Quisumbing Torres lawyers serve as hosts and moderators during the monthly European Chamber of Commerce in the Philippines (ECCP) luncheons. This exclusive role is enjoyed by the firm as ECCP's Legal Partner for 2019.

January

Guest speaker:  Department of Budget and Management Secretary Benjamin Diokno

Topic: Philippine Government's Budget and Priorities for the Year Ahead

Moderator: TJ Mendoza, Partner and Head, Banking and Finance Practice Group

Key Takeaways:

  • National budget is projected to steadily increase, from P3.757 trillion in 2019 to P5.3 trillion in 2022; an augmented share of GDP from 19.3% to 20.6%.
  • Debt is slow and declining. Debt to GDP ratio was at 42.1% in 2017, and is seen to decrease at 36% in 2022.
  • Total 2019 budget is P3.757 or 19.3% of the GDP. •Infrastructure remains to be top priority with an allocation of P999.7 billion for 2019, or 4.7% of the GDP. There is also a forecasted increase of infrastructure appropriations of 7% of the GDP in 2022.
  • Other key areas of budget allocation are education, social welfare, local government, and national defense.
  • The government has been implementing cash-based budgeting system since 2017, which serves as an international best practice that is being used by three-fourths of the OECD countries.
  • The Budget and Treasury Management System (BTMS) aims to provide for a harmonized system in keeping budget information and increasing capacity to report data in real term. This was piloted with BOT in 2017; rolled out to DPWH, DOH, DOTr, DENR in 2018; and is planned to cover all other government agencies this 2019.
  • Project DIME monitors high-value government projects by comparing accomplishments and utilisation of budgets. Uses drones and satellites that is able to reach even far flung areas.

The government aims to sustain momentum and be one of the fastest growing economies in the world, and projects a 7-8% GDP growth in the next 4 years, with the help of the implementation of an increasingly an expansionary fiscal program.

February

Guest speaker: Philippine Competition Commission Chairman Aresenio M. Balisacan

Topic: Major Developments in the Philippine Competition Landscape

Moderator: Christina Macasaet-Acaban, Partner and Head, Competition Group and Corporate & Commercial Practice Group

Key Takeaways:

  • The PCC reported notable developments in 2017 and 2018 given its transition and the first full year of the new competition regime. Furthermore, the Commission shared its plan for the year ahead.
  • PCC noted the relatively high level of competition restrictiveness in the Philippines. Dr. Balisacan emphasized that restrictive domestic policies need to be undone in order for sustained rapid growth to ensue.
  • On competition enforcement, the PCC discussed its leniency program, made effective last 19 January, which seeks to deter the formation of cartels and detect and prosecute existing ones.
  • PCC also informed the participants about its partnership with DOJ-OFC, Ombudsman and DTI in further enforcing the competition law.
  • The Commission discussed its competition advocacies which are geared towards the easing of foreign investments' entry with special focus on Amendments to the Foreign Investments Act; Amendments to the Public Services Act; promotion of competition in the telecommunications sector; opening up of the construction sector to foreign players; retail trade liberalization. The review of free trade agreements and legislative franchises is also on the radar of the PCC.
  • 2019 priority industries for enforcement and advocacy include manufacturing, rice, pharmaceuticals, air and land transport, logistics, e-commerce, retail/supermarkets, telecommunications, agricultural credit, poultry and livestock, milk products, fertilizers and pesticides, logistics supply chain, corn milling and trading, refined petroleum, and sugar. These industries are chosen based on a careful and strategic assessment of their impact on consumers and the probability of enforcement success. Market studies are conducted to serve as input in the Commission's work with regulators as well as the legislative and executive branches.
  • PCC also proudly announced its efforts on strengthening institutional capacity, now with 162 dedicated staff.

March

Guest speaker: Department of Trade and Industry Secretary Ramon Lopez

Topic: Creating an Enabling Business Environment for Trade and Investments

Moderator: Luisa Fernandez-Guina, Partner, Corporate and Commercial

Key takeaways:

  • With a 2018 GDP growth of 6.2%, the Philippines is the 2nd fastest economy in ASEAN.
  • Growth has transformed from being consumption-led to being investment-led. There is now more government spending, with and especially aggressive infrastructure program.
  • Production was before led by services, now banking on two strong legs -- services and industry.
  • BOI doubled average investments from P380 billion (2010-2016) to P766 billion (2017-2018) capping 2018 with P915 billion investment approvals (up to 48% YOY).
  • The country boasts a very young median age of 24, with a wide talent pool possessing English proficiency, and trainability, among others.
  • Inflation last year was at 5.2%, lower than the double digit inflation in previous admins and other countries.
  • There are a total of 45 reform initiatives for the DB 2020 Cycle; 25 have been implemented.
  • Other policy reforms include PSA and Retail law in deliberations in the Congress, expect to be passed H2 with new congress; will request president to certify as urgent and on the TRABAHO bill, incentives will be added, including depreciation allowance of assets; additional deduction on labor expense, R&D, trainings, infrastructure development, etc. Only thing being cut is perpetual nature of GIE.

April

Guest speaker:  Senate Economic Affairs Committee Chairperson Sen. Sherwin Gatchalian

Topic: Economic Liberalization: A Building Block for Growth

Moderator: Michael Macapagal and Camille Bianca Gatmaitan-Santos, Associates, Dispute Resolution

Key Takeaways:

  • The share of the construction industry to the country's GDP (2009-2018) has an average growth rate of 12.4%, with the private construction sector having a bigger share than the public sector.
  • Due to this, employment has also gradually increased, posting an average growth rate of 7.9% or 9.4% of total country employment.
  • Figures show that the construction sector has been one of the least productive industrial subsectors (compared to electricity, gas, water supply, manufacturing, and mining and quarrying) with Php 607,000 generated per employee.
  • The cost of construction in the Philippines is the second highest within the ASEAN region (with Singapore being on top of the list), due to the lack of competition, with the Philippines being one of the most restrictive in terms of equity participation for foreigners. Average foreign equity ownership among ASEAN members is at 71%, while the Philippines is at 50%.

Three bills to reform construction sector:

  • SB 1907. Foreign companies to participate in locally funded projects. If the entry of efficient foreign companies in the Philippines will be allowed, there will be better delivery of basic services.
  • SB 1909. Removing nationality requirement in the PCAB regulatory requirementswill place both local and foreign companies on equal footing. This will allow companies to participate in Build, Build, Build program and complex infrastructure projects.
  • SB 1921. Seeks to remove the 83-year old Commonwealth Act No. 138 which provides domestic preference in the procurement of goods and services. This will help stir competition for goods and services, and open government procurement to foreign companies.

Potential impact of liberalization on construction cost (conservative to optimistic)

  • Sector share to total FDA: 2.2-3.76%
  • Growth of gross value added share to GDP: 15.8-17.9%
  • Reduction in construction cost: 18.4-34%
  • Additional employment: 154 to 184 thousand

Among establishments engaged in construction activities, almost 90% comes from MSMEs.

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