of Halal products, processes and services?

Response:

Pursuant to Section 6(f)of Republic Act (R.A.) No. 10817, otherwise known as the Halal Export Promotion and Development Act of 2016 and Section 16(f)of its Implementing Rules and Regulations on its mandate to develop and promote Halal exports, a Philippine National Halal Certification Scheme (PNHCS) has to be developed.

As such, the Technical Working Group for Halal which was created by the Halal Board was tasked to craft the PNHCS. This document contains the general guidelines and procedures of certification by the Halal Certification Bodies (HCBs) in the Philippines. Based on the draft PNHCS, scope of certification covers the ff:

1. Food Products / Beverages / Food Supplements 2. Food Premises/Establishment 3. Consumer durables (define as non-food) 4. Cosmetics and Personal Health Care Products 5. Pharmaceuticals 6. Packaging 7. Farm Systems Includes Agricultural Inputs and Feeds 8. Slaughterhouses 9. Logistics 10. Others

The Philippine Accreditation Board, as the national accreditation body, for HCBs had participated in the review of this document done by the Technical Working Group for Halal. Note: The draft PNHCS is yet to be adopted or approved by the Halal Board, within this month.

3.1.5 Import prohibitions, restrictions, and licensing (MOH)

 Philippines has not mentioned any specific provisions on importation/exportation of human remains, human tissues, microorganisms and pathogenic substances. The Disease Control Division, Ministry of Health Malaysia would like to seek clarification whether the Government of Philippines, has imposed any license/permit requirements under the country legislation and guidelines to import/export human remains, human tissues, microorganisms and pathogenic substances?

 If the country imposed such requirements, we seek information on the name of Government agency issuing the license/permit and whether fees will be imposed on any license/permit issued by the Authority.

Response:

The Philippines has been implementing, through the Bureau of Quarantine of the Department of Health, the provisions on importation/exportation of human remains, human tissues, microorganisms and pathogenic substances. These provisions are governed by Republic Act No. 9271, known as the “Quarantine Act of 2004”, and stipulated in the Section 58 of Rule 10, and Sections 60 and 61 of Rule 11 of its Implementing Rules and Regulations (IRR).

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3.3.8 Intellectual property rights (MOH)

Para 3.126, p. 56

The Universally Accessible Cheaper and Quality Medicines Act of 2008 (R.A. 9502 of 2008) allows parallel imports of patented drugs and medicines. This law also allows for the issuance of a special compulsory license for the importation of patented drugs and medicines, which are primarily for domestic consumption and are subject to the payment of adequate remuneration to the patent owner either by the exporting or importing country. The compulsory license also contains a provision directing the grantee of the license to exercise reasonable measures to prevent the re- exportation of such products imported.

 Appreciate if Philippines could indicate what kind of reasonable measures are taken to prevent the re-exportation of the products imported through this special compulsory license? Does it include special markings or labelling?

Response:

The Philippines has not yet issued a special compulsory license for the importation of patented drugs and medicines. Nonetheless, the provisions of the special compulsory license in the Universally Accessible Cheaper and Quality Medicines Act of 2008 were inspired by the decision of 30 August 2003 of the WTO General Council on the implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health. Accordingly, the implementation of the special compulsory license will include the undertaking by the grantee of the license to exercise reasonable measures within the means and administrative capacity of the grantee to prevent re-exportation of the products covered by the special compulsory license. Such reasonable measures may include special markings or labelling. IPOPHL, together with the Department of Health (DOH) and the Food and Drug Authority (FDA), is in the process of enhancing and developing the regulations, guidelines, and procedures on the issuance of special compulsory licenses, which will also cover what may be considered reasonable measures to prevent re-exportation.

Para 3.8, p. 31

The Philippines accepted the Trade Facilitation Agreement on 27 October 2016. It notified its category A commitments in August 20145. The authorities indicate that the notification of category B and C commitments is under preparation.

 Can the Philippines indicate when Category B and C commitments will be notified?

Response:

The Philippines submitted its notification on Categories A, B and C on 30 January 2018.

3.1.3 Tariffs

Para 3.12, page 31

Cane sugar and rice receive the highest tariff protection, with rates of 65% and 50% respectively. 14.9% of tariff lines are nuisance tariffs, and 41.9% carry a tariff greater than zero and up to 5% (Chart 3.1). A greater share of duty-free lines and a reduction of nuisance tariffs would facilitate the Philippines integration into global value chains.

 The Report indicates that 14.9% of tariff lines are nuisance tariffs. Can Philippines explain the sectors that attribute to these nuisance tariffs and if there is any plan in the near future to eliminate them?

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Response:

Footnote d of Table 3.1 (page 31 of Secretariat Report) refers to tariff rates which are greater than zero, but less than or equal to 2%. At eight-digit level, there are 1,609 tariff lines, out of 10,813 total tariff lines, with rates within those range.

Under Executive Order (EO) 20, s. 2017 which provides for the Philippine MFN tariff schedule from 2017 to 2020, the number of 8-digit tariff lines with tariff rates less than 2% were reduced from 2,295 (or 21% share of total tariff lines) in 2016 to 1,609 tariff lines (15% share) in 2017.

The products whose tariffs were reduced to 0% under EO 20 include:

 certain products (e.g., agricultural, chemical) covered under the Agriculture and Fisheries Modernization Act (AFMA). Under the AFMA, which expired in 2015, said products may be imported duty-free subject to the submission of Certificate of Eligibility or Certificate of Accreditation issued by the Department of Agriculture;

 certain capital equipment; and

 products covered by the Philippine Expansion Schedule under the Information Technology Agreement (ITA II). The Philippines eliminated the duties on 116 tariff lines under ITA II in 2017 and is committed to eliminate the tariffs on an additional 95 tariff lines by 2019.

3.3.6 Government procurement

Para 3.99, p. 52

Government procurement accounts for about 10% to 11% of GDP. The Philippines has been making efforts to establish an open, transparent and competitive government procurement regime and relevant reforms have been carried out since early 2000s. However, despite the progress, there continues to be high risk of corruption in the system.77The restriction on foreign suppliers' participation in the sector also remains as a concern. The Philippines is not yet a party or observer of the WTO Agreement on Government Procurement (GPA). It has not included government procurement provisions or chapters in its free trade agreements with trading partners.

 Is the Philippines considering to be an observer or party to the GPA?

 Can the Philippines elaborate in detail on the initiatives that have been taken (if any) to open the sectors for foreign participation.

Response:

At present, the preference for “domestic entities” in the Procurement of Goods has been repealed by Republic Act No. 10667 or the Philippine Competition Act. Likewise, the President of the Philippines issued Memorandum Order No. 16, dated 17 November 2017 directing NEDA and its member agencies to exert utmost efforts to lift or ease restrictions on certain investment areas or activities with limited foreign participation, which include, among others, practice of particular professions, where allowing foreign participation will redound to the public benefit; and contracts for the construction and repair of locally-funded public works.

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Para 3.111, p. 54

The nationality requirement of bidders continues to restrict wholly-owned foreign entities from participating in public procurement. For procurement of goods and consulting services, it requires that at least 60% of the interest of partnerships or the outstanding capital of corporations belong to citizens of the Philippines. For infrastructure projects, it requires 75% Filipino ownership. Foreign bidders are only eligible to participate (i) when allowed under any treaty or international or executive agreement; (ii) when the foreign bidder is a citizen, corporation or association of a country whose laws or regulations grant reciprocal rights to citizens, corporations, or associations of the Philippines; (iii) when the goods sought to be procured are not available from local suppliers; or (iv) when there is a need to prevent situations that defeat competition or restrain trade. Of the 930,557 award notices issued between 2012 and 2016, 524 contracts (0.05 per cent) were awarded to foreign suppliers.

Based on paragraph 3.111, 524 contracts (0.05 per cent) were awarded to foreign suppliers. Could the Philippines indicate in which sectors?

Response:

The Philippine Government Electronic Procurement System (PhilGEPS) platform/Electronic Bulletin Board does not require the Procuring Entity to indicate the particular sector involved in its procurement, thus the data being asked is not available.

4 TRADE POLICIES BY SECTOR

4.1.2.2 Tariff quotas Para 4.5, p. 59

The tariff quota year runs from February to January, and licences are allocated twice per quota year. They are issued through a "systematic distribution procedure" combined with first-come- first-served allocation when quotas are underutilized. There is a beginning-year pool (annual commitment quantity plus unused quota volumes from the previous quota year), where priority access is given to: (i) licensees that have not surrendered any of their previous year's quota allocation, and have utilized at least 80% of the previous year's allocation from the beginning-year pool and used 30% from the mid-year pool by the last working day of May; and (ii) qualified entrants (first-time licensees or licensees that failed to obtain a quota share in the previous quota year). The mid-year pool is fed by surrendered quota allocations by end-May of each quota year. Any tariff quota volumes remaining in the beginning-year or mid-year pools are distributed to interested applicants on a first-come-first-served-basis. A special regime applies for rice (Section 4.1.5)

 Could the Philippines explain the details on the usage of "systematic distribution procedure" combined with first-come-first-served allocation when quotas are underutilized?

Response:

Unutilized quotas may be returned or be subjected to penalty (i.e. recalled) and said volumes are added to the pool for SDP. Unallocated volumes after SDP are made available on a First-Come, First-Served basis until exhausted, as stated in DA Administrative Order 8 series of 1997.

4.1.3 Domestic support

Para 4.9, p. 60

The main trade policy instruments remain unchanged: price support, input subsidies, insurance programmes, credit schemes, and buffer stocks, in addition to Green Box-type general services. The Philippines has yet to provide up-to-date domestic support notifications (the most recent year covered is calendar year 2010).11 The Philippines does not have a bound Total AMS commitment; domestic support is subject to a 10% de minimis ceiling.

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 Could the Philippines indicate when it intends to submit the notifications for domestic support?

 Based on paragraph 4.9, the recent year of Domestic Support notification was year 2010. Could the Philippines explain the reason of the pending notifications?

Response:

The Philippines has submitted its domestic support notification to the WTO for the years 2011-2015 last 15 February 2018 which are circulated as document G/AG/N/PHL/48- 52.

4.5.4 Tourism

Para 4.133, p. 81

Notwithstanding the importance the Government attaches to growth, significant market access and barriers to foreign investment remain in the tourism sector. 100% foreign equity is allowed in accommodation facilities. However, lands may be leased to foreign investors only for a period of 50 years, renewable once for not more than 25 years. For tourism projects, private land may only be leased to foreigners for investments of a minimum of US$5 million. Minimum paid-up capital for 100% foreign-owned restaurants is US$2.5 million; otherwise foreign ownership is limited to 40%.

 Para 4.133 emphasises that significant market access and barriers to foreign investment remains in the tourism sector. Can the Philippines explain the procedure for land acquisition once the 75 year period of leasing is over? Is the Philippines considering to liberalize further the tourism sector in the future?

Response:

Foreign investor may renegotiate with a Filipino land owner for a new lease term after the lapse of the 75 year initial lease but not to exceed a total number of 99 years from date of original lease agreement.

Furthermore, the Philippines already maximized 100% foreign equity for hotel/ lodging services. On the other hand, other sub-sectors under the travel and tourism services namely: restaurants, travel agencies and tour operator services and professional congress organizers shall still be subject to existing domestic rules and regulations.

GOVERNMENT REPORT

2.4.4 Logistics Para 2.30, p. 10

In addition, a number of improvement projects for the port system, including the Roll-on-Roll-off (RoRo) network and conduct of feasibility and engineering studies, were undertaken to ensure efficient operations and prepare the country’s port system for regional integration with the rest of the ASEAN.

 In order to promote regional integration with the rest of the ASEAN countries, does the Philippines allow right-hand drive vehicles from other countries to enter the Philippines via RoRo service to any of its ports? What are the terms and conditions imposed by the Philippines’ authority with regards to this matter?

Response:

Importation of all right‐hand drive vehicles and its parts are banned from entering any Philippine port.

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Pursuant to Republic Act No. 8506, it shall be unlawful for any person to import, cause the importation of, register, cause the registration of, use, or operate any vehicle with its steering wheel right-hand side thereof in any highway, street or road, whether private or public or of the national or local government except such vehicles that are acknowledged as vintage automobiles, manufactured before 1960, in showroom condition, and/or are to be utilized exclusively for officially and legally sanctioned motorsports events, and off-road special purpose vehicles.

On RoRo operations, Executive Order (EO) No. 204 (s. 2016) was signed to expand the coverage of EOs 170 and 170-A (s. 2003) and to include Chassis RoRo (Cha-Ro), addressing the need to further reduce logistics cost and support and promote competitiveness of the export sector, among others. With the expansion of the coverage of RoRo operations (i.e. Cha-Ro), containers on chassis can now be loaded unto the RoRo ship by prime mover (or tractor head) at the port of origin and unloaded from the RoRo by a different prime mover (tractor head) at the port of destination. Cha-Ro service is seen to address the left-hand, right-hand drive issue among ASEAN countries since prime movers from either side of the route would be used in loading and discharging of containers from the RoRo ships.

3.2.2 Services

Para 3.14, p. 13

The Philippines is committed to according appropriate consideration to the needs of MSME service suppliers and will continue to push for the exercise of options by member countries (i.e. where commitments will be made, apply horizontal limitations to all services; invoke general exceptions to justify existing regulations or to enact new ones in pursuance of legitimate public policy concerns; and invoke restrictions to safeguard the balance-of-payments).

 Does the Philippines intend to liberalise further the services sectors?

 Could the Philippines update on the progress made to facilitate MSMEs participation in the services sectors?

Response:

The President provided guidance through Memorandum Order No. 16, s. 2017, on the priority investment areas or activities where equity restrictions will be reviewed and these include a number of services sectors such as the following:

 Private recruitment, whether for local or overseas employment;

 Practice of particular professions, where allowing foreign participation will redound to the public benefit;

 Contracts for the construction and repair of locally-funded public works;

 Public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system;

 Culture, production, milling, processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and the by- products thereof;

 Teaching at higher education levels;

 Retail trade enterprises; and

 Domestic market enterprise.

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Based on the Philippine Development Plan 2017-2022, the strategies to facilitate MSMEs participation in general and relevant to the services sectors include accelerating HRD and skills development to make education more industry appropriate and supporting linkages between MSMEs and large corporations to facilitate increased participation of MSMEs in global value chains.

SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU, KINMEN AND MATSU

WT/TPR/S/368

2. TRADE AND INVESTMENT REGIMES

2.2. Trade Policy Formulation and Objectives

Page 22-23 (Para 2.4. / Para 2.5)

The National Economic and Development Authority (NEDA) is the Philippines’s economic development and planning agency. The NEDA Board, chaired by the President, set s the principles economic policy direction, and the NEDA Secretariat serves as the Board’s research and technical support arm. The NEDA Board is supported by several Cabinet-level inter-agency committees, including the Committee on Tariff and Related Matters. The Philippines Development Plan 2017- 2022 focus on the competitive of the economy through open services markets, good regulatory practices and sound competition policy and institutions.

Question(s):

With regard to formulating trade policies and making policy decisions, how does the NEDA consult the public and experts for opinions involving the policy-making process? Is there a similar mechanism or channel for foreign investors and stakeholders to make policy suggestions?

Response:

All agencies and interagency bodies have contact points for non-government stakeholders inputs into trade policy making process. For tariffs on goods, the Tariff Commission, an attached agency of the NEDA, conducts public hearings on proposed tariff modification and accession to trade agreements. NEDA also consults concerned agencies and experts on proposed PH positions and draft requests and offers for trade in services negotiations. These agencies in turn consult their respective stakeholders. The NEDA likewise participates in the One Country One Voice Advocacy and Consultation forum launched by the DTI in 2011 to enable stakeholders to participate in trade policy formulation and trade negotiation.

Foreign investors can make policy suggestions or submit position papers through the foreign chambers association or through the local chamber of commerce and industry, which are in turn submitted to the NEDA for consideration. Concerned government agencies are consulted in the crafting of the RFINL.

3. TRADE POLICIES AND PRATICES BY MEASURE

3.1 Measures Directly Affecting Imports

3.1.1 Customs procedures, valuations, and requirements

Page 30 (Para 3.4.)

The Customs Modernization and Tariff Act (RA No. 10863) of 30 May 2016 has the aim to modernize customs rules, expedite customs procedures, reduce opportunities for corruption, and improve customs service delivery. The Act introduced more severe penalties for misclassification, undervaluation, and corrupt behaviour of officials.

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Question(s):

When are the Customs Modernization and Tariff Act (RA No. 10863) and the relevant rules for implementation scheduled to be announced? If an importer does not comply with this act, what are the penalties? Are different customs clearance procedures set up according to the characteristics of the goods? What are the relevant application fees?

Response:

The copy of the Customs Modernization and Tariff Act is available in the Official Gazette: http://www.officialgazette.gov.ph/2016/05/30/republic-act-no-10863/

The draft CAOs can be accessed in the CMTA microsite: https://www.dof.gov.ph/index.php/issuances/cmta_irr/

3.3 Measures Affecting Production and Trade

3.3.1 Standards and other technical requirements

Page 46 (Para 3.6.5)

The Philippines Accreditation Bureau (PAB) is the national accreditation body of the Philippines. It covers the accreditation of inspection, testing and calibration laboratories and assesses the conformance of laboratories’ quality management systems with international guidelines. As the September 2017, PAB has accredited 243 conformity assessment bodies (76 testing laboratories, 41 calibration laboratories, six medical laboratories, four inspection bodies, and 16 certification bodies.)

Question(s):

Has the Philippines Accreditation Bureau (PAB) set up norms for halal certification product categories, including raw materials, processing, and distribution? We would appreciate it if the Philippines would share and provide more details about marketing promotion strategies on halal- certified products.

Response:

Section 6(f) of Republic Act No. 10817 or the Halal Export Promotion and Development Act of 2016 and Section 16(f) of its Implementing Rules and Regulations mandate the development and promotion of Halal exports as well as the development of the Philippine National Halal Certification Scheme (PNHCS).

A Technical Working Group for Halal, which was created by the Halal Board, was tasked to craft the PNHCS. This document will contain the general guidelines and procedures of certification by the Halal Certification Bodies (HCBs) in the Philippines. Based on the draft PNHCS, scope of certification covers the following products and services:

 Food Products / Beverages / Food Supplements;  Food Premises/Establishment;

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 Consumer durables (define as non-food);  Cosmetics and Personal Health Care Products;  Pharmaceuticals;  Packaging;  Farm Systems Includes Agricultural Inputs and Feeds;  Slaughterhouses;  Logistics;  Others.

As the national accreditation body for HCBs, PAB is a member of the Technical Working Group and had participated in the review of the PNHCS. The draft PNHCS is yet to be adopted or approved by the Halal Board with a target to do so within this month (March).

3.3.8 Intellectual property rights

3.3.8.2 Patents

Page 55 (Para 3.123)

The term of a patent is 20 years from the filing date. A patentable invention is "any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable". The Law lists non-patentable inventions (e.g. discoveries, scientific theories, and mathematical methods). In the case of drugs and medicines, the mere discovery of a new form or new property or new use of a known substance, or the mere use of a known process, are not patentable. Also excluded from patent protection are schemes, rules, and methods of performing mental acts, playing games or doing business, and computer programs; methods for the treatment of human or animal body by surgery or therapy and diagnostic methods practiced on the human or animal body; and plant varieties or animal breeds or essentially biological process for the production of plants or animals.

Question(s):

According to the Philippines’ Intellectual Property Code, inventions related to computer software are excluded from eligible subject matters protected by patents. Such inventions can only be protected by copyright. However, as copyright protects exclusively the outward form of an invention and the ideas thereof, its protection does not extend to the concrete steps of implementing such ideas. In recent years, we have seen the US, Japan, and the EU allow patent protection of inventions related to computers. We’d like to know if the Philippines will consider including inventions related to computer software as eligible subject matters protected by patents.

Response:

The Philippines can confirm that under Section 172.1(n) of the IP Code, a computer program per se is among the literary and artistic works that may be the subject of copyright protection. Copyright protection of computer programs extends to the original expression of ideas of its author, the computer programmer. Hence, the protection extends to the source and object codes, as well as the literary and artistic elements in the program.

Thus, under Sec. 22 of the IP Code, programs for computers are identified as non- patentable inventions that are excluded from patent protection, since they are treated as mere abstract ideas and lacking in technical effect.

However, if the computer program is installed in a certain apparatus or machine and it is able to produce technical effect, then the invention is not directed to the computer program. In such case, the computer program ceases to be an abstract idea, and it may be considered as an invention relating to a product or process.

The Philippines, through IPOPHL, has adopted the Guidelines on the Examination Guidelines for the Information Communications Technology and Computer-Implemented

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Inventions, which serves as a guide to IPOPHL patent examiners in the examination of patent applications. The Guidelines is available at the IPOPHL website.

3.3.8.4 Trademarks

Page 57 (Para 3.131)

A trade mark must be registered in the Philippines to be protected against trademark infringement. Well-known marks are similarly protected when these are declared as such by competent authorities. Trade names or business names, whether registered or not, are protected against any subsequent use by a third party which is likely to mislead the public.

Question(s):

Is IPOPHL the competent authority for declaring well-known marks? On what facts or grounds does IPOPHL determine if a trademark is well-known? Are the declarations based on the applications of proprietors or on court decisions? Should the declared marks, well-known or not, be registered with IPOPHL? We would like to know any related provisions.

Response:

The Philippines confirms that IPOPHL is one of the competent authority for declaring whether a mark is well-known. Under Rule 101(d) of the IPOPHL Rules and Regulations on Trademarks, Service Marks, Trade Names and Marked or Stamped Containers of 2017 (TM Regulations of 2017), the “competent authority” for purposes of determining whether a mark is well-known refers to the courts, the IPOPHL Director General, and the Director of the Bureau of Legal Affairs of IPOPHL.

Under Rule 103 of the TM Regulations of 2017, in determining whether a mark is well-known, the following criteria or any combination thereof may be considered: (a) the duration, extent and geographical area of any use of the mark, in particular, the duration, extent and geographical area of any promotion of the mark, including advertising or publicity and the presentation, at fairs or exhibitions, of the goods and/or services to which the mark applies; (b) the market share, in the Philippines and in other countries, of the goods and/or services to which the mark applies; (c) the degree of the inherent or acquired distinction of the mark; (d) the quality-image or reputation acquired by the mark; (e) the extent to which the mark has been registered in the world; (f) the exclusivity of registration attained by the mark in the world; (g) the extent to which the mark has been used in the world; (h) the exclusivity of use attained by the mark in the world; (i) the commercial value attributed to the mark in the world; (j) the record of successful protection of the rights in the mark; (k) the outcome of litigations dealing with the issue of whether the mark is a well-known mark; and (l) the presence or absence of identical or similar marks validly registered for or used on identical or similar goods or services and owned by persons other than the person claiming that the mark is a well-known mark.

The declaration of a mark as well-known will be made based on the evidence presented by a party to a case, and upon finding of the competent authority that the mark meets the criteria set out in the IP Code and the Rules. In this regard, Section 123(e) of the IP Code states that “in determining whether the mark is well-known, account shall be taken of the knowledge of the relevant sector of the public rather than of the public at large, including knowledge in the Philippines which has been obtained from the promotion of the mark”.

For purposes of a declaration that a mark is well-known, the mark need not be registered with IPOPHL. Under Sec. 131.3 of the IP Code, the owner of a well-known mark as defined under Section 123.1(e) of the IP Code, which is not registered in the Philippines, may, against an identical or confusingly similar mark, oppose its registration, or petition the cancellation of its registration or sue for unfair competition, without prejudice to availing himself of other remedies provided for under the law.

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On the other hand, under Section 147 of the IP Code, “[t]he exclusive right of the owner of a well-known mark defined in Subsection 123.1(e) which is registered in the Philippines, shall extend to goods and services which are not similar to those in respect of which the mark is registered: Provided, That use of that mark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered mark: Provided further, That the interests of the owner of the registered mark are likely to be damaged by such use.”

Is the protection of a proprietor, excluding a third party’s use of the trade name or business name (whether registered or not), which is likely to mislead the public, stipulated in the IP Code? If so, what are the provisions? Can the proprietor of a foreign trade name or business name pursue protection on the basis of such provisions?

Response:

The Philippines confirms that the protection for trade names from use by a third party that is likely to mislead the public is stipulated in the IP Code. Section 165 of the IP Code and Rule 104 of the TM Regulations of 2017 prohibit the use of a name or designation as a trade name if its nature or its use is contrary to public order or morals and if, in particular, it is liable to deceive trade circles or the public as to the nature of the enterprise identified by that name. Notwithstanding any laws or regulations providing for any obligation to register trade names, such names shall be protected, even prior to or without registration, against any unlawful act committed by third parties. In particular, any subsequent use of the trade name by a third party, whether as a trade name or a mark or collective mark, or any such use of a similar trade name or mark, likely to mislead the public, shall be deemed unlawful.

In accordance with the above provisions, if the use of a trade name by a third party is unlawful, i.e., in particular, if it is likely to mislead the public, then the proprietor of a foreign trade name may pursue protection on the basis of Section 165 of the IP Code.

REPUBLIC OF KOREA

2 Trade and Investment Regimes

2.4 Investment Regime

Page 26 (Para 2.26), Page 27 (Para 2.27 and Para 2.29)

According to the Para 2.26, 2.27 and 2.29, the Philippine government has liberalized restriction on foreign investment in some areas.

 My delegation wants to know whether the Philippine government has any long-term plan to liberalize foreign ownership cap.

Response:

The Philippines is currently reviewing the 1987 Constitution and several other laws with a view to lift or ease foreign equity restrictions. In December 2016, the President signed Executive Order No. 10 creating the 25-member consultative committee tasked to review the Constitution. The said committee has already started consultations with various government agencies on certain provisions of the Constitution.

The President has also directed the National Economic and Development Authority (NEDA) Board, through Memorandum Order No. 16, s. 2017, to take immediate steps to lift or ease existing restrictions on foreign participation in the following investment areas or activities:

1. Private recruitment, whether for local or overseas employment 2. Practice of particular professions, where allowing foreign participation will redound to the public benefit

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3. Contracts for the construction and repair of locally-funded public works

4. Public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system

5. Culture, production, milling, processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and the by- products thereof

6. Teaching at higher education levels

7. Retail trade enterprises

8. Domestic market enterprise

 My delegation also wants to know whether the Philippine government will reform business environment, which is considered not to be business-friendly for foreign investors. For exa mple, if foreigners own less that 40 percent of a company share, foreigners are not allowe d to take high ranking positions such as president and treasurer in the company.

Response:

This question is related to the previous question. The equity restriction in certain activities are currently under review as mentioned above. Once the equity restrictions are relaxed, foreigners will then be allowed to take higher positions in the said activities.

TURKEY

THE GOVERNMENT REPORT

2. Domestic Policies And Initiatives To Sustain Long-Term Growth And Improve The Business Environment For Inclusive Growth, 2.2 Enhancing Competition Policy and the Regulatory Environment, pg. 6, 2.10

It is stated in the Government Report that “To identify and eliminate regulations and laws that hamper doing business in the country, 2.10. the Philippines rolled out “Project Repeal” in June 2016 to cut red tape and streamline business transactions and processes. The project supports the Government’s policy of eliminating laws that place a heavy regulatory burden on businesses and improve the country’s overall competitiveness. Improvements are planned in more complex areas of competitiveness such as in infrastructure, government bureaucracy, tax rates and tax regulations, including education, research and development, and disaster response.”

Question: Could the Philippines give further explanation about this project, particularly regarding the regulation changes?

Response:

Project Repeal is a collaboration of 88 government agencies where an aggregate of 4,837 policy issuances were reviewed with a view to repeal outdated rules and reduce the cost of business.

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THE SECRETARIAT REPORT

1. Economic Environment, 1.3.2 Trends and patterns in FDI, pg. 20, 1.48

It is stated in the Secretariat Report that “Further success in attracting FDI inflows has been hampered by a number of factors such as lack of good infrastructure, FDI restrictions (Section 2.[investment regime]), and weak competition environment. The authorities noted that steps have been taken to address the issues, including steadfast implementation of the competition law, drawing up a national competition policy, and avoiding regulations that unduly discourage new entrants.”

Question: Could the Philippines provide detailed information about the steps that have been taken in relation with FDI legislation? (Elimination of FDI restrictions, avoidance of unnecessary bureaucracy etc.)

Response:

The President provided guidance via Memorandum Order No. 16, s. 2017, on the priority investment areas or activities where current equity restrictions will be reviewed. These include the following:

1. Private recruitment, whether for local or overseas employment 2. Practice of particular professions, where allowing foreign participation will redound to the public benefit 3. Contracts for the construction and repair of locally-funded public works 4. Public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system 5. Public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system 6. Culture, production, milling, processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and the by-products thereof 7. Teaching at higher education levels 8. Domestic market enterprise

At present, there is an ongoing review of the 1987 Constitution by a 25-member Consultative Committee created by the President through EO No. 10. The Committee is expected to complete its review in six months or until June this year. It will submit its recommendations and proposals to the President, who will transmit these to Congress.

3.1.3.2 Trade Policies and Practices by Measure – Measures Directly Affecting Imports – Tariffs – Tariff Quotas, pgs. 34, para. 3.17

It is stated in the Secretariat Report that “For 34 tariff lines the out-of-quota rate is equal to the in-quota rate; there is effectively no tariff quota on these lines.”

Question: Could the Philippines explain the purpose/mind-set of the equality between out-of and in-quota rates for these 34 tariff lines in practice? Response:

This tariff structure is the result of the implementation of the reduction commitments of out-quota rates.

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3.1.5 Trade Policies and Practices by Measure – Measures Directly Affecting Imports – Import Prohibitions, Restrictions and Licensing, pg. 39, para. 3.32

It is stated in the Secretariat Report that “A vast range of goods is subject to licences or permits when imported. For certain products, multiple permits or licences are required, and informal payments have been reported by the business community. The import licensing regime is regulated mainly by the Customs Modernization and Tariff Act of 30 May 2016. Import licensing is intended, inter alia, to safeguard public health, national security and welfare, and to meet international treaty obligations regulating certain products. Costs for the licence or permit depend on its validity period, the product, and import quantities; additional inspection fees may also apply.”

Question: As one of WTO members ratifying the Trade Facilitation Agreement, could the Philippines specify whether there will be any measures taken for facilitating the import regime in terms of both narrowing the vast range of goods that are subject to licensing and easing the complexity in the licensing procedures?

Response:

In the meantime, some agencies have automated their licensing processes. For example, the Food and Drug Administration (FDA) of the Department of Health has instituted an electronic system for the processing of import authorization (License to Operate and Certificate of Product Registration). A License to Operate (LTO) as food distributor- importer needs to be secured from the FDA while a Certificate of Product Registration (CPR), a pre-market approval certificate, needs to be obtained for each and every product prior to importation. The electronic system for the processing of import authorization can be accessed through the FDA website (https://www.fda.gov.ph) e- portal.

The general direction of the Philippines is to simplify and automate the processes.

3.1.6.3 Trade Policies and Practices by Measure – Measures Directly Affecting Imports – Anti-Dumping, Countervailing, and Safeguard Measures – Other Measures, pgs. 42-43, paras. 3.42

It is stated in the Secretariat Report that “Under Section 714 of the Customs Modernization Tariff Act, the President may impose an additional duty of up to 100% on goods from any country that discriminates against Philippine exports. If discrimination persists or increases after the duty is imposed, the President may prohibit the importation of goods of that country or establish import quotas, if in the national interest. Although this measure has not been used during the period under review, it adds an element of uncertainty to the Philippines' trade regime. ”

Question: Can these additional duties exceed the bound MFN rates? If yes, could the Philippines explain the legal rationale under the GATT and the WTO Agreements that justifies parties to impose additional duties should a country discriminate against other parties’ exports?

Response:

The Philippines can confirm that the duties can exceed the bound MFN rates and will be pursued according to applicable domestic and international trade remedy laws.

3.3.6 Government procurement, pp. 54, para. 3.111

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It is mentioned in the report that “The nationality requirement of bidders continues to restrict wholly-owned foreign entities from participating in public procurement. For procurement of goods and consulting services, it requires that at least 60% of the interest of partnerships or the outstanding capital of corporations belong to citizens of the Philippines. For infrastructure projects, it requires 75% Filipino ownership. Foreign bidders are only eligible to participate (i) when allowed under any treaty or international or executive agreement; (ii) when the foreign bidder is a citizen, corporation or association of a country whose laws or regulations grant reciprocal rights to citizens, corporations, or associations of the Philippines; (iii) when the goods sought to be procured are not available from local suppliers; or (iv) when there is a need to prevent situations that defeat competition or restrain trade. Of the 930,557 award notices issued between 2012 and 2016, 524 contracts (0.05 per cent) were awarded to foreign suppliers.”

Question: As the Philippines is getting ready for the Build, Build, Build Program, which will cover a number of big-scale infrastructural projects, could the Philippines explain if it has plans for a more accessible government procurement policy which would welcome foreign participants openly?

Response:

2. Table A2.2 Tenth foreign investment negative list, May 2015, p.94-95

As it is stated in the Tenth foreign investment negative list, in the Secretariat Report, “Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000” and “Domestic market enterprises which involve advanced technology or employ at least 50 direct employees” are restriction subtitles for FDI.

Question: Could the Philippines give further explanation regarding these restrictions? (i.e. the definition of domestic market enterprises, the grounds on which these restrictions are imposed, and whether there is any plan to abolish/amend these restrictions)

Response:

Domestic market enterprise refers to an enterprise which produces goods for sale, or renders services to the domestic market entirely or if exporting, consistently export below 60% of its output (RA 7042, as amended by RA 8179).

More than 40% foreign ownership of a domestic market enterprise is allowed as long as the paid-in capital is a minimum of US$200,000.00, or its equivalent. Employing a minimum of 50 direct employees or using advanced technology may allow a paid-in capital of less than US$100,000.00, or its equivalent (RA 7042, as amended by RA 8179).

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BRAZIL, FOLLOW-UP QUESTIONS

Line 22 – Inputs/Comments: “The assessment of the microbiological identification was guided by NMIS Memorandum Circular No.9-2008-5 Series of 2008 “Guidelines on the Assessment of Microbiological Quality of Fresh, Chilled and Frozen Meat”. The aforementioned guideline serves as the guideline for both locally produced and imported meat. While the Philippines is implementing its surveillance program to ensure food safety, the conduct of laboratory testing for meat, both local and imported, are done only when there are reports of adverse findings of contamination.”

With regards to the aforementioned NMIS Memorandum Circular No. 9-2008-5, could the Philippines clarify if there is differentiation between the requirements (i.e. the microbiological limits) which apply to meat that is destined for consumption and meat that is destined for further processing by local industrial plants? Are there other requirements that apply to cooked/processed meat for consumption or are they the same ones that apply to the products listed in NMIS Memorandum Circular No. 9-2008-5?

Response:

There is no differentiation on the requirements (i.e., microbiological limits) of meat destined for consumption and those that are destined for further processing by local processing plants.

CHINA, FOLLOW-UP QUESTIONS

Part I. Questions based on Report by the Secretariat (WT/TPR/S/368)

Summary, Para 5

“Attracting further FDI has been hampered by factors such infrastructure problems and restrictions on foreign ownership.”

1. Please further explain the restrictions on foreign investment ownership. Are there any differences between the conditions of market access of foreign investment by foreign state-owned enterprises and that by foreign private enterprises in the Philippines?

Response:

The 10th Foreign Investment Negative List (FINL) provides for the areas/activities where there are limitations in the participation (or ownership) of foreign nationals by mandate of the Philippines’ 1987 Constitution, specific laws, or for reason of security, defense, risk to health and morals. These limitations apply whether a foreign enterprise is private or state-owned. For details on restrictions, refer to: http://boiown.gov.ph/db- main-final/foreign-investments/.

Page 27, Para 2.27

“The Philippines continues to restrict foreign investment in a number of activities including agriculture, fisheries, telecom services, and public utilities, but it has also taken some liberalizing steps. In the area of professional services, the FDI restrictions in place at the time of the last Review have been eliminated (subject to certain exceptions and reciprocity). The Philippines has also liberalized banking services.”

2. Please elaborate on the liberalizing steps that the Philippines has taken and the professional services in which FDI restrictions have been eliminated.

Response:

The Professional Regulation Commission (PRC) has issued the Revised Guidelines on the issuance of Special Temporary Permit (STP) or PRC Memorandum No. 3, series of 2016 to streamline the processing of applications that allow foreign professionals to practice

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- 141 - in the Philippines for specific purposes and definite period of time. The said Memorandum provides for the designation of a Focal Person among the members of a Professional Regulatory Board (PRB) to act on applications of STP. Compared with the previous policy (PRC Resolution No. 668, series of 2012), a PRB needed to convene a majority before they can act on an application and issue a Resolution for the said purpose prior issuance of STP. The policy shift reduced the period of processing and issuance of permit from a period of a month to more or less ten (10) days.

The practice of Pharmacy (RA 10918) and Forestry profession (RA 10690) now allows foreign individuals in the Philippines. The provision on reciprocity has been incorporated in the said laws. The same provision on reciprocity is being considered in the proposed bills in Congress for the practice of radiologic and x-ray technology as well as the practice of criminology.

The difficulty of accessing the Philippine market by professionals may be attributable to the requirements of respective professional boards. However, the processes involved has been clarified and simplified by several policy issuances by the Professional Regulation Commission (i.e. PRC Memorandum Order No. 3 and 4, series of 2016). Again, the Commission has taken a liberal approach in the application of the principle of reciprocity.

Page 39, Table2 Goods subject to import permits or licensing

Government agency issuing Commodity permit/clearance Recyclable materials containing hazardous substances, Department of Environment and cyanide and its compounds, asbestos, mercury and its Natural Resources (DENR) / compounds, ozone depleting substances, methyl Environmental Management Bureau bromide, certain chemicals under the Philippine Revised (EMB) Priority Chemical List, new transformers, used computers and parts thereof, new chemicals

3. What measures have been taken by the Philippines to prohibit imports for the purpose of environmental protection? Have the implementation effects of these measures been evaluated? If so, please provide relevant evaluation reports.

Response:

Section 24 of Department Administrative Order (DAO) 1992-29, Implementing Rules and Regulations of RA 6969 (Hazardous Wastes Act), prohibits the entry even in transit of hazardous wastes and their disposal into the Philippines.

However, DAO 1994-28 (Interim Guidelines on the Importation of Recyclable Materials Containing Hazardous Substances) and amendments to its annexes, allows the importation of recyclable materials containing hazardous substances intended for recycling, recovery or reprocessing subject to the requirements of EMB-DENR. DAO 1994-28 allows the importation of the following recyclable materials, namely, scrap metals (lead-acid batteries & metal bearing sludge); solid plastic materials; electronic assemblies and scraps; used oil; and fly ash subject to certain limiting conditions. DAO 1994-28 was incorporated in the latest procedural manual on hazardous wastes issued as DAO2013-22 or the Revised Procedures and Standards for the Management of Hazardous Wastes.

There has been no large-scale evaluation of the effects of these import prohibitions. However, Regional Offices of the Environmental Management Bureau (EMB) regularly conduct monitoring on the implementation of these import prohibitions. For Ozone Depleting Substances, an assessment of all rules and regulations issued under the Montreal Protocol is tentatively set to be carried out from 2018 to 2019. This assessment will be conducted under the Institutional Strengthening Project 11 of the Philippine Ozone Desk of the Department of Environment and Natural Resources.

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Page 50, Para 3.82

“Since the previous TPR in 2012, the Philippines has made visible achievements in developing its legal framework and institutions for competition policy. The landmarks include the introduction of its first competition act in 2015 and the establishment of a competition authority, namely the Philippine Competition Commission (PCC), in 2016. Despite these efforts, the overall competition environment is still considered weak due to restrictive regulations on trade and investment, barriers to entrepreneurship and state control.”

4. Please provide the latest developments in the legislation and enforcement of competition laws in the Philippines after the introduction of the Competition act in 2015 and the establishment of a competition authority in 2016.

Response:

With the enactment of Republic Act No. 10667, otherwise known as the Philippine Competition Act (“PCA”), in 2015, and the subsequent constitution of the Philippine Competition Commission (“PCC”) the year after, the Philippines has made great strides in the enforcement of competition law. Following the PCA’s enactment, relevant rules and regulations pertaining to the implementation of the Act have been issued. These include the 2016 Implementing Rules and Regulations of the PCA, the 2017 Rules of Procedure of the PCC, the PCC Merger Review Guidelines, and the PCC Rules on Merger Procedure. A more recent development is the issuance of a memorandum circular which effectively increases the threshold values for mandatory merger review. From PhP 1 billion, as provided for in the PCA, the amount is now reckoned at PhP 5 billion for the Size of Party and PhP 2 billion for Size of Transaction, beginning March 20, 2018. As of April 2, 2018, the PCC has received a total of 158 notifications, with a total transaction value of almost PhP 2 trillion.

With the end of the PCA’s two-year transitory period on August 8, 2017, the investigation of potentially anti-competitive conduct and abuses of dominant position is now in full swing. Currently, the PCC’s Enforcement Office has been conducting several preliminary inquiries on matters brought before it, spanning across different industries with far-reaching consumer implications. Moreover, the PCC’s Economics Office is conducting market studies and issues papers on 10 different industries that might have potential competition issues. The outcome of these studies can help PCC in crafting recommendations as to how best address the perceived market inefficiencies in these sectors. Finally, the PCC is stepping up its advocacy efforts to increase awareness of the agency and its mandate, and so as to ensure that more Filipinos realize the benefits of having a comprehensive competition law.

Page 51, Para 3.92

“Competition provisions are included in several of the Philippines' regional trade agreements, such as the ASEAN-Australia New Zealand Free Trade Agreement, the ASEAN-Japan Comprehensive Economic Partnership Agreement, and the Philippines-Japan Economic Partnership Agreement.”

5. Please brief the main contents relevant to anti-monopoly law enforcement cooperation of the FTAs signed by the Philippines.

Response:

The Philippines’ free trade Agreements with Japan (PJEPA) the European Free Trade Association (EFTA) and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) contain provisions on Competition cooperation.

Under the PH-EFTA FTA, provisions include cooperation and consultation in dealing with anti-competitive practices with the view to end such practices or its adverse effects on trade. The Agreement recognizes that these anti-competitive practices (i.e., agreements and practices that aim to or have the effect of prevention, restriction or lessening of competition, and abuse of dominant position) also apply to state owned enterprises, in so far as the application of this does not obstruct the performance of the particular

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- 143 - public tasks assigned to them under domestic laws, rules, and regulations. Cooperation may include exchange of information, except those that are confidential under its domestic laws, rules, and regulations.

Under the PJEPA, implementing authorities of both Parties will work together in technical cooperation activities (e.g., exchange of personnel for training purposes, participation in training courses, assistance in advocacy and educational campaigns) related to competition law enforcement and competition policy. The Agreement also includes transparency provisions on (a) prompt notification about amendment of existing or adoption of new Competition laws and regulations and (b) provision to the other Party of copies of relevant reports or publications of its implementing authorities.

Under the ASEAN-Australia-New Zealand Free Trade Agreement, Chapter 14 on Competition recognizes the importance of cooperation in the promotion of competition, economic efficiency, consumer welfare, and the curtailment of anti-competitive practices. To this end, the State Parties may engage in various cooperation agreements, such as the exchange of experience regarding the promotion and enforcement of competition law and policy, exchange of publicly available information, staff exchange, capacity building activities, advocacy programs, and any other form of technical cooperation. In addition, the Annex on Telecommunications underscores the importance of competition by mandating Parties to prevent the occurrence of anti-competitive practices in their respective territories.

Page 59, Para 4.1

“Agricultural production is dominated by small family farms (averaging 1.3 ha in 2012). The average farm size is smaller than three decades ago, primarily owing to a land reform launched in the late 1980s (Comprehensive Agrarian Reform Programme, CARP). Legislation was passed during the review period with the aim, amongst others, of encouraging larger and more productive farm structures (Section 4.1.6).” Note 2: Sugarcane Industry Development Act, 2015; and Agricultural and Fisheries Mechanization Act, 2013 (aimed at farm sizes of at least 50 ha).

6. What is the specific number of small family farms in the Philippines and what is their proportion in all family farms?

Response:

Based on the latest Philippine Statistics Authority (PSA) agriculture census (2012), there are 11,025,921 small family farms registered or 98% of the total number of family farms. These farms have sizes of less than seven (7) hectares.

7. Please introduce the land reform plan launched in the late 1980s, including goals, contents, and effects.

Response:

Noting that this is not covered in detail in the period under review, details can be obtained from the following link: http://www.dar.gov.ph/ra-6657-what-is-carp-comprehensive-agrarian-reform- program.

8. According to Note 2, the Philippines adopted the Sugarcane Industry Development Act of 2015 and the Agricultural and Fisheries Mechanization Act of 2013 (aimed at farm sizes of at least 50 ha) during the period of review. Please brief us on the two acts. What are the specific measures to establish farm sizes of at least 50 ha? Has the Philippines taken land leasing or other forms of land transfer measures?

Response:

The Sugarcane Industry Development Act is a direct policy response to recent developments in the sugarcane industry that has been adversely affected by the

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- 144 - comprehensive agrarian reform law. A vast majority of sugarcane farmers are agrarian reform beneficiaries with average farm sizes of two (2) hectares; the comprehensive agrarian reform transformed the plantation mode of sugarcane production to one that is dominated by small sugarcane farmers. SIDA does not cover land leasing or other forms of land transfer.

Page 62, Para 4.12

“The PCIC covers losses arising from natural disasters…The subsidy has increased significantly in recent years.”

9. In addition to losses arising from natural disasters, does the PCIC also cover other crop risks such as price fluctuations?

Response:

The PCIC has no insurance product yet that covers price fluctuations.

10. What is the reason for the significant increase of subsidy provided by the Government?

Response:

PCIC supports the Agricultural Development, Food Sufficiency and Poverty Alleviation Programs of the Department of Agriculture and Department of Agrarian Reform. The increase is for farmers and fisherfolk who are annually affected by the destructive effects of climate change and other perils, on account of the high number of typhoons and calamities that pass the Philippines and nearby region.

Page 62, Para 4.13

“The PLEA/PUNLA is a new special credit programme to address the financial needs of marginal and small farmers and fisherfolk, offering non-collateralized loans at a 6% annual interest rate in areas underserved by banks, according to the authorities.”

11. Please brief the actual implementation and the effects of this programme.

Response:

The program was launched in 15 poorest provinces of the Philippines. Non-collateralized loans for agri-fishery production and agri-microfinance will be provided under the PUNLA through cooperatives and non-government organizations (NGOs) as credit delivery channels (lending conduits) of credit funds in extending loans to marginal farmers and fisherfolk.

Page 62, Para 4.15

“According to the authorities, the House of Representatives is currently [October 2017] reviewing a consolidated bill that would allow for tariffication of the QR on rice, and the Philippine executive branch is working closely with both Houses of Congress in the finalization of the bill, as the President ordered the passage of the rice tariffication law to be expedited.”

12. What is the latest progress made in the review of this bill? When is it expected to be passed?

Response:

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13. Will the Government adjust rice-related domestic policies after realizing tariffication of the QR on rice?

Response:

Yes. The policy will be geared towards the development of the rice industry.

Page 69, Para 4.56

“In order to encourage development of renewable energy, a Feed-In Tariff (FIT) system was introduced, and became operational in August 2010.”

14. Is FIT applicable to the electricity price subsidy for garbage incineration power generation projects, and what is the specific amount? For renewable energy power generation projects, is it applicable to renewable energy power generation policies based on the scale of power generation (the scale of installed capacity), or is it granted based on the actual power generation?

Response:

Power generation from garbage incineration is eligible for Feed-in Tariff (FIT) subsidy.

Section 7 of the Renewable Energy Act (RA 9513) mandates a feed-in tariff system for electricity produced from wind, solar, ocean, run-of-river hydropower, and biomass. Biomass resources is defined in Section 4(b) of the Renewable Energy Act.

There is only one FIT rate for biomass which is paid based on actual power generation. For Round 1, the biomass FIT rate was set at PhP6.63/kWh. It was degressed to PhP6.5968/kWh for the period January 2017 to December 2017. For 2018, the FIT rate for biomass (for the extension of the unfilled Installation Target set by the Department of Energy) is undergoing review by the Energy Regulatory Commission.

Page70, Para 4.59

(Note: Response to follow)

“The Government also provides a number of tax incentives for renewable energy producers.”

15. Please explain the contents of “a number of tax incentives”. What is the specific scope of renewable energy producers? Does this tax preference apply to all the foreign energy producers in the Philippines? Are there any differential policies?

16. Does the Philippines plan to cancel or correspondingly reduce the tariffs on equipment imported for construction in the energy industry?

Part III. Other Questions

In the Schedule of Specific Commitments on Services of the Philippines’ accession to the WTO, it is mentioned that the legal persons engaged in securities brokerage must be members of the Stock Exchange, and the maximum number of the members of the Stock Exchange is 200.

17. At present, how many members does the Philippine Stock Exchange have?

Response:

The PSE has 143 Trading Participants.

Which financial institutions can apply to become members of the Stock Exchange?

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Response:

Article III, Section 8 of the Rules Governing Trading Rights and Trading Participants sets out the following general qualifications of trading participants:

a) Must be a duly-registered domestic corporation authorized to transact business as a broker or dealer in securities; b) Must be composed of stockholders not exceeding such number as may be prescribed by law or regulations and who are all acceptable to the PSE Board; and c) Must have and minimum a minimum subscribed capital stock in such amount as may be required by law or regulations; Provided, that the Trading Participants shall have a minimum unimpaired paid-up capital, as defined by the Securities and Exchange Commission, of Twenty Million Pesos effective December 31, 2009; Provided further, that effective December 31, 2010 and onwards, the minimum unimpaired paid-up capital shall be Thirty Million Pesos. Further to this requirement, Section 28.1.2.5.2(b).1 of the 2015 SRC IRR which requires an unimpaired paid-up capital of One Hundred Million Pesos for (1) first-time registrants who will be participating in a registered clearing agency and (2) those acquiring the business of existing broker dealer companies and will be participating in a registered clearing agency.

In addition, Article III, Section 9 of the Rules Governing Trading Rights and Trading Participants requires the applicant to submit a certified true copy of the license from the SEC to operate as broker and dealer.

What are the proportions of banks and non-banking financial institutions among the current members of the Stock Exchange?

Response:

Only non-bank financial institutions/brokers are members/trading participants in the stock exchange.

However, 12 of the current members of the stock exchange are related to banks.

If the number of Stock Exchange members reaches 200, will new financial institutions not be allowed to engage in securities brokerage, or will new trade policies be adopted to optimize the situation?

Response:

Under PSE’s By-Laws, and Article III, Section 1 of the Rules Governing Trading Rights and Trading Participants, there shall be no more than one hundred eighty four (184) trading participants on the PSE.

However, new financial institutions may be allowed to engage in securities brokerage even if the membership in the stock exchange reaches 200. The PSE may propose to amend its By-Laws and Rules Governing Trading Rights and Trading Participants to allow for more number of trading participants than what is currently allowed, subject to approval by the SEC. Approval thereof may be granted provided the proposal will be consistent with the public interest and the protection of investors.

In the Schedule of Specific Commitments on Services of the Philippines, it is mentioned that when an issuer whose principal business is investment, reinvestment or securities trading is engaged in trading business, it shall establish a commercial presence in the Philippines with the proportion of foreign investment being not more than 40% and all the board members must be Filipino.

(Note: Response to follow)

18. Which financial institutions may be engaged in the above business? Which type of issuers are mentioned in the above business?

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In Section 1 “Definitions” of Republic Act No. 8179 (Implementing Rules and Regulations of RA 7042*(1) As Amended by Republic Act No.8179), the provisions on Section Q of the Foreign Investment Negative List (FINL) and List A in Executive Order No. 184 Promulgating the Tenth Regular Foreign Investment Negative List are: “the term ‘Foreign Investments Negative List’ shall mean a list of areas of economic activity whose foreign ownership is limited to a maximum of forty percent (40%) of the equity capital of the enterprises engaged therein.” Section 17 on “exploitation, development and utilization of natural resources”; Section 18 on “private land ownership”; and Section 19 on “operation of public facilities”.

19. According to the above legal provisions, for FDI in power and infrastructure projects in the Philippines, the proportion of shareholding by foreign investment shall not exceed 40%. Does the Government plan to further liberalize the shareholding proportion of foreign-invested enterprises in the power industry?

Response:

The Philippine government issued Memorandum Order (MO) No. 16, dated November 21, 2017, which directs the NEDA Board and its member agencies to take immediate steps to lift or ease existing restrictions on foreign participation in certain investment areas and activities. Public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system, are among the identified investment areas/activities under said memorandum order.

It is noted that power generation and the supply of electricity to the contestable market are not considered as public utility operation (Section 6 and Section 29, respectively, of RA 9136 or the Electric Power Industry Reform Act of 2001). Any person or entity engaged or which shall engage in power generation and supply of electricity shall not be required to secure a national franchise (Section 6 and Section 29 of RA 9136).

20. Does the Government plan to further liberalize the shareholding proportion of foreign-invested enterprises in construction and engineering sectors?

Response:

The Philippine government issued Memorandum Order (MO) No. 16, dated November 21, 2017, which directs the NEDA Board and its member agencies to take immediate steps to lift or ease existing restrictions on foreign participation in certain investment areas and activities. Contracts for the construction and repair of locally-funded public works are among the identified investment areas/activities under said memorandum order.

EUROPEAN UNION, FOLLOW-UP QUESTIONS

EU question No 4:

Could the Philippines give an update on the status of this law in Congress and its impact on Ease of Doing Business?

Response:

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EU question No 5

Is the Philippines planning to foster the automatic application of these Agreements?

Response:

For other types of treaty income such as business profits or capital gains, the BIR issues rulings or certificates for this purpose.

EU question No 8:

Customs Memorandum 2017_10-001 suspended the super green lane (SGL Customs Administrative Order 6-2003) (also referred to as Blue Lane in the report).

When will the Green Lane be re-instated as this will benefit especially SMEs?

Response:

There is a possibility that the Green Lane may not be reinstated. In lieu of it, the importers may apply for the Super Green Lane.

EU question No 13:

The excise structure of sparkling wine is as follows [per 750ml bottle, Net Retail Price (excluding excise and VAT]:

- PHP500 or less → PHP 292.47/litre - More than PHP500 → PHP 818.90/litre

What is the reason to levy this product over 23 times more than still or carbonated wine?

(Note: Response to follow)

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EU question No 17:

Reference is made to the certification schemes.

For what automotive parts does the PH accept UNECE regulations? Does the PH intend to expand the number of products covered under UNECE?

Response:

The Philippines accepts UNECE regulations for the following automotive parts:

1. Helmets and their visors 2. Safety belts (Seat belts) 3. Safety glass for automotive 4. Tires for automotive vehicles

The Philippines intends to expand the number of products covered under the UNECE regulations in accordance with the ASEAN Mutual Recognition Arrangement (MRA) for Automotive Products which is still under discussion.

EU question No 22:

EU appreciates that the Competition Act repealed section 4 of Commonwealth Act No 138.

However, can the PH expand on how MO 16 of 17 November 2017 will impact on provisions of the Government Procurement Reform Act (RA 9184 of 2002) as this still includes eligibility criteria for a limit of 40% foreign participation in the procurement of goods, and with considerations on reciprocity as provided by RA 5183. In the procurement of infrastructure, foreign contractors may participate up to 25% in joint- ventures or 100% when techniques/technologies required to build structures are not adequately possessed by nationals. Consulting services is as a general rule, limited to 40% foreign participation in capital (and reciprocity applies)?

Response:

The directive of the President through MO 16, s. of 2017, provides instruction to the executive branch, particularly the National Economic and Development Authority (NEDA) Board, to take immediate steps to lift or ease existing restrictions on foreign participation not needing legislative intervention. For those requiring legislative action, particularly in the procurement of goods, infrastructure projects and consulting services recognized under Republic Act No. 9184, otherwise known as the Government Procurement Reform Act, the NEDA Board is directed to earnestly support legislative efforts to address such restrictions. Accordingly, these efforts will include a review of existing legal frameworks affecting government procurement, e.g. Commonwealth Act No. 138 and Republic Act No. 5183, that involve provisions relating to preference and equity interests, and support to pending bills seeking to amend these legislations, including the procurement law.

Further, as point for clarification, in the procurement of infrastructure projects, joint ventures/consortia in which Filipino ownership or interest is less than seventy-five percent (75%) may be eligible where the structures to be built require the application of techniques and/or technologies which are not adequately possessed by Filipinos and that Filipino ownership or interest shall not be less than twenty-five percent (25%).

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EU question No 31:

How exactly can interested parties go about this, to avoid tariff rates going up of related products?

Response:

According to Section 1608 of the CMTA, the President, upon the recommendation of the National Economic and Development Authority (NEDA), in the interest of the general welfare and national security, can increase, reduce, or remove existing rates of import duty including any necessary change in classification.

Prior to the submission of the recommendation to the President by the NEDA, the Tariff Commission shall conduct an investigation and shall hold public hearings wherein interested parties shall be afforded reasonable opportunity to be present, to produce evidence and to be heard. The Tariff Commission shall also hear the views and recommendations of any government office, agency, or instrumentality, and submit its findings and recommendations to the NEDA within thirty (30) days after the termination of the public hearings.

Given this, any interested parties will have the opportunity to submit their views, comments, opposition, and even evidence to support their position before any recommendation for tariff modification is submitted to the President.

Notably, the power delegated to the President under the said law shall be exercised only when Congress is not in session and said delegated power may be withdrawn or terminated by Congress through a joint resolution.

EU question No 32:

The report mentions that Feed-in-tariff incentives for hydropower and biomass are due to expire in December 2017 but are under review.

Response:

This has expired and has not been renewed.

EU question No 21:

a) For vertical projects - minimum contract cost of 100 million Euros (5 Billion Php); b) For horizontal projects - minimum contract cost of 60 million Euros (3 Billion Php)

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By when do you expect these amendments to be effective and have foreign construction companies at an equal footing as domestic ones?

Response:

It cannot be ascertained as this will be the result of a comprehensive review of and consultations on existing laws and regulations.

MALAYSIA, FOLLOW-UP QUESTIONS

Para 4.12, p. 61-62

Crop insurance

The Philippine Crop Insurance Corporation (PCIC) under the Department of Agriculture is implementing insurance programmes for: (i) rice and corn; (ii) high-value crops; (iii) livestock; (iv) fisheries; (v) non-crop agricultural assets; and (vi) credit and life.17 The PCIC covers losses arising from natural disasters. The government expenditures were accordingly notified as Green Box "payments for relief from natural disasters”. Government Premium Subsidy (GPS) is provided in the form of matching grants to cover the premium cost of the insurance for subsistence farmers. The subsidy has increased significantly in recent years.

1. Whether the crop insurance programme is ceded to / supported by the private sector through a reinsurance arrangement?

Response:

Yes, PCIC cedes a portion of its risks on Non-Crop Agri-Assets Insurance Program to the National Reinsurance Corporation of the Philippines (PhilNARE). PCIC also avails of reinsurance protection for other agricultural insurance programs, whenever available.

2. Method or basis to determine the amount of annual subsidy to be provided under the crop insurance programme?

Response:

Yearly, PCIC submits the Annual Budget to the Department of Budget and Management (DBM) with the details of the target number of farmers and fisherfolk to be covered with insurance.

Para 4.52, p. 69

Renewable energy (geothermal, hydro, wind, biomass, and solar) makes up the rest of the installed capacity of the country (accounting for about 34.3%). The DOE issued the National Renewable Energy Programme (NREP), with the aim of diversifying and expanding renewable energy. Under the NREP, the Philippines aims to double the 2010 installed capacity of renewable energy sources by 2030, which implies an increase from 5,438 MW in 2010 to 15,304 MW in 2030.

(Note: Response to follow)

3. Can the Philippines share on the government's policy towards long-term financing for green projects, for instance, through the issuance of sukuk?

Para 4.76, p. 73

There are three government-owned banking institutions in the Philippines: the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP), and Al Amanah Islamic Investment Bank of the Philippines (AAIIBP). Together, these account for 14.2% of the total assets of the banking sector. The DBP and the LBP provide commercial banking services as well as development financing. The AAIIBP is the only bank in the Philippines authorized to offer Islamic banking. It is also licensed to perform both commercial and investment banking services.

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4. Given that past initiatives by the Philippine government to pass a law on Islamic finance (i.e. The Philippine Islamic Financing Act) have not yet come to fruition, what would be the immediate priority for the government to progress in this area?

Response:

The BSP is collaborating with Congress for a suitable legal framework for Islamic banking in the Philippines. Meantime, we are looking at an "open approach" whereby conventional banks can operate Islamic banking windows under principles that recognize the unique characteristics of Islamic banking, a level playing field for conventional and Islamic banks and the opportunities of providing innovative products and services for Muslim brothers.

GOVERNMENT REPORT

Banking Services

Para 2.27, p. 9

To promote foreign participation in the banking and financial sectors, Republic Act 10641 (An Act Allowing the Full Entry of Foreign banks in the Philippines) was signed into law in July 2014,...The Law further opened up the banking sector to more offshore players. Since its establishment, the Philippines has approved the entry of foreign banks from Japan, the Republic of Korea, Chinese Taipei, and Singapore.

We commend that the Philippines has undertaken various liberalisation initiatives during the period under review.

5. In line with the Philippines liberalisation efforts, are there plans to relax the requirements on Filipino understudies for every non-Filipino employed in the financial sector?

Response:

The understudy requirement is within the purview of the Department of Labor and Employment of the Philippines. The said requirement is not discriminatory as it applies to both domestically-owned banks and foreign banks. By virtue of the National Treatment commitment, the said requirement, if liberalized, will equally apply to domestically-owned banks and foreign banks.

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