OECD Investment Policy Reviews PHILIPPINES Contents OECD Investment Policy Reviews Chapter 1. Philippine reform environment: Successes and challenges Chapter 2. Legal protection of investment in the Philippines Chapter 3. Investment promotion and facilitation in the Philippines PHILIPPINES Chapter 4. Competition policy in the Philippines Chapter 5. Infrastructure investment in the Philippines Chapter 6. Responsible business conduct in the Philippines Also available in this series: Nigeria (2015), Botswana (2014), Mauritius (2014), Myanmar (2014), Tanzania (2013), Jordan (2013), Mozambique (2013), Malaysia (2013), Costa Rica (2013), Tunisia (2012), Colombia (2012), Kazakhstan (2012), Zambia (2012), Ukraine (2011), Indonesia (2010), Morocco (2010), Viet Nam (2009), India (2009), China (2008), Peru (2008), Russian Federation (2008), Egypt (2007). OECD Investment Policy Reviews http://oecd.org/daf/inv/investment-policy/countryreviews.htm PH PHILIPPINES L Consult this publication on line at http://dx.doi.org/10.1787/9789264254510-en. This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases. Visit www.oecd-ilibrary.org for more information. ISBN 978-92-64-25450-3 20 2015 01 1 P OECD Investment Policy Reviews: Philippines 2016 This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of OECD member countries. Please cite this publication as: OECD (2016), OECD Investment Policy Reviews: Philippines 2016, OECD Investment Policy Reviews, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264254510-en ISBN 978-92-64-25450-3 (print) ISBN 978-92-64-25451-0 (PDF) Series: OECD Investment Policy Reviews ISSN 1990-0929 (print) ISSN 1990-0910 (online) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. Photo credits: Cover © tonyoquias/iStock /Thinkstock, © Shutterstock.com/Denis Babenko, © Shutterstock.com/Xebeche. 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FOREWORD Foreword This first OECD Investment Policy Review of the Philippines uses the OECD Policy Framework for Investment to assess the investment climate in the Philippines, including the institutional and legislative framework for investment. It includes chapters on investment regulation and protection, investment promotion and facilitation, competition policy, infrastructure and responsible business conduct. The Review was undertaken in partnership with the ASEAN Secretariat and involved three Task Forces within the Philippine government chaired by Department of Trade and Industry Secretary Adrian Cristobal. The Task Forces covered investment policy, investment promotion and facilitation and competition policy. This publication is based on a background report that was presented and discussed in the OECD Advisory Group on Investment and Development in Paris in October 2015. The Philippine delegation was led by Secretary Cristobal. A draft version of the Review was discussed at a workshop gathering government agencies and stakeholders, organised by the Government of the Philippines in Manila in July 2015. The Review has been prepared by a team comprising Stephen Thomsen, Mike Pfister, Hélène François, John Hauert, Carole Biau, Barbara Bijelic and Leona Verdadero, with inputs from Fernando Mistura, Alexandre de Crombrugghe and Rose Poreaux, all from the Investment Division of the OECD Directorate for Financial and Enterprise Affairs, and Hilary Jennings, an external consultant. The Review was supported by the ASEAN- Australia-New Zealand Free Trade Agreement Economic Cooperation Support Programme. The information in this Review is current as of end-December 2015. OECD INVESTMENT POLICY REVIEWS: PHILIPPINES 2016 © OECD 2016 3 TABLE OF CONTENTS Table of contents Preface.......................................................................................................................... 11 Acronyms and abbreviations ..................................................................................... 13 Executive summary ..................................................................................................... 17 Assessment and recommendations ............................................................................ 19 Introduction ............................................................................................................... 19 Successful reforms provide a platform to address remaining challenges .................. 23 Principal recommendations ....................................................................................... 31 Notes ......................................................................................................................... 34 References ................................................................................................................. 34 Chapter 1. Philippine reform environment: Successes and challenges ............... 35 The overall policy environment has shaped economic performance ........................ 37 Sectoral reforms have brought significant benefits ................................................... 44 Foreign direct investment performance and structure ............................................... 52 Cross-border mergers and acquisitions involving Philippine companies .................. 61 Key reforms of the restrictions covering foreign direct investment .......................... 68 The Philippines in the OECD FDI Regulatory Restrictiveness Index ....................... 73 FDI has helped the Philippines link to regional and global value chains .................. 83 Notes ......................................................................................................................... 87 References ................................................................................................................. 88 Annex 1.A1. Sources and methodologies of Philippine FDI statistics ...................... 92 Chapter 2. Legal protection of investment in the Philippines .............................. 95 Summary ................................................................................................................... 96 Domestic legislative and institutional framework for investment policy .................. 98 No explicit principle of non-discrimination with regard to establishment .............. 104 International investment agreements ....................................................................... 111 Selected provisions in Philippine IIAs .................................................................... 117 Notes ....................................................................................................................... 138 References ............................................................................................................... 140 OECD INVESTMENT POLICY REVIEWS: PHILIPPINES 2016 © OECD 2016 5 TABLE OF CONTENTS Chapter 3. Investment promotion and facilitation in the Philippines ................ 143 Policy options .......................................................................................................... 146 Investment promotion and facilitation in the overall development strategy ........... 148 Institutional structure for effective promotion and coordination............................. 152 Investment promotion measures .............................................................................. 156 Monitoring and evaluating investment promotion .................................................. 166 The incentives regime ............................................................................................. 168 The central role of economic zones in the Philippines ............................................ 173 Promoting linkages .................................................................................................. 180 Notes ....................................................................................................................... 187 References ............................................................................................................... 190 Chapter 4. Competition policy in the Philippines ................................................ 193 Summary ................................................................................................................. 194 The impact of liberalisation reforms on product market competition ..................... 197 Development of competition law in the Philippines