Philippines Gearing up for the New Millenium: "Opportunities and
Carl John G. Matriano
Department of Trade and Industry
is an excerpt from the speech delivered at the 5th General Membership
Meeting of the Philippine Chamber of Industrial Estates & Ecozones
held on the 7 December 2000, at the Mandarin Oriental Hotel)
The country's strong macroeconomic fundamentals and stable
democratic government gave us a GDP growth of at least 3.9% and
inflation of 4.2% during the first semester of 2000. This
achievement is a result of keeping domestic prices stable despite
rising fuel prices all over the world due to OPEC's cut back in oil
production. The inflationary pressures of oil price increases were
offset by bumper crops for rice and corn. This is a confirmation
that the government is on the right path in giving priority to
agriculture and food security.
Our exports of US$ 8.6 billion for the first quarter of 2000
showed an increase of 9.6% relative to the same period of last year.
Government Actions in Facilitating Investments
In promoting and facilitating investments, the Philippine
government has undertaken an economic reform program. This program
focused primarily on three areas: privatization, deregulation and
The operational goal of our developmental objectives is the
creation of Philippine industries, which are globally competitive
and world-class. Thus we have been undertaking a program
of privatizing state enterprises in order to place industries in the
hands of those best suited to running a productive and profitable
concern: the private sector. To date, we have privatized government
participation in steel, power generation, banking, airlines, water
utilities, hotels and infrastructure development, to name a few.
We have also deregulated many industries in order that
they may grow and develop through free initiatives of the private
sector and with the minimum of unnecessary government restriction
and regulation of the airline, telecommunications, oil and banking
sectors. Consumers of these industries now enjoy better products,
more choices and better services as a result of the infusion of
healthy competition. Increased competition as a result of
deregulation has resulted in improved services and production
outputs by the firms of deregulated industries.
The end results of these reforms aimed at privatization,
deregulation and liberalization is a Philippine economy that is
increasingly open, transparent and not plagued by the structural
inefficiencies that have been brought down by a number of our
In the area of opening up the country to foreign investment, we
continue to make great strides.
The E-Commerce Law will further enhance the Philippines'
attractiveness as an ideal investment site in the field of
information technology (IT). The salient features of the law include
the legal recognition of electronic signatures; and the grant of
authority to the Department of Trade and Industry to direct and
supervise the promotion of E-commerce in the country.
The Philippine Build-Operate-Transfer (BOT) Scheme has
been hailed as one of the more successful BOT efforts in the world
and has become a model in Asia.
The Retail Trade Liberalization Act (Republic Act 8762)
liberalizes Philippine retail industry and encourages Filipino and
foreign investors to forge an efficient and competitive retail
sector in the interest of empowering the Filipino consumer through
lower prices, higher quality goods, better services and wider
choices. Foreigners may now own up to 100% of enterprises engaged in
retail trade, subject to minimum capital requirements and other
The Banking Sector was also liberalized allowing the entry
of foreign banks and full service foreign banks. We have also
allowed the establishment of banks subsidiaries with up to 60%
foreign ownership and permitted foreign acquisition of up to 60%
voting stock in an existing bank.
The Philippine Investment House Industry was also
liberalized by allowing foreign equity participation of up to 60%
and raising the minimum capital to P 300 million.
Recently, the law on Regional Headquarters / Regional
Operating Headquarters (RHQ/ROHQ) was approved granting better
tax breaks to multinational corporations locating their regional
headquarters in the Philippines.
In line with the government's thrust to prepare the country for
the e-world, the IT Services is included in the Investment
Priorities Plan for this year. IT and IT related projects are also
granted a maximum of 12 years Income Tax Holiday without securing
prior DOF approval under the proposed Amendments to the Omnibus
The DTI/BOI Agenda is based on creating a policy environment
hospitable for the creation of wealth and economic activities all
throughout the country. This consists of:
- Job and income generation through more investments and
- Rationalizing the cost of doing business and cost of living;
- Increasing the value of money for consumers
- Preparing the country particularly local businessmen and
enterprises for entry, engagement and meeting the challenges of
the whole new world of E-Commerce and Information Technology
In lowering the cost of doing business, DTI/BOI's efforts are
geared towards reviewing all procedures, red tape and bureaucratic
steps that may have been important in previous years but are now
just being done because of habit, or because they have always been
done that way. So we are taking a long hard look at all of these
steps and processes not only at the national level but also down to
the local government level to try to squeeze out the inefficiencies,
the duplications, the inconsistencies and perhaps eliminate as many
of them as possible. We have to make the processes much more
painless for our prospective investors and businessmen.
To further boost the image of the Philippines as an investment
destination, BOI continues to proactively promote the Philippines
through the conduct of investment promotion activities both here and
abroad. Likewise, it initiated moves to further enhance the
investment environment via the filing of a bill which proposes a new
package of BOI incentives which will include a 12 year Income Tax
Holiday for IT projects and other major undertaking worth at least
US$ 50 Million, NOLCO, tax and duty free importation of capital
equipment, among others. To date, the bill has already been passed
at the Lower House and is undergoing readings at the Senate.