WORLD TRADE ORGANIZATION  
ORGANISATION MONDIALE DU COMMERCE  
ORGANIZACIÓN MUNDIAL DEL COMERCIO WT/TPR/M/149/Add.1 
17 August 2005 
 (05-3657) 
Trade Policy Review Body 
5 and 7 July 2005 Original:  English/ 
                 anglais/                  inglés 
  
TRADE POLICY REVIEW 
THE PHILIPPINES 
Minutes of Meeting
 
Addendum  
Chairperson:  H.E. Mr. Don Stephenson (Canada)  
 This document contains the advance writte n questions, and replies provided by the 
Philippines.1 
__________________________________________________________________________________  
Organe d'examen des politiques commerciales 
5 et 7 juillet 2005 
 
EXAMEN DES POLITIQUES COMMERCIALES 
PHILIPPINES 
Compte rendu de la réunion
 
Addendum  
Président:  S.E. M. Don Stephenson (Canada) 
 
 Le présent document contient les questions écrites communiquées à l'avance et les réponses 
fournies par les Philippines.1 
__________________________________________________________________________________ 
 
Órgano de Examen de las Políticas Comerciales 
5 y 7 de julio de 2005  
EXAMEN DE LAS POLÍTICAS COMERCIALES 
FILIPINAS 
Acta de la reunión
 
Addendum  
Presidente:  Excmo. Sr. Don Stephenson (Canadá) 
 
 En el presente documento figuran las pre guntas presentadas anticipadamente por escrito, 
junto con las respuestas facilitadas por Filipinas.1 
 
 
  
_________________________________________ 
 1 
In English only./En anglais seulement./En inglés solamente.  
  WT/TPR/M/149/Add.1 
 Page 3 
 
 
ADVANCE WRITTEN QUESTIONS BY MEMBERS AND 
REPLIES PROVIDED BY THE PHILIPPINES 
ECONOMIC ENVIRONMENT 
Chinese-Taipei 
[1] B. WT/TPR/S/149 
I. ECONOMIC ENVIRONMENT 
(4) STRUCTURAL MEASURES 
(p. 10, paras. 16-17) The WTO Secretariat report mentions "...gradua lly introducing VAT on electricity over four 
years…", and "…deregulation to achieve a compe titive market and privatization of generation 
plants and of the national electricity grid…" As we know, the high cost of electricity is one of 
the main concerns of the local business commun ities. Since the Philippines’ power costs rank 
as the second highest in the region, the compe titiveness of local investors has been eroded. 
Added to this, with the new VAT bill, which removes exemptions in the fuel and power 
sector, having been approved in May of this y ear, the problem of a high electricity tariff will 
eventually be further aggravated.  
We would be interested in knowing how the Philippines government plans to remedy this 
situation? We would also appreciate knowing how it plans to accelerate the process of privatization of the National Power Company, which has been subject to long delays over 
recent years. What is the current timetable  for implementing the privatization process? 
Response: The Power Sector Assets and Li abilities Management Corporation (PSALM) has 
successfully bid out 5 hydroelectric power plants and a 600-MW coal-fired plant out of 31 power 
plants identified for privatisation.  On average, the 6 power plants have fetched US$9.932 million per 
megawatts of capacity.  The hydroelectric plants ha ve been in operation for th e last 47 years, while 
the coal-fired plant is 6 years old. 
PSALM accelerated the sale of the National Power Co rporation’s generation assets with a target of 
privatising 70% of its total generating capacity by the end of 2005.  These assets consist of 
16 generation assets and 5 decommissioned plants.  Th e main objective of the accelerated schedule is 
to bring assets to the market as quickly as possi ble under a plan that maximizes proceeds within 
PSALM’s procedures and limitations for fair and transparent bidding.  
PSALM is currently undertaking an Investors’ Pr eliminary Asset Review Process (IPARP) to allow 
interested parties to conduct a preliminary asset review  of the generation assets.  This is not part of 
the formal sale process and interested parties who w ill not undertake asset review can still participate 
in the formal sale process.  The IPARP will t erminate 3 months before the bidding of the last 
generation asset. 
To mitigate the possible impact of the new value added tax law on the marginalized end-users, the 
Department of Energy issued Department Circular No. DC2005-06-005 on 22 June 2005.  This 
Circular directs all distributio n utilities to file the necessary pe tition with the Energy Regulatory 
Commission for the adoption of revised lifeline l evels of consumption (kWh per month) and 
corresponding rate structures to mitigate the increase in electricity rates resulting from the new VAT, 
rising world oil prices, and other costs of producti on.  The lifeline rate structure is a socialized WT/TPR/M/149/Add.1 
Page 4  
 
pricing mechanism for the marginalized end-users.  For the Manila Electric Company franchise area, 
there is a petition to expand the lifeline level of cons umption from 100 to 200 kWh.  The lifeline rate 
structure varies accordi ng to the franchise area. 
Moreover, Section 110(B) – Excess Output or Input Ta x – of the new VAT law is being proposed to be 
removed from the provisions of the law to reduce the impact of price increases.  This provision says 
that "if the input tax exceeds the output tax, the exce ss shall be carried over to the succeeding quarter 
or quarters; provided, that the input tax inclusi ve of input VAT carried over from the previous quarter 
that may be credited in every quarter shall not exceed 70% of the output VAT". 
[2] WT/TPR/G/149 
II. LIBERALIZATION THROUGH DOMESTIC REFORM 
(2) FOREIGN INVESTMENT LIBERALIZATION 
(p. 9, para. 26) We note from the report of the government that "f ull foreign participation is allowed for retail 
trade enterprises with paid-up capital of US$ 2. 5 million or more …" This relatively high 
capital investment threshold would seem to be a ser ious deterrent to foreign investment in the 
retail trade, and is a feature that is freque ntly criticized by foreign business communities. 
May we respectfully suggest that the Philippi nes consider lowering the minimum paid-up 
capital required for potential foreign investor s in the retail sector to US$ 200,000, the 
standard minimum in the Foreign Investment Act, rather than maintaining the current 
minimum of US$ 2.5 million. 
Response:  The US$2.5 million paid-up capital requirement for full foreign participation is 
prescribed under Section 6 of Republic Act 8762 or th e "Retail Trade Liberalization Act of 2000", to 
lower the prescribed amount requires le gislation/congressional amendment. 
[3] (p.10, para. 27) 
It is indicated in the same report that "owner ship of private lands…was added as a legal basis 
for the 40 percent foreign equity limitation for pr ivate land ownership…"  In view of the fact 
that the land cannot be removed from the Philippi ne territory by foreign owners, would the 
Philippines consider easing such constitutional rest rictions on foreign ownership of land?  In 
fact, is it not more likely that foreign capital and technology would increase the value of land 
in the country instead, and that this kind of FDI-friendly measure would reinforce the 
determination of foreign investors to engage  in more long-term investment planning? 
As far as the Regular Foreign Investment Nega tive List is concerned, does the Philippine 
government have any plans to relax the other sectors where foreign investment is limited? 
Response: Easing Constitutional restrictions  on foreign ownership of land requires 
Constitutional amendment.  However, RA 7652 or the "Foreign Investor Long-Term Lease Act" 
allows foreign investors to lease private lands for 50 years renewable to another 25 years for the 
establishment of industrial estates, factories, assembly of processing plants, agro-industrial 
enterprises, land development for industrial or co mmercial use, tourism, and other similar priority 
productive endeavors, while at the same time protecting agriculture. 
The Medium Tem Philippine Development Plan (MTD P) also included in the constitutional reform 
agenda the need for fundamental economic reforms in the restrictive provisions on national economy  WT/TPR/M/149/Add.1 
 Page 5 
 
 
and patrimony, while bearing in mind the need for appropriate regulatory framework, safeguard 
mechanisms, conditions  and limitations.  
Executive Order 389 (Promulgating the Sixth Regular  Foreign Investment Negative List) is divided 
into 2 parts, enumerating areas where foreign investment is restricted or regulated pursuant to law.   
The extent of foreign equity participation in these a reas shall be limited to the percentages indicated 
in the List.  Amendments to List A may be made at any time to reflect changes instituted in specific 
laws while amendments to List B shall not be m ade more often than once every two years, pursuant to 
Section 8 of RA 7042 as amended, and its Implementing Rules and Regulations. 
[4] (6) DEVELOPMENTS IN FOREIGN DIRECT INVESTMENTS 
(p. 15, paras. 25—26) 
As indicated in the report, the FDI inflows ha ve been significantly influenced by investor 
uncertainty over economic stability, especially  the fiscal position, the poor investment 
climate, and increased competition for FDI from neighbouring economies. 
However, having been the fourth largest FDI provider to the Philippines in 2003, we would 
like to ask whether there are an y future plans to revitalize th e investment climate in the 
Philippines? 
Response: Preliminary assessment of the IMF Post-Program Monitoring mission that visited 
Manila during June 9-22,  2005 reports that considerable prog ress has been made with Philippine 
economic reforms in the last year. The passage  of the expanded VAT law marks a major breakthrough 
in the reform process. Other significant achievements  include long-overdue in creases in alcohol and 
cigarette excises and power tariff hike s that will substantially stem the National Power Corporation's 
(NPC's) losses. With steadfast implementation, this  package of measures should permit a major stride 
towards balancing the budget, reassure markets about  the authorities' commitment to tackling the 
fiscal problem, and create room for needed development expenditures. 
Successful implementation of the fiscal reform age nda will be important for reducing vulnerabilities 
and initiating a virtuous investment-growth cycle. While  a significant reduction in the fiscal deficit is 
in prospect for 2005 and 2006, additional fiscal measures, such as the rationalization of tax 
incentives, will be needed to ensu re achievement of the medium-term plans to balance the budget.  
TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
Trade Policy Formulation and Implementation  
Canada 
[5] Report by the Government of the Philippines (WT/TPR/G/149) 
Part II. Liberalization through Domestic Reform , (1) Structural Reform, Financial Sector: 
Paragraph 10. 
The Philippines introduced an Anti-Money La undering Act in 2001, which was further 
amended in 2003.  We understand that the Philippines intends to introduce comparable 
legislation for countering terrorist financi ng.  Could the Philippines please report on the 
current status of this legislation’s development? WT/TPR/M/149/Add.1 
Page 6  
 
Response: To date, two anti-terrorism bills had been filed in Congress and had undergone first 
reading in the House of Representatives. Both bills , which are expected to be harmonized, seek to 
penalize all acts of terrorism and expressly make unl awful the financing of terrorism. While it is 
unlikely that the proposed legislation will be appr oved in the current Congress, there is a strong 
interest on the part of the Government to have it a pproved soonest. The proposed legislation will 
complement and strengthen the implementation of the Anti-Money Laundering Law. 
The proposed legislation complement recent anti- money laundering developments including the de-
listing of the Philippines from the non-cooperati ng countries under the Financial Action Task Force 
(FATF) and the acceptance of the Anti-money Laundering Council of the Philippines as one of the seven new members of the Egmont Group, the global network of financial intelligence units (FIUs) 
against money laundering and terrorist financing. 
Korea  
[6] (WT/TPR/S/149, page 17, pa ra 1; page 21, paras 19-20) 
Korea appreciates the Philippines’ initiatives to combat corruption, such as the launch of its e-
procurement system, the improvement of the capacity of Ombudsman’s Office and its "re-
engineering" of government agencies to re duce waste and corruption.  However, the 
Secretariat Report indicates that there have been limited results.  What are the reasons for this 
and how can the Philippine Government ensure  that these initiatives bring actual results?  
Response: The Philippines adheres to  the rule of law and there are legal institutions in place to 
ensure that due process is accorded to every one. N onetheless, the Government is exerting efforts to 
improve judicial efficiency, and has instituted, among others, a) lifestyle checks and suspension of 
erring officials, b) intensive audits and reconciliati on of tax payments to minimize tax evasion, 
c) shutdown of customs bonded warehouses that violate Bureau of Customs procedures and d) revival of an anti-smuggling task force. 
European Communities 
[7] Could the Philippines please indicate which sect ors are currently being considered to be 
included in the process of increasing productivity  and diversifying prod uction, and inform 
about the status of efforts to increase the productivity of manufacturing of goods more 
generally? 
Response: An executive order (EO), to be signe d by the President, has recently been drafted 
expanding the One-Stop-Action Centre (OSAC) for investo rs.  The draft EO basically strengthens the 
existing OSAC by expanding its functions to address problems and concerns in investing and 
establishing business operations in the Philippines.   
The economic fields which the government has iden tified to attract more trade-related FDI include 
electronics, automotive, mining, fashion garments, jewellery, agribusiness, en ergy and infrastructure, 
among others. These are outlined in the government ’s Medium-term Philippine Development Plan 
(MTPDP) for 2004-2010. 
A legislative bill entitled, "Consolidated Investment and Incentives Code of the Philippines", has been 
proposed aimed at creating a more open and trans parent basis for foreign investments.  The 
consolidated legislative proposal filed has the ob jective of a unified incentives policy with one 
governing statute to regulate the grant of incen tives as opposed to the present system of having  WT/TPR/M/149/Add.1 
 Page 7 
 
 
different agencies administer and implement various in centives laws.  The proposed bill is pending, 
for further deliberation, in the Senate. 
[8] In what way is Philippines seeking to enhan ce/address/secure sustainable development when 
increasing the manufacturing of goods, i.e. how can The Philippines ensure adequate 
protection of the environment, while maximizing foreign exchange earnings? 
Response: The Philippines has the Philippine Agenda 21 (PA21) that provides the overall 
framework and roadmap for the achievement of sust ainable development in the country.  Through the 
PA21, the country pursues sustainable development that takes into consideration the harmonious 
integration of a sound and viable economy, respons ible governance, social cohesion/harmony and 
ecological integrity to ensure that development is  a life-enhancing process.  In the action agenda of 
the PA21, a mix of strategies that integrate S& D parameters in the overall development strategy is 
elaborated, including the creation of an enabling economic  environment.  This is achieved through 
the promotion of a stable and broad based economic development in output an d employment through 
a range of fiscal, monetary and investment policies consistent with PA21.  Given the above, the PA21 
sets the principles and context against which trade w ill be conducted.  In the context of a global 
trading system, this SD framework puts forward the n eed at the national level to institute specific 
measures that would seize the potential of globalizat ion to contribute to sustainable development.  
Meanwhile, the country’s main development plan, th e Medium Term Philippine Development Plan 
(MTPDP) 2004-2010 incorporates the SD principles  adhered to in the PA21.  Development goals and 
strategies including those on trade are, therefore, guided by these SD principles.  
[9] How is the issue of trade being dealt with in The Philippines’s national strategies? Are the 
strategies based on the possibilities for advanci ng the country’s development objectives in the 
context of increasing globalization through trade? 
[10] A comprehensive reform and development pl an could assist The Philippines in the upgrading 
of the capacity of the Government of The Philippines to undertak e it’s obligations in 
international trade related matters. 
Does "The Medium-Term Philippine Developmen t Plan 2004" meet these aims, and which 
steps would be taken in order to attract coordi nated donor involvement in support of the steps 
envisaged? 
[11] The EC considers that the WTO and multilate ral liberalization is the most certain way for 
small and medium sized countries to promote their interests. 
How does the Philippines judge the relative impor tance and weight of bilateral/FTA policies 
and further development of the WTO system in terms of its own trade and development 
needs?  
[12] How does The Philippines see the development of its trade policies in the context of the 
multilateral system? 
[13] The Philippines is a developing country  with high growth and great development 
perspectives. Other countries in the global trading system are less fortunate. 
Has the Philippines introduced arrangements aime d at increasing the integration of the least 
developed countries in the global trading system , e.g. through schemes in creasing the market WT/TPR/M/149/Add.1 
Page 8  
 
access of these countries? How does the Phili ppines assess the development prospects of 
these countries? 
Response: The multilateral trading system underpin s Philippine pursuit of all its bilateral and 
regional trading arrangements.  The Philippines will always balance the objective of a high quality 
RTA with policy flexibility allowed for developing countries, and the provisions of the WTO. Any 
measure implemented to assist the least-developed countries (LDCs) shall be within the capabilities of 
the Philippines as a developing country itself. The Philippines, consistent with its own trading 
interests, participates in schemes designed to assi st LDCs like the ASEAN Integration Scheme of 
Preferences (AISP) for Cambodia, Laos, Myanmar and Vietnam.  
European Communities 
[14] The EC welcomes the Philippines’s em phasis on sustainable economic growth and 
sustainable development. Looking at the overall policies of  the Philippines: 
What plans does The Philippines have for adopti on of policy strategies in order to enhance 
sustainable development? Does the issue of tr ade and sustainable development fit into the 
Philippines’s overall development strategies? 
Response: Please refer to the response to sustainable development issues below in 
question no. 8. 
[15] The importance of linking trade with sust ainable domestic policies, and in particular 
employment related matters and core labour sta ndards, was confirmed last year by the Final 
Report of the World Commission on the Social Dimension of Globalisation. 
How does the Philippines assess the conclusions  in the report, and does the Philippines 
intends to follow up the various programmes which have been implemented to increase 
employment and address challenges related to social adjustment? 
Response: The Philippines concurs with the conc lusion of the report and agrees that the process 
of globalization  should be one with a strong social dimension based on universally shared values, 
and respect for human rights and individual dignity; one  that is fair, inclusive, democratically 
governed and provides opportunities and tangible be nefits for all countries and people. Specific to 
sustainable development issue, the Philippines supports the call of the Report that globalization must 
be underpinned by the interdependent and mutua lly reinforcing pillars of economic development, 
social development and environmental protection at the local, national, regional and global levels. 
As regards plans on increasing em ployment, the government is committed in the pursuit of decent 
and productive employment.  This  will be done more vigorously by  employing the four major 
employment-promoting strategies: employment gen eration, employment preservation, employment 
facilitation and employment enhancement. 
Moreover, labour policies shall be guided by th e principles of providing decent and productive 
employment.  Decent and productive em ployment means that adequate income is generated, rights at 
work are protected, social protection is provided for, and participation in the democratic process is 
guaranteed through tripartism and social dialogues. It  also means sufficient employment, where all 
workers have full access to income earning opportunities. Decen t employment also entails the 
continuous improvement of workers personal capa bilities through a build-up in competitive skills 
and positive work ethics to make him more productive.  This will enable workers to fully participate  WT/TPR/M/149/Add.1 
 Page 9 
 
 
in both economic and social activities, and maximi ze their human development potential even with 
the challenges posed by globalization.   
[16] How does The Philippines asse ss the possibilities for increasing trade and development while 
ensuring environmental sustainability? Does The Philippines currently have a specific plan 
addressing this? 
Response: In the MTPDP 2004-2010, the significance of trade and investment in terms of 
country’s development goals, particul arly on job creation, is highly recognized.  As such, the Plan 
sets the direction towards expansion of trade oppor tunities through strategic measures. Moreover, the 
Plan is clear on its policy that developmental activities should not undermine the quality of the environment.  On this note, country is set to liberalize/streamline and ref ocus the Environmental 
Compliance Certificate (ECC) syst em to increase the efficiency and the development facilitation 
function of the system without lowering the environm ental standards it seeks to promote.  This is one 
way of creating an environment conducive for trade and investment.  Furthermore, the use of clean 
technologies among industries is promoted.  Also, measures to expand the use of market-based instruments, proper pricing of natural resource s and other incentives/disincentives mechanisms are 
on the way.  
Notwithstanding this, the Philippines maintains its advocacy that environmental standards should not 
be used as barriers to trade.  
Regional Trade Agreements
 
European Communities 
[17] The EC take note of the important and en couraging improvements to the AFTA made in 
recent years, including the so-called ASEAN Sectoral Integration Protocols. 
When does the Philippines consid er that these could be notified to the WTO in accordance 
with paragraph 4 of the Enabling Clause? 
Response:  The ASEAN’s Priority Integration Scheme (PIS) is merely an improvement of its 
Common Effective Preferential Tariff Scheme (CE PT) which has been notified under the Enabling 
Clause.  The PIS aims to accelerate the eliminatio n of tariffs from 2010 to  2007 for 11 priority 
sectors, namely: agro-based products, fisheries, wo od-based products, rubber products, air travel, 
automotive, e-ASEAN, electronics, healthcare, textiles and clothing and tourism. 
Chinese-Taipei  
[18] (3) TRADE AGREEMENTS AND ARRANGEMENTS 
(ii) OTHER ARRANGEMENTS  
(d) BILATERAL 
(p. 28, para. 43) As indicated in the report, the Japan-Philippi nes Economic Partnership Agreement (JPEPA) is 
aimed at promoting freer transborder flows of goods, persons, services, and capital. The JPEPA also covers intellectual property, comp etition policy, mutual recognition of electrical 
products, improvement of the business environment,  and bilateral cooperation in areas such as 
human resource development, information an d communications technology, and small and 
medium-sized enterprises. WT/TPR/M/149/Add.1 
Page 10  
 
It would be appreciated if the Philippines could provide us with more detailed information on 
three of the above-mentioned bilateral coope ration issues: human resource development, 
information and communications technology, and small and medium-sized enterprises. 
Response: In view of the fact that the JPEPA is under negotiations, information on such matters 
can only be made publicly available in due course. 
Foreign Investment Regime
 
United States of America 
[19] Paragraph 31 of the Government Report notes that in December 2004, the Philippines’ 
Supreme Court reversed its January 2004 deci sion on the unconstitutionality of foreign 
ownership in the mining sector, thus opening up  the possibility of foreign investment that 
could become a promising source of jobs fo r the economy and revenue for the government. 
A) Could the Philippines please provide an update on plans to attract fresh foreign investment 
into its mining sector?   
Response: The Supreme Court decision of Decem ber 2004 upheld the constitutionality of the 
Financial and Technical Assistance Agreement (FTAA), thus paving the way for the entry of foreign 
investment into the mining sector.  Following this  decision, government has embarked on vigorous 
promotional activities in various countries to encourage investments into the sector. 
From an institutional point of view, an Executi ve Order creating the Minera ls Development Council, 
which will be headed by the Presidential Adviser on Minerals Development, has  been prepared for 
signing of the President.  The MDC shall serve as a "one-stop-shop" with primary responsibility of attending to the needs of the invest ors in the minerals industry. The functions of the MDC includes:  
 a) coordinate national agencies and LGUs to harmonize investment-related 
requirements and procedures and facilitate and expedite investments in the minerals 
industry; 
 b) assist investors in th e minerals industry by providing information, guidance, 
direction, and solutions concerning th eir investment problems and needs;  
 c) review all aspects related to the inves tments in the minerals industry, recommend 
measures and take appropriate actions  to address policy, institutional 
implementation and operations issues relative to mining investments;  
 d) advise the president on timely and effectiv e solutions to mining investment-related 
problems;  
 e) promote investments in the minerals industry;  and 
 f) prepare and submit reports to the Presid ent on the status of the investments in the 
minerals industry. 
The Department of Trade and Industry, in coordi nation with the Department of Environment and 
Natural Resources, and the Chamber of Mines of the Philippines held a high-level mining roadshow 
in China in January 2005 to  attract Chinese investors.  WT/TPR/M/149/Add.1 
 Page 11 
 
 
An International Mining Conference was then held in  Manila in February.  The Conference sought to 
identify major mining companies from countries such  as the US, UK, Australia, Canada, China, 
Japan, Korea, Mexico, Chile and South Africa.  In March, another roadshow was organized and held in coordination with the Prospectors, Developers Association of Canada (PDAC).  More recently, in 
June, a Tokyo Mining Seminar was organized with officials of large Japanese mining corporations 
such as Japan Oil, Gas Metals National Corp . (JOGMEC), pan Pacific Copper, Sumitomo Metal 
Mining and Sojitz Corporation. These companies have pl anned expansion projects in the Philippines.  
No less than the Secretary of Trade and Industry participated in the Tokyo seminar. 
In August, the DTI will hold a ro adshow in Australia to attract Australian mining companies.  The 
roadshow will be held in conjunction with the Philippines-Australia Ministerial Meeting also 
scheduled next month.  
In the coming months, the DTI-BOI will be involved  in the conduct of local mining roadshows in  
selected mining regions such as in Cebu, Davao,  Surigao, Baguio, etc., in order to promote 
responsible mining activities among various industry stakeholders such as Local Government Units, 
communities, religious groups, mining industry, non -governmental organizations, etc.  The activities 
will be undertaken together with other governme nt agencies and the Chamber of Mines.   
Exploration, Mining and Mineral Processing is listed under the mandatory inclusion of the 2005 
Investment Priorities Plan by virtue of Repub lic Act No. 7942 (the Mining Act of 1995). 
[20] B) Have there been any prominent examples of  new entrants into the mining sector that point 
to the benefits of foreign investment? 
Response: Yes.  Among others, Australi an, Canadian, Japanese and Chinese groups have 
expressed serious interest in participating in  the mining sector of the Philippines. 
[21] Paragraph 46 on pages 28-29 of the Secr etariat Report reviewed the Philippines extensive 
constitutional and statutory limitations on fore ign investment.  We have heard that the 
Philippine Congress in planning to hold a Constitutional Convention later this year to consider amending the Constitution to liberalize th e Philippines’ foreign investment regime as 
a way to spur economic growth.  Please discuss this prospect in more detail. 
Response: The MTPDP contemplates a reassessment of the restrictive Constitutional provisions 
on national economy and patrimony to bring in invest ment that will create jobs and opportunities and 
eventually reduce poverty. 
European Communities 
[22] On page 29, footnote 60 of para 48, in the report prepared by the WTO secretariat it is 
indicated that the efficacy of the one-stop centre for investors is limited.  
The EC would be interested to hear if furthe r improvements are foreseen and if so could the 
Philippines also indicate the time frame? 
Which economic fields has the Philippines identifie d to attract trade related FDI? And in what 
way does the Government plan to attract more FDI? 
Does The Philippines intend to ch ange the current law with a view to create a more open and 
transparent basis for foreign investments?  WT/TPR/M/149/Add.1 
Page 12  
 
Does the Philippines intend to improve the re liability of the legal framework for economic 
operators and investors, in particular with r espect to the investment and public procurement 
sectors? 
Response:   Please refer to the response to the EC in question no. 7 above. 
Brazil 
[23] DOCUMENT WT/TPR/G/149 
Section II - LIBERALIZATION THROUGH DOMESTIC REFORM (1), paragraph 8 1. The Government Report addresses several stru ctural reforms, as quoted here: "Structural 
reforms have long been recognized by the Gove rnment as fundamental elements to achieve 
economic prosperity and growth. Subsequently, a number of critical economic reform bills 
were passed and new policies were implemente d during the period of review from 1999-2004 
to strengthen the banking sector, improve access to credit, restructure the electric power 
industry, address the fiscal problem and improve governance". Regarding the banking reform, the Secretariat Report, in its paragraph 18,  stresses some points which may undermine 
Government achievements, and offers a soluti on: "The banking sector efficiency could be 
increased through greater competition". To what extent does the Government agree with this 
solution and what measures could be taken to improve competition in this sector? What has 
been achieved regarding improving governan ce? How successful were the Government 
Procurement Reform Act of 2002 (paragraph 24,  WT/TPR/G/149) and the performance of the 
Bureau of Internal Revenue and Bureau of Customs? 
Response:  Cognizant of the need for efficiency in  the banking sector, the Philippines  has unilaterally 
implemented liberalization measures on the entry of foreign banks in the coun try in recent years. The 
country realizes that undertaking binding commitments in this sector will redound to predictability of 
the regulatory regime in banking. However, this mo ve should be accompanied by a continuous review 
of prudential measures to ensure the soundness of  the Philippine banking system. The focus of the 
monetary authorities in recent periods has been to ensure that the banking system is able to endure 
domestic and external shocks by strengthening the system’s capital base and ensuring that international best practices are observed, among others. There is also significant progress in 
Government’s measures to improve governance, and improvement in the collection efforts of the 
Bureaus of Customs and Internal Revenue.  
[24] (2), paragraphs 26 through 30 
2. The Government Report (WT/TPR/G/149), in  paragraphs 26 through 30, emphasizes the 
importance of Foreign Direct Investment a nd also of creating an entrepreneurial and 
competitive environment, as quoted in paragr aph 30: "In 2004, the IPP(Philippine Annual 
Investments Priorities Plan, starting in 200 2) gave emphasis on sustaining globally 
competitive industries given an environment of  increasing trade liberalization.". However, 
The Secretariat Report, in paragraph 25 of chapter I, stresses that "Success in attracting 
significant inflows, however, has been hamper ed by investor uncertainty over economic 
stability, especially the fiscal position, political uncertainties, the poor investment climate, and increased competition for FDI from neighbouring economies. The Philippines is ranked as performing "below potential" in attracting inwa rd FDI (i.e. has high FDI potential but low 
FDI performance). Improving the investment clim ate would facilitate sustained growth". How  WT/TPR/M/149/Add.1 
 Page 13 
 
 
has the Government been addressing the difficulti es indicated in the Secretariat report? What 
measures have been taken in orde r to attract more inward FDI? 
Response:  The administration has embarked on several government policy reform initiatives, as 
follows: 1) fiscal reform is on top of the prio rity list; 2) addressing infrastructure bottlenecks; 
3) poverty alleviation projects to focus on ecot ourism and capacity building of local governments; 
and 4) promotion of healthcare services to overseas aging market. 
The government has also adopted the Six-Year Development Plan (2004-2010). The Medium-Term 
Philippine Development Plan (MTPDP)  and the Medium-Term Public Investment Program (MTPIP) 
will serve as the country’s economic blueprints for 2004-2010 and will be based on five central 
themes: a) macroeconomic stability anchored on fisca l and financial strength; b) job creation through 
global competitiveness; c) social development and  direct anti-poverty measures; d) decentralized 
development; and e) good governance and national harm ony. The five themes support the President’s 
10-point National Development Agenda that was enum erated in her inaugural address in June 2004. 
The formulation of Regional Development Plans (R DPs) was likewise aligned to the 10-point agenda 
and MTPDP to ensure that efforts of both natio nal and local governments are focused. Regions are 
expected to concentrate on: a) minimum desirable levels of welfare for each region; b) physical and 
economic integration of regions; c) regional grow th based on comparative advantages; d) role of 
local government units in development; and e) peace and development. 
The MTPDP and MTPIP have been completed and appr oved by the President in October 2004, with 
the RDPs in November 2004. 
Chinese-Taipei 
[25] WT/TPR/G/149 
II. LIBERALIZATION THROUGH DOMESTIC REFORM (2) FOREIGN INVESTMENT LIBERALIZATION 
(p. 9, para. 26) We note from the report of the government that: "…full foreign participation is allowed for 
retail trade enterprises with paid-up capital of US$ 2.5 million or more…." This relatively 
high capital investment threshold would seem to be  a serious deterrent to foreign investment 
in the retail trade, and is a feature that is frequently criticized by foreign business 
communities.  
May we respectfully suggest that the Philippi nes consider lowering the minimum paid-up 
capital required of potential foreign investors in the retail sector to US$ 200,000, the standard 
minimum in the Foreign Investment Act, rath er than maintaining the current minimum of 
US$ 2.5 million. 
Response: The minimum paid-up capital for retail trade enterprises is provided in Republic Act 
No. 8762 or the Retail Trade Liberalization Act of 2000.  Any proposed reduction in this amount will 
require an amendment of the law, and will require legislative action.   WT/TPR/M/149/Add.1 
Page 14  
 
[26] (p. 10, para. 27) 
It is indicated in the same report that: "Ownership of private lands…was added as a legal 
basis for the 40 percent foreign equity limitation for private land ownership…"  In view of the 
fact that the land cannot be removed from the Philippines territory by foreign owners, would 
the Philippines consider easing such constitutiona l restrictions on foreign ownership of land? 
In fact, is it not more likely that foreign capital and technology would increase the value of 
land in the country instead, and that this ki nd of FDI-friendly measure would reinforce the 
determination of foreign investors to engage  in more long-term investment planning?  
Response: The legal basis is Republic Act ( RA) 7652 or The Investor’s Lease Act (approved 
4 June 1993).  Prior to  RA 7652, foreigners were allowed to lease for an initial period of only 
25 years subject to renewal, and with the mutual consent of both parties, for another 25 years 
(Presidential Decree or PD 471 issued on 24 May 1974) .  RA 7652 allowed the initial term to be as 
long as 50 years with the possibility of an extension of such a term, also upon mutual agreement of 
the parties, for an additional period of 25 years( total of 75 years) subject to the conditions, among others, that the lease area shal l be used solely for the purpose of investment and that the lease 
premises shall comprise such a rea only as may reasonably before the purpose of the investment. In 
the case of tourism projects the lease of privat e land by qualified foreign investors is limited to 
projects with an investment of not less than US $ 5M, 70% of which shall be infused in the said 
project within three years from the signing of the least contract. 
See also the response to question no. 3 
As far as the Regular Foreign Investment Nega tive List is concerned, does the Philippines 
government have any plans to relax the other sectors where foreign investment is limited? 
Response: There is no timetable for rel axing constraints in the List. 
[27] WT/TPR/S/149 
(6) DEVELOPMENTS IN FOREIGN DIRECT INVESTMENT (FDI) 
(p. 15, paras. 25-26) 
As indicated in the report, the FDI inflows ha ve been significantly influenced by investor 
uncertainty over economic stability, especially  the fiscal position, the poor investment 
climate, and increased competition for FDI from neighbouring economies. 
However, having been the fourth largest FDI provider to the Philippines in 2003, we would 
like to ask whether there are an y future plans to revitalize th e investment climate in the 
Philippines? 
Response: The question is quite broad.  It is  suggested that reference is made to responses 
already provided from question no. 19 to 26.  WT/TPR/M/149/Add.1 
 Page 15 
 
 
Japan 
[28] (WT/TPR/S/149) 
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES (4) FOREIGN INVESTMENT REGIME 
(Page 28, paragraph 46) 
The Government of the Philippines maintains the Foreign Investment Negative List (FINL).  
Please indicate the time schedule for relaxing the constraints on the FINL in the future.  There were some cases in which Japan ese enterprises, such as construction and forwarder business 
that were not listed in the FINL, were discrim inated against in obtaining a licence.  Please 
indicate the standards used when refusing to  provide a licence for the businesses which are 
not listed in the FINL. 
Response: The bases for granting of licenses/pe rmits depend on the specific law, rules, and 
regulations implemented by concerned agencies. Mo reover, the enactment of related laws is within 
the purview of Congress. The Construction Industry Authority of the Philippines is best consulted 
regarding requirements to obtain licen ses on construction-related activities. 
Korea 
[29] (WT/TPR/S/149, page 28, para 46)
 
Liberalization of FDI has been delayed to such an  extent that only a slight change has been 
made over the past few years in the restriction on foreign ownership shares and the areas 
where foreign investment is allowed. Please explain the reasons behind this. 
[30] (WT/TPR/S/149, pages 29, paras 47-49)  
The Philippines provides investment incentives, such as tax incentives and concessions, in an 
effort to induce foreign direct investment . However, lack of consistency in the 
implementation of government investment policies, including these incentives, causes 
confusion and reduces predictability in the Ph ilippines’ investment regime. What measures 
will the Philippines take to address this con cern that is expressed in the letter dated 
9 June 2005 to the Philippines Government by The Foreign Chambers of the Philippines? 
Response: Please see reply to Question No. 21. 
Measures Directly Affecting Imports – Customs Valu ation and Rules of Origin – Customs Valuation  
United States 
[31] According to paragraph 10  on page 33 of the Secretaria t Report, the Philippines invoked a 
three-year extension – to 2005 – to implement some aspects of the WTO Customs Valuation Agreement.  What is the status of efforts to  bring the Philippines’ customs valuation regime 
into full conformity with WTO rules? 
Response: Republic Act No. 9135 ("An Act Ame nding Certain Provisions of P.D. No. 1464, 
otherwise known as the Tariff Customs Code of the Philippines, as Amended") is the legislation that 
brings the Philippines into full conformity with the relevant prov isions of the Agreement on the 
Implementation of Article VII of  GATT 1994 (Customs Valuation). WT/TPR/M/149/Add.1 
Page 16  
 
Australia 
[32] Australia notes the implementation of a more  streamlined customs clearance process based on 
risk management techniques as well as the in troduction of a transaction valuation method for 
calculating the dutiable value of imports (Secretar iat report para. 8 page 32, para. 10 page 33)  
Could the Philippines please comment on the benefits of the new customs clearance system 
and share with other Members possible lessons  for the WTO Trade Facilitation negotiations?  
What further steps do the Philippines plan to take to reduce the number of import 
consignments subject to red lane treatment? 
Response:  The Philippines will share in due tim e its experience with its new customs clearance 
system. The Philippines continues to study possible measures or steps to reduce the number of import 
consignments subject to red lane treatment. 
European Communities 
[33] The EC is pleased to note that the Phili ppines had adopted the transaction value import 
valuation method.  
The EC should like the Philippines to clarify its view on the reports of continued private 
sector involvement in the valuation process.  
Could the Philippines also inform about the measur es, if any, that has been taken to prevent 
conflicts of interest in order to ensure  fair and transparent treatment for all? 
Response: The private sector is involved in th e valuation process when the Chamber of Customs 
Brokers Inc. is requested to disseminate to its me mbers’ clients request for information to ascertain 
the transaction value of a commodity , to present additional documents such as proof of payment or 
sales contract.  The Philippines Customs Service in itiated the creation of the Valuation Classification 
Review Committee, which is composed of the Dist rict Collector, the Deputy Collector for Assessment, 
and Customs Operations Officers, and representatives fr om other agencies such as the Tariff 
Commission and the Department of Trade and Industry.  The main objective of this Committee is to ensure due process in matters relating to valuation. 
[34] The EC welcomes the use of risk assessment by the Philippines in its customs’ procedures, 
including the establishment of "red", "yellow" , "green" and "super green" lanes for imports 
and the use of "post-audit review".  The EC is  concerned with the implementation, including 
the very high level of imports still classified as "red" (80%).  
Could the Philippines elaborate on the reasons for this and indicate the measures, if any, it 
intends to take to improve the situation and facilitate trade? 
What are the actual average times taken to clear through the "yellow", "green" and "super 
green" lanes (the WTO Secretariat report on page  32 says that the average time for the "red" 
lane is 2 days)? 
Could the Philippines clarify the meaning of " post-audit review" and gi ve indications on the 
length and detail of such a review? 
Which are the criteria defined in the Custom s Code to determine which goods pass through 
the green channel and which ones through the yellow or red channels?  WT/TPR/M/149/Add.1 
 Page 17 
 
 
The EC notes that the Philippines has undertaken a number of customs reforms.  The EC would be grateful for further detail on these reforms and the Philippines' plans for future 
measures. 
Chile 
[35] In the section on Procedures
, the report states at paragraph 109 that some 80 per cent of 
imports are classified as "red lane" for the pur pose of procedures relating to risk analysis.  
Could you please describe the criterion for risk-class ifying shipments as "red lane", "green 
lane" or "yellow lane"? 
Korea  
[36] (WT/TPR/S/149, page 32, para 8 ) 
What plan does the Philippines have to stre amline and improve customs procedures? How 
will the Philippines enhance risk assessment and re duce the percentage of shipments that have 
to go through the "red lane," thereby saving resources and reducing clearance time? 
Response: The Philippines’ Customs Service Automated Customs Operating System (ACOS) 
incorporates with it a module called the "Selectiv ity System." Through the use of risk assessment 
methods several "selectivity screens" were developed that enables the system to automatically select 
which shipment goes to the red, yellow or green  channel. This automated selection system was 
developed to take away the prerogatives from the cust oms officials, thus, reducing if not eliminating 
opportunities for corruption. The "selectivity sc reens" undergo periodic review by the risk 
management group to ensure that only those shipme nts classified as "high risk" are channelled to 
"red" which necessitates physical examination. There is an on-going project to upgrade the hardware 
of the current automated customs operating system and with it a comprehensive review of "selectivity 
system" which hopefully would enhance the efficiency of the current system. 
For shipments in "super green" lanes, processing of  import documents would take only hours. Since 
shipments under this lane are unloaded "direct to truck" they are released immediately and should 
regulations require physical examination the same is conducted at the consignee’s premises thereby 
eliminating delays. 
For shipments under the "yellow lane" the processing time is dependent on the time the consignee or 
the authorized customs broker presents the documen tary requirements (e.g. import licenses issued by 
other government agencies). Since shipments under the yellow lane do not undergo physical 
examination, except when subject of derogatory information, with co mplete documentation, 
processing of import documents would not take a day. 
For shipments under the "green lane ," the processing time is much faster than those under the yellow 
lane. At most, two (2) hours, since that is the l og time before payments to the banks can be confirmed 
through a different automated system which is not in corporated into the ACOS. For both those under 
yellow and green lanes, there are situations where dela ys in the release of th ese shipments occur but 
which cannot be attributed to Customs, that is, when the private port operators suffer shortage of 
moving/lifting equipment for various reasons. 
The criteria that enable the "selectivity system" to select which shipment goes to the red, yellow or 
green channel is not defined in the Customs Code . It is the safety net device to balance trade 
facilitation and customs control. For obvious rea sons and as with other Customs Administration WT/TPR/M/149/Add.1 
Page 18  
 
practices, these criteria can not be divulged. But on e thing is certain that these criteria were devised 
through risk assessment method. 
Measures Directly Affecting Imports – Tariffs
 
United States  
[37] In paragraph 12, page  33, the Secretariat Report notes that tariff reform "seems to have stalled 
due to fiscal and industrial policy considerations ." How does the Philippines plan to revitalize 
trade liberalization – one of the reforms the Secretariat Report identifies as required for sustained future growth – given apparent in tentions to raise tariffs on products in the 
agricultural, petrochemical, steel, textile, shi pping and other industries (see reference in 
Box III.1 on page 35 of the Secretariat Report)?" 
Australia 
[38] The Secretariat report observes that the Philippines’ Tariff Reform Programme initiated 
almost two decades ago appears to have stalled and in some cases tariffs have been "re-calibrated" upwards largely in response to political pressure from special interest groups 
(WT/TPR/S/149 page 31 para. 2, & page 33 para. 12)  Could the Philippines advise whether 
this recent unwinding of its Tariff Reform Pr ogramme is a fundamental change in policy 
direction away from a more liberal trading regime? 
European Communities 
[39] The EC notes that the Philippines has a numbe r of tariff lines for which it applies a duty rate 
which is lower than the bound level. The EC has also noted that there have been changes in 
the applied rates, and that there has been an  increase in the average applied rates in 2004. 
Even though the increases are w ithin the bound rates levels, such changes seem to create 
uncertainties on the direction and credibility of Philippine trade policy reforms.  
Could the Philippines clarify the motivations fo r this? Are further rate increases foreseen? 
And how do the Philippines assess the imp act of such changes on its trade? 
Korea 
[40] (WT/TPR/S/149, page 17, para 5; page 33, para 12)
 
The Philippines' policy to raise tariffs in the context of tariff "re-calibration" might bring 
about adverse effects of strengthened protecti onist policies in neighbouring countries focusing 
on the agricultural, steel, textile and ship building industries, thereby reducing the 
opportunities for trade and its gains. What is th e view of the Philippine Government on this 
possibility, and does the Philippines have any plan to reconsider the aforementioned measure? 
Response: The Philippines remain s fully committed to pursuing the Tariff Reform Program 
(TRP).  Despite the adjustments effected on so me tariff lines in 2003 to address specific policy 
objectives, the Philippines’ simple average MFN tariff in 2004 was 7.5%.  The WTO Secretariat 
Report notes, in page viii in the summary observation,  that "this average is still low by developing 
country standards".  As the Philippines continu es with the TRP, the balance among the policy needs 
of domestic industries, maintaining sound macro economic policies, and improving international 
competitiveness will be a foremost consideration.  WT/TPR/M/149/Add.1 
 Page 19 
 
 
Australia 
[41] We are concerned about repor ts that the Government is considering further tariff increases as 
a means to increase government revenues.  We would appreciate any further information on the status of this review.   
If tariff increases are likely, would they be applied across the board or limited to certain 
industries?  What would be the im pact of such increases on inflation? 
Response: There is an ongoing comp rehensive tariff review by the Philippines to determine the 
tariff schedule for 2006 onwards and it would be prematu re at this point in time to predict the results 
of this review.   
United States of America 
[42] The Secretariat Report notes in paragraphs 2 and 3 that the President of the Philippines has 
the discretionary authority to raise applied MFN tariffs to 100%.  In addition, he or she has the authority to prohibit imports of goods from "any country that discriminates against 
Philippine exports."   
A) What are the criteria under which the President could raise tariffs?  Please describe the 
process by which a decision to raise tariffs is made. 
C[sic] ) How does the Philippines define discriminat ion against Philippine exports?  What is 
the process by which the authorities reach such a determination? 
Response: Section 304, which is an original provision in the decades-old Tariffs and Customs 
Code of the Philippines, preda ting membership of the Philippin es in the WTO, has never been 
invoked.  Section 304 of the Tariff and Customs C ode of the Philippines empowers the President to 
impose new or additional duties in an amount not exceeding 100% ad valorem upon articles of any 
foreign country, or to prohibit importation thereo f, which discriminates against the commerce of the 
Philippines.   
The circumstances under which the President can ra ise tariffs under Section 304 are:  (1) the 
imposition by a foreign country of any unreasonable c harge, exaction, regulation or limitation which 
is not equally enforced upon the like articles of every foreign country; and (2) discrimination by law 
or administrative regulation or practice in respect to any customs, tonnage, or port duty, fee, charge, 
exaction, classification, and others, in such a mann er as to place the commerc e of the Philippines at a 
disadvantage compared with the co mmerce of any foreign country.  
It is the duty of the Tariff Commission to ascertain a nd at all times to be informed whether any of the 
aforementioned discriminations against the comm erce of the Philippines are practiced by any 
country; and when such discriminatory acts are discl osed, it is the duty of the Commission to bring 
the matter to the attention to the President, togeth er with recommendations.  Wh en the President finds 
that public interest will be served, shall by proc lamation impose new or additional duties or prohibit 
importation. WT/TPR/M/149/Add.1 
Page 20  
 
Brazil 
[43] WT/TPR/S/149 
Section III - TRADE POLICIES AND PRACTICES BY MEASURE (2), (iii), paragraph 12; 
4. Upon recommendation of the National Economic  and Development Authority (NEDA), the 
President may raise, reduce or remove import duties up to a maximum of 100% ad valorem . 
Are there legal provisions in place that make sure this presidential power is exercised in a way consistent with the Philippines’ obligations in the WTO? 
Australia 
[44] The Secretariat report (in para. 12, page 33) indicates that under Section 401 of the Tariff and 
Customs Code the President can raise tariffs up to a maximum of 100% ad valorem  which 
could breach WTO binding commitments. Has the Philippines increased tariffs above its WTO bindings? Does the Philippines expect tariffs to be raised in the future to such an extent 
that it breaches its WTO commitments? 
Response: The Philippines has ne ver breached tariff commitments bound in th e WTO.  Neither 
does the Philippines expect to raise tariffs in the future  beyond such commitments. 
[45] The Secretariat report notes that the Philippi nes’ binding coverage is around 65% of tariff 
lines (para. 13, page 33).  Within the context of  the 2-3 June APEC Trade Ministers statement 
on the WTO NAMA negotiations, could the Philippines indicate whether it plans to bind all tariff lines as part of the Doha Round outcome?  
Response: The Philippines is active in the NAMA negotiations and its position on the issues is 
well known. 
[46] The Secretariat report states that "a striking feature of the 2004 applied tariff is the increased 
number of lines, which almost doubled from 2003" (para. 16, page 35).  Philippine authorities 
indicate that the rationale for this significant increase in tariff lines is to facilitate trade 
negotiations. 
Could the Philippines explain how almost doubling the number of tariff lines assists in a more 
efficient and effective outcomes in preferential trade agreement negotiations?  Would the Philippines agree that doubling the number of  tariff lines increases the complexity of its 
applied tariff schedule resulting in a less transparent import regime?  
Response: In 2004, the ASEAN Member Stat es adopted the ASEAN Harmonized Tariff 
Nomenclature (or AHTN) which led to an increase in the number of Philippine tariff lines from 5,861 
HS 2002 lines to 11,059 AHTN lines.   
The AHTN is an 8-digit commodity nomenclature t hat is based on the Harmonized System (HS) and 
incorporates the HS 2002 amendments.  Adheri ng to the 6-digit level of the HS, the 7
th and 8th digit 
codes of the AHTN are assigned to ASEAN subhead ings and cover the requirements of the 10 ASEAN 
Member States. 
The AHTN is a uniform tariff nomenclature used by ASEAN.   
The AHTN’s advantages are:  (1) it establishes uniform ity of application in the classification of goods 
in ASEAN; (2) it enhances transparency in the clas sification process for goods in the region; (3) it  WT/TPR/M/149/Add.1 
 Page 21 
 
 
simplifies the tariff nomenclature system of ASEAN Me mber States to facilitate trade in the region.  
The AHTN does not at all lead to less transparency and complexity. 
Japan  
[47] III. TRADE POLICIES AND PRACTICES BY MEASURE 
(2) MEASURES DIRECTLY AFFECTING IMPORTS 
(iii) Tariffs 
(Page 33, paragraph 13) 
According to the World Trade Report (2004) issued by the WTO, 61.8 % of all non-
agricultural tariff lines are bound.  Japan belie ves that all non-agricultural tariff lines should 
be bound in principle from the standpoint of enhanc ing predictability in trade.  In this regard, 
please indicate the specific views of th e Government of the Philippines. 
Response: Please see reply to Question No. 45. 
[48] (Pages 34 to 37, paragraphs 14 to 18) 
With regard to the import duties on digital cameras, as a participant of the ITA, the 
Philippines is obligated to eliminate import du ties on digital cameras since January 1, 2000.  
However, the Philippines currently levies tariff s of 3% on digital cameras on which other ITA 
participants do not levy import duties.  Thus, Jap an considers that the Philippines is clearly in 
violation of the ITA and should eliminate the duties immediately.  In this regard, please 
provide information on the plan to elimin ate the import duties on digital cameras. 
Response: The Philippines will address this clas sification issue in the on-going comprehensive 
tariff review. 
[49] (Page 35, paragraph 15, Box III.1) 
According to the Report by the Secretariat, the President of the Philippines announced that 
tariffs could not be lowered in 2002 and the un ilateral tariff reduction pr ogramme was to slow 
down in 2003.  In 2003, tari ffs on sensitive agricultural goods were increased.   Please 
indicate the objectives and procedures of incr easing tariffs in 2003, as well as the specific 
laws and regulations which are the basis for it. 
Response:  The modification of tariffs, a power delegated by Congress to the Executive Branch, 
is undertaken pursuant to Section 401 of the Ta riff and Customs Code of the Philippines.  The 
Philippines’ planned reduction of applied MFN ta riff rates to 0% - 5% by 2004, with some 
exceptions, under the unilateral Tariff Reform Pr ogram (TRP) was put on hold in 2003 mainly 
because of the associated tax rev enue losses and unexpected magnitude of adjustment costs.  Since the 
TRP is a unilateral initiative, the tariff recalibration undertaken by the Philippines in 2003 is thus in 
terms of the Philippines’ internal timetable and does not at all represent any breach of WTO bound 
tariff commitments.  The Philippines’ simple average  MFN tariff in 2004 remains low at 7.5% and, as 
noted in the WTO Secretariat report, "is still low by developing country standards" (paragraph 2, Chapter III of the Secretariat report).  
[50] (Pages 34 to 36, paragraphs 15 to 17) 
Concerning the tariff structure of the Philippines, Japan is interested in the following points:  
Please indicate the specific articles of the la ws and regulations which are the basis for WT/TPR/M/149/Add.1 
Page 22  
 
ensuring not to impose the tariff rates over the le vel of the bound rates regarding the tariff 
rates of goods which are bound. 
Response: The WTO Agreement was ratified by the President and concurred to by the Senate 
and therefore forms part of the law of the land.  The Philippines operates w ithin WTO rules and there 
has never been an instance where bound  rates were breached in the ta riff modification process (under 
Section 401 of the Tariff and Customs Code).  Please also see reply to Question No. 44. 
[51] Are there any different procedures between bound tariff lines and non-bound ones in 
increasing tariff rates?  Are there any differe nces between bound tari ff lines and non-bound 
ones in deciding the increase of tariff rates? 
Response: In any tariff modification process, th e Philippines does not dis tinguish between bound 
and unbound tariff lines. 
[52] Please provide information for the laws and regulations which are the basis for, and the 
formal procedures on, increasing tariff rates ot her than those in the announcement made by 
the President, if any. 
Response:  The modification of tariffs is a pow er delegated by the Legislative Branch to the 
Executive Branch. Through Section 401 of the Ta riff and Customs Code of the Philippines, the 
President exercises this power following the pre scribed administrative proc edure. However, Congress 
can exercise its inherent power to modify tariffs follo wing its legislative procedures. Please also see 
reply to Question No. 44.   
[53] Please indicate the list of tariff numbers of a ll the goods of which the tariff rate was really 
increased, including each specific tariff rate  before the rise and after the rise. 
Response: The following issuances contain th e AHTN headings where modifications were 
effected:  Executive Orders 241 of 2 October 2003, and 264 of 30 December 2003. 
[54] Please indicate the specific reasons why the tariff rate of these goods was increased. 
Response: Refer to response in question no. 49.  
[55] (Page 37, paragraph 18)  
Japan believes that in order to improve real  market access to create the new trade which 
contributes to the "development" targeted by th e DDA, in principle, tariff peaks, high tariff 
rates and tariff escalations regarding non-tari ff-bound goods should be reduced. They should 
be reduced by applying the same formula as tariff bound goods, according to the Doha 
mandate, taking into considerati on the endeavour to have reduced the tariff rates concerning 
non-tariff-bound goods which already have relatively low rates.  In this regard, please indicate 
the specific views of the Gove rnment of the Philippines. 
Response: The views of the Philippines in th e NAMA on the particular points above have been 
and continue to be clearly enunciated in th e negotiations, and they are well known.   
Chile 
[56] With regard to the section on Tariffs
 (paragraph 125), what is the purpose of applying the 
10 per cent tax on imports and domestically produced goods?  WT/TPR/M/149/Add.1 
 Page 23 
 
 
Response: There does not seem to be a paragra ph 125, but the question may be referring to the 
value added tax. 
Colombia 
[57] The report of the Secretariat points out, in Chapter VI, section 4, that in the 1980's, the 
Philippines embarked on a reform of the produc tion sectors that included a unilateral tariff 
reduction programme which, in 2001, became th e Tariff Reform Programme, with a view to 
reducing tariffs to an average of 5 per cent by 2004. 
Unfortunately, that programme was not impl emented, and during the period 2002-2003 a 
number of discretional selective tariff increas e measures were taken which would appear not 
to be based on clearly-defined economic and trade criteria and which run counter to the 
principle of predictability and certainty.  We w ould like to ask the following questions in this 
respect: 
Is it possible to continue introducing modifications  to the tariff levels as part of the process of 
"re-calibration" of tariff reductions for tax reas ons or by virtue of the powers conferred upon 
the President of the Republic to ra ise applied tariffs to 100 per cent? 
Response: Please refer to the responses to questions 37-49. 
[58] Have the Philippine authorities conducted an assessment of the improvements in the levels of 
competitiveness of the ten sectors benefiting from the tariff increases? 
Response: The sectors referred to are not clear. 
[59] Is there any intention to revive the Ta riff Reform Programme approved in 2001 once the 
application of the temporary tariff increases introduced between 2002 and 2003 has been 
terminated, in 2006? 
Response:  Please refer to the response to questions 37-40. 
Measures Directly Affecting Imports – Tariff Quotas  
Australia  
[60] The Secretariat Paper notes that a substan tial number of the Philippines tariff quotas have 
been regularly unfilled – e.g. live goats and b eef – while a number of others are underutilized, 
e.g., pork, live poultry, goat meat.  
Could the Philippines explain why it retains these tariff rate quotas when utilisation rates are 
so low? 
European Communities 
[61] Referring to the WTO report prepared  by the secretariat Chapter III(2)(iii)(c): 
The EC should like the Philippines to inform if there are any measures fo reseen to reduce the 
complexity of the tariff quota administration? WT/TPR/M/149/Add.1 
Page 24  
 
Hong Kong, China 
[62] (WT/TPR/S/149, P. 39, Para. 20) 
We are concerned that the Philippines admi nisters a tariff quota system which appears 
complex and may therefore deter imports.  We note that a substantial number of tariff quota 
are regularly unfilled, and that more recently ther e have been no imports of certain items.  We 
would like to know whether the Philippines has any plan to review the system.  
Response: The relatively low quota fills for the i ndicated products is mainly determined by 
market demand. 
The rules and regulations for the implementation of the agricultural minimum access volumes 
(MAVs), or the TRQ administration a re fully consistent with the provisions of the AOA. These rules 
are contained in the Department of Agriculture (D A) Administrative Order No. 9, series of 1996, 
which was further amended by AO Nos. 8 (1997), I (1998), and 52 (2000). 
These series of amendments were intended to im prove the implementation of the MAV mechanism, 
promote transparency, fair trade and full market a ccess.  The amendments in the TRQ administration 
were a result of coordinated and participatory deci sion-making processes, which has been taken into 
account the concerns of the affect ed sectors, including not only domestic constituents, but also our 
major trading partners.  It should be highlighted t hat these amendments took on board, in particular 
the concerns and suggestions form interested trading partners such as the US and Canada. 
Colombia  
[63] In Chapter III(2) concerning measures directly affecting imports, the Secretariat remarks that 
in 2004, tariff quotas were applied to 14 product categories (60 tariff lines) and that several of 
them were currently inoperative, inter alia  those corresponding to coffee beans, following the 
equalization of out-of-quota and in-quota tariff rates. 
Are the Philippine authorities thinking of officially reducing the number of products to which 
the quota applies and rationalizing the complex system of administration? 
As regards variable levies and seasonal tariffs , which have not been applied since 1999, is 
there any intention of repealing the legal provisions as a mark of transparency and 
predictability? 
Response: On the issue of tariff quotas, please refer to the response above on question no. 62.  
There is no intention to repeal the legal provisions .  In any event, the provisions have not been 
invoked since 1999. 
Measures Directly Affecting Imports – Tariffs – Other Duties, Fees, and Taxes
 
United States 
[64] According to paragraph 25 on page 40 of the S ecretariat Report, imports of distilled spirits are 
subject to higher excise taxes than those pr oduced domestically.  The Report added that 
legislation to remove this discrimination is be ing considered.  Please provide an update on the 
status of legislation to equalize excise tax rates applied to domestic and imported distilled 
spirits, in keeping with the requirements of Article III of the GATT.  WT/TPR/M/149/Add.1 
 Page 25 
 
 
European Communities 
[65] Referring to the WTO report prepared  by the secretariat Chapter III(2)(iii)(g):  
At the last TPR, the Philippine delegation i ndicated that "The matter of rationalizing the 
internal taxation for wines and spirits… is a prio rity legislative agenda". To date it however 
seems that the Philippines continue to appl y an excise taxation system to spirituous 
beverages. Furthermore, in December 2004,  the Philippine authorities adopted a new 
legislation (the Republic Act No. 9334), wh ich seems to increase the pre-existing 
discrimination, by imposing a rate increase differentiated again by raw materials used.  
The EC would therefore like the Philippines to clarify its views on this legislation and also 
inform about what steps are being taken, if any, to ensure that all distilled spirits are subjected 
to the same tax rates regardless of the raw material used in its production.   
Response: On 21 December 2004, the President signed into law Republic Act No. 9334, an "Act 
Increasing the Excise Tax Rates Imposed on Alc ohol and Tobacco Products, Amending for the 
Purpose Sections 131, 141, 142, 143, 144, 145 and 288 of the Nati onal Internal Revenue Code of 
1997, as Amended".  The Philippines believes that, un der prevailing circumstances, this is the optimal 
policy response it can provide to the issue of excise taxation for wines and spirits. 
Measures Directly Affecting Imports – Prohi bitions and Restrictions – Import Licensing  
United States 
[66] Paragraphs 30-34 on pages 41- 43 and Table III.3 on pages 41-42 of the Secretariat Report 
provided a sketchy overview of the Philippin es’ import licensing regime.  Paragraph 32 
explicitly states that the "licensing system is opaque and appears complex." 
A) In the interest of transparency, please provi de additional details on products subject to 
licensing by completing Table III.3 to include HS codes for products that face import 
restriction, the type of restriction, and for products that require import licenses, the type (automatic or non-automatic) of license. 
Response: The coverage indicated in Table III.3 covers all products subjected to licensing 
requirements. The Philippines has always substantia lly complied with the requirements of the 
Agreement on Import Licensing (e.g., Article 5).  In any event, should any Member require specific 
information on particular products, whose inclusion in the notifications may not be required, and 
moreover, could be impractical, reference, could be made to the Tariff and Customs Code of the 
Philippines, which is available with the WTO Secretar iat.  The type of restriction takes the form of a 
license and a permit (say, in the case of materials co vered by or related to the relevant provisions of 
Article XX and XXI of GATT 1994).  
[67] B) To what extent has this informa tion been notified to the WTO Committee on Import 
Licensing Procedures? 
Response: Please refer to document series G/LIC/N/3/PHL. WT/TPR/M/149/Add.1 
Page 26  
 
European Communities 
[68] On page 42, para. 32 in the report prepared  by the WTO secretariat it is explained that two 
licensing procedures exist, one for non-quota goods and one for products subject to quotas. 
The EC should like the Philippines to explain its view on the functioning of its import 
licensing regime.  
Does the Philippines foresee any changes or measures of its licensing system? 
Furthermore in para. 33 further explan ations is provided on import quotas.  
The EC should like to ask the Philippines to confirm if quotas on certain fish, crustaceans and 
molluscs still apply? If so, the EC would like to  receive the view of the Philippines as to the 
rationale of such quotas and if the Philippines would foresee any prospects for their removal? 
Japan  
[69] (iv) Prohibitions and restrictions 
(Page 42, paragraph 32) The Report by the Secretariat states that "Two  licensing procedures exist, one for non-quota 
goods and one for products subject to quotas.  Licenses for non-quota goods are generally 
granted immediately, but applications must be filed at least two weeks prior to the loading 
date.  However, some non-automatic licen ces also seem to apply to these goods. All 
registered importers may apply for a non-au tomatic licence.  There is an additional 
registration requirement to import certain goods , which, according to the authorities, ensures 
that only qualified applicants obtain a licence.  However, some goods subject to this 
additional requirement do not seem to be subject  to licensing."  Japan considers that the 
licensing system in the Philippines is not clear.  Does the Philippines have a plan to improve 
the licensing system?  Is the Philippines thinking of providing clearer content in notifying Committee on Import Licensing ? 
Response: The Philippines views its import lic ensing regime in the agriculture sector as 
fundamentally consistent with the provisions in the Agreement on Import Licensing Procedures.  
Automatic or non-automatic types are issued, dependi ng on the commodity to be imported.  For rice, 
the non-automatic license type applies in view of  the administration of quantitative restrictions 
(pursuant to the application of special treatment to  this primary agricultural product per Annex 5 of 
the AoA). NFA implements import licensing to regul ate the importation of rice in relation to the 
implementation of the rice QR and to ensure that rice importers are legitimate grains businessmen.  
Improvements in the NFA licensing system shall pr imarily be reflected in its licensing fees, a 
computerized and updated industry wide database read ily available for management use, effective 
implementation of grains standards , a holistic approach in the integr ation of licensing programs for 
more efficient and cost effective business for grains stakeholders, among others.  
The non-automatic license regime also applies to MAV products and the system of TRQ 
administration is enabled by a series of implemen ting rules and regulations that were the result of 
transparent and open consultations between the govern ment and the affected private stakeholders, 
precisely for the purpose of improving the system.   WT/TPR/M/149/Add.1 
 Page 27 
 
 
Non-automatic licensing also applies to fisheri es products, per Fishery Administrative Order 195 
(rules and regulations governing importation of fresh/chilled/frozen fish and fishery/aquatic 
products), pursuant to RA 8550, or the Philippine Fisheries Code of 1998.  
For non-quota agricultural products (plants/ plant products, animals/animal products, 
fertilizers/agricultural chemicals), automatic licen ses are issued by the concerned regulatory DA 
agency primarily as a means of validating the im porters’ qualifications and legitimacy of business 
and  keeping track of imports for sanitary and phyt osanitary (SPS) considerations as well as for 
statistical purposes.  
The procedures for applications are transparent and known to interested applicants, including the 
timeframes involved in processing time and validity of licenses issued. For automatic licenses, anyone 
legally qualified to import the products con cerned may apply; applications are accepted on any 
working day; and approval is within the prescribed 10 working days.  
Issuance of automatic licenses is well –delineated among the regulatory agencies of the 
Department. For example: 
• For plants and plant products: Bureau of Plant Industry 
• For animals and animal products: Bureau of Animal Industry 
• For fish/fish products: Bureau of Fisheries and Aquatic Resources 
• For pesticides, fertilizers, agricultural ch emicals: Fertilizer and Pesticide Authority  
Korea  
[70] (WT/TPR/S/149, pages 40-43, paras 27-36) 
Currently exporters check items subject to import prohibition, import restriction, and 
preliminary import inspection using the Circul ar No. 1389 (1993) of the Central Bank. 
However, there has been no comprehensive re vision of the Circular regarding these items 
since then. Items subject to the above-mentione d import measures are published in a Circular 
Letter in the newspapers by the related bureau and those measures go into effect. Therefore, 
exporters can practically only confirm whethe r goods require preliminary import inspections 
or are subject to import prohibition or restri ction by making inquiries via telephone or in 
writing to the Bureau of Import Service. 
Does the Philippine Government have any plans to make more readily available the changes 
in the import restrictions, for example, by pub lishing the change in the import restriction on 
the web-site of the Bureau of Import Service or  in the related publication of the Central Bank? 
Response: Central Bank (CB) Circular No. 1389 refers to the Consolidated Foreign Exchange 
Rules and Regulations, which was issued by the then Central Bank of the Philippines (now the Bangko Sentral ng Pilipinas) on 13 April 1993. CB Circ ular No. 1389 governs foreign exchange rules and 
regulations on current accounts, capital acc ounts, foreign currency deposit units, offshore banking 
units and representative offices of foreign banks. Among others, the said Circular covers import trade 
transactions particularly with regard to the sa le of foreign exchange service payments for imports. 
Through the years, a number of issuances had been made  by the BSP to amend the provisions of the 
Circular. These amendments are published in the BS P website (www.bsp.gov.ph) when issued. There 
is an ongoing review of the Circular and the amendato ry issuances with the end view of consolidating 
them into one regulation. The consolidated version shall be published in the BSP website. WT/TPR/M/149/Add.1 
Page 28  
 
Measures Directly Affecting Imports – Contingency Measures
 
European Communities 
[71] The EC should like to ask the Philippines to clarify whether Philippine legislation allow the 
Trade Secretary (in the case of non-agricultural goods) or Agriculture Secretary (in the case 
of agricultural goods) to reverse the definitive findings made by the Tariff Commission? If so, 
could the Philippines explain whether any specific criteria need to be filled or give an 
example where such a decision could be taken? 
Japan 
[72] (v) Contingency measures 
(Page 46, Table III.4) 
Concerning cement imports, a safeguard meas ure which was definitively imposed in 2003 
damaged imports by Japanese companies.  In the process of initiating the safeguard measure, 
the Department of Trade and Industry (DTI) decided to impose it, although the Tariff 
Commission (TC) did not identify "serious injury or threat of serious injury".  Thus, Japanese 
companies appealed to the Supreme Court on the decision by the DTI which overrode the 
judgment by the TC.  The case is now being examined by the Grand Bench of the Supreme 
Court.  Japan considers that this case shows the uncertainty of the administrative decisions in 
the Philippines since the identification by the TC, which is a more specialized entity, was 
overridden in the fact finding.  Concerning this  case, please indicate the specific views of the 
Government of the Philippines. 
Response: Under the law, the Trade and th e Agriculture Secretarie s can not reverse the 
definitive findings made by the Tariff Commission.  U nder the relevant legislation, they are instructed 
to adopt the findings of the Tariff Commission th rough the issuance of Department Orders imposing 
contingency trade remedies or terminating inves tigations/measures.  Other parties, e.g., the 
petitioning domestic industry, however, are free to appeal decisions of the Tariff Commission to the 
domestic courts including the Supreme Court, as wa s the case in cement.  In the cement case, in 
particular, the Secretary of Trade and Industry acted only upon a legal finding issued by the courts 
after the domestic industry questioned in court th e Secretary’s acceptance of the Tariff Commission’s 
findings. The act of the lower court was then raised by the importers before the Supreme Court on 
whether the Trade Secretary and the courts can rever se the negative determination of the Tariff 
Commission.  The government, the DTI in particular, will be guided by the decisions of the Supreme 
Court once final and executory. 
Japan  
[73] (Page 46, Table III.4) 
Concerning cement imports, a definitive safegua rd measure was imposed on June 25, 2003. 
The measure only applies to certa in countries, such as Japan, Chinese Taipei and Indonesia, 
but excludes many countries like China and the Re public of Korea.  Concerning cement, the 
Philippines has not offered any concessions unde r the WTO Agreements.  However, Article I 
of the GATT (General MFN Treatment) applies to not only goods subject to concessions but also those without any concessions.  Japan c onsiders that this measure may not be MFN 
consistent since a different tariff rate has been  imposed only on certain countries.  In this 
regard, please indicate the specific views of the Government of the Philippines.  WT/TPR/M/149/Add.1 
 Page 29 
 
 
Response: The imposition of safeguard measu re by the Philippines is non-discriminatory and 
across-the-board whether or not the good is the subj ect of a concession in the WTO.  However, as 
provided in the WTO Agreement on Safeguards, th e Philippines excludes those developing countries 
whose imports are negligible, i.e., their share to total Philippine imports is less than 3%, and so long 
as cumulatively their shares do not exceed 9%, whic h was the basis for the exclusion of Chinese and 
Korean imports from the safeguard duties.     
[74] Concerning this measure, please indicate the prospects for withdrawal, relax or review. 
Response: The measure expired on 10 December 2004.  
Chinese-Taipei 
[75] III. TRADE POLICIES AND PRACTICES BY MEASURE  
(2) MEASURES DIRECTLY AFFECTING IMPORTS 
(V) CONTINGENCY MEASURES  (a) ANTI-DUMPING AND COUNTERVAILING MEASURES  
(p. 44, paras. 40-42) As indicated in the report, the anti-dumping duty imposed by the Philippines must equal the 
dumping margin, or less if the lower duty is low enough to remove the injury to the domestic 
industry.  Between 1999 and 2003, the Philippi nes initiated 13 anti-dumping investigations, 
and in five of the cases the final determinations were in the affirmative.  
Could the Philippines please let us know whethe r it adopted the lesser duty rule when 
determining final anti-dumping duties in these five affirmative cases? If yes, please describe the methodology used in determining the lesser duty and in calculating the injury margin. 
Response: National legislation allows the application of a lesser duty.  In the five affirmative 
cases during the period 1999-2003, the definitive anti-dumpi ng duty rate was equal to the full margin 
of dumping as this was deemed as the only way to  stop and remove the injury to the domestic market.  
[76] (p. 44, para. 41) 
We note that anti-dumping/countervailing duties are effective for five years and may be 
extended following a further determination of their continuing need by conducting a sunset 
review. We would appreciate knowin g the duration of such a review and, in the event that the 
outcome of the review goes beyond the sunset da te and the determination is negative, will the 
Philippines refund the anti-dumping/countervailing duties that have been collected beyond the five years of duty collection? 
Response: As a general rule, the imposition of an anti-dumping or countervailing duty shall 
remain in force only as long as and to the extent necessary to counteract injurious dumping or 
subsidization.  The review shall be  conducted within 150 days from th e date of initiation, as provided 
in law.  In the event that the conclusion of the review goes beyond the sunset date and the determination is negative, the government w ill refund the anti-dumping/countervailing duties that 
have been collected beyond the sunset date. WT/TPR/M/149/Add.1 
Page 30  
 
Hong Kong, China 
[77] (WT/TPR/S/149, P. 44, Para. 42) 
 We note that the Philippines initiated 13 anti- dumping (AD) investigations during 1999-2003, 
only five of which resulted in affirmative final determinations.  We would be interested to 
know the reasons why the remaining eight case s resulted in no imposition of AD duties.  
Also, we should be grateful to know the Philippi nes’ views on such findings, particularly on 
whether initiation standards or other factors a ttribute to the relatively low percentage for 
affirmative cases. 
Response: Investigating authorities implement legisl ation on trade contingency measures fully, 
including in respect of the specified actions in regard to initiation.  The termination or negative 
determinations of the 8 cases were due to the follo wing reasons:  the domestic industry decided not to 
pursue the matter; de minimis margin of dumping and/or injury; and eventual findings of no 
dumping/injury/causation.  
Measures Directly Affecting Imports – Standards and SPS
 
European Communities 
[78] The report prepared by the WTO Secretariat (p age 48 para. 59) establishes that the provision 
in the Meat Inspection Code of the Philippines (Republic Act 9296) require shipping or 
airlines to secure a Veterinary Quarantine Certif icate from the Department of Agriculture and 
the International Veterinary Certificate issu ed by the exporting country prior to accepting 
meat and meat product shipments to the Philippines. 
The EC should like to receive the Philippines view on and the rational of this requirement? 
The EC should also like to ask the Philippines for a clarifica tion of the procedure as well as 
indicating the length before the shipment can be made? 
Could the Philippines provide a status on the implementing rules and regulations (IRR) of the 
MICP? 
Response: The requirement is consistent with the implementation of SPS measures to protect 
human or animal health and life from pests and diseases that may be borne by imported 
animals/animal products. The requirement is to en sure that imported animals/animal products are 
covered by the necessary documen tation before these are loaded in to the cargo vessels.  The 
procedures for implementing this regulation, incl uding the length of time before shipments can be 
made, are yet to be drafted.  
Chile 
[79] With regard to the section on Sta ndards and other technical requirements , what are the legal 
provisions governing the development and ad option of, and amendments to, technical 
regulations and conformity assessment proce dures by the authorities?   Please describe the 
legal procedure involved. 
Response: The  Bureau  of  Product  Standards functions on the basis of the following legal 
provisions: 
- Republic  Act  4109:1964-  An  Act  Converting  the  Division  of  Standards  into  a  Bureau  of  
Standards  to  Provide  for the  Standardization  and  /or   Inspection  of  Products   and  Imports  of    WT/TPR/M/149/Add.1 
 Page 31 
 
 
the  Philippines.  At  present  this National  Standar dization  Act is  under  revision  to  better  protect  
the safety  and  health  of  consumers  and  to  enab le  industry  advancement.  Main purpose  of  the  
revision  is  to  strengthen  the  National  Quality  Infrastructure. 
- Executive Order 913:1983 – Strengthening  the  Rule -making  and  Adjudicatory  Powers  of  the  
Minister  of  Trade  and  Industry  in  order  to  Further  Protect  Consumers 
- Republic Act 7394 -  Consumer  Act  of  the  Philippines 
Other  relevant  regulatory  agencies  involved  in  the  implementation  of  the Agreements on TBT  
and  Sanitary  and  Phytosanitary  Measures  have  also  their  respective  laws  to   ensure  
compliance  to  the  said  agreements.  
Relative to  the  development  and  adoption of, an d  amendment  to  technical  regulations and  
conformity  assessment  procedures,   the  BPS and  concerned  regulatory  agencies  follow the  
following procedures 
- Conduct  of  public consultations  among  representatives  of  the  government, industry associations, 
consumer  organizations  and  the academe  to  gat her  inputs  and  comments  on  the  proposed  
technical  regulations and  conformity assessment  procedures.  The consultation allows for a 60-day 
comment period. 
- Notification to the WTO Secretariat   of the draft technical regulation or c onformity assessment   
procedure  if  it  may  have  a significant  effect  on  trade  or  whenever   an  international  standard  
does  not  exist  or  the  draft  measure  is  not  in  accordance  with  international  standard.  BPS  
closely  coordinates  with  regulatory  authorities in   the  preparation  of  their respective   
notification  with  BPS directly  transmitting  the  notification  to  the  WTO Secretariat and  the  
Philippine  Mission to the WTO. 
- Provision  of  texts of  the  proposed  tec hnical  regulation and/or  conformity  assessment  
procedure  to  the  requesting  party. 
The developed, adopted  or amended  technical  regul ations and  conformity  assessment  procedures 
are published in the Official Gazette and two newspapers of general circulation. 
[80] With regard to the section on Sta ndards and other technical requirements , is there a website 
on which to consult technical re gulations and conformity assessme nt procedures applicable to 
all products? 
Response: For transparency  purposes, information  on technical  regulations  and  conformity 
assessment  procedures  being  implemented  by  th e  BPS  are   posted  in the  BPS  website:  
http:///bps@dti.dti.gov.ph.  Howeve r, since other regulatory authorities  handle various products  and  
are  involved  in  the  implementati on  aspect, such as  those  identified  in the  Consumer  Act  of the  
Philippines,  their requirements  are  posted  in th eir  respective  websites.  At present,  not  all of 
these  websites  are linked  with  the BPS.  Fundi ng constraints do not allow the development of a 
website  containing  all  Philippine  technical  regulations  and  conf ormity  assessment  procedures.   
[81] With regard to the section on Standards and other technical requirements , is the Philippines 
party to Mutual Recognition Agreements on c onformity assessment?  If so, what is your 
experience with the development and implemen tation of such agreements, in terms of 
compliance by foreign bodies and of human and material resources necessary to control the 
system? WT/TPR/M/149/Add.1 
Page 32  
 
Response: The Philippines is a party to several Mutual Recognition Agreements on conformity 
assessment as follows: 
1. Mutual Recognition Arrangement between  Japan Electrical Safety and Environment 
Technology Laboratories (JET) and Bureau of Pro duct Standards (BPS) on Factory Inspection. 
2. Mutual Recognition Arrangement between  Japan Electrical Safety and Environment 
Technology Laboratories (JET) and Bureau of Pr oduct Standards (BPS) on Product Tests. 
3. Memorandum of Understanding between Standar ds Australia Quality Assurance System 
and Bureau of Product Standards on Factory Inspection. 
4. Memorandum of Understanding and Mut ual Recognition Arrangements on product 
certification and approval schemes between B adan Standardisasi Nacional (Standardization 
Agency of Indonesia) and  Bureau of Product St andards on product certific ation and approval 
schemes. 
5. Memorandum of Understanding between SIRI M QAS International Sdn. Bhd. and the 
Bureau of Product Standards on Technical Cooperation pertaining to Inspection, Testing and Certification. 
6. ASEAN Mutual Recognition Arrangement on Co nformity Assessment for Electrical and 
Electronic Equipment (ASEAN EE MRA). 
7. Pacific Accreditation Cooperation (PAC) and International Accreditation Forum (IAF)  
Multilateral Recognition Arrangements signatory member for Quality System or ISO 9000 
certification. 
The above MRAs were signed primarily to add ress the problems on cost, time and human resources 
for both exporters and conformity assessment bodies, t hus facilitating trade and  avoiding duplication 
of conformity assessment activities (e.g.; testing,  inspection, certification) conducted by counterpart 
conformity assessment bodies.  
In the case of MRA of the Philippines with Japan and Australia, it is costly for Philippine exporters to 
spend for the travel of inspecto rs from either Japan or Australia covering their hotel accommodation, 
airfare and living allowances.  It is also not pr oductive on the part of the conformity assessment 
bodies (in this case certification and inspection bodies) of these countries to travel to the Philippines 
just to inspect a factory for 2 or 3 days; consideri ng that there are other companies that need to be 
visited within their respective countries and countries other than the Philippines. 
The MRA of the Philippines with Japan and Aust ralia provide for the Philippine inspectors 
(conformity assessment auditors) to  perform the inspection on behalf of Australia and Japan; and vice 
versa.  Philippine exporters to Australia and Japan (f or industrial products) did not have to spend for 
airfare, accommodation and living allowances of foreign inspectors as the inspection is being 
conducted by Philippine inspectors.  Of cou rse, the inspectors need  to have the necessary 
qualifications that are acceptable to Japan and Au stralia.  This was done through a joint audit and 
on-the-job training on local inspectors against the systems of Japan and Australia. 
In the case of Indonesia and Malaysi a, exporters to Philippines need to be subjected to inspection by 
Philippine auditors to comply with Philippine requirem ents.  With the MRA, the Philippine recognizes 
the inspection and audit being performed by  our counterpart auditors.  The counterpart 
inspectors/auditors joined the Phili ppine auditors in performing the audits in Indonesia or Malaysia  WT/TPR/M/149/Add.1 
 Page 33 
 
 
for them to understand the Philippine system.  Only  after they underwent such joint audit will they 
allow performing the inspection/audit on our behalf.  
For the ASEAN EE MRA, the Philippines is a partici pant to the recognition of test report together 
with other 9 ASEAN member countries.  To enjoy full benefit of this MRA, the Philippines is 
upgrading its technical infrastructure such as having the testing laboratories accredited to 
international standards, and working  towards  its   being  a  signatory  to  the  APLAC MRA. 
Upgrading of technical infrastructure to meet int ernational standards and practices is necessary to be 
globally competitive. 
Measures Directly Affecting Imports – Government Procurement  
United States 
[82] The Government Procurement Reform Act of  2003, as briefly described in paragraph 65 of 
the Secretariat Report, appears to be compa tible with many aspects of the WTO Agreement 
on Government Procurement (GPA).  Does the Ph ilippines have any plans to join the GPA or 
to take other measures that would increase access of foreign suppliers to Philippine 
government procurement? 
Response: None. United States 
[83] Paragraph 67 explains that authorities deem the bid with the "most advantageous price" for 
the government to be the bid with the lowest price. Does this method obtain the best "value 
for money," that is, are other factors than lowest price taken into consideration, such as performance based factors that will impact total cost over the lifecycle of the acquisition?   
Korea 
[84] (WT/TPR/S/149, page 50, para 67)
 
The "lowest price" is being used as the crite ria for successful bidding for alternative bidding 
methods used under special circumstances. Is th e "lowest price" criterion enough to evaluate 
biddings of all procurements, some of which may be better evaluated by other criteria in 
addition to price? 
Response: Yes, factors other than price are always taken into full account.  These include 
performance-based factors and so -called "value for money". 
United States 
[85] Paragraph 76 explains that foreign par ticipation in the procurement of goods remains 
restricted.   
A) How are preferences for local suppliers administered?   
B) How are foreign suppliers able to know when they are eligible to participate in a tender? 
Response: Please refer to Republic Act (RA) 918 4 and its implementing rules and regulations 
(IRR) that can be accessed through the national Ec onomic Development Authority (NEDA) website.  WT/TPR/M/149/Add.1 
Page 34  
 
European Communities 
[86] The report prepared by the WTO secretariat e xplains (page 52 – para. 74) that every Bids and 
Awards Committee's decision can be contested to the head of the procuring entity.  
Does the Philippines provide external challenge procedures so that suppliers, whether foreign 
or local, can be heard by a court or by an impartial review body with no interest in the 
outcome of the procurement and the members of  which are secure from external influence? 
Response: Yes, an external venue other than within the Procuring Entity is provided for challenge 
procedures where suppliers/bidders can be heard. U nder Section 58 (Resort to Regular Courts; 
Certiorari) of Republic Act (RA) 9184, otherwise known as the Government Procurement Reform Act 
(GPRA) and its Implementing Rules and Regulations  (IRR), court action may be resorted to by 
bidders after protests have been resolved/decided upon by the head of a procuring entity. Specifically, 
the regional trial courts have jurisdiction over such  decisions made at the level of the procuring 
entity. In addition, the Supreme Court has the sole  jurisdiction to issue temporary restraining orders 
and injunctions relating to infrastr ucture projects of the government. 
[87] Furthermore, paragraph 76 of the report indicates that foreign assisted projects are subject to a 
15% price preference for domestic suppliers. 
What is the price preference for other projects where foreign suppliers may be invited to bid? 
Could the Philippines provide statistics regarding awards of contracts for year 2004 or 2003, 
detailed by type of contract s (works, supplies, services), tendering procedure (competitive, 
limited or direct) and origin (international, local). 
Response: Section 4 (Scope and Appl ication) of the GPRA/IRR states t hat any treaty or international 
or executive agreement, i.e., loan/grant agreements  between International Financing Institutions 
(IFIs) and other bilateral/multilateral sources, concerning government procurement shall be 
observed. Thus, if an agreement for a FAP does not  impose any price preference for domestic 
suppliers, then the agreement shall govern and no p reference will be applied during procurement.  
Regarding the question asking for the price prefer ence for other projects where foreign suppliers may 
be invited to bid, the provisions  on procurement of the loan/grant agreement for a particular FAP will 
govern. However, for locally-funded projects (LFP s), Section 43 (Procurement of Domestic and 
Foreign Goods) of the GPRA/IRR stat es that a procuring entity may
 give preference to local suppliers 
that meet the specified or desired quality. Preference may be imposed.  
Data on contract awards are presently lodged at the agency level.  Korea 
[88] (WT/TPR/S/149, page 52, para 76)
 
For foreign assisted projects, overseas firms may participate in public procurement, subject to 
a 15% price preference for domestic suppliers . As a means to enhance efficiency in 
government procurement though increasing competition, does the Philippine government 
have any plan to lower the percentage of  the price preference for domestic suppliers?  
Response: None.  WT/TPR/M/149/Add.1 
 Page 35 
 
 
[89] (WT/TPR/S/149, pages 49-52, paras 65-76)  
When it comes to government construction proj ects, the Philippine Government is imposing 
an 8.5% withholding tax (as of 1 July 2005, it will be reduced to 5%) to contractors, 
according to a VAT system. In addition, construction companies are paying a 10% VAT on 
their purchases of construction materials and equipment. The total VAT levied exceeds 10% of the project costs allowed by law and the c onstruction companies are entitled to get a refund 
of the amount exceeding 10%. However, as a means of reducing the budget deficit, the 
Philippine Government fails to fulfil its oblig ation to reimburse the excess by refusing or 
delaying reimbursement applications.  Please e xplain any plans to expedite the process of 
reimbursing the excess VAT on contractors' refund-filings.  
Response: The Philippines should like to clarify  that the statement that contractors of 
government construction projects are entitled to get a refund since the total VAT levied exceeds ten 
percent (10%) is not accurate.  The tax withheld on government construction projects is 8.5% of the 
project cost.  Incidentally, this is just equal to  the net VAT payable by public works contractors which 
is computed by deducting the input VAT (comprised  of the contractors’ purchases of construction 
materials and equipments) from the output VAT.  Please note, however, that there is a cap on the 
input VAT.  Section 111 (B)(2) of the National Inte rnal Revenue Code prov ides that public works 
contractors are only allowed a presumptive input VAT e quivalent to 1.5% of the contract price with 
respect to government contracts only in lieu of actu al input taxes thereof.  Hence, the government is 
not in anyway obligated to refund the contractors if their total purchases exceed the cap on input 
VAT. 
Colombia 
[90] Paragraph 24 (Good Governance) states that as part of its effort to widen public access, the 
Philippine Government implemented an Internet-based electronic procurement system which 
includes " … and a suppliers' registry to provide agencies a common list of accredited suppliers to support invitations to bid." 
Can companies from other countries be included in the suppliers' registry?  If so, what are the 
requirements for participating? 
Response:  Foreign entities may register with the PhilGEPS online through the Department of 
Budget and Management – Procurement Service website, specifically, at  
www.procurementservice.net 
Please note, however, that registration with the PhilG EPS is not a proof of eligibility. The same is 
still subject to determination by the procuring entity conducting the bidding. 
Measures Directly Affecting Imports – State Trading Enterprises
 
European Communities  
[91] Referring to Chapter III(2)(viii) in the report prepared by the WTO secretariat. 
Could the Philippines confirm that the only state trading enterprise operating is the National 
Food Authority?  
Response: The Philippines confirms that, as no tified, the only state trading enterprise operating 
is the NFA. WT/TPR/M/149/Add.1 
Page 36  
 
Measures Directly Affecting Imports – Local Content Requirements
 
European Communities  
[92] In the report, page 53, prepared by the WT O secretariat it is explained about the local-content 
schemes. 
Could the Philippines clarify their views on the rationale for requiring pharmaceutical 
companies to purchase semi-synthetic antib iotics from a specific local company?  
Response:  The requirement referred  to is no longer operational w ith the closure of the specific 
local company.  
[93] Furthermore, the EC should like the Philippine  to clarify the meaning of the local content 
requirements under the Retail Trade Liberalisation Act of 2000 or RA 8762 (10% for luxury 
goods specialty stores, at least 30% fo r others) and who it is implemented [ sic].  
Response: This refers to "locally  manufactured goods" which, as provided under RA No. 8762, 
shall mean goods manufactured, proc essed or assembled in the Philippines, regardless of the source 
of the raw materials and components used in the manufacture of the product.  The Department of 
Trade and Industry and Board of Investme nt implement this provision.  
Hong Kong, China [94] (WT/TPR/S/149, P. 53, Para. 79) 
We note that "pharmaceutical firms are required to purchase semi-synthetic antibiotics from a specific local company, unless th ey can show that imports are at least 20% 
cheaper".  We would be interested to know more details about this requirement.  We should also 
be grateful to know whether this requirement, in  the view of the Philippines, falls within the 
Illustrative List of the Agreement on Trade-Rela ted Investment Measures (TRIMs), and whether 
there is any plan for eliminating the requirement.  
Response: Please refer to the response to question no. 92. 
Measures Directly Affecting Exports – Exports Taxes and Other Charges
 
European Communities 
[95] The EC should like the Philippines to clarif y the legal base for the export tax on non-native 
logs? 
Response: Please refer to Executive Order No. 26 of 1986, and Section 514 of the Tariff and 
Customs Code of the Philippines..  
Measures Directly Affecting Exports – Export Support  
United States 
[96] According to paragraph 90 on page 55 of the Secretariat Report, the Philippines maintains 
that it provided no export subsidies during the period under review.  However, the Secretariat 
Report describes tax incentives based on export perf ormance and/or use of local content that  WT/TPR/M/149/Add.1 
 Page 37 
 
 
are made available to investors under the I nvestment Priority Plan (IPP), the Export 
Development Act (EDA), and the Omnibus Invest ment Code (OIC).   In addition, the 
Government’s Comprehensive Industrial Polic y and Directions for the Motor Vehicle 
Development Programme 2004-08, seems to author ize vehicle imports at preferential tariff 
rates, contingent on export performance. 
A) Please explain why the authorities do not consider the IPP, EDA, or OIC to be export 
subsidies.  Please explain why the government  does not consider incentives provided by the 
Board of Investments (BOI) and the Philippi ne Economic Zone Authority (PEZA) to be 
export subsidies. 
B) During the period under review, did the authorities authorize vehicle imports at 
preferential duty rates to any firm on the basis of export performance?   
C) According to paragraph 93, drawback is ava ilable for duties imported or materials used to 
"manufacture or process exports."  Is duty draw back available for materials not consumed in 
the production process? 
D) Has the Philippines notified these progr ams to the Committee on Subsidies and 
Countervailing Measures?  If not, when do es the Philippines intend to do so? 
Response: The incentives are consistent with th e WTO provisions, specifically, Annex 7 to the 
Agreement on Subsidies and Countervailing Measures (ASCM) that provides developing country-members, like the Philippines, with less than $1,000 GDP per capita, to grant incentives for 
development considerations. 
Duty drawback is not available for materials not c onsumed in the production process.  It is strictly 
available for duties imported or materials u sed to "manufacture or process exports."   
Incentive programmes were notified and discusse d at the WTO Committee on Subsidies and 
Countervailing Measures. 
European Communities  
[97] Reference is made to page 55 para. 91-92 in  the report prepared by the WTO Secretariat, 
concerning different tax credits a nd incentives offered by BOI and PEZA. 
The EC should like the Philippines to clarify its views on these duties and tax concessions and 
also inform about how the Philippines assesses th e link to other policies aiming at increasing 
trade and economic growth.  
Could the Philippines inform if there any plans to rationalizing and harmonizing all 
investment incentives and if so clarify the timeframe for its plans? 
Response: Given the limited size of the Philippine  market, the government for decades has been 
encouraging domestic companies to increasingly participate in international trade.  It is believed that 
this will not only improve their economies of scale , thereby increasing their competitiveness but also 
generate the much needed forei gn exchange for the government.  Incen tives are likewise provided to 
firms to make up for market imperfections such as the lack in infrastructure, among others.   
Yes, the Philippines has plans to rationalize and har monize all investment incentives.  The bill that 
seeks to rationalize fiscal incentives has been approved on third (and final) reading in the House of 
Representatives, and has been transmitted to the Senat e of the Philippines.  In the Senate of the WT/TPR/M/149/Add.1 
Page 38  
 
Philippines, the bill is currently being deliberate d at the Committee level.  The Senate has conducted 
one public hearing. 
Chinese-Taipei 
[98] (3). MEASURES DIRECTLY AFFECTING EXPORTS 
(vi) EXPORT SUPPORT 
Drawbacks 
(p. 55, para. 93) As indicated, duties paid on imported materials used to manufacture or process exports may 
be fully refunded only when the Board of Investment of the Philippines has certified upon 
importation that locally produced competitive s ubstitutes are unavailable. With a view to 
facilitating foreign investment and promoting gl obal trade, would the Philippines consider 
abolishing this requirement? 
Response: The Philippines does not envisi on the abolition of this requirement. 
Colombia 
[99] In Chapter I(4) and in the introduction to Ch apter III, the Secretariat highlights the difficulties 
encountered by the Government of the Philippin es in tackling the delicate tax situation which 
even poses a threat to macroeconomic stability.  The report mentions specifically that the 
Philippines resorts to tax and non-tax incentives to encourage investment in export-oriented 
activities, specific sectors, and less developed regions, and that this has had a negative impact 
on tax revenue and on the tariff reduction programme. 
In Chapter III(4) on measures affecting production and trade, the report states that the 
Philippines has a long history of providing incentives (mainly tax) to selected activities, and that these have eroded the tax base and added to the tax system's complexity, undermining its 
equity and neutrality in allocating resources. 
According to the Secretariat, the Government of the Philippines, together with the Congress, 
is taking measures to rationalize this complex sy stem of tax incentives which would appear to 
be pursuing too many policy objectives and has not produced the expected results. 
When is the law to rationalize the fiscal incentiv es structure expected to be approved?  Will 
the new law correct the discrimination against foreign investors? 
Response: Please see reply to Question No. 97. 
Measures Directly Affecting Exports – Export Performance Requirements
 
Chinese-Taipei 
[100] (vii) EXPORT PERFORMANCE REQUIREMENTS 
(p. 56, para. 96) It appears that the export performance require ment is higher for foreign-owned enterprises 
(70% of production) than for Philippines- owned companies (50%). Would the Philippines 
consider providing equal treatment to both kinds of enterprise?  WT/TPR/M/149/Add.1 
 Page 39 
 
 
Response: The proposed amendment of Executi ve Order No. 226, which is currently being 
deliberated in the Senate, provides equal treatment.  In the proposal, an ‘export enterprise’ shall 
mean a registered enterprise which is a manufactur er, processor or service provider that exports or 
supplies to exporters fifty percent (50%) or more of  its output and its activity is listed in the 
Investment Priorities Plan. 
Measures directly affecting Exports – Export Support – Duty and Tax Concessions – Export 
Processing Zones (EPZs)  
United States 
[101] The Report states in paragraph 95 on page 55 that "[e]enterprises that wish to operate in 
(EPZs) need to fulfil [the Philippine Economic Zone Authority (PEZA)]’s eligibility criteria; 
100% foreign ownership is allowed." 
A) Please describe the eligibility criteria th at businesses must meet to operate in EPZs. 
B) Has the Philippines notified PEZA’s elig ibility criteria and incentives to the WTO 
Committee on Subsidies and Countervailing Measu res?  If not, when does it intend to do so? 
Response: PEZA defines an economic zone export- producer locator enterprise as a Filipino 
enterprise whose export sa les account for at least 50% of its total annual sales, or a foreign 
enterprise whose export sales account for at least 70%  of total annual sales.  Various fiscal incentives 
are provided to zone locators by virtue of Re public Act No. 7844 ("The Export Development Act of 
1994"), the Omnibus Investment Code, and Execu tive Order No. 266 (specifically Book VI). 
European Communities  
[102] Referring to the report prepared by the WTO secretariat, Chapter III (3) (vi): 
Could the Philippines inform about the experien ce the Philippines have with the operation of 
this scheme?  
Are any changes in policies or procedures foreseen to improve its administration? 
Response: As in all policy instruments, there will always be room for improvement.  The 
Philippines has plans to rationalize and harmonize all investment incentives.  In fact, a legislative bill 
entitled, "Consolidated Investment and Incentives C ode of the Philippines", has been proposed and 
submitted to Congress aimed at creating a more open and transparent basis for foreign investments.  
The consolidated legislative proposal filed has th e objective of a unified incentives policy with one 
governing statute to regulate the grant of incen tives as opposed to the present system of having 
different agencies administer and implement various incentives laws.  In addition, a review of the 
entire fiscal incentives system has been undertaken , primarily to identify incentives that overlap, 
result in "double-dipping", are obsolete and/or have inconsistent objectives. These are addressed in 
the proposed bill. 
Chile  
[103] With regard to the Introduction  section (paragraph 253), what advantages do export 
processing zones enjoy other than exemption from import duties? 
Response: Locators in export processing zones (EPZs) and other economic zones or "ecozones" 
enjoy the following incentives and privileges: WT/TPR/M/149/Add.1 
Page 40  
 
• exemption from national internal revenue taxes and from local taxes, licenses, 
imposts or fees; 
• lower final tax of 5 per cent on gross income earned in lieu of other national and 
local taxes, except real estate taxes; 
• additional deduction from the five (5)  per cent final tax on gross income equivalent 
to half of the value of training expenses; 
• duty- and tax-free importation into the ecoz one of capital equipment and spare parts 
of such equipment, construction material s for its factory, warehouse and other such 
structures, specialized o ffice equipment and specialized vehicles and other transport 
equipment, subject to conditions imposed by the PEZA; 
• tax and duty-free importation of professional  instruments and tools of trade and of 
personal and household effects of foreign nationals connected with the registered enterprise in the ecozone; 
• tax credits for import substitution of raw ma terials, capital equipment and/or spare 
parts; 
• net operating loss carryover for losses incu rred during the first five years of 
operation inside the ecozone; 
• accelerated depreciation of fixed assets; 
• permanent resident status for the invest or, his/her spouse and dependent children 
below 21 years of age, where the investor's initial personal investment is not less than US$150,000.00; and  
• remittance of after-tax profits and other ea rnings in any foreign currency of foreign 
investment without need of prior approval by the Bangko Sentral ng Pilipinas (BSP), if such investment has been previ ously registered with the BSP. 
Measures Affecting Production and Trade – Competition Policy
 
European Communities 
[104] The EC should like the Philippines to inform about its intention to enact a general competition 
law and the timeframe foreseen? Also with respect to which institutional arrangements 
foreseen in this respect? 
Japan  
[105] (4) MEASURES AFFECTING PRODUCTION AND TRADE 
(ii) Competition policy 
(Pages 59 to 61, paragraphs 109 to 112) 
Four ASEAN member countries have introduced  competition laws and regional integration 
among AFTA will improve, including regional tariff bans by 2010.  Please indicate any 
perspectives for introducing a comprehensiv e competition law in the Philippines and the 
related plans and initiatives in the Philippines.  
Response: Several competition bills have been  introduced in Congress and are now being 
discussed in the appropriate Committees of both th e House of Representatives and the Senate.  The 
common principal feature of the bills is the creation of a central competition body. 
[106] To accelerate the introduction of a competition law, which authorities or sectors does the 
Philippines recognize need competition advocacy activities?   WT/TPR/M/149/Add.1 
 Page 41 
 
 
Response: Advocacy activities would be useful in the legislature, relevant regulatory bodies, the 
private sector, and consumer groups. 
[107] Please provide information on recent competition advocacy activities conducted by the 
Government of the Philippines and their achievements? 
Response: As part of the advocacy initiatives u ndertaken by the Philippine Government to 
promote awareness of competition policy, represent atives of a number of government agencies such 
as the DTI, the Tariff Commission (TC), and the Na tional Economic Developm ent Authority (NEDA) 
have participated in various seminar/workshops  on competition policy in the Philippines and 
elsewhere. The same agencies also act as hosts/c o-sponsors of such seminar/workshops.  To date 
Philippine representatives have atte nded over 25 seminar/workshops either hosted domestically or 
held outside of the country since 1997. 
The TC, as  one of the government bodies in the fo refront of promoting, advocating, and rallying 
support for fair competition and the adoption of a workable competition policy and law,  makes it a 
point to sell the benefits of fair competition and the formulation of a workable comprehensive 
competition policy/law and will hos t on  2-4 August 2005, the 1st APEC Training Course on 
Competition Policy/Law in Manila in coll aboration with Japan’s Fair Trade Commission.  
Measures Affecting Production and Trade – Price Controls  
European Communities  
[108] The report of the WTO Secretariat provides that  a "Price Act" allows for price ceilings to be 
imposed on certain goods, for ex rice and corn.  
How do the Philippines assess the impact of this  act in context of its overall development 
strategy? Have any evaluations been made in this respect, and does the Philippines intend to 
continue with the scheme?  
Response: The Price Act (Republic Act No. 7581)  is integral to existing competition-related 
legislation, which current legislative efforts seek to amend and modernize.  The Department of Trade 
and Industry does not, per se, control prices, b ecause such pursuit only discourages market-based 
production and business decisions.  Instead, the DTI monitors the domestic conditions that impact on 
price levels and trends ( e.g., supply chain co nditions) and intervenes only as far as market-based 
principles will allow.  In the case have agricultu ral commodities, the Price Act does not impose price 
ceilings on rice and corn (except during situations of national emergencies), and in fact, since 1985, 
commercial rice and corn prices had been deregulat ed.  The National Food Authority, however, 
implements a single price nationwide on government-own ed rice stocks, which it sells to targeted low-
income consumers. 
Measures Affecting Production and Trade – State-Owned Enterprises and Privatization  
Chinese Taipei  
[109] (4). MEASURES AFFECTING PRODUCTION AND TRADE 
(V) STATE-OWNED ENTERPRISES AND PRIVATIZATION  (pgs. 63-64, para. 122) 
In 2001, the total deficit of the 14 Government  Owned and Controlled Corporations (GOCCs) 
monitored by the IMF increased to PhP 24.54 billi on, the main contributors to this deficit 
being the National Power Corporation (N PC) and Maynilad Water Corporation.  WT/TPR/M/149/Add.1 
Page 42  
 
We would be interested in knowing the names of  the other 12 GOCCs.  In addition, could the 
Philippines please confirm whether there is a fi rm schedule for the privatization of these 
14 corporations and, if so, what is the timetable?  
The authorities also indicate that there are curre ntly eight "big-ticket" enterprises still to be 
privatized. Could the Philippines please provide more details about these eight enterprises as 
well?  
Response: The other twelve GOCCs monitored by the Philippine government are: the  
Philippine National Oil Company; National Food Authority; National Irrigation Administration; National Electrification Administration; Local Waterworks Utilities Administration; Philippine 
National Railway; National Development Company; Ph ilippine Ports Authority; Light Rail Transit 
Authority; Home Guaranty Corporation; Philippi ne Economic Zone Authority; and the National 
Transmission Corporation. There is no fixed timet able for the privatization of these 14 GOCCs. 
"Big-ticket items" slated for privatization in  2005 and 2006 are the government shares in the 
Philippine National Bank, Philippine National Oi l Company-Energy Development Corporation, 
Republic Philippines Network – 9, Intercontinental Broadcasting Corporation – 13, Philippine Postal 
Corporation; certain large real estate properties such as the international school property, 
Welfareville Property, Milelong Property, and the Iloilo airport property. 
Korea 
[110] (WT/TPR/S/149, page 32, para 6)
 
Given the benefits of privatization accomp anied by improved corporate governance, as 
outlined in the Secretariat Report, what is the pr ivatization plan of the state-owned enterprises 
in the future?  
Response: Please refer to the response above in Question no. 109. 
Measures Affecting Production and Trade – Intellectual Property Rights – Overview  
United States 
[111] With respect to Paragraph 123 on page 64 of the Secretariat Report, please explain which 
laws provide, as required by Article 39.3, eff ective protection against unfair competition for 
undisclosed test or other data submitted as a condition for marketing approval. 
Response: It is legal condition that drugs must first be registered with  the BFAD before these 
can be manufactured, imported, exported, sold, offered  for sale, distributed or transferred. It is during 
registration that these products are evaluated in te rms of safety, efficacy, quality and purity. Thus, the 
BFAD normally requires the registrant’s to submit data relating to the drug’s quality, safety, and 
efficacy, as well as information on the compositi on and physical and chemical characteristics of the 
product sought to be registered. Scientific and t echnical data are thoroughly vetted and evaluated. 
Clinical substantiation on therapeutic claims or benefits are rigidly scrutinized and validated 
including literature/inserts and product labels. Only after these standards are met and satisfied that 
the corresponding Certificate of Product Registration (C PR) is issued. Applications that do not meet 
the criteria are routinely denied and the drugs must not be offered for sale to the public. 
The data submitted by applicants are protected pu rsuant to Article 39.3 of the TRIPS Agreement, 
which requires governments of member countries to provide protection to marketing approval data 
against unfair commercial use under certain conditions . The Philippines is fully compliant and has in  WT/TPR/M/149/Add.1 
 Page 43 
 
 
fact been practicing data protection long before the existence of the TRI PS Agreement under existing 
laws and regulations, to wit, 
1) Republic Act No. 3720 (Food, Dr ug and Cosmetic Act), as amended:  
Prohibits the using by any person to his own advantage, or revealing, other than to the 
Secretary or officers and employees of the Department or to the courts when relevant in any 
judicial proceeding under the Act, any inform ation concerning any method or process which 
as a trade secret is entitled to protection. 
2) BFAD Order No. 27-A s. 2001 (Confidentiality of Documents):  
This directs BFAD employees to observe strictly  the confidentiality of documents submitted 
for evaluation and/or registration. 
3) Revised Penal Code), as amended, which penalizes:  
-the revelation of secrets by a public officer known to him by reason of his official capacity as 
well as revelation of industrial secret by private person. 
4) Republic Act No. 6713 (Code of Conduct and Ethical Standards  for Public Officials and 
Employees):  
This prohibits the disclosure and/or misuse of c onfidential information to further their private 
interest or to the prejudice of the public interest. 
Significantly, Republic Act No. 829 3 otherwise known as the Inte llectual Property Code of the 
Philippines (IP Code) includes "protection of undisclosed information" as one of the intellectual property rights (IPR).  
Measures Affecting Production and Trade – Intellectual Property Rights – Patents 
 
Canada 
[112] Report by the Secretariat (WT/TPR/S/149) 
Part III. Trade Policies by Measure, (4 ) Measures affecting Production and Trade, 
(vi) Intellectual property rights, Paragraph 128: 
Canada notes that "under specific circumstanc es, a government agency or third person 
authorized by the Government may exploit th e invention even without agreement of the 
patent owner."  
a. Could the Philippines provide practical examples of what constitutes a "specific 
circumstance"? 
Response:  The specific circumstance wherein a government agency or a third person authorized 
by Government may exploit the invention even without the agreement of the patent owner are 
enumerated in Section 74 of Republic Act No. 8293, also known as the Intellectual Property Code of 
the Philippines (IP Code), to wit:  
"Sec. 74.  Use of Invention by Government.  -   WT/TPR/M/149/Add.1 
Page 44  
 
"74.1. A Government agency or third person authorized by the Government may exploit the 
invention even without agreement of the patent owner where: 
(a) the public interest, in particular, nationa l security, nutrition, health or the 
development of other sectors, as determ ined by the appropriate agency of the 
government, so requires; or  
(b) A judicial or administrative body has determined that the manner of exploitation, by 
the owner of the patent or hi s licensee, is anti-competitive. 
"74.2.  The use by the Government, or third person authorized by the Government shall be 
subject, mutates, mutandis, to the conditions set forth in Sections 95 to 97 and 100 to 
102. (Sec. 41, R.A. No. 165a)" 
Consequently, Sections 95-97 of the IP Code read:   
"Sec. 95.  Requirement to Obtain a License on Reasonable Commercial Terms.-  "95.1 The license will only be granted after the petitioner has made efforts to obtain 
authorization from the patent owner on  reasonable commercial terms and conditions 
but such efforts have not been successful  within a reasonable period of time. 
"95.2 The requirement under Subsection 95.1 s hall not apply in the following cases: 
(a) Where the petition for compulso ry license seeks to remedy a practice determined after 
judicial or administrative process to be anti- competitive; 
(b) On situations of national emergency or other circumstances of extreme urgency; 
(c) In cases of public non-commercial use. 
"95.3 In situations of national emergency or ot her circumstances of extreme urgency, the right 
holder shall be notified as soon as reasonably practicable. 
"95.4 In the case of public non-commercial use,  where the government or contractor, without 
making a patent search, knows or has dem onstrable grounds to know that a valid 
patent is or will be used by or for the go vernment, the right holder shall be informed 
promptly. (n) 
"Sec. 96.  Compulsory Licensing of Patent Involving Semi-Conductor Technology.- In the 
cases of compulsory licensing of patents involving semi-conductor technology, the license may only be granted in case of pub lic non-commercial use or to remedy a 
practice determined after judicial or admi nistrative process to be anti-competitive. (n) 
"Sec. 97.  Compulsory License Based on Interd ependence of Patents. – If the invention 
protected by a patent, hereafter referred to  as the `second patent,’ within the country 
cannot be worked without infringing another pat ent, hereafter referred to as the `first 
patent,’ granted on a prior application of benefiting from an earlier priority, a 
compulsory license may be granted to the owner of the second patent to the extent 
necessary for the working of his invention,  subject to the following conditions: 
97.1 The invention claimed in the second patent involves an important technical advance of 
considerable economic significance in relation to the first patent;  WT/TPR/M/149/Add.1 
 Page 45 
 
 
97.2 The owner of the first patent shall be entitled to a cross-license on reasonable terms to 
use the invention claimed in the second patent; 
97.1. The use authorized in respect  of the first patent shall be non-assignable except with 
the assignment of the second patent; and 
97.2. The terms and conditions of Sections 95, 96 and 98 to 100 of this Act. (Se. 34-C, R.A. 
No. 165a)" 
Please take note that the grounds under Section 74 of the IP Code are similar to the grounds for the 
grant of compulsory licensing.    
[113] Part III. Trade Policies by Measure, (4) Measures affecting Production and Trade, 
(vi) Intellectual property rights, Paragraph 129: 
Paragraph 129 states that "according to the aut horities, the IPO has granted two compulsory 
licenses since 1999, both regarding pharmaceuticals." 
a. Could the Philippines provide details regarding the granting of the two compulsory 
licenses related to pharmaceutical patents? 
Response:  Two (2) Compulsory Licenses were grant ed by the Intellectual Property Office under 
Decision No. 2001-32 dated December 19, 2001 under section 34 of the old patent law (RA 165), to 
wit: 
1. IPC NO. 3852 
    Petition for Compulsory Licensing;     Patent No. 21761     Date Issued: February 18, 1988 
    Title:  "Pharmaceutical Composition Containing  
 Form 2 Ranitidine Hydrochloride & Process of Preparation Thereof " 
2. IPC NO. 3851 
 Petition for Compulsory Licensing:  Patent No. 19489 
 Date Issued: May 14, 1986 
 Title: "Amino alkyl Furan Derivatives" These were the consolidated Petitions filed by United American Laboratories, Inc. against 
Glaxo Group, Ltd. for Compulsory Licenses und er Philippine Patent No. 19489 for Amino 
alkyl-Furan derivatives and Philippine Patent  No. 21761 for Pharmaceutical Composition 
containing Form 2 Ranitidine Hydrochloride and Preparation thereof.  Petitioner filed the 
two cases on the ground that the patent ed inventions relate to medicine. 
In resolving the case, Chapter VIII, Article 2 of RA 165  was applied. 
Records show that the patented invention, compounds and compositions are used in the 
treatment of ulcer, hence, both patents relate to medicine. WT/TPR/M/149/Add.1 
Page 46  
 
Also, the application for compulsory licensing has  been made after the expiration of two 
years from the grant of the patent the condition for filing of a compulsory license has perforce 
been fulfilled. 
Measures Affecting Production and Trade – Intellectual Property Rights – Trademarks
 
Canada 
[114] Part III. Trade Policies by Measure, (4 ) Measures affecting Production and Trade, 
(vi) Intellectual property rights, Paragraph 135: 
a. Paragraph 135 states that "a trade mark mu st be registered in the Philippines or 
abroad to be protected." Can a trademar k right holder claim prior use (in the 
Philippines and/or abroad) for having a pr iority claim? Can a famous trademark 
benefit from prior use (in the Philippines or ab road) in order to have a priority claim? 
Response:  No. The Philippines adopts the first -to-file system, which in effect, prohibits 
registration of a mark that is identical with a reg istered mark belonging to a different proprietor or a 
mark with an earlier filing or priority date , in respect of: (i) the same goods or services, or (ii) closely 
related goods or services, or (iii) If it nearly resembles  such a mark as to be likely to deceive or cause 
confusion.  
Moreover, prior use in the Philippines and/or abroad is not the basis for claiming convention priority , 
but prior application/registration filed/obtained in a foreign country which is a party to any 
convention, treaty or agreement relating to inte llectual property rights or the repression of unfair 
competition, to which the Philippines is also a party , or extends reciprocal rights to nationals of the 
Philippines by law. 
[115] b. Does the Philippines have a disposition regarding the protection of famous marks that 
are not registered in Philippines?  
Response: Yes, a well-known mark whether or not  it is registered in the Philippines as being 
already the mark of a person other than an applicant for registration used for identical or similar goods or services serves as a bar to the registration of  a mark that is identical with, or confusingly 
similar to, or constitutes a translation of the above well-known mark. A mark is considered well-
known if it is determined by competent authority  to be well known internationally and in the 
Philippines. However, for purposes of claiming convention priority, the trademark application 
covering the well-known trademark must be filed in th e Philippines within six months from the date 
the earliest foreign application was filed. 
[116] c. Does the Philippines protect famous trademarks for goods or services not similar to 
those for which the famous trademark is registered?  
Response: Yes, a well-known mark whether or not  it is registered in the Philippines as being 
already the mark of a person other than an applicant for registration used for identical or similar goods or services serves as bar to the registration of  a mark that is identical with, or confusingly 
similar to, or constitutes a translation of the above well-known mark. A mark is considered well-
known if it is determined by competent authority  to be well known internationally and in the 
Philippines. 
Likewise, the owner of a well-known mark as defined under Section 123.1 (e) of the IP Code, that is 
not registered in the Philippines, may, against an identical or confusingly similar mark, oppose its  WT/TPR/M/149/Add.1 
 Page 47 
 
 
registration, or petition the cancellation of its reg istration or sue for unfair competition, without 
prejudice to availing himself of other remedies provided for under the law. 
[117] d. Does the Philippines plan to become a signatory of the Madrid Protocol? If so, when 
does it expect to ratify this treaty? 
Response:  We are still studying the implications  of the Madrid Protocol to our existing IP 
system.  
Measures Affecting Production and Trade – Intell ectual Property Rights – Copyright and Related 
Rights  
United States 
[118] In paragraph 140 on page 67, the Secretaria t Report states, "the Philippines does not seem to 
provide national treatment regarding the granting of copyright." 
A)  Does the Philippines grant copyright to nationals of other WTO Members even if the 
work is never published in the Philippines? 
B)  Does the Philippines protect sound recordings if produced by nationals of other WTO 
Members even if the work is never published in the Philippines? 
C)  Does the Philippines apply the three- step test (see Article 13 of the TRIPS 
Agreement, as well as Article 9 (2) of the Berne Convention, Art 10 of the WCT, and 
Art 16 of the WPPT), when determining whether or not an exception or limitation to copyright protection is permissible? 
Response: Section 3 of the Intellectual Property Code of the Philippines states that: 
"Any person who is a national or who is domiciled or has a real and effective industrial establishment 
in a country which is a party to any convention, treaty or agreement relating to intellectual property 
rights or the repression of unfair competition, to which the Philippines is also a party, or extends reciprocal right to nationals of the Philippines by  law, shall be entitled to benefits to the extent 
necessary to give effect to any provision of such conv ention, treaty or reciprocal local, in addition to 
the rights to which any owner of an intellectual property right is otherwise entitled by this Act."  
Hence, since the Philippine is a member of th e WTO and the Berne Convention, it provides national 
treatment regarding the granting of copyright. Thus , the Philippines grants copyright over works of a 
national of a member country of the WTO and the Berne Convention, whether published in the 
Philippines or not. 
Yes, Section 184.1 of the Intellectual Property Code  enumerates certain special cases that constitute 
the limitations on copyright. Further, Section 184.2 thereof provides that the li mitations to copyright 
shall be interpreted in such a way as to allow the work to be used in a manner which does not conflict 
with the normal exploitation of the work and do es not unreasonably prejudice the right holder’s 
legitimate interest. 
Canada 
[119] Part III. Trade Policies by Measure, (4) Measures affecting Production and Trade, 
(vi) Intellectual property rights, Paragraph 140: WT/TPR/M/149/Add.1 
Page 48  
 
Canada understands that "the Philippines do es not seem to provide national treatment 
regarding the granting of copyright. Copyright is  granted if the work was first published in the 
Philippines or first published in another country  but published within thirty days in the 
Philippines, if the author was a national or if producers of audiovisual work have their headquarters or habitual residence in the Philippines."  
Has the Philippines considered amending its Copyri ght act so as to provide national treatment 
for the granting of copyright? 
Response: Section 3 of the Intellectual Property Code of the Philippines states that: 
"Any person who is a national or who is domiciled or has a real and effective industrial establishment 
in a country which is a party to any convention, treaty or agreement relating to intellectual property 
rights or the repression of unfair competition, to which the Philippines is also a party, or extends 
reciprocal right to nationals of the Philippines by  law, shall be entitled to benefits to the extent 
necessary to give effect to any provision of such conv ention, treaty or reciprocal local, in addition to 
the rights to which any owner of an intellectual property right is otherwise entitled by this Act."  
Hence, since the Philippine is a member of the WTO and the Berne Convention, it provides national 
treatment regarding the granting of copyright. Thus, the Philippines grants copyright over works of a 
national of a member country of the WTO and th e Berne Convention, whether published in the 
Philippines or not.    
Measures Affecting Production and Trade – Intellectual Property Rights – Plant Varieties 
 
United States 
[120] With respect to Paragraph 144, please expl ain why the compulsory licensing provisions 
within the plant variety protection law are so broad, under what circumstances these 
provisions will be employed, and whether they have been used to date. 
Response:  The provisions on compulsory licen sing in the Philippine Plant Variety Protection 
Act of 2002 are not broad.  The law enumerates th e specific grounds for the grant of compulsory 
licensing.  It states that a compulsory license may be granted when it is for the public interest and 
upon proof of any of the following grounds: 
a) The reasonable requirements of the public for any part of the variety are not met; or 
b) There is an overseas market for the sale of any par t of the variety and the same are not met by 
the holder; or 
c) The plant variety developed relates to or requi red in the production of medicine and/or any 
food preparation. 
The law also provides the scope, duration, and proc edure for grant of compulsory license.  However, 
to date, the provisions on compulsory licensing have not yet been used, as the National Plant Variety 
Protection Board has not yet issued a Certificate of Plant Variety Protection.  The Department of Agriculture is still working on the development of test guidelines; only the test guidelines for rice have 
been approved and issued by the PVP Board.  Work on databases and accreditation of examiners and 
gene banks is also being pursued.  WT/TPR/M/149/Add.1 
 Page 49 
 
 
Canada 
[121] Part III. Trade Policies by Measure, (4) Measures affecting Production and Trade, 
(vi) Intellectual property rights, Paragraph 142: 
Does the Philippines plan to beco me a signatory of the International Union for the Protection 
of New Varieties of Plants (UPOV)? If so, when does it expect to ratify this treaty? 
Response: At present, there are no plans for th e Philippines to become a signatory of the 
International Union for the Protection of New Varieties of Plants (UPOV).  The Philippine Plant Variety Protection Act of 2002 states the conditions fo r the grant of the plant variety protection.  
While these conditions are similar to the provisi ons of the UPOV, the Philippine Plant Variety 
Protection Act of 2002 contains pr ovisions on the protection of the traditional rights of small farmers 
which are not present in the UPOV. 
Measures Affecting Production and Trade – Intellectual Property Rights – Enforcement 
 
United States 
[122] Paragraph 146 on pages 68-69 of the Secretariat Report advises that, "the IPO is in charge of 
coordinating IPR enforcement efforts; however, its  ability to do so seems to be limited." What 
specific steps are the authorities taking to st rengthen the IPO’s ability to coordinate IPR 
enforcement efforts?  What results are projected for 2005-2007? 
In Paragraph 147 on page 69, the Secretariat Report states that a ne w law was enacted to 
"regulate the trade and production of optical disks. "  It adds that "enforcement remains lax", 
and that "many enforcement agencies suffer from a lack of resources", including a "lack of trained personnel." 
A) Do authorities have plans to increase the operating budgets of IPR enforcement agencies? 
Response: This is highly desirable but w ill be subject to internal budget and finance 
considerations. 
The IPO is not an enforcement agency. Its coordinating function is on policy formulation and 
implementation rather than coordinating day-to-day operations in enforcement. The area of IPR 
enforcement is only one of the concerns covered by the inter-agency coordination. Nevertheless, as 
the lead agency in IP, the IPO gives special attentio n to IPR enforcement and has in fact conducted a 
series of inter-agency meetings specifically on this issue. Through this cons olidated effort, an IPR 
action plan has been developed. One of the programs under the action plan is the Strengthened Inter-Agency Coordination Program, which aims to ins titutionalize and strengthen the secretariat within 
IPO, the issuance of a Presidential order to e nhance inter-agency coordina tion and cooperation on 
IPR enforcement, enhance and sustain coordination with Local Government Units (LGUs) in the 
effective enforcement of IPRs in their respective jurisdictions through the enactment of local 
ordinances on IP enforcement and assisting in how  to operationalize these ordinances, strengthen 
public-private IPR partnerships by institutionalizing monthly meetings  with the different IP holders, 
associations, chambers, etc., establish networki ng facilities among the enforcement agencies and to 
put up a comprehensive database on enforcement ac tivity, prosecutions and other related matters 
[123] B) What are the authorities’ plans for training IPR enforcement personnel for the period 
2005-2007? WT/TPR/M/149/Add.1 
Page 50  
 
The Secretariat Report notes in paragraph 147 on page 69 that "raids and seizures often have 
only a temporary effect due to ineffective post-raid enforcement." What steps are the 
authorities undertaking or planning to improve post-raid enforcement? 
Response: One of the programs under action plan, developed through the efforts of the different 
enforcement agencies led by the IPO, is the HRD Program for IP Community. One of the long-term 
components under this program is the developm ent of an IPR Enforcement Training Modules for 
enforcement agencies, which includes conducting at  least once a month trainings for enforcement 
agencies regarding IP laws and regulations, enfo rcement procedures, evide nce gathering, skills 
training, investigation and surveillance methods and strategies, product identity and other relevant matters. Also included in the HRD program is the distribution of the Handbo ok on Investigation of 
IPR Cases to all police stations or at least 5, 000 PNP personnel particularly in Metro Manila and 
other urban centers like Baguio, Cebu, Bacolod, Iloilo and Davao Cities, and the adoption of the Handbook as part of the curriculum of the Philippine National Police Academy (PNPA). 
Under the Enforcement Program of the IP Action Plan "beat patrols" are envisioned to increase 
visibility and as a deterrent measure.  A PNP con cern, uniformed police officers visit establishments 
that have been previously raided.    
European Communities 
[124] The EC has noted that the Philippines h as made significant progress within the area of 
Intellectual Property Rights 
There remain, however, certain weaknesses/pr oblems and the EC should therefore like the 
Philippines to clarify what steps are currently be ing taken in order to improve the situation? 
The EC understand that the Philippines are faced with some tough challenges such as 
smuggling of piratical imports and counterfeit merchandise.  
Could the Philippines inform about the steps take n or future plans to tackle these issues?  
The EC should like to hear the views of the Ph ilippines on the functioning of the procedural 
and administrative system handling Intellectual Property Rights. 
Would the Philippines share its views on how the rights of IP holder could be secured through 
the legal system? 
Response: The Philippines will implement an IPR Ac tion Plan to sustain efforts against piracy.  
The Action Plan includes information and educat ion campaigns, HRD and capacity building, and 
advocacy (for media and the legislature).  Also covered are enhanced and sustained enforcement, 
prosecution and adjudication with strengthened int er-agency as well as international coordination 
and networking. 
The Bureau of Customs (BOC) has strengthened it s border control measures by issuing Customs 
Administrative Order (CAO) No. 6-2002 which am ended CAO 7-1993.  The new CA provides the 
basis for addressing entry of counterfeits and infringi ng goods (e.g., scope of prohibited importation, 
maintenance of records at the BOC, alert/suspe nsion orders and other operational provisions). 
In September 2003, the BOC also created a permanent IP Unit (IPU) directly under the Director of 
the Customs Intelligence and In vestigation Service (CIIS).  WT/TPR/M/149/Add.1 
 Page 51 
 
 
A significant part of the border control measures ex tends to the influx of goods sent via the postal 
system and the Philippine Postal Corporation re ported that in May and June alone of 2004. 
184 parcels were seized representing 134,330 pieces of IP  infringing goods weighi ng almost 4 tons or 
3,931.81 kilograms. 
The procedural and administrative system to handl e IPRs involves the Intellectual Property Office 
(IPO) and the courts. The Supreme Court (SC) has designated 65 Special Commercial Courts nation 
wide through SC Administrative Memorandum 03 -03-03 dated 17 June 2003to decide IP cases and 
has provided for the  training of judges. 
The SC has also issued rules on search and seizure in civil cases in compliance with Article 50 of the 
TRIPs Agreement providing for the prompt and effec tive judicial measures to prevent an infringement 
of IPR from occurring, in particular to prevent th e entry of counterfeit goods as well as to preserve 
evidence in regard to alleged infringements.  Provisions to prevent abuse are also included. 
The Department of Justice (DOJ) on the other hand formed a Task Force of 18 Special Prosecutors 
(SP) in 2002 supervised at the level of an Undersecr etary. The IP SPs were also given special and 
extensive training. 
Then at the level of the IPO, its Bureau of Lega l Affairs (BLA) has been strengthened to perform 
adjudication functions as an alternative to the cour ts.  The measures include hiring of new lawyers 
and hearing officers for speedy, quality, and reliable disposition of IP cases. 
The rights of IP holders could be secured by filing complaints with the Philippine National Police 
(PNP) and the National Bureau of Investigation (NB I). These agencies conduct their investigations 
and if so warranted apply for search and seizure warr ants from the courts.  Following successful 
raids, cases will be referred to the DOJ for prelimina ry investigation.  If a prima facie case exists, the 
DOJ will file a case in the courts. The IPR holder may also file a case directly with the courts or the 
BLA.    
Hong Kong, China 
[125] (WT/TPR/S/149, P. 69 - 70, Table III.8) 
On the Philippines' enforcement action on IPR prot ection, we notice that there is considerable 
variation in the number of items confiscated in  the period 1999 - 2004, from year to year, and 
also between different government agencies.  For example, the total number confiscated items 
dropped from 4515K in 1999 to 1426.1K in 2000, and surged again to 5287.7K the following 
year.  There were also instances, particularly  in 2002, when four agencies (NBI-IPRD, PNP-
CIDG, BOC and DTI-BTRCP) have recorded value, but not the actual numbers of items 
confiscated.  Two of these agencies, namely PNP-CIDG and BOC, have consistent records of 
the number of items confiscated for the en tire reference period except 2002 when only the 
value was reported. 
Could the Philippines’ authorities shed light on the year-to-year and agency-to-agency 
variations in enforcement action, and the discrepancies between the number and value of 
items confiscated as observed above? 
Response:  The situation cited is due to various  factors such as reduction in occurrence of IPR 
enforcement as well as infringement, prioriti es because of limited resources, and monitoring and 
submission of reports by enforcement agencies that, while cooperating, operate independently of each 
other.  The IPR Action Plan includes enabling the IPO to become th e central repository of WT/TPR/M/149/Add.1 
Page 52  
 
information/data by collecting and  consolidating data from enforcement agencies, the creation of a 
comprehensive database on enforcem ent activity, prosecutions and other related matters, as well as 
the establishment and maintenance of a web-based  database exclusively for IPR enforcement. 
Japan [126] (vi) Intellectual property rights 
(Pages 67 to 68, paragraphs 139 to 141) 
The Philippines have yet to provide provisions concerning the right of making available, the 
circumvention of effective technological measur es and the rights management information, 
although it is a member of the WIPO Copyri ght treaty and the WIPO Performances and 
Phonograms Treaty. Please provide information a bout the prospect of taking such legal 
measures. 
Response:  The Philippines acceded to the WIPO Int ernet Treaties (WCT and WPPT). It took 
effect 04 October 2002. Hence, the Internet Treaties,  which include provisions concerning the right of 
making available the circumvention of effective technological measures and the rights management 
information, have become ipso facto part of the law of the land. Nevertheless, there are proposed 
legislations filed in Congress specifically to ame nd the Copyright provisions of the IP Code. The 
proposed amendments include the subject provisi ons of the Internet Treaties. The Committee on 
Trade and Industry of the House of Representatives have conducted hearings on the bills (House Bill 
Nos. 322 and 3308).  
[127] (Pages 68 to 70, paragraphs 146 to 149) 
Concerning the enforcement of the protection of intellectual property rights, please provide 
more detailed information on the role sh aring and cooperation between the Philippine 
National Police (PNP) and the National Bureau of  Investigation (NBI).  Please indicate the 
following data: 
(a) The status of enforcement per each ri ght such as trademarks, copyright, patents, 
industrial designs and plant breeder’s right. 
(b) The status of enforcement in the front lines per each destinati on country for exports. 
Please provide more detailed information on the specific content and current status of the 
draft law which imposes penalti es on exports of pirated items. 
Response: The IPO being the lead agency mandated to administer and implement the State 
policies on IPRs, coordinates with government enforcement agencies and the private sector to 
address the issue of piracy and infringement to form ulate and implement effective plans and policies. 
Through IPO’s initiative, the Intellectual Property Rights Enforcement Action Panel (IP-REAP) was created to strengthen the protection and enforcement of intellectual property rights in the country. 
IPO convenes the IPREAP regularly, thus provid ing an institutional forum for information exchange, 
policy and operational coordination among different IP related government agencies, a mechanism for information and advocacy campaigns, and lobby ing for critical legislation. PNP and NBI are both 
members of the IPREAP.  
As part of the cooperation and co ordination between the different enforcement agencies, the holding 
of case conferences on regular basis not only between the PNP and NBI but also among the different 
enforcement agencies, is also being contemplated.   WT/TPR/M/149/Add.1 
 Page 53 
 
 
Trademarks – Raids or seizures are conducted by enfo rcement agencies on the basis of the complaints 
filed by the IP owners. The border control meas ures are also strengthened especially with the 
operationalization of the Customs IP unit. 
Copyright – Raids or seizures are conducted by enfo rcement agencies on the basis of the complaints 
filed by the IP owners. However, under the Optical  Media Act of 2003 (OMA), the OMB has the 
power to take into preventive custody any optical me dia and/or material or equipment used for the 
mastering, manufacture or replication of optical me dia which are found in any premises if the OMB 
has reasonable ground to believe or suspect that these are evidence of violation of the provisions of 
the OMA. Thus, even without a complaint from the IPR owner, the OMB has the power to conduct 
raids and seizures of suspected pirated optical disks or media. 
Patents and Industrial designs – Raids or seizu res are conducted by enforcement agencies on the 
basis of the complaints filed by the IP owners. 
Plant breeder’s right – The Department of Agricultu re has already issued the Implementing Rules and 
Regulations of the Plant Variety Protection Act of  2002  (Administrative Order No. 7, series of 2003 
dated 20 February 2003). The issuance of said IRR ensures the effective and efficient implementation 
and enforcement of the provisions of PVPA. 
Presented below are data on enforcement actions conducted by the PNP and NBI for the year 2005, 
as follows: 
Trademark:  National Bureau of Investigation (NBI) 
 For the period covering January to May 2005, the NB I-confiscated/seized fake products estimated at 
Php 44,143,000.00 classified as follows: Louis Vuitton Products; Nescafe Coffee; Autocad/Adobe 
Software; K-Swiss Rubber Shoes; HP toner & ink cartridges; Cricket lighters; Warner Brothers product; NBA basketball product; New Era & HKT glow plugs; Toblerone & Kitkat chocolates; BVD 
underwears; NS D-10 plus broad spectrum fungicide ; Betet balm; Lee T-shirts; Petron/Shell/Total 
LPG & Superkalan; Top Gel & Leaf Soap Microsoft Software; Nestle and Procter and Gamble 
Products; Microsoft Software; Lee Jeans; UFC and Jufran Catsup; Nescafe Coffee; Loreal and 
Maybeline Cosmetics; DKNY Bags; Uratex F oam; Oakley Shades; Nescafe Coffee and Close-up 
Toothpaste and Tide Detergen t; Dragon and Continental Cement; Reno Liver Spread and 
DVD/VCD/CD products.  
 Philippine National Police (PNP) 
For the period covering January and March 2005, the PNP-CIDG confiscated 8,260 pairs of 
Converse shoes and Retro Streetware; 6 boxes C ATA Electronic Fluorescent Lamps; 294 pieces 
CATA Lamps; 7 packs CATA Bulbs (40watts); 3 bo xes CATA Bulbs (40watts); 3 boxes CATA Bulbs 
(26watts); 21 boxes CATA Bulbs (18watts); 30 boxes CATA Bulbs size: 490x250x180; 310 boxes 
CATA Bulbs size: 402x204x154; 359 boxes CATA Bulbs size: 62 1/2x52x18; 35 boxes CATA Electronic Fluorescent Lamps (26watts); 34 boxes CATA Electronic Fluorescent Lamps (13watts); 
5 boxes CATA Electronic Fluorescent Lamps (9watts ); 5 boxes CATA Electronic Fluorescent Lamps 
(40watts); and 18 boxes CATA Bulbs; and 170 pairs of Converse shoes. But in the report submitted by 
the PNP no estimated value was given for the aforesaid confiscated goods. 
For the period covering March 2005, the PNP-CIDG confiscated the following: 6,344 pieces of 
assorted fake Nescafe Classic, Milo Actigen -E and Coffeemate Nestle products valued at WT/TPR/M/149/Add.1 
Page 54  
 
Php 45,000.00; 4 boxes consisting of 10,000 pieces of substandard Ajinomot o (Vetsin) valued at 
Php 10,000.00; 1 box consisting of 50 packs of fake Marlboro products valued at Php 11,250.00; and 
1 box consisting of 50 packs of fake Hope products valued at 9,350.00 
Copyright:  Optical Media Board (January-April 2005) 
Inspection Operations: 
   Illegal Optical & Magnetic Media 
Seized Illegal Equipment Seized 
Month IOP's 
Served Discs Blank 
Discs/Case Others 
(Stampers etc.) Computer Replicating 
Jan. 170 283,250 0 0 0 0 
Feb. 1 750 0 0 0 0 
Mar. 202 212,650 0 0 0 0 
April 185 177,434 1,885 12 sacks resin 3 8 
Total 559 674,080 1,885  3 8 
Estimated value  Php24,832,500 18,850 600,000 60,000 240,000,000 
Search Warrant Operations: 
   Illegal Optical & Magnetic 
Media Seized Illegal Equipment Seized 
Month IO's 
Served Discs Blank 
Discs/ 
Case Others 
(Stampers 
etc.) VCD 
Player DVD Player CD 
Burner TV 
Monitor Others 
Jan. 0 0 0 0 0 0 0 0 0 
Feb. 0 0 0 0 0 0 0 0 0 
Mar. 0 0 0 0 0 0 0 0 0 
April 121  25,500 1stereo, 
1PS, 
2MP3 13 29 41 40 Ampl. 
Spkrs. 
Total 121 482,025 25,500 4 13 29 41 40 109 
Estimated value  Php24,101,300 127,500 14,000 26,000 240,000,000 92,250 200,000 143,500 
Almost all pirated discs and counterfeit goods are manufactured not in the Philippines but in other 
countries. Also, the OMB, with its regulatin g power and functions under the OMA, can check and 
prevent the exports of pirated goods using optical media. 
We cannot think of any draft law which imposes penalti es on exports of pirated items as referred to in 
this question. (However, under the OMA, exportatio n of optical media, manufacturing equipment, 
parts and accessories and manufacturing materials u sed or intended for use in the mastering, 
manufacture or replication of optical media is regul ated by the OMB by requiring the person or entity 
to register and secure the appropriate licenses from th e OMB. Also, the penalties under the IP Code 
cover all infringing acts including exportation)  WT/TPR/M/149/Add.1 
 Page 55 
 
 
Korea 
[128] (WT/TPR/S/149, pages 67-68, paras 139-141)  
The Philippine Government’s efforts to crac kdown on violations of intellectual property 
rights (IPR) seems to have had a limited effect , particularly in view of the continued 
proliferation of pirated copyright materials (DVDs, VCDs, CDs, CD-ROM) in the market. How does the Philippine Government inte nd to enhance enforcement of IPRs? 
Response:  In sustaining our efforts against IPR piracy, the government will adopt and 
implement an IPR Action Plan. One of the compone nts under the plan is the Enhanced and Sustained 
Enforcement, which aims to institutionalize IPR violations monitoring through regular 
"environmental scanning" of local/district PNP pat rols, conduct weekly raids/enforcement actions 
and OMB, NBI and/or PNP personnel visibility in  strategic areas, conduct post-raid activities 
through regular "beat patrols" to increase visibility  as deterrence, increase coverage of OMB’s 
enforcement actions by increasing the number of its lawyers, enforcers and agents, institutionalize 
local inter-agency monitoring and enforcement groups , including DTI Field Offices, and Establishing 
linkages with the private investigating and enforcement groups. 
However, under the Optical Media Act of 2003 (OMA), the OMB has the power to take into 
preventive custody any optical media and/or mat erial or equipment used for the mastering, 
manufacture or replication of optical media wh ich are found in any premises if the OMB has 
reasonable ground to believe or suspect that these are evi dence of violation of the provisions of the 
OMA. This is significant because even without a complaint from the IPR owner, the OMB has the 
power to conduct raids and seizures of susp ected pirated optical disks or media. 
TRADE POLICIES BY SECTOR 
Agriculture
 
Colombia 
[129] Paragraph 5 states that agriculture sector benefited form the government’s infrastructure, 
financial, and technical support programs such as "…aggressive distribution of high-yielding 
varieties and high breed seeds, fertili zers and financial/credit programs." 
 We would be grateful if the Philippines can  provide further information regarding these 
programs, inter-alia on the sectors covered, th e economic resources allocated to them, their 
operations, and clarify whether the distribution of seeds and fertilizer is free or whether its cost is entirely covered by the farmers. 
Response: The Department of Agriculture (DA) has five flagship programs covering the rice, 
corn, high-value commercial crops, livestock,  and fisheries sectors. The programs include 
components on production support services, irrigati on development, farm mechanization and post-
harvest development, extension support, educa tion and training, research and development, credit 
facilitation/extension, informati on support, market development, regulatory and technical support 
services. The DA allocates resources for the impl ementation of these programs from its annual 
budget. 
[130] Chapter IV(2)(ii) of the Secretariat report me ntions that the objective of agricultural policy is 
self-sufficiency, especially in products su ch as rice, corn, and recently, sugar. WT/TPR/M/149/Add.1 
Page 56  
 
How does the principle of self-sufficiency opera te?  Is the Philippines thinking of reducing 
the scope of application, given that a number of quotas are unused and out-of-quota tariffs are high, generally exceeding 40 per cent, with a consequent impact on the end consumer? 
Paragraph 5 states that the agriculture sector benefited from the Government's infrastructure, 
financial and technical support programmes such  as " … aggressive distribution of high-
yielding variety and hybrid seeds, fer tilizer and financial/credit programmes." 
We would be grateful if the Philippines coul d provide further information regarding these 
programmes, inter alia  on the sectors covered, the economic resources allocated to them, their 
operation, and clarify whether the distribution of seeds and fertilizer is free or whether its cost 
is entirely or partially covered by the farmers. 
Response: As provided in the Agriculture and  Fisheries Modernization Act (AFMA), the 
country’s self-sufficiency objective is targeted onl y to the rice and corn sectors and does not cover the 
sugar sector.  The objective of self-sufficiency relates  to the exploitation of the country’s existing and 
potential resource endowments and related production advantages in these two sectors.   
The Philippines has a relatively large rice and corn  sectors, which we believe can be competitive 
given the adequate institutional set up and support ser vices.  Both sectors a re comprised of small 
farmers and as such, the objective of self-sufficiency is also aimed at uplifting the standard of living of 
these farmers. 
Rice, which is the country’s main staple, is paramount  to its food security co ncerns.  This situation 
coupled with the fact that only 3% of the total world production of rice is internationally traded, 
provide a strong rational for pursuing the objective of self-sufficiency.  It should be underscored, 
however, that the objective of self-sufficiency does not preclude importation, as is clearly evident in 
the Philippines’ import re cords for these commodities.  
Brazil 
[131] IV - TRADE POLICIES BY SECTOR 
(2), (ii), paragraph 15 
5. What is the reason for prohibiting foreign inv estments in agriculture if the Government and 
domestic private sector cannot provide them? 
Response: Easing Constitutional restrictions  on foreign ownership of land requires 
Constitutional amendment.  However, RA 7652 or the "Foreign Investors Long-Term Lease Act" 
allows foreign investors to lease private lands fo r fifty (50) years renewable to another twenty-five 
(25) years for the establishment of industrial estat es, factories, assembly of processing plants, agro-
industrial enterprises, land development for industria l or commercial use, tourism, and other similar 
priority productive endeavors, while at  the same time protecting agriculture. 
Foreign investment in agriculture is not genera lly prohibited.  However, EO 389 or the 6
th Regular 
Foreign Investment Negative List (RFINL), issued in November 2004 , lists down the areas where 
foreign equity participation is limited. These are limita tions on foreign equity participation, as listed 
in the said RFINL, specifically, under List A  (Foreign ownership is limited by mandate of the 
Constitution and specific laws) and List B (Foreign ownership is limited for reasons of security, 
defense, risk to health and morals, and protection of small and medium enterprises).  WT/TPR/M/149/Add.1 
 Page 57 
 
 
[132] (2), (iii), paragraph 18 and footnote 21 
6. What are the actual benefits for the sector in promoting sugar production, if only 6% of it is 
exported under a preferential re gime, with relatively limited pr ofits (US$ 139 per tone)? What 
are the benefits for the poorest consumers in keeping sugar domestic prices at the level of 
US$ 725 per tone? 
Response: The Philippines has been a traditiona l producer and exporter of sugar.  The country 
is confident that it can be competitive in th e world market if the distortions which are still 
predominant in the international sugar market would be eliminated. 
The Philippines is seriously exploring the potentia l of sugar as an alternative source of fuel.  
[133] (2), (iii), paragraph 20 
Could you clarify the meaning of the statement "According to the authorities, growers needed 
better returns to prevent surplus production from depressing prices to unacceptable levels"? 
We understand that "better returns" do not te nd to prevent surplus production, but actually 
promote it. 
Response: While "better returns" only encourage more production, we wish to clarify that, at 
that particular point in time in 2004 and on the basis of unique circumstances prevailing then, the 
intervention was necessary to prevent a coll apse in already depressed prices.   
[134] (5), paragraph 10 
9. The Secretariat Report says that "agricultu re protection increased substantially from 1994 
to 1998 following "tariffication" of non-tariff barriers with high tariffs and/or out-of-quota rates, and these measures, along with quantitative import restrictions for rice (and seemingly 
fish) and SPS arrangements for issuing import permits, contribute to relatively high 
agricultural protection". Moreover, "the Nati onal Food Authority (NFA), the Government’s 
grains market arm, controls rice imports, and provides price support to growers of rice, corn 
and, since 2004, sugar". What are the benefits, for the Philippine low-income consumers, of 
aiming at controlling imports and providing price support to staple products such as rice, corn 
and sugar, if the factual result of it is lower competitiveness in  the sector and higher prices for 
consumers? 
Response: Tariff averaging cannot ordinarily be  a more protective regime than a quantitative 
regime. 
The NFA is duly-notified State Trading Enterprise (STE).  It has recently opened, under more 
transparent procurement protocols, rice imports (as well as corn) to the private sector.   
The Government’s price support policy is the re sult of balancing the interest of consumers and 
producers especially the dominant small farmer sector , who are also consumers.  Small rice farmers 
also have higher per capita consumption of rice.  Given the volatility of the international rice market 
and process, this policy regime affords due protec tion of the livelihood and incomes of small rice 
farmers.  Even the cheapest rice or any staple, c annot realize effective consumer welfare gains if the 
small farmer sector which compri ses a large portion of the consumer population, does not have the 
purchasing power after their means of livelihood and incomes are wiped out by cheap imports.  WT/TPR/M/149/Add.1 
Page 58  
 
Fisheries
 
Australia 
[135] Could the Philippines provide detailed inform ation on its import quota regime for certain fish, 
crustaceans and molluscs, as the Secretariat was unable to verify the current import arrangements for these products  (para. 35, page 43).   
Could the Philippines explain the basis for restriction of trade for these products? Could the 
Philippines also advise whether these measures are consistent with its WTO obligations, 
including those under GATT Article XI? 
European Communities 
[136] The EC should like to ask the Philippines to confirm if quotas on certain fish, crustaceans and 
molluscs still apply?  If so, the EC would like to  receive the view of the Philippines as to the 
rationale of such quotas and if the Philippines would foresee any prospects for their removal? 
Japan 
[137] The report by the Secretariat states in para graph 25, that "imports of fish products are 
negligible, at least partly due to government re gulation, including import controls to ensure 
food security".  Bearing this in mind, please elaborate more on the "certificate of necessity" 
system by DOA and the "import permit" system by BFMR which are explained briefly in 
paragraph 28.   More specifically, we  would appreciate information on:  
(a) The criteria used for determining the sp ecies and amount of fish products to which 
"certificate of necessity" and "import permit" are issued;  
(b) The record of issuance of "certificate of necessity" and "import permit" of fish products 
and their actual results in the last 3 years; 
(c) The relationship of the "certificate of necessity"/"import permit" combination to the 
GATT provisions, as well as the difference be tween the combination and Import Quota 
system, because the combination seems to have the same effect as the IQ system. 
Response: Fisheries Administrative Order (FAO) 195 defines the rules and regulations 
governing the importation of fresh/chilled/frozen  fish and fishery/aquatic products, pursuant to 
Section 61c and d of RA 8550 or the Philippine Fi sheries Code of 1998. The FAO requires issuance 
by the DA Secretary of a Certificate of Necessity  (CN) certifying the necessity of importing fish to 
ensure food security, taking into cons ideration public welfare and safety. 
The CN applies only to fish importation intended for we t markets. When a CN has been duly issued by 
the DA Secretary, an importer may file an applic ation to import at least five days prior to 
importation. The CN does not apply to canners, processors, and institutional buyers that include 
hotels, restaurants and supermarkets. For these typ es of importers, the procedure for importation 
requires accreditation/registration and application for import permit.  
The regulation of entry of imported fish in wet market s is intended for the food safety of consumers.  
Generally, wet market traders lack refrigeration and other post harvest facilities necessary to ensure 
the quality and safety of imported fish. Wet mar ket traders mainly sell freshly-caught/chilled fish.  WT/TPR/M/149/Add.1 
 Page 59 
 
 
The volume and nature of species to be importe d for the wet market depend on the demand of the 
particular sector petitioning for the issuance of the CN in accordance with food security and public 
health considerations. 
Since the passage of the Fisheries Code in 1998 , providing for the first time the CN requirement, 
three (3) CNs have been i ssued for the importation of tuna and tuna-like species for the City of 
Davao, with the last CN issued for an indefinite  period from November 17, 2003 until revoked by the 
Secretary. The volume allowed and the actual volume imported for 2002-2004 are: 
Year Volume Allocated 
(in MT) Volume Imported 
(in MT) 
2002 438,000 228,896 
2003 385,200 381,359 
2004 1,277,500 695,135 
The DA Bureau of Fisheries and Aquatic Resources (BFAR) is currently in the process of amending 
certain sections of RA 8550, or the Philippine Fish eries Code of 1998. This includes Sec 61c and d of 
the Code, which stipulates the requirements and c onditions regulating the importation of fisheries 
products into the Philippines. In keeping with the principle of transparency, the process of amending 
the Code will necessitate a series of consultations with the concerned stakeholders from the public 
and private sectors. Amendments shall be subjected to the usual legislative process before these are 
enacted into a new law.  
Japan 
[138] IV. TRADE POLICIES BY SECTOR 
(2) AGRICULTURE 
(iv) Fisheries 
(Pages 78, paragraphs 25 to 28) Please provide more detailed information on th e programmes of "long-term loans to build or 
improve fishing vessels and equipment" and "tax  and duty rebates on fuel consumed" raised 
in paragraph 26. 
The report by the Secretariat states in paragraph 27 that in the Philippines "fishing licences 
are still issued largely unrestricted, includi ng by municipal governments, even though 
according to the authorities most of the pelagi c and demersal fisheries have reached MSY 
levels."   
Taking into account this point, please explain how  it ensures that the various subsidizing 
programmes raised in paragraph 26 do not undermin e the sustainability of  fisheries resources 
in its waters.  
Response: Sections 110 and 111 of the Fisheri es Code created the Fishery Loan and Guarantee 
Fund and the Fishing Vessel Development Fund to finance the development of the fishery industry.  
While created by law, these funds have not been  given appropriations and remain unimplemented.  
A moratorium has been imposed on October 2004 in the issuance of new fishing licences for 
commercial fishers as a precautionary approach to fisheries management and to manage fishing WT/TPR/M/149/Add.1 
Page 60  
 
capacity. When stock assessment studies are completed, a quota system on the number of fishing 
licenses would be implemented.  
For municipal fishers, Executive Order 305 s. 2004 was enacted devolving to municipal governments 
the registration of fishing vessels below three gr oss tons, which would facilitate the issuance of 
licenses based on the carrying capacity of municipal wa ters. Various other meas ures are in place to 
ensure that the incentives given do not undermin e the sustainability of fisheries resources in 
municipal waters such as the prohibition on the use of  active gears such as trawl, purse seine, Danish 
seine, ring net, dive-in net, round haul seine, motorized push net and bagnet and superlights in 
municipal waters. 
Automobiles
 
European Communities  
[139] The EC notes that the Motor Vehicle De velopment Plan promotes the assembly operations 
and component manufacture. The Philippines at the same time has in place rather high tariffs for cars. 
Could the Philippines inform about plans for reducing such tariffs in the future? 
The EC should like the Philippines to furthe r explain the content of the Motor Vehicle 
Development Plan and inform about th e time frame set out for this plan. 
Response: The basic framework for the tariff stru cture in the Philippine automotive industry is, 
as follows: to maintain ta riff differential between raw materials, KD parts and CBU; 
and to maintain tariff differential between locally  produced and imported KD parts. Currently, the 
Philippines has the lowest MFN rates in ASEAN.   
On the other hand, the New MVDP aims to adopt  a clear and stable industrial policy framework 
consistent with the core requirements of the laws and executive issuances promulgated for the 
development of the Philippine motor vehicle industry and create a playing field both within and outside among competitors.  Progr am Components are, as follows: 
• Strengthening of Automotive Policy 
• Prohibition of used vehicle importation; 
• Restructuring of MFN tariff rates; 
• Rationalization of excise taxes; 
• Extension of AICO; and 
• Provision of special export incentives. 
• Implementation of Productiv ity and Competitiveness Program 
• Addressing Industry Value Chain Gaps 
• Establishment of a Center for Automotive Excellence 
Please also refer to the re plies to Tariff Issues.  WT/TPR/M/149/Add.1 
 Page 61 
 
 
Japan  
[140] (4) MANUFACTURING 
(iii) Selected activities 
(Page 90, paragraph 73) 
The Report by the Secretariat states that "EO 156 banned all imports of used motor cycles, 
components, and motor vehicles, except for certain trucks, buses, and special purpose vehicles.  However, the ban, which authorities indicated was for environmental and safety reasons, is not operating since the Court of App eal ruled it unconstitutional.  Used and new 
vehicles therefore continue to be imposed at the same tariff rates, pending the Supreme 
Court’s decision of the ban’s legality.  Some  government and industry bodies are monitoring 
used vehicle imports, although not legally required to do so".  Does the Philippines have a future plan to ban or restrict imports of used motor cycles, components, and motor vehicles? 
Response: Yes. 
Korea 
[141] (WT/TPR/S/149, page 90, para 73)
 
Before 2002, more than 300 dealers of Korean u sed cars together imported in a year as many 
as 10,000 units of used diesel-powered multi purpose vehicles. In December 2002, the 
Philippine Government estab lished a ban on used vehicle importation through Executive 
Order 156 due to environment and safety concerns as well as a d esire to protect the domestic 
industry. Due to the total ban, these dealer s had no choice but to close their businesses. 
However, despite the ban, local importers have conti nued to import used vehicles of a certain 
country through the Subic Freeport. Though the ba n was not specifically targeted at Korean 
vehicles, the continued importation of used vehicles of that country by the local dealers 
resulted in eventual discrimination against Ko rean used cars. Korea would like to ask the 
Philippine Government to prevent any such discrimination in the future. 
In February 2005, the Court of Appeals deci ded that the total ban was unconstitutional and 
invalid because the Philippine Government has declared the ban in the exercise of police 
powers without legal basis. In that regard, pl ease explain what plans there are to allow the 
importation of used vehicles, keeping with the above-mentioned decision. 
Response: The Government intends to exhaust all legal remedies available to it. 
Mining  
Australia 
[142] Since the November 2004 Supreme Court decision on mining, which confirmed that the 
Mining Act 1995 was consistent with the Philippines Constitution, what steps has the Government taken to encourage forei gn investment in the mining sector?  
What actions have been taken to si mplify mining permit approval processes?  
How does the national government plan to wo rk with provincial and local governments to 
remove obstacles to foreign investment at the local level? WT/TPR/M/149/Add.1 
Page 62  
 
Response: A number of Investment Missions and Ro ad shows abroad, specifically in China, Canada 
and some parts of Europe, have been undertaken by  senior government officials in order to sell the 
highly mineralized Philippine archipelago as on ce more a viable destination for mining investment. 
The process of reopening the Philippines to foreign in vestment in mineral development began with the 
Mining Act of 1995.  The constitutionality of this  Act was  upheld by the Supreme Court of the 
Philippines only in December 2004, as was the right of foreign miners to enter into Financial or 
Technical Assistance Agreements (FTAA) with th e government in order to  exploit mineral resources 
within the country. It is under an FTAA that forei gn firms can control 100% of a mining project 
requiring upwards of $50 million of investment, t hough strictly speaking ownership of resources 
remains that of the Filipino government. Repatria tion of capital and freedom  from expropriation are 
explicitly guaranteed to investors under the 1995 Mining Act.  
The only overt restriction on mining ventures of ov er $50 million in investment value is that they 
strictly adhere to policies of sustainable developmen t, i.e., those facilitating economic growth, social 
equity and environmental protection. The substance of these policies is ensh rined in the Minerals 
Action Plan of 2004.  
The government of the Philippines has also undert aken several other measures to encourage foreign 
investment in mining. These include the streamlining of the permit process for all types of project, the 
invalidation of mineral claims to land identified as being made by speculators in favour of re-
licensing these areas to parties willing to commit to  their active development and various reforms of 
taxation, immigration and customs protocols.  The positive change in attitudes towards mining on a 
political and popular level is the belief encouraged by the current government that foreign investment 
in mining can contribute significantly to the o verall economic prosperity of the Philippines.  
The government also plans to establish a mec hanism to address such concern on working with 
provincial and local governments to remove obstacles to foreign investments at the local level. Under 
the planned interventions a "one-stop-shop" led by the DTI’s Board of Investments (BOI) with the 
primary responsibility of attending to the needs of  investors in the mining industry shall be created 
with the following proposed functions: 
• Coordinate with national agencies and LGUs to harmonize investment-related 
requirements and procedures as well as fa cilitate and expedite investments in the 
mineral industry; 
• Assist investors in the mining industry by providing information, guidance, direction, 
and solutions concerning their investment problems and needs; 
• Review all aspects related to mining investments, recommend measures, and take 
appropriate actions to address policy, institutional implementation and operational 
issues relative to mining investments; 
• Advise the President on timely and effective solutions to mining investment-related 
problems; 
• Promote investments in the minerals industry. 
Minerals and Energy
 
Australia 
[143] The Secretariat report indicates that the Ph ilippines’ average tariff on petroleum products is 
around 4 per cent, while coal and most mineral ta riffs averaged 5 per cent.  Tariffs on oil and 
refined products were raised in 2005 to 5 per cent, which we understand is a transitional 
revenue-enhancing measure until additional oil taxes are introduced (para. 33, page 80).  WT/TPR/M/149/Add.1 
 Page 63 
 
 
As minerals and energy products are essen tial inputs to industry, has the Philippines 
considered eliminating these tariffs to increas e manufacturing output, given that taxes on such 
inputs retards the Philippin es’ manufacturing capacity? 
Could the Philippines indicate when it expects the transitional revenue -enhancing tariffs on 
oil and refined produc ts will be removed? 
Response: Executive Order No. 440 was signed on 29 June 2005 reducing the import duty on crude 
petroleum oils and refined petrol eum products from 5% to 3%. 
Brazil 
[144] (3), (iv), paragraph 48 
Alongside with the Secretariat review on para graph 48 about the difficulty and slowness in 
the implementation of the reforms, including  privatization, aimed at deregulating the 
electricity market, the International Monetary Fund (IMF) Statement at the conclusion of the 
Post-Program Monitoring Mission to the Phili ppines assesses that the regulatory framework 
to attract needed new investments into the sector is of great importance. It also suggests that 
privatization of generation and transmission assets in the power sector are a priority necessity. 
Indeed, the Report by the Government states, on page 8, paragraph 19, that the Electric Power 
Industry Reform Act is designed to encourage greater competition and efficiency in the sector. On the other hand, the Nation Transmission Corporation (TRANSCO) was created in 2001 to run the National Power Corporation's transmission monopoly. How does the creation of TRANSCO stand in view of the government ’s goal of encouraging greater competition? 
Response: Due to fiscal problems, the EPI RA discouraged NPC from putting up more 
generating capacities; the generation function, as envisioned, will be transferred eventually to the 
private sector.  The private sector has three options  to invest in the generation sector.  One is to 
participate in the ongoing privatization of NPC’s ge nerating and other disposable assets. The other 
one is to participate in the buy-outs of the energy sales contracts of the NPC with independent power 
producers or IPPs as an IPP Administrator. The most  promising option is to put up new power plant 
capacity using the 2005-2014 Power Development Pr ogram (PDP) or the market signal for new 
capacity additions provided by the WESM as guides. 
Competition in the generation sector will not succeed however unless we have adequate and reliable 
transmission system and unless the competing power generators are assured that they will have full 
access to the existing transmission system.   
Another issue in the transmission sector is the need for huge invest ment for the necessary 
rehabilitation and expansion projects that will ensure adequate and reliable service.   The Philippine 
government has serious fiscal problems that future expansions in the transmission sector cannot be 
ensured.  As a result, the government decided to priv atize TransCo.  But it should be emphasized that 
TransCo itself is not the object of privatisation,  rather, it is the transmission business which the 
government aims to privatize in the form of  a concession that has a 25-year life, renewable for 
another 25 years subject to review and no preceding default. The Government shall retain the 
ownership of the transmission assets. 
During Phase 1 (limited concession) of the concession period, the Concessionaire will be in charge of 
the improvement, expansion, and/or maintenance of  the transmission assets while during Phase 2 (full 
concession), the Concessionaire shall also be resp onsible for the operation of the transmission 
system.   Among the expected benefits from priv atizing TransCo concession are more efficient WT/TPR/M/149/Add.1 
Page 64  
 
operation and management of transmission facilities and av ailability of more capital to finance future 
expansions.  These are critical inputs which are nece ssary for the competition in the generation sector 
to succeed. 
Services – General
 
Japan 
[145] (WT/TPR/G/149) 
III. TRADE POLICY DEVELOPMENTS (2) THE DDA NEGOTIATIONS 
(Pages 11 to 12, paragraphs 38-41)   
The Report by the Philippines states that the Ph ilippines shares the disappointment of some 
Members on the quality of commitments in areas where developing countries have 
comparative advantages, especially for categor ies of personnel not related to commercial 
presence, and at lower skill levels.  Does "cat egories of personnel not related to commercial 
presence" mean the movement of natural persons  based on the contracts between enterprises? 
Response: Yes. 
[146] (WT/TPR/S/149) 
IV. TRADE POLICIES BY SECTOR 
(5) SERVICES 
(Page 90, paragraph 76) As for trade in services, one of the important factors for the movement of natural persons is 
the visa and immigration system.  In this regard, please answer specifically the following 
questions: 
(a) What are the procedures for a skilled worker  to enter into the Philippines and to start 
his/her job, including the procedures for work permission, application for a visa and immigration control? 
Response: Under the Labor Code, foreign nati onals seeking admission to the Philippines for 
employment purposes are required to secure an alien employment permit (AEP) from the Department 
of Labor and Employment. The AEP may be issu ed to a non-resident foreign national after a 
determination of the non-availability of a person in  the Philippines who is competent, able and willing 
at the time of application to perform the services for which the alien is desired. This labor market test 
is implemented by the DOLE Regional Office th rough the publication requirement. Any interested 
party may file with the Regional Office any objec tion or information against the foreign national 
within five (5) working days after its publication. If  there is no objection or information filed within 
this period, the application will be processed. Oth erwise, the Regional Director shall assess the 
objection or information filed, and if found m eritorious, the application will be denied. 
The AEP is a pre-requisite in securing a working visa from the Bureau of Immigration. Under the Anti-Dummy Law, foreign nationals may be employed in nationalized activities only as 
technical personnel subject to an authorization by the Secretary of Justice.  WT/TPR/M/149/Add.1 
 Page 65 
 
 
[147] (b) How is the skill of a worker entering into  the Philippines reviewed in the procedure raised 
in (a)? 
Response: The general rule is that only those w ho will occupy technical, advisory, and supervisory 
positions as well as the officers and executives electe d by the governing board, may be allowed to 
work in the Philippines. The skill of a worker entering the Philippines is not the proximate decisive 
factor in determining whether or not said worker will be allowed to work in the country but the 
determination of the non-availability of a person in  the Philippines who is competent, able and willing 
at the time of application to perform th e services for which the alien is desired.  
[148] (c) In each procedure raised in (a) and (b), is the reason for refusal notified to the applicant? 
Response: Yes, a formal order of denial is issued  to the applicant specifying the reason for the denial. 
Services – Financial Services  
United States 
[149] What progress has the government made in obtaining Senate ratification of the GATS Fifth 
Protocol on financial services?  What can we expect from the Philippines in terms of a new, liberalizing financial services o ffer in the Doha negotiations? 
European Communities 
[150] Referring to the report prepared by th e WTO secretariat page, 91, para. 76 concerning 
financial services:  The EC should like the Philippi nes to clarify its intention to sign the Fifth 
Protocol of the GATS and inform of its planned date for signing? Could the Philippines also explore the reasons for the delay in ratification? 
Response: The GATS 5
th Protocol on Financial Services wa s transmitted by the Office of the 
President to the Philippine Senate for concurrence early this year.  The Senate Committee on Foreign 
Relations commenced hearings on 02 June 2005. 
Canada 
[151] Report by the Secretariat (WT/TPR/S/149)  
Part IV. Trade Policies by Sector, (5) Services, (i) Financial Services, Paragraph 77: 
It is our understanding that the moratorium on new bank offices and branches referred to in 
paragraph 77 has been extended to includ e new banks on an indefinite basis. 
a. Is the Philippines also considering extending the temporary permission granted to 
foreign banks to acquire 100% of a domestic bank (set to expire June 13, 2007) on an 
indefinite basis? 
b. Given that the moratorium is aimed at bank consolidation and the fact that the total 
number of commercial bank head offices has not decreased since 2001, has the 
Philippines considered a review of the effec tiveness of the moratorium with a view to 
its possible removal?  WT/TPR/M/149/Add.1 
Page 66  
 
Response: The General Banking Law of 2000 allows foreign banks to acquire 100% of a voting 
stock of a domestic bank within a period of seven years up to June 2007.  At present, there are no 
plans to amend the law that will extend the 7-year period. 
The number of universal and commercial banks in the Philippines decreased from 45 in 2000 to 44 in 
2001 when the 3-year moratorium was introduced.  Thereafter, the number of head offices was further 
reduced to 42 in 2002.  
It should be clarified that consolidation is meant  to strengthen the capital base of commercial banks 
and not to reduce the number of commercial banks.  The capital position of commercial banks continued to improve from 2001 to 2004.  Under the new risk-based framework, the commercial 
banks’ capital adequacy ratio (CAR) increased from 15. 30 in 2001 to 18.4 in 2004.  Foreign bank’s 
CAR was recorded at 22.6 in 2001 and 27.4 in 2004.  These developments were attributed to capital 
build-up and reflected the banking system’s improved ability to cover risky assets. 
There are currently no plans to remov e the moratorium on the establishment of new bank offices in 
the Philippines.  
Hong Kong, China  
[152] (WT/TPR/S/149, P. 94 - 95, Paras. 84 - 85; and P. 96 - 97, Para. 90) 
We note that the Philippi nes' existing regime on the banking  and insurance sectors is more 
liberal than its GATS commitments. Examples include the cap on foreign ownership of 
domestic banks at 60% (which has been temporarily  lifted to 100% until 13 June 2007) versus 
the cap at 51% as inscribed in its GATS schedule; and unlimited foreign equity in the case of foreign insurance companies (provided they have  been in the top 200 world companies for the 
past ten years) versus the 51% cap of forei gn ownership in the GATS schedule.  While the 
Philippines has not included any improvements on the sectors in its initial offer, would it 
consider reflecting its more liberal de facto re gime in its revised offer, so as to increase the 
predictability of the regime? 
Response: The Philippines will assess the balan ce of the concessions in the on-going DDA 
Round. 
Services – Financial Services – Insurance 
 
United States 
[153] The Secretariat Report notes in paragraph 90  on page 76 that there are no limits on foreign 
equity.  It is the USG understanding that there is a foreign equity limitation of 40% for foreign reinsurance companies and a mandatory  cession of 10% to the National Reinsurance 
Corporation of the Philippines.  Has there b een a recent change in the laws governing the 
limits to foreign equity? 
Response: None. 
Canada 
[154] Part IV. Trade Policies by Sector, (5) Se rvices: (i) Financial Services, Paragraph 92: 
In Paragraph 92, it is stated that "insurance la ws are intended to apply equally to domestic and 
foreign firms."  WT/TPR/M/149/Add.1 
 Page 67 
 
 
a. Can the Philippines confirm that both forei gn and domestic insurers are required to 
cede 10% of total insurance cessions to foreign unauthorized reinsurers to the 
National Reinsurance Corporation? 
Response: Confirmed. 
[155] Part IV. Trade Policies by Sector, (5) Se rvices, (i) Financial Services, Paragraph 93: 
Paragraph 93 states that "the IC must appr ove all life and non-life premiums and products, 
including policy forms, certificates and contr acts, application forms, warranties, and 
endorsements." 
[156] Could the Philippines outline the IC approval process for new insurance products?  
Response: For life insurance products on st andard policy provisions and/or standard asset 
share format, the Insurance Commission (IC) has 30 days to take action to approve the products. If 
the IC has not communicated to the insurance co mpany, the product shall be deemed approved.  
However, if the IC at anytime during the 30-d ay period finds compelling need for additional 
requirements to be submitted, the insurance co mpany shall be advised and the 30-day countdown 
stops.  If the product is not on standard policy prov isions and/or standard asset share format, the IC 
has 90 days to act instead of 30 days.  
[157] Has the IC considered implementing a pro cess for automatic approval or simple notification 
for ‘standard’ insurance products? 
Response: Yes, the Insurance Commission is considering issuing a Circular regarding this 
matter.   
Services - Tourism  
Canada 
[158] Report by the Secretariat (WT/TPR/S/149)  
Part IV. Trade Policies by Sector, (5) Servi ces; (iv) Tourism, paragraphs 125 and 126: 
Paragraph 125 cites the establishment of "tour ism enterprise zones…to remove barriers and 
promote the free flow of investment and tourists to and within the country."  
a. Could the Philippines provide additional information on these enterprise zones, 
including the incentives provided to prom ote investment and tourist flows? 
Response: The Department of Tourism (DOT) en tered into a Memorandum of Agreement with 
the Philippine Economic Zone Auth ority for grant of incentives to tourism enterprise zones/tourism 
estates which are granted Special Economic Zone status, upon registration with PEZA and subject to 
the issuance of the required Presidential Proclamation. 
Incentives available under Republic Act 7916 include the following: 
• Four (4) years Income Tax Holiday, provided  that tourism ecozones located in Less 
Developed Areas shall be granted six (6) years ITH; WT/TPR/M/149/Add.1 
Page 68  
 
• 5 percent Gross Income Tax incentive wh ere upon expiry of the ITH, the tourism 
ecozone developer/operator shall have th e option to pay a 5 percent tax on gross 
income earned, in lieu of all national  local taxes except real property taxes; 
• Tax and duty free importation of capital equipment required for the technical 
viability and operation of the registered ac tivities of the tourism enterprise zones. 
[159] Paragraph 126 provides in formation on ownership and opera tion of tourism facilities.  
What is meant by "domestic market enterpri ses," for which full foreign equity is allowed 
under certain conditions? 
Response: Pursuant to the Foreign Investments Act of 1991, "domestic market enterprise" shall 
mean an enterprise which produces goods for sale, or renders services to the domestic market entirely 
or if exporting a portion of its output fails to consistently export at least 60 percent thereof. 
Non-Philippine nationals may own up to 100 percent of domestic market enterprises unless foreign 
ownership therein is prohibited or limited by the Co nstitution, existing law, or the Negative List, and 
provided that the paid-in equity is at least US$200,000.00. 
Tourism-related activities included in the Negative List include the following: 
• Ownership of private lands where foreign equity participation is limited to up to 
40%. 
• Operation and management of public utiliti es (e.g. tourist transport) where foreign 
equity is limited to up to 40%. 
• Retail trade where no foreign equity is allowed unless enterprise has a minimum 
paid-in capital of US$2.5 million. 
[160] Report by the Government of the Philippines (WT/TPR/G/149)
 
Part II. Liberalization through Domestic Refo rm, (2) Foreign Investment Liberalization, 
paragraph 30: 
Paragraph 30 notes that medical tourism  is one of the new areas included in the 2004 
Philippine Annual Investment Priorities Plan (IPP).  
Could the Philippines provide more information on what "medical tourism" means and what 
is envisioned under the IPP.  
Response: Medical tourism involves travelling for the purposes of availing health care services 
or treatment of illnesses and health problems in order to maintain one’s health and wellness. 
Activities under medical tourism includes establishmen t of tertiary hospitals and spas. These activities 
are entitled to incentives, subject to the gui delines under the Investment Priorities Plan  
[161] Is medical tourism part of the Philippines’ initial services offer? 
Response: It is not.  WT/TPR/M/149/Add.1 
 Page 69 
 
 
Hong Kong, China 
[162] (WT/TPR/S/149, P. 105, Para. 126) 
We note that there are no foreign investment restrictions on ownership of tourism 
infrastructure or resorts and 100% foreign equity is allowed in accommodation facilities, 
travel agencies, tour operators, and organiza tion of professional conferences.  Moreover, full 
foreign equity is allowed in restaurants and "domestic market enterprises" on the conditions 
of fulfilling respective minimum paid up capitals.  We are glad to note that the Philippines has 
proposed to reflect the more liberal regime in  respect of hotel lodging services in its initial 
offer.  However, the offers on other sub- sectors such as travel agencies and professional 
congress organizers still fall short of the actual regi me.  We would be interested to know the 
difficulties of the Philippines in binding the existing regime for these services. 
Response: The Philippines will assess the balan ce of concessions in the ongoing DDA Round. 
Japan 
[163] (iv) Tourism 
(Page 105, paragraph 126)  
Please indicate how the Government of the Philippi nes is taking specific measures for further 
liberalization of tourism and travel-related servi ces, in particular travel agencies, travel 
operators and tourist guide services 
Does the Government of the Philippines have a pl an to relax the 40% limitation of the foreign 
equity and nationality requirement in tourism and travel-related services? 
Response: No.  
Services – Telecommunications  
United States 
[164] What progress has the government made in obt aining Senate ratification of the GATS Fourth 
Protocol (on basic telecommunications commi tments)?  What can we expect from the 
Philippines in terms of a new, liberalizing offe r for the telecommunications sector in the Doha 
negotiations? 
European Communities  
[165] The EC should like the Philippines to confirm its  intention to sign the Fourth Protocol of the 
GATS and to provide informa tion on the date on which signing is to take place?  
Response: The GATS 4th Protocol on Basic Telecoms wa s transmitted by the Office of the 
President to the Philippine Senate for concurrence early this year.  The Senate Committee on Foreign 
Relations has commenced hearings on the 4th Protocol on 02 June 2005. WT/TPR/M/149/Add.1 
Page 70  
 
Japan 
[166] (iii) Telecommunications 
(Page 100, paragraph 103)  
Please indicate how the Government of the Phil ippines is taking specific measures for further 
liberalization of telecommunications services in the Philippines.  Does the Government of the 
Philippines have a plan to relax the 40% limitation of the foreign equity in the telecommunications 
sector? Does the Government of the Philippines have a plan to accept the Reference Paper of 
Telecommunications? 
Response:  Several policy/regulatory and structural  measures have already been initiated by the 
Philippine Government to further enhance liberalizati on, competition, and regulation of the country’s 
telecommunications market. The Government is cu rrently pursuing the passage of various ICT-
related legislative bills that are pending in Congress, which include: 
a. Convergence Bill . The bill seeks to establish a policy fr amework that would allow multiple 
services (i.e., telecommunications, broadcast media,  information technology, electronic commerce, 
etc.) to be carried in the same physical netwo rk. The enactment of the convergence bill will have 
widespread industry benefits, such as but not limited to the following: 
• Promoting sector competitiveness; 
• Aligning Philippine policy with global industry realities; and 
• Providing robust incentives for investment and growth, whilst ensuring fair and 
sustainable competition. 
Moreover, the Convergence Bill aims to address several purposes, which include among others: 
• Managing the transition from the old indust ry arrangement to an environment of 
convergence; 
• Addressing competition and other regulato ry issues raised by convergence; and 
• Developing a national convergence plan 
b. The DICT bill . This bill seeks to establish a Departmen t of Information and Communications 
Technology (DICT) that would ensure the "focu sed execution" of policies and programs to develop 
the sector and facilitate the entry of more ICT projects.  
Under the proposed bill, the existing Departmen t of Transportation and Communications (DOTC) 
shall be split and all its divisions dealing with co mmunications shall be absorbed by the DICT.  DICT 
shall administer all laws in the field of ICT and prescribe regulations for the operation and 
maintenance of ICT facilities in areas not adequately served by the private sector.  
The DICT shall likewise direct government resea rch and development programs in ICT, draw up 
measures to promote the sector, including universal access in telecommunications and wider use of 
the Internet. It shall also set and execute integrat ed and comprehensive ICT systems at the national, 
regional and provincial levels.  
c. National Telecommunications Commi ssion (NTC) Reorganization Bill. This bill proposes 
the reorganization of the NTC in order to  make it more responsive, as the country’s 
telecommunications regulatory body, ensuring that the appropriate regulatory environment is in  WT/TPR/M/149/Add.1 
 Page 71 
 
 
place not only to promote and enhance investment, i nnovation and competition, but in holding to the 
promise of driving down consumer costs and fostering technical and market innovations. 
If further liberalization refers to th e lifting of the 40% limit on foreign ownership, this is not possible 
without amending the Constitution. Our commitmen ts in 1997 are based on RA 7295, which is the 
governing law. We cannot have additional commitments unless RA7925 is amended. 
The Philippines endeavors to further improve its le gal policy and regulatory frameworks to make the 
sector globally competitive. The Philippines w ill, aside from what CICT has identified: 
• Pursue the passage of the Cybercrime Pr evention Bill, which defines cybercrime, 
providing for prevention, suppression, and imposition of penalties. 
• Accelerate implementation of various e-Government programs.  
• Pursue the enactment of an e-Gov Law whic h will institutionalize the establishment of 
e-Gov Fund.  
• Accelerate the implementation of the Community E-Center program (CECP) 
nationwide to promote universal access. CECP  provides Filipinos particularly in the 
rural areas public access points for ICT services. 
• Pursue/support the enactment of Compe tition Law, which will enhance competition 
among service providers.  
• Pursue the amendment of RA 7325 for possi ble redefinition of basic and value added 
services and revision of classification of telecom entities. 
[167] Does the government of the Philippines have a plan to relax the 40% limitation of the foreign 
equity limitation of the foreign equity in the telecommunications sector? 
Response: The 40% foreign equity limitation fo r public utilities, including telecommunications, 
is a Constitutional restriction. Unless the Constitutio n is amended, the Philippine Government cannot 
do anything to relax and/or lift such restriction.  The Philippines is bound by this limitation. 
[168] Does the government of th e Philippines have a plan to accept the Reference Paper of 
Telecommunications? 
Response: No. The Philippine Offer has adopted 6 out of the 6 regulatory principles of the WTO 
Reference Paper. However, modified language was used in order to suit to the existing domestic 
regulatory environment. 
REGULATORY PRINCIPLES  (Adopted with modified language) 
Competitive Safeguards  (Regulatory principle to prevent anti-competitive practices in 
telecommunications). The Philippine version of the pr inciple adopted a general and a more flexible 
language. It avoided defining sp ecific anti-competitive practices which may have potential problems 
in the implementation. 
Interconnection  (Linking of telecoms networks of service  suppliers in order to allow users of one 
supplier to communication with users of another supplier). The Philippine offer adopted a modified 
version of the principle which is now presented in th ree (3) subsections instead of five (5) of the GBT 
Reference Paper. 
Universal Access  (Transparent, non-discriminatory administr ation of universal service obligation of 
suppliers). The Philippine version of this principl e introduced a section on the mandate of IGF and 
CMTS operators to install a set number of  local exchange lines in designated areas. WT/TPR/M/149/Add.1 
Page 72  
 
Public Availability of Licensing Criteria. This principle was adopted in full. 
Independent Regulators  (Sub-principles for regulators ensu ring independence and impartiality). The 
Philippine offer adopted the principle on independe nt regulator and added sub-principles on – i] 
adoption of an administrative process with empha sis on technical, legal, economic and financial 
considerations; and ii] maintenance of a consultative forum. 
Allocation and Use of Scarce Resources  (Ensuring objective, timely, transparent and discriminatory 
allocation and use of scarce res ources). The Philippine version modified the principle from the 
reference paper such that it defined the scope of scarce resources to fre quencies, numbers and rights 
of way only.  
Canada 
[169] Report by the Secretariat (WT/TPR/S/149)
 
Part IV. Trade Policies by Sector, (5) Services, (ii) Telecommunications, Paragraph 96: The Secretariat Report notes that "reforms  during the 1990s created market entry 
opportunities, lowered prices, and improved the av ailability, quality, and choice of service" in 
the telecommunications sector. The Report also s hows statistical data demonstrating how the 
Philippines have benefited from the liberalizati on of their telecommunications services sector. 
a. Could further liberalization of the telecommunications services sector by taking 
additional commitments help the Philippines reach its goals, as per the Secretariat Report, of 100% mobile coverage, reduc ing the excess capacity in fixed lines, 
increasing the speed of interconnection, and promoting a more competitive market? 
Response: The 40% foreign equity limitation fo r public utilities, including telecommunications, 
is a Constitutional restriction. Unless the Constitutio n is amended, the Philippine Government cannot 
do anything to relax and/or lift such restriction.  The Philippines is bound by this limitation. 
[170] Part IV. Trade Policies by Sector, (5) Services, (ii) Telecommunications, Paragraph 98 
The Secretariat Report mentions that the Philippines’ National Telecommunications 
Commission (NTC) "usually grants provisiona l approval for telecommunications services, 
initially for 180 days, if the service is economically feasible, sufficiently in demand, and in 
the ‘public interest’." As stated in the Report, "this provides adequate time to verify that the 
installed service is compliant, after which a thr ee-year extension is provided, during which the 
operator must comply with all requirements and show that the service is  commercially viable, 
efficient, and in the public interest." The Secr etariat’s Report notes that "this appears to be a 
type of economic needs test." 
a. Could the Philippines explain whether this is, in fact, a form of an economic needs 
test? 
b. How does the Philippines defi ne "public interest"? 
Response: Provisional authorizations (Pas) ar e issued for a period of 18 months and not 
180 days. The 18-month period for the PA is to en sure that the applicant will install the proposed 
network and commence providing the proposed service within the period proposed by the grantee.  WT/TPR/M/149/Add.1 
 Page 73 
 
 
[171] The privately owned (with 40% forei gn equity) Philippine Long Distance Telephone 
Company (PLDT) is the dominant telecommunications services provider. The Secretariat Report mentions that "although carriers have  national franchises, only the PLDT operates 
local exchange services nationally. Other fra nchised carriers can supply these services in 
specific geographic areas." The Report notes that "geographical market segmentation may 
prevent new carriers from gaining scale economies and network externalities, limiting their 
potential to compete with PLDT." 
a. What are the Filipino government’s intenti ons regarding this geographical market 
segmentation restriction? 
Response: There is no government-enforced geogr aphical market segmentation. As a matter of 
fact, a company other than PLDT has been authorized  to install, operate, and maintain local access 
networks in all areas in the Philippines. 
[172] Part IV. Trade Policies by Sector, (5) Se rvices, (ii) Telecommunications, Paragraph 100: 
The Secretariat Report states that "interconnecti on charges, which have to be ‘reasonable and 
fair’ and provide for the ‘cross subsidy of u nprofitable local services’" are set to meet 
universal service goals, which, in return, has ma de interconnection less transparent, has raised 
access charges and is inconsistent with a comp etitive market. The Report mentions that this 
"helps PLDT maintain higher access fees  to squeeze margins of entrants."  
a. How does the Philippines plan to address the points raised in the Secretariat Report? 
b. We note that the Philippines have only par tially subscribed to the WTO Reference 
Paper on Basic Telecommunications, which we  believe is important for promoting a 
fair and competitive telecommunications ma rket. Could the Philippines explain why 
it has chosen to adopt only part of the WTO Reference Paper? Is there anything 
preventing the Philippines from adopting the whole document? 
Response: Section 18 of RA 7925 provides that access charges shall consider the cost of 
interconnection facilities, cost of universal service/access and a ccess deficit contribution.  The 
Commission is presently formulating rules on interconnection pricing. 
Services – Air Transport
 
Korea 
[173] (WT/TPR/S/149, pages 100-101, paras 105-110) 
The Philippine Government is imposing the Gro ss Philippine Billings (2.5% of revenues; in 
case of airlines from countries with which the Ph ilippines has concluded the agreement on the 
prevention of double taxation, 1.5% of reve nues), and a Common Carrier's Tax (3% of 
revenues) to the foreign airlines operating f lights to/from the Philippines. The first is 
understood as having the characteristics of an income tax, while the second of a business tax. 
The two taxes are targeting at the foreign carriers while granting exemption to local carriers, 
which could be construed as discriminatory taxation. What corrective measures does the 
Philippine Government intend to take? 
Response: The Philippines confirms the ra tes cited by Korea above as applicable to 
international carriers doing business in the Philippi nes.  In addition, on 11 October 2002, the Bureau 
of Internal Revenue issued Regulation No. 15-2 002 which governs the imposition of income tax on WT/TPR/M/149/Add.1 
Page 74  
 
GPB, other income of international air carrier s and common carriers’ tax pursuant to the 1997 Tax 
Code (as well as procedures for the claiming de ductions on travel expenses and freight charges 
incurred).  This new regulation exempts off-line carriers from paying the 2.5% GPB and 3% common 
carriers’ tax.  Moreover, it is also provided that  "the GPB shall be determined by computing the 
monthly average net fare of all the tax coupons of pl ane tickets issued for the mo nth, per point of final 
destination, per class of passage and per cl assification of passenger, and multiplied by the 
corresponding total number of passengers flown for the month as declared in the flight manifest". 
In contrast, domestic carriers pay the following taxes:   a corporate income tax of 32% on net taxable 
income; a 10% value added tax on cargo; and an excise tax on domestic fuel consumption of 
Philippine Pesos 3.67 per liter. 
Maritime Transport 
 
European Communities 
[174] The report prepared by the WTO secretariat me ntions that cabotage is prohibited, and national 
(including inter-island) shipping is limited  to Philippine-flagged a nd owned vessels engaged 
in domestic trade, but that waiver can be granted.  
Can the Philippines indicate to what extent such waivers have been granted in recent years?   
Does the government have any assessment of the impact of these restrictions on freight rates 
for cabotage/coastal operations? The estimates wh ich the EC has seen have underlined that 
onward domestic transport add significant extra transport costs to the international freight 
rates due to limited supply of adequate dom estic shipping capacity. How does the Philippines 
assess the impact of the lack of liberalisation on its own development, considering that this 
increases the cost of transporting and exporting goods? 
Response: Rule V, Section 2 of the Impl ementing Rules and Regulations of Republic 
Act No. 9295, provides instances warranting issuance of  a Special Permit by the Marina in any of the 
following circumstances: 
-  There is no available Philippine-registered ship to transport the cargo to meet the shipping 
requirement as determined by the MARINA; or 
-  There is no suitable Philippine-registered ship to  meet the specific requirem ents of the shipper or 
consignee, as determined by the MARINA; or 
-  When public interest warrants, as determined by the MARINA.  WT/TPR/M/149/Add.1 
 Page 75 
 
 
 
Hereunder is the statistics to show the extent such  waivers have been granted to foreign-flagged ship 
in recent years: 
YEAR Number of Special Permits Issued to Foreign-
Flagged Ships to Temporarily Operate in Domestic 
Trade (for Passengers/Cargo) Number of Exemption Permit Issued (for 
Government Projects) 
2004 3 10 
2003 4 14 
2002 8 59 
2001 2 48 
2000 5 109 
The impact of the policy on cabotage  has been assessed from the point of view of fiscal revenues, 
local ports development, revenues of domestic line rs, the local shipbuilding and repair industry, 
employment, and fare rates.   
Chinese-Taipei  
[175] IV. TRADE POLICIES BY SECTOR 
(5) SERVICES (iii) Transport (b) Maritime Transport 
(pg. 102, para. 112) 
We note that only Filipino nations or locally in corporated entities authorized to engage in 
overseas shipping and with a maximum of 40% foreign equity may register a vessel. Please could the Philippines explain the rationale behind these limitations? May we respectfully suggest that the Philippines consider raising th e foreign equity maximum required to register 
a vessel to 50%. 
Philippine-registered vessels must be comple tely manned by Filipino crews except in 
approved cases where a "supernumerary" may be allowed for up to six months, provided the 
functions performed are not those of the cr ew and do not interfere with the ship's 
management. 
It would be appreciated if the Philippines could provide further clarification of what exactly 
constitutes a "supernumerary" and the rationale behind these restrictions. 
May we also respectfully suggest that the Phili ppines consider allowing foreign crews to stay 
for up to one year in the case of an approved "supernumerary", with the possibility of an 
extension for an additional year if it could be proved necessary. 
Response: The 40% foreign equity limitation is embodied in the following laws/regulations: 
- Corporation Code of the Philippines, Section 298; 
- Republic Act No. 7471, as amende d by Republic Act No. 9301; and 
- MARINA Memorandum Circular No. 182. WT/TPR/M/149/Add.1 
Page 76  
 
Under the above-mentioned regulations/laws, oversea s ship acquisition should be controlled by a 
Philippine national which refers to a citizen of the Philippines or a partnership or association wholly 
owned by and composed of citizens of the Philippin es or of which at least sixty percent (60%) of the 
capital stock outstanding and entitled to  vote is owned and held by  Philippine citizens or a trustee of 
funds for pensions or other employee retiremen t  or separation benefits, where the trustee is a 
Philippine national and at least 60% of the funds w ill accrue to the benefit of the Philippine national; 
provided, that where a corporation and its non-Fili pino stockholders own stock in an enterprise, at 
least 60% of the members of the governing board of both corporations must be Philippine nationals. 
The MARINA has included in its Integrated Plan for 2005-2010 the conduct of study on increasing 
foreign equity participation in overseas shipping and the issuance of a relevant legislation, if 
necessary. 
A supernumerary as defined under Chapter III.7 of  MARINA Memorandum Circular (MC) 182 is a 
person who is not a crew of the ship and whose presence onboard is for a specific purpose other than 
to perform navigation, operation and management functions. 
Further, under Chapter V, Section 7 of MC states  that "A Philippine-registered ship may, under 
circumstances to be determined by the Administ ration, have onboard supernumeraries provided that 
they shall not perform any of the functions of the crew nor interfere with th e operation/management of 
the ship." 
Such restriction is in view of the fact that under Presidential Decree No. 760/866 and 1711, the 
operation of the vessel shall be entirely in the hands of Philippine nationals and free from any 
participation or interference from the alien owner, except insofar as such action shall be to directly 
protect his right as owner thereof, except in the case of specialized vessel, e.g. refrigerated cargo 
ships or livestock carriers.  
__________