The
Philippine economy is based upon agriculture, light industry and supporting
services. In 1998, it slowed sharply as a result of spillover from the Asian
financial crisis and El Nino-related weather conditions, although the
contraction in the Philippines was not as severe as in other East
and Southeast Asian countries during the Crisis. The country had not grown as
rapidly as some of its neighbors, had not experienced the same scale of foreign
short term capital rushing in during the boom years of the mid-1990s and had a
better capitalized and supervised banking sector that served to cushion the
economy from the worst of the "Asian contagion." But, like many of
its developing Asian neighbors, it did have a large current account deficit.
The lasting legacy of the Asian financial crisis in the Philippines has been much like it is across the
region—a sharp swing in the current account from deficit to surplus and a very
sizable depreciation of the peso against the major world currencies. In 1996,
the average exchange value of the peso was P26.2/US$; in 2001, that value was
P51/US$. Accordingly, the peso lost half its international purchasing power as
measured in US dollars. That depreciation led to a significant change in the
terms of trade which made Philippine exports much more price competitive in
world markets and imported goods much more expensive domestically with the
resulting dramatic turn in the country's current account balance.
Another legacy of the Asian financial crisis is the ongoing economic reform
efforts to which the government has committed to help the Philippines match the pace of development in
the newly industrialized countries of East Asia. The strategy includes improving infrastructure, overhauling the tax
system to bolster government revenues and moving toward further deregulation
and privatization of the economy. Of particular note is the enactment by the
Philippine congress during 2001 of a long-debated electricity sector privatization
and deregulation law. The Philippines has committed to 'unbundle' its
electricity industry, separating power generation from transmission and from
local distribution, making power generation a competitive industry and turning
over responsibility for investment in new plants to the private sector. This is
an unusual step for a developing nation—common enough among developed nations
with well-established electricity industry infrastructure, but less so among
countries still needing very substantial investment to electrify the country
and to bring power prices toward world levels by installed world class
facilities. And, with the completion during 2001 of the development of the Malampaya
natural gas field and the pipeline to bring its output to the Batangas
peninsula for use in several large power plants, the Philippines entered into a new era of making
real progress in reducing its high degree of dependence on imported petroleum
for transportation and electricity.
The October 2000-January 2001 political crisis that ultimately brought current
President Macapagal-Arroyo damaged investor confidence and triggered
intensified downward pressure on the peso. However, the transition of power
certainly improved the overall economic outlook; the economic manifestations of
this resolution were stabilization of the exchange rate (although at a lower
level) and a restoration of consumer and investor confidence. The new
president, a trained economist, seems to have taken a firm hold on domestic
policy. Enactment of the landmark electricity industry reform bill was a
particularly noteworthy achievement since the debate over the legislation had
been wide and long-lasting.
The
Philippine economy is based upon agriculture, light industry and supporting
services. In 1998, it slowed sharply as a result of spillover from the Asian
financial crisis and El Nino-related weather conditions, although the
contraction in the Philippines was not as severe as in other East
and Southeast Asian countries during the Crisis. The country had not grown as
rapidly as some of its neighbors, had not experienced the same scale of foreign
short term capital rushing in during the boom years of the mid-1990s and had a
better capitalized and supervised banking sector that served to cushion the
economy from the worst of the "Asian contagion." But, like many of
its developing Asian neighbors, it did have a large current account deficit.
The lasting legacy of the Asian financial crisis in the Philippines has been much like it is across the
region—a sharp swing in the current account from deficit to surplus and a very
sizable depreciation of the peso against the major world currencies. In 1996,
the average exchange value of the peso was P26.2/US$; in 2001, that value was
P51/US$. Accordingly, the peso lost half its international purchasing power as
measured in US dollars. That depreciation led to a significant change in the
terms of trade which made Philippine exports much more price competitive in
world markets and imported goods much more expensive domestically with the
resulting dramatic turn in the country's current account balance.
Another legacy of the Asian financial crisis is the ongoing economic reform
efforts to which the government has committed to help the Philippines match the pace of development in
the newly industrialized countries of East Asia. The strategy includes improving infrastructure, overhauling the tax
system to bolster government revenues and moving toward further deregulation
and privatization of the economy. Of particular note is the enactment by the
Philippine congress during 2001 of a long-debated electricity sector
privatization and deregulation law. The Philippines has committed to 'unbundle'
its electricity industry, separating power generation from transmission and
from local distribution, making power generation a competitive industry and
turning over responsibility for investment in new plants to the private sector.
This is an unusual step for a developing nation—common enough among developed
nations with well-established electricity industry infrastructure, but less so
among countries still needing very substantial investment to electrify the
country and to bring power prices toward world levels by installed world class
facilities. And, with the completion during 2001 of the development of the Malampaya
natural gas field and the pipeline to bring its output to the Batangas
peninsula for use in several large power plants, the Philippines entered into a new era of making
real progress in reducing its high degree of dependence on imported petroleum
for transportation and electricity.
The October 2000-January 2001 political crisis that ultimately brought current
President Macapagal-Arroyo damaged investor confidence and triggered
intensified downward pressure on the peso. However, the transition of power
certainly improved the overall economic outlook; the economic manifestations of
this resolution were stabilization of the exchange rate (although at a lower
level) and a restoration of consumer and investor confidence. The new
president, a trained economist, seems to have taken a firm hold on domestic
policy. Enactment of the landmark electricity industry reform bill was a
particularly noteworthy achievement since the debate over the legislation had
been wide and long-lasting.
World Bank Data
|
|
1997 |
2000 |
2001 |
|
88.2 billion |
78.5 billion |
80.8 billion |
|
|
1,240.0 |
1,040.0 |
1,050.0 |
|
|
82.3 billion |
74.7 billion |
71.4 billion |
|
|
5.2 |
4.0 |
3.4 |
|
|
6.2 |
6.7 |
6.7 |
|
|
18.9 |
15.9 |
15.2 |
|
|
32.1 |
31.1 |
31.2 |
|
|
49.0 |
52.9 |
53.6 |
|
|
49.0 |
56.3 |
55.3 |
|
|
59.3 |
50.2 |
54.9 |
|
|
24.8 |
17.8 |
17.0 |
|
|
19.0 |
15.4 |
.. |
|
|
0.1 |
-4.1 |
.. |
The
strength of the external sector of the economy, reflected in the strong current
account surpluses registered during 1999 and 2000, helped bring the Philippine
economy out of its 1998 recession. Goods exports earnings expanded by 18
percent per year in 1999 and 2000 while imports fell by more than seven percent
per year over the same period. In 2001, export growth slowed dramatically to
nine percent as the global IT investment depression took its effect on the
electronics manufacturing sector of the Philippine economy and imports grew
less than four percent. The trade balance expanded in 2001, but the deficit on
services expanded and the surplus on net factor income contracted so that the
current account surplus in 2001 was substantially lower, at about 5.9 percent
of GDP, as compared to 2000 when the surplus exceeded 11 percent of GDP.
The year 2001 was a very strong year for direct and portfolio investment
inflows to the Philippines. Direct investment by foreign firms
rose to almost US$2 billion from US$1.35 billion in 2000 and portfolio
investment resulted in a net inflow of US$1.4 billion as compared to a net
outflow of about US$100 million during 2000. The Philippines finished 2001 in a very strong net international reserve
position—US$13.4 billion, representing nearly six months of imports.
|
Balance
of Payments |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
1997 |
2000 |
2001 |
|
77.1 |
98.5 |
.. |
|
|
151.2 |
.. |
.. |
|
|
66.4 |
.. |
.. |
|
|
98.0 |
.. |
.. |
|
|
Foreign direct investment, net inflows in reporting country (current US$) |
1.2 billion |
2.0 billion |
.. |
|
.. |
50.8 billion |
.. |
|
|
9.2 |
13.7 |
.. |
|
|
11.8 billion |
5.9 billion |
.. |
|
|
9.8 |
7.6 |
.. |
|
Exports: |
$37 billion (f.o.b., 2000) |
|
Exports - commodities: |
Electronic equipment, machinery and transport equipment, garments, coconut products |
|
Exports - partners: |
US 30%, Japan 15%, Netherlands 8%, Singapore 8%, Taiwan 8%, Hong Kong 5% (2000) |
|
Imports: |
$30 billion (f.o.b., 2000) |
|
Imports - commodities: |
Raw materials and intermediate goods, capital goods, consumer goods, fuels |
|
Imports - partners: |
Japan 19%, US 16%, EU 9%, South Korea 8%, Singapore 6%, Taiwan 6% (2000) |
The Philipinne
Stock Exchange, the sole stock exchange in the Philippines, was created in 1992 after a successful merger of the two
former stock exchanges of the country, the Manila Stock Exchange and the Makati
Stock Exchange. By the end of the 1990s, the Philippines Sock Exchange had 226
listed companies.
Foreigners are restricted to investing in B-shares and total foreign investment
in a company is limited to 40 percent for general listed stocks and 30 percent
for banks. All foreign transactions must be registered with the Central Bank.
Profits and dividends can be repatriated without restriction.
Progress in investment liberalization has been substantial
and is proceeding despite sometimes contentious opposition by
"nationalist" blocs and vested interests. In the first six months of
2000, the Philippine Congress passed legislation opening the retail trade
sector and the corn and rice milling business to foreign investment and
substantially easing restrictions on foreign ownership of banks. A provision in
the new Electronic Commerce Act may also open the door to foreign investment in
cable infrastructure. Congress is also finalizing legislation to restructure
the power sector and privatize the government-owned National Power Corp. Earlier,
March 1996 legislation abolished one of three negative lists originally under
the Foreign Investment Act (i.e., List C, which limited foreign ownership in
"adequately served" sectors).
Despite the progress, significant barriers to foreign investments remain. The
two remaining "negative lists" under the Foreign Investment Act (FIA)
fully or partially restrict foreign ownership in a variety of sectors of the
economy:
List A restricts foreign investment in certain sectors because of
constitutional or legal constraints. For example, the practice of licensed
professions is fully reserved for Philippine citizens, as are industries such
as mass media, small-scale mining, private security agencies, and the
manufacturers of firecrackers and pyrotechnic devices. Varying foreign
ownership ceilings are imposed on enterprises engaged in, among others,
financing, advertising, domestic air transport, public utilities, pawnshop
operations, education, employee recruitment, public works construction and
repair (with the exception of Build-Operate-Transfer and foreign-funded or
assisted projects), and commercial deep sea fishing. Land ownership is also
constitutionally restricted to Filipino citizens or to corporations with at
least 60 percent Filipino ownership. The exploration and development of natural
resources must be undertaken under production sharing or similar arrangements
with the government. For small-scale projects, a company should be at least 60
percent Filipino-owned to qualify. High-cost and high-risk activities such as
oil exploration and large-scale mining are open to 100 percent foreign
ownership. In 1998, private domestic construction was deleted from List A,
lifting the 40 percent foreign ownership ceiling previously imposed on such
firms.
In March 2000, President Estrada signed Republic Act (R.A.) 8762 ("Retail
Trade Liberalization Act of 2000") into law, repealing 1954 legislation
which banned foreigners from engaging in retail trade. RA 8762 allows immediate
100 percent foreign ownership of retail companies capitalized at $7.5 million
or more ("Category B" enterprises). For two years after enactment,
foreign equity will be limited to 60 percent in retail trade businesses
capitalized between $2.5 million and less than $7.5 million ("Category
C"), with full foreign ownership allowed after that two-year period. A
lower minimum capitalization threshold ($250,000) applies to foreigners seeking
full ownership of establishments specializing in "high-end or luxury
products" ("Category D" firms). Foreign equity remains banned in
retail companies capitalized at less than $2.5 million ("Category A"
enterprises). R.A. 8762 also repealed several laws restricting foreign
companies from engaging in rice and corn trade.
List B restricts foreign ownership (generally to 40 percent) for reasons of
national security, defense, public health, safety and morals. This list also
seeks to protect local small- and medium-sized firms by restricting foreign ownership
to no more than 40 percent in non-export firms capitalized at less than
$200,000.
In May 2000, President Estrada signed R.A. 8791 ("General Banking Law of
2000"). R.A. 8791 provides, inter alia, for a seven-year window during
which foreign banks may own up to 100 percent of one locally-incorporated
commercial or thrift bank (with no obligation to divest later). Reflecting the
government's current emphasis on consolidation, a three-year freeze was imposed
on new bank licenses. A "macro" limitation on foreign ownership
requires that majority Filipino-owned banks should, at all times, control at
least 70 percent of total banking system resources. May 1994 amendments to the
previous Banking Act had allowed a maximum of ten additional foreign banks to establish
branches in the Philippines and increasing foreign banks' maximum ownership of
domestically incorporated banks from 40 percent to 60 percent. All ten licenses
were issued. Rural banking remains completely closed to foreigners.
The limit on foreign ownership of securities underwriting firms was raised from
40 percent to 60 percent in 1997. The limit for financing companies was also
raised to 60 percent in 1998. The insurance industry (formerly part of the FIA's
deleted List C) was opened up to majority foreign ownership in 1994; however,
minimum capital requirements increase with the degree of foreign ownership.
Article XII-Sec. 7 of the 1987 Philippine Constitution bans foreigners from
owning land in the Philippines. Foreign companies investing in the Philippines
may lease land for 50 years, renewable once for another 25 years, or a maximum
75 years. Prior to 1994, foreign firms were allowed to lease land for 25 years,
renewable once for another 25 years, or a maximum 50 years.
There are no separate regulations which discriminate against foreign buyers
under the government's privatization program.
RA 6957 (as amended by RA 7718) provides the legal framework for
build-operate-transfer (BOT) projects and similar private sector-led
infrastructure arrangements. The BOT and similar schemes are generally open to
both domestic and foreign contractors/operators. Consistent with Constitutional
limitations on foreign investment in public utilities, franchises in
railways/urban rail mass transit systems, electricity distribution, water
distribution and telephone systems must be awarded to enterprises which are at
least 60 percent Filipino-owned. American firms have won contracts under BOT
and similar arrangements, including in the power generation and water distribution
sectors. Developers of BOT and similar projects valued at over one billion
pesos may register for incentives with the Board of Investment.
Under Book I ("Investments with Incentives") of the 1987 Omnibus
Investment Code, the Philippine government, through the Board of Investments
(BOI), offers incentives to exporters and to preferred activities listed in an
annual Investment Priorities Plan (IPP). Screening mechanisms for companies
seeking investment incentives appear to be routine and non-discriminatory, but
the application process can be complicated. Incentives granted by the BOI often
depend on actions by other agencies, such as the Department of Finance.
Certain provisions of the incentives law impose more stringent conditions on
foreign-owned enterprises which seek to qualify for BOI-administered incentives:
In general, foreign-owned firms producing for the domestic market must engage
in a "pioneer" activity to qualify for incentives.
"Non-pioneer" activities are generally opened up to foreign equity
beyond 40 percent only if, after three years, domestic capital proves
inadequate to meet the desired industry capacity.
For firms seeking BOI incentives linked to export performance, export
requirements are higher for foreign-owned companies (at least 70 percent of
production should be for export) than for domestic companies (50 percent of
production for export).
Foreign-owned companies must divest to a maximum 40 percent foreign ownership
within thirty years or such longer period as the BOI may allow. Foreign firms
that export 100 percent of production are exempt from this divestment
requirement.
1. Currency Conversion and Transfer Policies
There are generally no restrictions on the full and immediate transfer of funds
associated with foreign investments (i.e., repatriation and remittances),
foreign debt servicing, and the payment of royalties, lease payments, and
similar fees. To obtain foreign exchange from the banking system for such
purposes, the Bangko Sentral only specifies certain registration and/or
documentation requirements. Certain types of foreign loans require the prior
approval of the Bangko Sentral, such as public sector and public
sector-guaranteed debt; private loans covered by foreign exchange guarantees
issued by local banks; foreign currency deposit unit loans funded or
collateralized by offshore loans and deposits; and medium-to long-term loans
obtained by financial institutions for re-lending. In January 2000, the Bangko Sentral
moved to curb foreign exchange speculation and foreign exchange volatility by
requiring a minimum holding period for foreign investments in peso time
deposits (otherwise, the investor will not be allowed to purchase foreign
exchange from banks for repatriation and remittance purposes).
There is no difficulty in obtaining foreign exchange and foreign exchange can
be freely bought and sold outside the banking system. There are no mandatory
foreign exchange surrender requirements imposed on export earners. The exchange
rate is not fixed and varies daily in response to market forces.
2. Expropriation and Compensation
Philippine law guarantees investors freedom from expropriation, except for
public use or in the interest of national welfare or defense. In such cases,
the government offers compensation for the affected property. Most
expropriation cases involve right-of-way and acquisition for the implementation
of major public sector infrastructure projects. In the event of expropriation,
foreign investors have the right under Philippine law to remit sums received as
compensation in the currency in which the investment was originally made and at
the exchange rate at the time of remittance.
There are laws that mandate divestment by foreign investors. The Omnibus
Investment Code specifies a 30-year divestment period for foreign-owned
companies which qualify for investment incentives. The recently enacted Retail
Trade Liberalization Act (R.A. 8762) requires foreign-owned retail
establishments which do not specialize in luxury products to offer at least 30
percent of their equity to the public within eight years from the start of
operations.
3. Dispute Settlement
As in the United States, the Philippine judiciary is constitutionally
independent from the executive and legislative branches. The Court of Appeals and
the Philippine Supreme Court, however, are not as selective as in the United
States, and tend to hear most cases that are elevated to them. Many cases
are, therefore, eventually elevated to the Supreme Court. Partly as a result,
the court system is overburdened and cases proceed extremely slowly.
There has been criticism that judges rarely have any background in or thorough
understanding of economics, business or a competitive economic system, and that
some decisions have strayed from the interpretation of law to policymaking.
There have also been charges that the judicial system can be manipulated.
The Philippines is a member of the International Center for the Settlement of
Investment Disputes (ICSID) and of the Convention on the Recognition and Enforcement
of Foreign Arbitral Awards. Competition Law. While there are legal provisions
prohibiting unfair trade practices (i.e., the Constitution and the Revised
Penal Code), the Philippines lacks a comprehensive anti-trust law.
The Corporation Code contains legal provisions governing insolvency/bankruptcy,
with jurisdiction over such matters divided between the Securities and Exchange
Commission (SEC) and the courts. The law has important shortcomings, including
a lack of detailed guidelines and standards for reorganization, liquidation, or
debt payment suspension cases. It also does not clearly specify how interests
of debtors and creditors should be balanced. As a result, legal proceedings
face potential delay. The spate of debt suspension filings triggered by the
Asian financial crisis exposed the inadequacy and ambiguity of
insolvency/bankruptcy laws and regulations. The SEC recently made some progress
in this area by issuing more detailed and systematic guidelines for dealing
with debt suspension cases. The SEC is working to develop more comprehensive
bankruptcy laws and procedures with foreign donor assistance.
4. Performance Requirements and Incentives
Book I - "Investment with Incentives" - of the Omnibus Investment
Code provides for incentives for qualified firms engaged in sectors and
geographic areas included in the annual Investment Priorities Plan,
administered by the Board of Investments (BOI). Firms which are eligible to
receive incentives are divided into those considered "pioneer" and
"non-pioneer." "Pioneer enterprises" refers to companies
which manufacture goods not yet produced in the Philippines on a commercial
scale; which employ a formula, process, or production scheme not yet tried in
the country; which produce non-conventional fuels or manufacture equipment
which utilize non-conventional energy sources; or which engage in certain
agricultural, mining and forestry activities. Pioneer enterprises enjoy more
liberal incentives than "non-pioneer" firms, including a longer
income tax holiday privilege and 100 percent foreign ownership (with divestment
over a thirty-year period). "Non-pioneer" companies refers to
enterprises in preferred activities which do not, however, qualify for
"pioneer" status.
The basic incentives offered to all BOI-registered companies include:
• Income tax holiday: Six years (for new pioneer firms) and four years (for new
non-pioneer firms); three years for registered expanding firms (limited to
incremental sales revenue).
• Additional deduction for wages: For the first five years from registration,
deduction from taxable income equivalent to 50 percent of the wages of
additional direct-hire workers, provided the project meets a prescribed capital
equipment-to-labor ratio set by the BOI. Firms that benefit from this incentive
cannot simultaneously claim an income tax holiday.
• Tax and duty exemption on imported breeding stocks and genetic materials
and/or tax credits on local purchases thereof (equivalent to the taxes and
duties which would have been waived if imported), for purchases made within ten
years from a company's registration with the BOI;
• Importation of consigned equipment for ten years from date of BOI
registration, subject to posting a re-export bond;
• Employment of foreign nationals: Enterprises may employ foreign nationals in
supervisory, technical or advisory positions within a five-year period from
registration (extendible for limited periods at the discretion of the BOI)
under simplified visa requirements. Government regulations require the training
of Filipino understudies for the positions held by foreigners. If
foreign-controlled, registered firms may indefinitely retain foreigners in the
positions of president, treasurer, general manager or their equivalents.
• To encourage the regional dispersal of industries, BOI-registered enterprises
which locate in less-developed areas are automatically entitled to
"pioneer" incentives. In addition, such enterprises can deduct from
taxable income an amount equivalent to 100 percent of outlays for infrastructure
works. They may also deduct 100 percent of incremental labor expenses from
taxable income for the first five years from registration (double the rate
allowed for BOI-registered projects not located in less developed areas).
Performance requirements, usually based on an applicant's approved project
proposal, are established for investors granted incentives, and vary from
project to project. In general, the Board of Investments (BOI) and the investor
agree on yearly production schedules and, for export-oriented firms, export
performance targets. The BOI requires registered projects to maintain at least
25 percent of total project cost in the form of equity.
The BOI generally sets a 20 percent local value-added benchmark when screening
applications. The BOI is flexible in enforcing local value-added ratios
registrants commit to in their approved project proposal, as long as actual
performance does not deviate significantly from other participants in the same
activity.
The BOI specifies industry-wide local content requirements only for
participants under the government's Motor Vehicle Development Program. Current
guidelines also specify that participants in this program generate, via
exports, a certain ratio of the foreign exchange needed for import requirements.
In October 1999, the Philippines requested a five-year extension of the Jan. 1, 2000 deadline to eliminate these measures under the WTO Agreement on Trade-Related
Investment Measures (TRIMS).
The BOI has been flexible in enforcing individual export targets, provided that
exports as a percentage of total production do not fall below the minimum
requirement (50 percent for local firms and 70 percent for foreign firms)
needed to qualify for BOI incentives. BOI-registered foreign-controlled firms
which qualify for incentives are subject to a 30-year divestment period, at the
end of which at least 60 percent of equity must be Filipino-controlled.
Book III of the Omnibus Investment Code provides incentives for the
establishment by multinational enterprises of regional or area headquarters (RHQs)
in the Philippines. Incentives to the regional or area headquarters include
exemption from income tax and from local licenses, fees and dues (except real
property taxes on land improvement and equipment); as well as tax and duty-free
importation of training and conference materials. Privileges extended to
foreign executives include tax and duty-free importation of household effects,
multiple entry visas for the executive and his/her family, as well as exemption
from various types of government-required clearances and from fees under
immigration and alien registration laws.
Certain industries are subject to specific laws which require local sourcing.
• Executive Order (E.O.) No. 776 requires that pharmaceutical firms purchase
semi-synthetic antibiotics from a specific local company, unless they can
demonstrate that the landed cost of imported semi-synthetic antibiotics is at
least 20 percent less than that produced by the local firm.
• E.O. 259 of 1987 requires the soap and detergent industry to use a minimum of
60 percent of raw materials which do not endanger the environment, and
prohibits imports of laundry soap and detergents containing less than 60
percent of such raw materials. The law is intended to require soap and
detergent manufacturers to us coconut-based surface active agents of Philippine
origin. While the provision was notified to the WTO, it has not been repealed.
The Philippine Department of Justice, in Opinion No. 88 of 1999, stated that
E.O. 259 conflicts with the country's obligations under the WTO Agreement on
Trade-related Investment Measures.
• Letter of Instruction (LOI) 1387, issued in 1984, requires mining firms to
offer their copper concentrates to the then government-controlled Philippine
Associated Smelting and Refining Corp. (PASAR). PASAR was privatized in 1998
and the policy is under review.
• The Retail Trade Act of 2000 requires local sourcing for the first ten years
after the law's effective date. During that period, at least 30 percent of the
cost of inventory of foreign retail firms not dealing exclusively in luxury
goods, and 10 percent of the inventory of firms selling luxury products, should
consist of products assembled in the Philippines.
Regulations specify that government agencies generally must engage Philippine
firms (defined as one which is at least 60 percent owned by Filipinos) for
locally-funded consulting requirements, including research and development
projects. Foreign companies may, however, participate in locally-funded
government research and development programs if the skill required is not
available locally. Projects funded by foreign aid donors are not subject to
these limitations.
5. Private Ownership Rights
The government respects the private sector's right to freely acquire or dispose
of its properties or business interests, although acquisitions, mergers and
other combinations of business interests involving foreign equity must comply
with foreign nationality caps specified in the constitution and other laws.
There are few sectors closed to private enterprise, generally for security,
health and public morals. The government controls and operates the country's
casinos through the Philippine Amusement and Gaming Corporation (Pagcor) and
runs lotto/sweepstake operations through the Philippine Charity Sweepstakes
Office (PCSO).
Private and government-owned firms generally compete equally, although there
are exceptions. For example, government-owned banks corner the bulk of public
sector deposits. The National Food Authority, a government agency, is the sole
importer of ordinary rice. In some cases, government procurement guidelines -
specifically for rice, medicines and infrastructure projects - favor Philippine
over foreign-controlled firms. In the insurance sector, current regulations
specify that only the state-owned Government Service Insurance System (GSIS)
may provide insurance coverage for government-funded and BOT projects. As a
general rule, locally-funded government consulting requirements should be serviced
by Philippine-controlled firms.
6. Protection of Property Rights
Although the Philippines has established procedures and systems for registering
claims on property (including intellectual property and chattel/mortgages),
delays and uncertainty associated with a cumbersome court system continue to be
of concern to investors.
In order to protect their products from intellectual property rights (IPR)
infringement, U.S. manufacturers and suppliers should register their patents,
trademarks, and brand names with the Intellectual Property Office (IPO),
located at the IPO Building, 351 Sen. Gil J. Puyat Avenue, Makati City, fax:
(632) 890-4936, email: ipo@dti.gov.ph, website: www.dti.gov.ph/ipo.
Manufacturers and importers are also encouraged to register patents,
trademarks, brand names, and copyrighted works with the Bureau of Customs, in
order to facilitate enforcement of rights.
Under the Intellectual Property Code of the Philippines, the IPO has
jurisdiction to resolve certain disputes concerning alleged infringement and
licensing. However, this right to pursue cases against IPR violators through
the IPO's administrative complaint mechanisms, while provided for in law, is
currently unavailable to rights owners due to organizational delays at the IPO.
In addition to the IPO, agencies with IPR enforcement responsibilities include
the Department of Justice; National Bureau of Investigation; Videogram
Regulatory Board (for piracy involving cinematographic works), the Bureau of
Customs, and the National Telecommunications Commission (for piracy involving
satellite signals and cable programming). The Presidential Interagency
Committee on Intellectual Property Rights (PIAC-IPR) is composed of
representatives from these and other agencies, and is tasked with coordinating
enforcement efforts. The private sector can file requests for IPR enforcement
actions with the PIAC-IPR.
Significant problems remain in ensuring the consistent and effective protection
of intellectual property rights. A new intellectual property code (R.A. 8293),
which took effect Jan. 1, 1998, improves the legal framework for IPR protection
in the Philippines. It provides enhanced copyright and trademark protection;
creates a new Intellectual Property Office (IPO), with original jurisdiction to
resolve certain disputes concerning alleged infringement and licensing;
increases penalties for infringement and counterfeiting; and relaxes provisions
requiring the registration of licensing agreements.
Deficiencies in R.A. 8293 remain a source of concern. These include, inter alia,
the lack of authority for courts to order the seizure of pirated material as a
provisional measure without notice to the suspected infringer (as required by
Article 50 of the WTO Agreement on Trade-Related Intellectual Property Rights);
ambiguous provisions on the rights of copyright owners over broadcast,
rebroadcast, cable retransmission, or satellite retransmission of their works;
and burdensome restrictions affecting contracts to license software and other
technology. Some provisions of R.A. 8293, while nominally in force, are
currently unavailable to rights holders, because of organizational delays at
the IPO. These include the right to pursue cases against IPR violators using
the IPO's administrative complaint provisions. Legislation is pending in the
Philippine Congress to provide IPR protection for plant varieties and
layout-designs of integrated circuits, in line with WTO obligations that became
mandatory for the Philippines on Jan. 1, 2000.
7. Transparency of Regulatory System
Regulatory agencies in the Philippines are generally not statutorily
independent, but are attached to cabinet departments or the office of the
president. As part of the process of developing or changing regulations, the
law requires that agencies proceed through a public consultation process, often
involving public hearings. In most cases, this ensures some transparency in the
process of developing regulations. New regulations are supposed to be published
in national newspapers of general circulation, often before taking effect.
Enforcement of regulations, once issued, is often weak and sometimes
inconsistent.
Many foreign investors find business registration, customs, immigration and
visa procedures in the Philippines burdensome and a source of frustration. Some
agencies (such as the Securities and Exchange Commission, Board of Investment, Department
of Foreign Affairs) have established "express lanes" or
"one-stop shops" to reduce bureaucratic delays, with varying degrees
of success.
Both foreign and domestic investors have expressed concern about the propensity
of courts to issue "temporary restraining orders" (TROs) and to stray
beyond matters of legal interpretation into policymaking functions.
8. Political Violence
Kidnapping for ransom is a serious problem in the Philippines, particularly in
the remote southern island provinces of Basilan and Sulu and in parts of Mindanao.
Richer Filipinos, including many of Chinese descent, are the usual targets
although some foreigners have also been kidnapped in the past.
Communist insurgents in remote areas and southern separatists occasionally
kidnap government officials, military personnel or prominent businesspersons to
make a political statement as well as for ransom. On April 23, 2000 nineteen foreigners and two Filipinos were kidnapped at a Malaysian resort and brought
to the Philippines.
In the last
two years, violence against locals as well as foreigners by Islamic militants,
such as Moro Islamic Liberation Front and Abu Sayyaf, have increased. Located
in the southern parts of the Philippines,
these groups have kidnapped and killed several people, including many
non-Filipino victims. The decapitation of one American resulted in very little
action or interest on the part of the American government until after the
events of September 11, 2001, when world attention was finally fixed on the
issue of radical Islamic violence. Since then, however, an American missionary
couple was kidnapped and one of them was killed during the exchange of fire
between Islamic rebels and the Filipino military.
Thus, it is fair to state that while the national state of peace and order is
stable, separatist rebels in central and western Mindanao, communist insurgents in remote areas, and Islamic
insurgency movements in the south of the country pose a serious threat.
Peace talks between the government and the main communist factions were broken
off in 1999 and have yet to resume. The government opened formal peace talks in
October 1999 with the last major-armed separatist group in Mindanao, the Moro Islamic Liberation Front,
but progress is slow and positions remain far apart. An upsurge in fighting
between government forces and MILF rebels has marked the first half of 2000.
The Philippines faces no serious external threat, although
overlapping claims to disputed islands in the South China Sea cause friction. The United States and the Philippines
are treaty allies under the Mutual Defense Treaty, which is the basis for our
continuing security cooperation. The "Visiting Forces Agreement,"
which went into effect on June 1, 1999,
has allowed the resumption of normal military cooperation, including
large-scale exercises and ship visits.
9. Corruption and Crime
The Philippine Revised Penal Code, Anti-Graft and Corrupt Practices Act, and
Code of Ethical Conduct for public officials are in place and are intended to
combat suspected corruption and related anti-competitive business practices.
The Office of the Ombudsman investigates cases of alleged graft and corruption
involving public officials. The "Sandiganbayan" (anti-graft court)
prosecutes and adjudicates cases filed by the Ombudsman. There is also a
Presidential Commission Against Graft and Corruption. Soliciting/accepting and
offering/giving a bribe are criminal offenses, punishable with imprisonment
(six to 15 years), a fine and/or disqualification from public office or
business dealings with the government. As with many other laws, enforcement of
this provision has been inconsistent. A broad new initiative to strengthen public
and private governance, including anti-corruption efforts, was launched in
cooperation with bilateral and multilateral aid donors (in particular the World
Bank) in May 2000. It is too early to say whether this new effort will bear
fruit.
In spite of these government mechanisms directed at combating suspected
corruption, evidence suggests that graft remains a serious problem at many
levels in all branches of the Philippine government. In its 1999 survey of
public perceptions of corruption in 99 countries, the non-governmental
organization Transparency International gave the Philippines a score of 3.6 (10
being the perfect corruption-free score), ranking the Philippines at 20th
place in terms of the perceived level of corruption. The Philippines is not a signatory of the OECD
Convention on Combatting Bribery.
10. Labor
American managers are likely to find in the Philippines a highly motivated work force that is easy to train. Plant
managers are generally pleased with their initial experience in recruiting and
training Filipino workers. They often point to the following characteristics of
the work force:
• Easy to train - literacy is relatively high and employers give good marks to
the quality of Filipino secondary education, including schools in areas distant
from Manila. Most young Filipino workers can
read and speak English to a degree that permits managers to use American
training materials and trainers from the U.S.
in the first phases of new production.
• Productive - employers find that Filipino workers usually respond well to
productivity goals and wage incentives for increasing their output.
Many employers indicate they have a productive working relationship with local
trade union leaders with the exception of radical unions engaged in political
activism. In general, the mainstream trade union movement recognizes that its
members' welfare is tied to the productivity of the economy and, more
specifically, to the competitiveness of the firm where they work. The effects
of globalization have pressured unions to factor new concerns into their
bargaining and organizing approach. The example of frequent plant closures in
industries affected by trade and increased imports makes many unions more
willing to consider productivity issues as part of an employment package. In
1999 there were fewer than 60 strikes nationwide, continuing the steady decline
in work stoppages since the late 1980s.
The trade union movement is divided and rarely speaks with a single voice. Much
depends on the personal leadership style of local union leaders. There are
seven national labor centers and some 160 labor federations that claim more
than three million organized workers. There are also numerous independent
unions unaffiliated with any federations. However, only about 540,000 workers
are covered by collective bargaining agreements.
Special economic zones (SEZs) play a central role in attracting new investors
to the Philippines. SEZs normally include their own
"labor centers" for providing investors with assistance in recruiting
staff, coordinating with the Department of Labor and Employment (DOLE) and
social security agencies, and mediating labor disputes. The SEZs have helped
produce the fastest growth in new jobs as both Filipino and foreign firms seek
the tax and other advantages of operating in areas devoted to fostering export
industries.
Many trade unions charge local SEZ administrators with fostering a
"non-union" environment, noting that there are almost no unions in
the great majority of the SEZ areas. A combination of local political pressures
and the restricted access to the SEZ's appears to have hampered trade unions
from making organizing inroads.
Multinational managers generally report that their total compensation package
is comparatively low and a very good value for their mid-level management and
skilled staff in the Philippines. They report that comparative wage
costs are somewhat higher for semi-skilled and line workers.
Minimum wages are determined on a regional basis through the determination of
Wage and Productivity Boards that meet periodically in each of the Philippine
government's 16 administrative regions. In recent years, the regional boards
have adjusted the minimum wage rate about once annually.
The National Capital regional board normally sets the national trend. In
October 1999, it made the most recent adjustment to the daily minimum, raising
it to 223.50 pesos (about $5.25 at current exchange rates) for firms with ten
or more workers. Most of the other regions soon followed suit, adjusting wages
to a level 31 to 78 pesos less than Manila's. Various exceptions are granted by the wage boards, including
separate rates depending on the type of industry. For example, in Metro Manila,
the daily minimum wage for agricultural workers, or those for firms with fewer
than ten employees, is 198 pesos (about S$ 4.65).
11. International Investment Agreements
As of March 2000, the Philippines had signed bilateral investment agreements
with Argentina, Australia, Bangladesh, Belgium, Canada, Chile, China, the Czech
Republic, Denmark, Finland, France, Germany, India, Iran, Italy, Republic of
Korea, Kuwait, Myanmar, Netherlands, Pakistan, Romania, Russian Federation,
Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, and
Vietnam. The general provisions of the bilateral investment agreements include
the promotion and reciprocal protection of investments; non-discrimination; the
free transfer of capital, payments and earnings; freedom from expropriation and
nationalization; and recognition of the principle of subrogation.
The Philippines has a tax treaty with the United States for the purpose of avoiding double
taxation, providing procedures for resolving interpretative disputes, and
enforcing taxes of both countries. The treaty also seeks to encourage bilateral
trade and investments by allowing the exchange of capital, goods and services
under clearly defined tax rules and, in some cases, preferential tax rates.
Under the Philippine-U.S. tax treaty, the maximum tax rate on interest income
that can be imposed on American investors by the Philippine government is 15
percent, versus a 20 percent withholding tax rate normally applied. According
to U.S. banks, obtaining a refund of the
five percent excess tax is often difficult. In recent years, some treaty disputes
also arose between U.S.-owned companies and the Philippine government's Bureau
of Internal Revenue (BIR), mainly on the interpretation of permanent
establishments, business profits, and the final withholding tax on dividends
and royalties paid to U.S. residents. Disputes on the
applicable tax rate on royalties paid to U.S.
firms by a Philippine company have been resolved in favor of U.S. taxpayers.
The BIR Commissioner has authority to allocate income or deductions
between/among related organizations or businesses, whether or not organized in
the Philippines, if such allocation is necessary to
prevent tax evasion. In mid-1998, the BIR issued audit guidelines for the
examination of related groups of companies and created audit teams to focus on
large taxpayers and their intercompany transactions. The BIR also issued
guidelines on the determination of an arm's length price, where different
methods under OECD rules on transfer pricing may be used as reference. Tax
practitioners note that the BIR rules - which mainly restate the transfer
pricing principle to govern related party transactions - lack clarity and
detail. Issues on interpretation and application could therefore arise from the
lack of detailed guidelines and local precedents. U.S. jurisprudence is, however, persuasive in the
Philippine tax scene.
The BIR is considering issuing regulations which prescribe the basis and
procedure for entering into an advance pricing arrangement (APA) with BIR and
the U.S. Internal Revenue Service (IRS) to address transfer pricing and
permanent establishment issues. An APA is an agreement on the acceptability of
a transfer price for a related party transaction-binding among the BIR, IRS and
the taxpayer, and is valid for a stipulated time period, but renewable.
12. Foreign Trade Zones
Republic Act 7916, "The Special Economic Zone Act of 1995," grants
preferential tax treatment to enterprises located in "special economic
zones" (also referred to as "ecozones"). Pursuant to R.A. 7916,
"ecozones" may contain any or all of the following: export processing
zones, free trade zones, and certain industrial estates. The Philippine
Economic Zone Authority (PEZA) manages four government-owned export-processing
zones and administers incentives available to firms located in some 40
privately-owned and operated zones. Any person, partnership, corporation, or
business organization, regardless of nationality, control and/or ownership, may
register as an export processing zone enterprise with PEZA.
Enterprises located in ecozones designated "export processing zones"
are considered to be outside the customs territory of the Philippines and are
allowed to import capital equipment and raw material free from customs duties,
taxes, and other import restrictions. Goods imported into "free trade
zones" may be stored, repacked, mixed, or otherwise manipulated without
being subject to import duties. Goods imported into both export processing
zones and free trade zones are exempt from the government's Selective Preshipment
Advance Classification Scheme (SPACS). An ecozone may simultaneously be
registered as both an export processing zone and a free trade zone, although
the registered enterprise cannot receive incentives under both categories. A
developer may register his project as an ecozone, and at the same time locate
inside that ecozone as an enterprise, but under separate names.
Incentives for firms in export processing and free trade zones include:
• exemption from corporate income tax (four years for non-pioneer and six years
for pioneer, renewable up to an additional two years);
• after the expiration of the income tax exemption, a special five percent tax
rate in lieu of national and local income taxes;
• tax credits for import substitution; exemptions from wharfage dues, export
taxes and other fees;
• a tax credit on domestic capital equipment;
• tax and duty-free importation of breeding stocks and genetic materials;
• tax credits on domestic breeding stocks and genetic materials;
• additional deductions for labor costs and training expenses;
• domestic sales allowance equivalent to 30 percent of total export sales;
• permanent resident status for foreign investors and immediate family members;
• permission to hire foreign nationals;
• simplified import procedures.
Amendments to the Special Economic Zone Act (under R.A. 8748), which took
effect on June 20,1999, include:
• imposition of a real property tax on land owned by ecozone developers;
• increasing from one to two percentage points the share of income tax to be
passed directly to local government units;
• reorganizing and expanding the membership of the PEZA Board from nine to
thirteen.
R.A. 8748 does not apply to economic zones and areas created under the Bases
Conversion and Development Authority (BCDA) and other special laws (described
in the following paragraphs). PEZA Board Resolution No. 99-264 provides for the
registration as ecozones of information technology (IT) parks having a minimum
area of five hectares. Upon registration with the PEZA, IT park developers,
locators and utilities enterprises are eligible to receive the same package of
investment incentives PEZA extends to registered economic zones. PEZA's
"Guidelines for the Establishment and Operation of Information Technology
(IT) Parks" define IT as a collective term for various technologies
involved in processing and transmitting information, which include computing,
multimedia, telecommunications, and microelectronics. To be eligible for PEZA
registration, IT parks located in the National Capital Region (Metropolitan
Manila) may serve only as locations for service-type activities, with no
manufacturing operations.
Two other privately-owned ecozones are independent of PEZA oversight: the Zamboanga
City Economic Zone and Freeport, located in Zamboanga City, Mindanao; and the Cagayan Special Economic
Zone and Freeport, covering the city of Santa Ana, Cagayan Province, and adjacent islands. The
incentives available to investors in these zones are provided for by R.A. 7903
and 7922, respectively, and are very similar to those provided by PEZA under
R.A. 7916.
In addition, the special economic zones located inside the two principal former
U.S. military bases in the Philippines are also independent of PEZA and
subject to separate legislation under the Base Conversion Development Authority
(created under R.A. 7227). These are the Subic Bay Freeport Zone (SBFZ) in Subic Bay, Zambales, and the Clark Special
Economic Zone (CSEZ) in Angeles City, Pampanga. Firms operating inside the SBFZ and CSEZ are
exempt from import duties and national taxes on imports of capital equipment
and raw materials needed for their operations within the zone. Both the SBFZ
and the CSEZ are managed as separate customs territories. Products imported
into the zones are exempt from the government's Selective Preshipment Advance
Classification Scheme, with the exception of products imported for sale at
duty-free retail establishments within the zones. Firms operating in the zones
are required to pay only a 5 percent tax based on their gross income. Both
zones boast of their own international airports, power plants, telecom
networks, housing complexes and tourist facilities.
13. Foreign Investment Statistics
The Securities and Exchange Commission (SEC), Board of Investment (BOI),
National Economic and Development Authority (NEDA), and the Bangko Sentral ng Pilipinas
each generate their respective direct investment statistics. Bangko Sentral
data (which records actual rather than approved investments, and which is
readily available in US$ terms and broken down by investor country and by
industry) is widely used as a convenient and reasonably reliable indicator of
foreign investment stock and foreign investment flows.
The general
corporate tax rate in the Philippines is
35 percent. In addition, for branch offices, a profit remission tax of 15
percent applies. Capital gains from the sale of shares traded through the stock
exchange are subject to a tax of .5 of one percent of the gross selling price
and other capital gains are subject to a 10 percent tax on gains less than P100,000
and 20 percent for gains exceeding P100,000.
Republic Act 7916, "The Special Economic Zone Act of 1995," grants
preferential tax treatment to enterprises located in "special economic
zones" (also referred to as "ecozones"). Pursuant to R.A. 7916,
"ecozones" may contain any or all of the following: export processing
zones, free trade zones, and certain industrial estates. The Philippine
Economic Zone Authority (PEZA) manages four government-owned export-processing
zones and administers incentives to some 40 privately-owned and operated zones.
Any person, partnership, corporation, or business organization, regardless of
nationality, control and/or ownership, may register as an export processing
zone enterprise with PEZA.
Enterprises located in ecozones designated "export processing zones"
are considered to be outside the customs territory of the Philippines and are
allowed to import capital equipment and raw material free from customs duties, taxes,
and other import restrictions. Goods imported into "free trade zones"
may be stored, repacked, mixed, or otherwise manipulated without being subject
to import duties. Goods imported into both export processing zones and free
trade zones are exempt from the government's preshipment inspection program. An
ecozone may simultaneously be registered as both an export processing zone and
a free trade zone, although the registered enterprise cannot receive incentives
under both categories. However, a developer may register his project as an ecozone,
and at the same time locate inside that ecozone as an enterprise, but under
separate names.
Almost all products, including imports, are subject to a 10 percent value-added
tax (VAT). The VAT is imposed on imports for resale or reuse. Exemptions from
the VAT include:
• the sale or importation of agricultural and animal food products in their
original state;
• the sale or importation of feeds, seeds, and fertilizers;
• the sale and importation of coal, natural gas, and certain petroleum products
subject to excise tax;
• the importation of passenger and/or cargo vessels of more than 5,000 tons to
be operated by the importer.
The VAT is based on the valuation determined by the Bureau of Customs for the
application of customs duties, plus those duties themselves, excise taxes, and
other charges (other charges refer to charges on imports prior to release from
customs custody, including insurance and commissions).
Certain products, whether domestically manufactured or imported, are subject to
excise tax. These include alcohol products, tobacco products, petroleum
products, mineral products, fireworks, cinematography films, automobiles,
artificial sweeteners, jewelry, perfumes/toilet waters, and yachts/similar
vessels.
U.S. producers of distilled spirits and
automobiles have raised concerns about certain discriminatory aspects of the Philippines' excise tax system. For example,
the excise tax structure for automotive vehicles includes tiers based on engine
displacement rather than vehicle value. The excise tax structure for distilled
spirits has the effect of subjecting most imported distilled spirits to a
higher excise tax than that applied to distilled spirits produced from
indigenously available materials.
Legislation is pending in the Philippine Congress to expand the list of
available incentives
administered by the BOI, to include:
• a longer tax holiday for "big ticket" investments;
• provisions for net operating loss carry-over and the accelerated depreciation
of fixed assets;
• more liberal tax deductions for training and for research and development
expenses than under current internal revenue laws;
• the deferred imposition of the minimum corporate income tax (two percent of
gross income);
• subject to certain conditions, the provision for an "investment tax
allowance" for spending on fixed assets.
The pending legislation also seeks to restore BOI incentives that expired at
the end of
1997, including tax and duty exemptions for capital equipment imports and tax
credits for purchases of locally manufactured equipment.
In addition to the general incentives available to BOI-registered companies, a
number of incentives provided under the Omnibus Investment Code apply
specifically to registered export-oriented firms. These include:
• Tax credit for taxes and duties paid on imported raw materials used in the
processing of export products;
• Exemption from taxes and duties on imported spare parts (applies to firms
exporting at least 70 percent);
• Access to customs bonded manufacturing warehouses.
Firms which earn at least 50 percent of their revenues from exports may
register for incentives under the 1994 "Export Development Act"
(EDA). Exporters registered with the EDA may also be eligible for BOI
incentives, provided the exporters are registered according to BOI rules and
regulations and the exporter does not take advantage of the same or similar
incentives twice. Incentives under the EDA include a tax credit, which ranges
from 2.5 percent to 10 percent of annual incremental export revenue.
R.A. 8756, which took effect in May 2000, amended Book III of the Omnibus
Investment Code and provides for incentives for the establishment of regional
operating headquarters (ROHQs) - which, unlike RHQs, may derive income from
specified services. R.A. 8756 requires that eligible multinationals
establishing ROHQs invest at least $200,000 yearly to cover operations. ROHQs
enjoy the same incentives as RHQs but, being income-generating, are subject to
a 10 percent value-added tax and a preferential 10 percent corporate income
tax.
Multinationals establishing regional warehouses for the supply of spare parts,
manufactured components or raw materials for their foreign markets also enjoy
fiscal incentives on imports that are re-exported. Re-exported imports are
exempt from customs duties, internal revenue taxes and local taxes. Imported
merchandise intended for the Philippine market is subject to applicable duties
and taxes.
THE PHILIPPINES stands at the crossroads of the
developed western world and the Orient. It lies in the heart of Southeast Asia, stretching more than 1,840
kilometers. Composed of 7,107 islands, the Philippines is readily accessible to the different capitals of the
world. Its three main islands are Luzon,
Visayas and Mindanao.
The South China Sea washes its western shores. Taiwan, China and Hong
Kong are northern
neighbors and further north is Japan. To the
west lie Southeast Asian countries such as Singapore, Malaysia and Thailand. An arm of the archipelago reaches out towards Borneo and at its feet stands the chain of
Indonesian islands. To the east and south, the waters of the Pacific Ocean sweep its headlands, looking out
towards Micronesia and Polynesia.
Its unique location has made the Philippines the commercial, cultural and intellectual hub of Asia from the dawn of history.
BEING an
archipelago of more than 7,000 islands scattered over 114,000 square kilometers
is no obstacle to travel in the Philippines. The country's geographical structure and makeup has, in
fact, proven to be an advantage to the traveler, particularly the adventurous,
daring and enterprising.
Traveling overland the entire length of the Philippines is now possible through the Pan Philippine Highway. Also
known as the Maharlika
Highway, the road
network runs from Manila to Laoag City via Cagayan Valley in northern Luzon and from Manila to Davao in Mindanao via Bicol in southern Luzon
and Samar and Leyte in eastern Visayas.
Twenty-six areas in Luzon and seven areas in the Bicol
region, the Visayas and Mindanao have been designated as Scenic
Highways, all with great amenities for the traveller.
Sources: Country Watch, Central Intelligence Agency: http://www.cia.gov
International Monetary Fund: http://www.imf.org
World Bank: http://www.worldbank.org