PHILIPPINES liberalized for reasons of health, safety, or national security. (Note: The specific count of items is based on the original Philippine Standard Commodity Classification Code (PSCC). Under the revised PSCC, the number of items liberalized will appear larger as a result of the disaggregation of many product lines.) Banking: Foreign bank branches have been denied entry since 1948. Foreign participation is currently limited to no more than 30 percent (40 percent with Presidential approval) of voting stock in existing domestic banks. Four foreign banks whose operations have been grandfathered control approximately 12 percent of total assets in the commercial banking system. In June 1990 the Central Bank lifted a prohibition against the installation of off-premise automated teller machines in high-demand areas, provided the bank has a regular branch operating within the service area. Since foreign banks cannot establish additional branches, this ruling places them at a disadvantage. The Central Bank is currently studying the possibility of allowing the limited entry of additional foreign banks, as well as increasing the maximum level of foreign participation in domestic banks. Foreign bank branches have also been denied entry into trust activities, although one foreign bank does have a grandfathered trust license. A foreign bank may not obtain a "universal banking" license which would allow it to participate in investment banking activities. Insurance: The licensing of new domestic and foreign life insurance companies has been suspended since 1947 and that of new nonlife insurance firms since 1966. Under the Philippine Insurance Code, foreign firms are defined as those organized under laws outside the Philippines. Companies organized under Philippine law, even if majority foreign-owned, are defined as domestic firms. There are about seven such companies in the country which were operating before the 40 percent nationality cap on foreign investment was imposed. Majority foreign-owned companies, whether foreign or domestic, control an important segment of the overall insurance market. Securities: Although only domestically incorporated companies may engage in the securities brokerage business, the government allows majority foreign ownership in this activity. A foreign investor who wishes to purchase shares of stock of a domestic corporation is limited by national ownership requirements. Stock exchange membership is open to any company incorporated in the Philippines. Legal Services: Philippine citizenship, graduation from a Philippine law school, and membership in the Integrated Bar of the Philippines are the requirements which a U.S. attorney must meet in order to practice in the Philippines. Motion Pictures: Industry problems include excessive taxation and pressure from the local motion picture industry to increase the time reserved in theaters (30 percent) for locally produced films. There has been some improvement in the incidence of piracy, although it remains widespread (see PHILIPPINES below). Standards, Testing, Labelling and Certification: The generics drug law of 1988 is now fully in force. Department of Health (DOH) implementing regulations call for the generic name of most drugs to appear above the brand name, in a slightly larger typeface, and enclosed in a box, with contrasting backing. The guidelines also require DOH approval for all new labels. Labelling changes caused by the generics legislation imposed substantial one-time costs, amounting to millions of pesos, on all pharmaceutical firms. This poses a greater burden for foreign firms than those that produce in the Philippines, as the foreign firms are forced to change their labelling just to fit the regulations of a relatively small pharmaceuticals market. The Philippines is a signatory to the GATT Standards Code. Investment Barriers: The new Foreign Investment Act of 1991 is an important milestone. It increases the number of industries in which foreigners can take up to 100 percent ownership without prior governmental approval. However foreign equity is still limited to 40 percent in enterprises related to national defense (weapons) and in businesses involved in the exploration, development, and utilization of natural resources. Also, only Filipino citizens or corporations, at least 60 percent Filipino-owned, may own land. The government gives tax and other incentives to export-oriented businesses. The Department of Labor allows the employment of foreigners provided there are no qualified Philippine nationals for the position. However, the employer must train Filipino replacements and report on such training periodically. The Philippine Constitution explicitly states that all executive and managing officers of firms engaged in mass media and in the operation of public utilities should be Filipino citizens. The free remittance of profits and repatriation of investment is allowed, subject to emergency foreign exchange provisions as necessary. The permissible time period for the repatriation of investment currently ranges from one to nine years, depending on net foreign exchange earnings, the size of investment, and the type of industry, with more liberal treatment accorded investments in government-registered, export-oriented, or import-substituting industries. The Philippines currently does not provide guarantees against losses due to nationalization, damage caused by war, or inconvertibility of currency. However, a full Overseas Private Investment Corporation (OPIC) agreement is in effect, and U.S. investors may contract for coverage under this arrangement. Government Procurement Practices: Philippine government procurement policies do not generally discriminate against foreign bidders. Preferential treatment is given to Filipino firms in the purchase of medicines. Government offices which grant rice allowances to their employees must purchase the rice from a specified Filipino source. Philippine government agencies must procure their petroleum products from PHILIPPINES government-owned sources. Pre-qualification for potential bidders in infrastructure projects requires the domestic corporation to be at least 75 percent Filipino owned. Subject to the availability of products of comparable quality, price, and delivery terms, preferential treatment is to be given to locally manufactured iron and steel products in government projects. Areas of interest to U.S. suppliers, including power generation equipment, communications equipment, and computer hardware, are not affected by significant restrictions. The Philippines is not a signatory to the GATT Government Procurement Code. Customs Procedures: One element of the import liberalization program is pre-shipment inspection of imports, imposed since 1987 to prevent misdeclaration of goods into the Philippines and tariff evasion. Under the current scheme, imports valued over $2500 from ten countries (Japan, Hong Kong, Taiwan, South Korea, Macau, and all ASEAN countries) are subject to pre-shipment inspection. The government plans to expand this program to cover all imports valued over $500 from all countries. Implementation is scheduled to begin on December 1, 1991. The Philippine government has been working to make custom procedures more transparent and to minimize widely reported irregularities and corruption in the system. The Philippines is not a signatory to the GATT Customs Valuation Code. 6. Export Subsidies Policies Enterprises registered with the Board of Investments (BOI) are entitled to tax and duty exemptions. The Philippine Omnibus Investment Code of 1987 provides for several programs which benefit Philippine industry. These include income tax holidays, tax and duty exemptions for imported capital equipment, as well as tax credits for purchases of domestic capital equipment and raw materials. Export traders are entitled to tax credits for imported raw materials required for packaging purposes. The Central Bank operates a rediscounting window which allows exporters to borrow at less than market rates. However, to comply with the terms of a World Bank program, the Central Bank plans to eliminate this facility in early 1992. 7. Protection of U.S. Intellectual Property The Philippine government is a party to the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty, the Berne Convention for the Protection of Literary and Artistic Works, and is a member of the World Intellectual Property Organization. The Philippines remains on the U.S. Trade Representative's Special 301 "Watch List" under the provisions of the 1988 Omnibus Trade and Competitiveness Act. Where administrative enforcement is possible, as for example by working with the Videogram Regulatory Board (VRB), enforcement raids can be readily arranged and cases can be resolved expeditiously. However, where intellectual property owners must have recourse to the courts, enforcement is slower PHILIPPINES and less certain. Many prosecutors are not familiar with intellectual property laws. As a result, intellectual property owners frequently complain of arbitrary and capricious decisions. The Philippines argues that U.S. standards of intellectual property protection are too high for developing countries. The Philippine Department of Trade and Industry has recently taken several steps to improve enforcement of intellectual property laws. These steps include strengthening the Philippine government's interagency task force on anti-piracy and counterfeiting, and creating regional task forces in areas where counterfeiting is prevalent; issuing a Department order identifying copyright law as one which can be enforced administratively by Trade and Industry personnel; and permitting private-sector intellectual property organizations to assign a full-time representative to work with enforcement officials in the Department's Bureau of Trade Regulation and Consumer Protection. Patents: The main problems with the present law relate to working of the patent, provisions which allow issuance of a compulsory license under lenient conditions beginning three years after the patent is granted, and a requirement that places a very low ceiling on royalty payments. These provisions undermine the nominal protection available under Philippine law and discourage foreign and domestic investment. Several pharmaceutical products have been subjected to compulsory licensing, but, considering the years that provision has existed, the actual number of licenses is small. Trademarks: Trademark counterfeiting is widespread. While enforcement is possible, results can be disappointing because of slow legal procedures and because penalties for infringement are not sufficiently high to deter pirates. Philippine law requires use or justified nonuse of a trademark to avoid cancellation of registration after five years. Nonuse of a mark must be totally beyond the control of a registrant, but it is unclear whether Philippine government restrictions, such as import bans, constitute justified nonuse. All license arrangements between foreign companies and Philippine companies must be submitted to the Technology Transfer Registry for approval and registration, and there is a requirement that royalty for the license to use trademarks may not exceed one percent of net sales of the licensed product. Copyrights: Philippine law is overly broad in allowing the reproduction, adaptation or translation of published works without the authorization of the copyright owner. Also, a Presidential Decree allows compulsory reprint licenses for textbooks used in school courses. The compulsory licensing provisions, especially for textbooks, are inconsistent with the appendix of the 1971 text of the Berne Convention. The Motion Picture Export Association of America reports effective cooperation with the VRB. A key factor in recent enforcement improvements on the videotape front is the presence in the Philippines of U.S. firms offering legal versions of videos not previously available. Printed material piracy and audio piracy are not problems. Computer software is pirated, but PHILIPPINES software owners are beginning to organize to protect their rights in the Philippines. New Technologies: Many shops rent video laser discs purchased retail in the United States without payment of commercial rental fees to the producers. The Motion Picture Export Association of America reports the cooperation of the VRB in arranging an interim solution which would allow these shops to license discs for a fee to be paid to Philippine representatives of U.S. producers. The right of workers, including public employees, to form and join trade unions is assured by the Constitution and legislation, and is freely practiced without government interference. About ten percent of the nation's employed work force of approximately 23 million workers are organized into over 3,700 trade unions. Subject to restrictions in the Labor Code and emergency executive powers, strikes in the private sector are legal, and take place frequently. The right to strike and the status of employees in government-owned industries, however, have not yet been clarified. Numerous strikes by public sector workers occurred, although there were comparatively few in 1991. b. Right to Organize and Bargain Collectively Labor's right to organize and bargain collectively is provided for in law. Since 1986, the number of collective bargaining agreements in force has increased from 3,112 to 4,982. In the same period, the number of registered unions increased by more than 10 percent. It is an unfair labor practice to dismiss a union official or a worker who is trying to organize a union. Nevertheless, employers sometimes attempt to intimidate workers by threats of firing or closure. Allegations of intimidation and discrimination for union activity are actionable, as unfair labor practices before the National Labor Relations Commission (NLRC). There is a history of industrial relations violence in the Philippines which has been exacerbated by the insurgency and the counterinsurgency. However, labor-related violence declined significantly in 1991. The rate of unionization and the number of collective bargaining agreements concluded in the several export processing zones (EPZ's) is similar to that in the rest of the country. C. Prohibition of Forced or Compulsory labor Compulsory labor is illegal and there were no reports of forced labor being practiced. |