Moving Across Borders: The Philippines and the ASEAN Economic Community 2016 Investment Guide by KPMG in the Philippines In this issue: Is the Philippines ready for the AEC? The challenges of the AEC Strengthening the ASEAN integration What role will the Philippines play in the AEC? © 2015 R.G. Manabat & Co. This publication is copyrighted. No part of this publication may be reproduced by any process or means without the prior written permission of R.G. Manabat & Co. All rights reserved. R.G. Manabat & Co. is a Philippine partnership and a member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. 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Moving Across Borders: The Philippines and the ASEAN Economic Community 2016 Investment Guide by KPMG in the Philippines Contents Introduction 01 Contributors 03 Acknowledgements 04 Glossary 71 About the Philippines 72 Directory of Government Agencies 74 About KPMG 75 Directory of Partners and Principals 76 The Philippines: Gearing Towards 4 - 10 a Borderless ASEAN Economic Community 11 - 17 Transforming into one ASEAN market 18 - 28 Reaping the fruits of labor mobility in the AEC Addressing the implementation 29 - 47 challenge of facilitation and connectivity 48 - 64 Establishing the Philippines as production base 65 - 70 Navigating through the Single Window Foreword Since 2010, the Philippines has been taking big leaps in terms of economic performance, posting an average GDP growth rate 6.3% until the end of 2014. In the second quarter of 2015, GDP grew by 5.6%, higher than the growth rate of 5.0% in the first quarter. It is one of the most rapidly emerging markets in the ASEAN region with its sound economic fundamentals and highly skilled and productive workforce. This has also helped the country attain investment grade status from ratings agencies such as Moody’s, Standard & Poor’s and Fitch. As one of the strongest and fastest-growing economies in the region, what role will the Philippines play in the upcoming ASEAN integration? This is the question that KPMG R.G. Manabat & Co. (KPMG RGM&Co.) strives to answer through this latest thought leadership publication. KPMG RGM&Co. partnered with the University of Asia and the Pacific (UA&P), one of the country’s premier research universities and leading economics schools, to explore the Philippines’ readiness and role in the upcoming implementation of the ASEAN Economic Community (AEC). In this guide we identify the challenges of the ASEAN integration such as labor mobility, trade facilitation and connectivity, and transforming into one ASEAN market. We also look at the opportunities that the AEC will bring about and how the Philippines can position itself as a game changer in the region. Finally, we hope to shed light on how businessmen and investors can take full advantage of the integration as the country continues to become one of the strongest economies in Southeast Asia. Roberto G. Manabat Chairman and CEO KPMG R.G. Manabat & Co. About the University of Asia and the Pacific The University of Asia and the Pacific (UA&P) is a private, not-for-profit institution of higher learning that offers some of the most outstanding academic programs in Asia. UA&P began in 1967 as the Center for Research and Communication (CRC), a think tank conducting research and offering graduate courses in economics and management. The UA&P School of Economics has been recognized as a catalyst of economic progress in the Philippines and in Asia and has earned a reputation for its highly relevant economic research. The major areas of its research activities include the fields of economic forecasting, financial markets, wage determination, and macroeconomics. www.uap.asia [email protected] Moving Across Borders: The Philippines and the AEC 1 2 Moving Across Borders: The Philippines and the AEC Contributors The Philippines gearing towards a Borderless Transforming into one ASEAN market; ASEAN Economic Community Navigating through the Single Window Dr. Bernardo Malvar Villegas is a visiting Emmanuel Bonoan is the Vice Chairman and Professor of IESE Business School in Head of Tax, Chief Operating Officer of Barcelona, Professor at the University of Asia KPMG R.G. Manabat & Co. He is a former and the Pacific (UA&P) and Research Director Undersecretary of the Philippine Department of the Center for Research and Communication, of Finance and exercised oversight functions Manila. He has a Ph.D. in Economics from over the Bureau of Internal Revenue and the Harvard University (1963) and is a Certified customs authority. Public Accountant, having been one of the CPA board topnotchers in 1958. His special fields of study are development economics, social Bernardo M. Villegas economics, business economics and strategic Emmanuel P. Bonoan management. He is the author of several economics textbooks widely used in Philippine schools and universities. Transforming into one ASEAN market; Reaping the fruits of labor mobility Establishing the Philippines in the AEC as production base Henry Antonio is currently the Head of Kristine Joy Martin is a member of the Advisory of KPMG R.G. Manabat & Co. He faculty of the School of Economics of UA&P. has extensive experience on forensic and Her research and policy analysis areas cover fraud investigations, business process regional integration initiatives such as the reviews, corporate rehabilitation, and risk TransPacific Partnership, the ASEAN management and compliance. He has over Economic Community and EU Generalized 18 years of domestic and international System of Preferences. She has conducted experience in risk management, finance, and collaborative research under the East Asia audit, including various advisory positions in distressed-related restructure management, Kristine Joy Martin Development Network (EADN). She is also a Henry D. Antonio member of the International Input Output consolidation, transactional support and Association (IIOA) based in Austria. She receivership. handles the economic research seminar and managerial econ &P. Reaping the fruits of labor mobility Addressing the implementation in the AEC; Addressing the challenge of facilitation and implementation challenge of facilitation connectivity and connectivity; Strengthening Jerome Garcia is a Principal in the Deal ASEAN financial integration Advisory group of KPMG R.G. Manabat & Co. He has over 15 years of experience in Dr. George Manzano is an Assistant the areas of mergers and acquisitions, Professor of the School of Economics of investment banking, corporate finance, and UA&P. His research interests extend to financial advisory, having been previously international and regional economic issues connected with several investment banks (AEC, WTO, APEC, etc). He was a former and financial institutions. Commissioner of the Philippine Tariff George N. Manzano Commission and an Economic Affairs Jerome Andrew Officer of the Economic and Social H. Garcia Commission for the Asia Pacific of the United Nations. Establishing the Philippines Navigating through the Single Window as a production base Andrew Ruiz is a practicing tax lawyer Michael Guarin is the Head of Deal Advisory since 1993. He has extensive experience group of KPMG R.G. Manabat & Co. Mike in Philippine Taxation having handled has extensive advisory experience in the engagements under the whole gamut of banking, mining, hospitality and media tax practice, including tax planning, tax sectors in the Philippines. He has advised advocacy (including appearances at the banking clients on the valuation of Philippine Court of Tax Appeals), tax advisory, and thrift banks as well as on non-performing tax due diligence/compliance reviews. He loans portfolios. He has also successfully has assisted in the drafting of various advised clients on core asset acquisitions. He issuances on tax industry issues for has advised foreign investors on available Michael Arcatomy Andrew James Gerard submission to the Bureau of Internal market entry strategies into the Philippine Revenue. H. Guarin mining company. In the media sector, he has D. Ruiz been the preferred advisor for financial due diligence needs of one of the biggest media companies in the Philippines. Strengthening ASEAN financial Setting sail for the ASEAN integration Single Shipping Market Nini Balde has over 15 years of experience Aurora Hipol is the Associate Legal in the audit, banking and advisory services. Counsel of KPMG R.G. Manabat & Co. She She has led and transitioned the audits of has previously worked for law firms, both several KPMG global, as well as local, bank in the Philippines and the U.S. She also clients. She has been seconded to KPMG worked in the local government in the Hong Kong, and also coordinates closely review of draft legislative measures.