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  IV. TRADE POLICIES BY SECTOR 
(1) AGRICULTURE AND FISHERIES  
(i) Agriculture  
1. Agriculture and related-activities continue to be a key sector in the economy (Chapter I(2)). 
Agriculture accounted for 33% of employment in 2010 (36% in 2004).1  The authorities reported an 
annual average growth rate of 2.6%.2  The decline in employment in agriculture while output 
increased indicates improving productivity.  However, this is still below other sectors of the economy 
and is probably a result of the small size of farm s, which accounts for low levels of mechanisation 
(see below).  Foreign participation in the farming sector is subject to significant barriers:  there are 
restrictions on land ownership3;  all farmers must be Filipino citizens4;  and in the rice and corn 
sectors foreign equity participation in production, mi lling, processing, and trading (except retailing) is 
limited to 40%, except under exceptional circumstances.5  Government policy is to be self-sufficient 
in the production of rice, sugar and corn and various measures are in place to achieve this. 
2. Agricultural production in the Philippines is b ased on small family farms, which average 
1.7 hectares.  Although there are also large and medium-siz ed commercial farms, the number of small 
farms has increased under the Comprehensive Agrari an Reform Program (CARP), which was initiated 
in 1988 and is still being implemented.  The CARP  involves the physical distribution of agricultural 
land to landless farmers and farm workers as well as support services to lift the economic status of these beneficiaries.
6  The maximum award is three hectares.7 
3. As reported in the Philippines Development Pl an 2011-2016, the major challenges facing the 
agriculture sector include:  the high cost of pr oduction inputs such as fertilizers and pesticides;  
inefficient supply chain and logistics systems;  inad equate provision of irrigation infrastructure;  a low 
rate of adoption of technologies (including mechaniza tion);  and limited access  to formal credit and 
financing.  The report also touches upon a variety of inappropriate policies and institutions.  Among 
these are the weak agricultural extension services as a result of their devolution to local government 
units;  significant financial losses resulting from government intervention in the rice sector (see 
below) and a corresponding lack of investment in  research and development and in the commodities 
in which the Philippines has a comparative advantag e.  Progress in identifying strategic agriculture 
                                                      
1 Bureau of Agricultural Statistics (2011). 
2 NEDA (2011). 
3 Foreigners (including corporations with 60% or less domestic equity) may not own farmland, but may 
lease it for 25 years (extenda ble for another 25 years) subject to area limitations. 
4 Under the Eighth Regular Foreign Investment Negative List, agriculture is among the professions 
reserved for Filipino citizens except in cas es prescribed in law (Table AII.2). 
5 Under Presidential Decree No. 194 and its implementing guidelines, up to 100% foreign investment 
in the rice and corn industry may be permitted if it is deemed to be urgently needed.  The foreign investor must submit a development plan to the National Food Authority (NFA), and at least 60% of the equity must be 
transferred to Filipino citizens over a 30-year period.  NF A online information, "Important Features of P.D. 194 
and the Guidelines Required in the Divestment of Foreign Equity".  Viewed at:  http://www.nfa.gov.ph/files/pd194-impfeat.pdf. 
6 As at December 2010, 83% of land acquisition an d distribution had been completed (a total of 
4.274 million hectares).  Of this 56% was private agricultural land, and the remaining 44% included landed estates and government-owned lands. 
7 CARPER Law (RA 9700), Section 14.  Viewed  at:  http://www.lawphil. net/statutes/repacts/ 
ra2009/ra_9700_2009.html. WT/TPR/S/261 Trade Policy Review 
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  and fishery development zones (SAFDZs) has been  slow.  The Development Plan proposes a large 
number of goals and strategies to address these shortcomings.8   
4. The Department of Agriculture (DOA) is respons ible for agriculture in the Philippines, and 
the 1997 Agriculture and Fisheries Modernizati on Act (AFMA) (as amended by R.A. 9281) governs 
agricultural (and fisheries) policies.9  Legislative developments over the review period have been the 
enactment of:  the Organic Agriculture Act in 2010 to promote organic farming, and the Philippine 
Rubber Research Institute Act (2010) to develop the Philippine rubber industry, inter alia,  through 
government support for research and development, seed ling propagation, and the dispersal of rubber 
trees.  The Agri-Agra Reform Credit Act (2009) re quires all banking institutions (government and 
private) to set aside at least 25% of their total lo anable funds for agriculture and fisheries credit in 
general, of which at least 10% for beneficiaries undertaking certain activities.10  The Climate Change 
Act (2009), inter alia , mainstreams climate change into gove rnment policy formulation, establishes 
the framework strategy and programme on climate change, and creates the climate change commission.  Incentives are offered under both th e AFMA and the Organic Agriculture Act (see 
below). 
5. The National Food Authority (NFA) buys rice an d corn from domestic producers.  It has the 
exclusive authority to import and export rice, alt hough the private sector is increasingly involved (see 
below).  When there is a shortfall in the market, the NFA may be instructed by the President (through 
the issuance of an executive orde r) to import sugar and corn to stabilize prices.  It also issues export 
permits for corn when domestic consumption has been fulfilled.  The Government, as part of efforts to 
trim the national budgetary deficit, has been looking at how to restructure, streamline or privatize 
certain activities of the NFA.  As at November 2011, three bills were being considered in Congress, 
relating to changing is its pow ers, functions, and status.
11   
6. The Agro-Industry Modernization Credit a nd Financing Programme (AMCFP) is the 
Department of Agriculture's umbrella financi ng and credit guarantee programme for small-scale 
farmers and fishermen.  It provides loans to fina nce activities within the agricultural value chain, 
including production, processing, trading, and marketi ng.  The authorities indicated that interest rates 
are market-based to allow for the recovery of le nding costs.  The AMCFP is being funded from loan 
receivables from the Department of Agriculture's prev iously administered directed credit programmes.   
It has two modes of financing:  either loan f unds are sold wholesale to accredited retailers for 
relending to small-scale farmers and fishermen;  or special time-deposits are placed in accredited 
cooperative banks for lending to sm all-scale farmers and fishermen.12  The latter method eliminates 
the need for wholesalers, resulting in a lower interest rate.   
7. The Philippine Crop Insurance Corporation, a go vernment-owned and controlled corporation, 
provides insurance to farmers for losses resulting from natural disasters.   
                                                      
8.NEDA (2011). 
9 Agriculture and Fisheries Modernization Act (R .A. 8435).  Viewed at:  http://www.da.gov.ph/ 
n_agrilaws/ra/afma.pdf. 
10 R.A. No. 10000, the Agri-Agra Reform Credit Act (2009).  Viewed at:  http://www.atty.ws/2010-
republic-acts/?p=8. 
11 Congress online information.  Viewed at:  http ://congress.gov.ph/download/index.php?d=billstext.  
The respective House Bills are numbered 160, 1528 and 4284. 
12 Accredited retailers include rural and cooperativ e banks, farmer cooperatives and organizations, non-
government organizations (NGOs), and people's organizations. The Philippines WT/TPR/S/261 
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  8. The Philippines ranks in the top ten in the worl d for producers of rice, bananas, and coconuts, 
and is the biggest world's producer of pineapples.13  Crops account for 65% of the total value of 
agricultural production and livestock and poultry for 35%;  paddy, pigs, and bananas are the most 
significant in value terms (Table IV.1). 
Table IV.1 
Agricultural production, 2010  
Product Value of production  
(PHP million, current prices) % of total value of production 
 
Crops, of which   
Rice, paddy 230,906.8 22% 
Banana 106,485.7 10% 
Coconut 81,273.9 8% 
Corn 69,698.4 7% 
Sugarcane 38,547.9 4% 
All othera 147,387.9 14% 
Livestock and poultry, of which   
Pigs 172,049.2 17% 
Chickens 112,512.8 11% 
All otherb 77,425.5 7% 
Total: 1,036,288.7 100% 
a This includes pineapples, coffee, mangos, tobacco, abaca, peanuts, mongo, cassava, camote, tomatoes, garlic, onions, cabbages , 
 eggplants, calamansi, and rubber. b This includes carabao, cattle, goats, dair y, ducks, chicken eggs, and duck eggs. 
 
Source:  Bureau of Agricultural Statistics (2011), Selected Statistics on Agriculture .  Viewed at:  
 http://countrystat.bas. gov.ph/documents/ssa2011.pdf. 
9. The simple average applied tariff on agricultu ral products (ISIC definition) for 2011 is 
7.7%.14  Applied tariffs range from 0-50%;  with the high est tariff applied to corn (50%).  The simple 
average bound tariff is 30.8%.  Tariff quotas are maintained on 0.8% of 15 applied tariff lines (0.2% of total tariff lines).  As noted in Chapter IV.2, cane sugar has an applied tariff of 65%, and rice and 
beet sugar an applied rate of 50%. 
10. There has been significant ag ricultural liberalization under the ASEAN Free Trade Area 
(AFTA) (Chapter III, Table III.4).  Under the Philippines' other FTAs, transition periods for tariff liberalization end between 2016 and 2022 (Chapter II, Table II.3). 
11. Under the AFMA, all certified agricultural (and fisheries) enterprises are exempt from the 
payment of customs duties on imports of all types of  agricultural and fisheries inputs, equipment and 
machinery until 2015.
15  These fiscal incentives are also ava ilable to organic farmers under the 2010 
Organic Agriculture Act.  In addition, agricultu ral (and marine) food products and agricultural inputs 
are exempt from VAT (at 12%) (Chapter III(1)(iii)(g)).  VAT is zero-rated on the sale/purchase of bio-organic products (both inputs and produce). 
12. Other measures to assist organic production, foreseen under the Organic Agriculture Act, 
include:  provision of special rates by the Land Ba nk of the Philippines;  subsidies for certification 
                                                      
13 FAO Stat online database.  Viewed at:  http://faostat.fao.org. 
14 This average excludes the in-quota, and includes the out-of-quota rates. 
15 R.A. 9281.  Viewed at:  http://nafc.da.gov.ph/afma/PDF/ra9281.pdf. WT/TPR/S/261 Trade Policy Review 
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  fees and other support services to facilitate organi c certification;  and a seven-year income tax 
exemption, starting from the date of registration, fo r organic food and organic inputs or produce.  In 
addition, local government units are charged with identifying local tax incentives.16   
13. In its Uruguay Round schedule, the Philippines has included 118 tariff lines for which special 
safeguard measures may be taken.  Over the revi ew period, the Philippines has imposed a special 
safeguard measures on frozen chicken (affecting one tariff line).  The measure was initially imposed 
in November 2004 and lifted in December 2006;  it was reinstated in January 2007 and lifted in 
November 2009.  Special safeguard measures on onions and shallots, imposed in December 2004, 
were lifted in January 2005.17 
14. The Philippines notifications to the WTO are outstanding in a number of areas.  There have 
been no notifications of either the volume of im ports under tariff-quota commitments or domestic 
support during the review period.18  The Philippines' most recent notification on export subsidies 
covers the period 2005-07;  in this notification it reported that no export subsidies were provided.19 
15. Most support to agriculture in the Philippines is  effected through tariff protection, which has 
contributed to high domestic prices for key agri cultural products.  In addition, the Government 
intervenes in the market by controlling imports and e xports of rice, buying from producers, stocking, 
and selling to wholesalers (see below).  It has also invested considerable amounts in various 
programmes, particularly the Hybrid Rice Commerc ialization Program (HRCP).  In 2007, estimated 
nominal protection rates (NPR) (i.e. domestic prices are higher than border prices) were 26% for beef, 
27% for chicken and rice, 32% for corn, 80% for sugar, and 94% for pork.  Coconut was an exception 
as NPRs were negative for coconut oil and copra. 20  
16. It has been reported that, since the Philippines last notification for domestic support in 2001, 
support for research, inspection services, and infrastru cture improvements has increased substantially, 
to about PHP 1.5 billion, PHP 2.5 billion, and PHP 7.7 billion, respectively, in 2008.  Over the 2001-08 period, support for input subsidies rose to PHP 3.6 billion.  At the same time, despite 
increases in reference prices for ri ce and corn, the total value of support remains low compared with 
the value of agricultural production.
21 
(a) Selected sectors 
Rice 
17. The National Food Authority, provides price support to growers of rice.  It buys paddy from 
farmers at a support price recommended by th e Inter Agency Committ ee on Rice (composed of 
representatives from different government agencies) to en sure what it considers to be a fair return.  
Currently this support price is PHP 17 per kg.  It then sells rice to accredited dealers at fixed prices 
                                                      
16 The Organic Agriculture Act (RA 10068).  Viewed at:  http://www.da.gov.ph/n_agrilaws/ra/ 
ra100681.pdf. 
17 WTO documents G/AG/N/PHL/40, 4 October 2011, and G/AG/N/PHL/39, 19 January 2009.  
The SSG covered chicken products under HS 0207.1492, and onions and shallots under HS 0703.1000 
18 The latest notification on domestic support was for the period 2002-04 (WTO document 
G/AG/N/PHL/37, 16 January 2009).  The latest notification on the volume of imports under tariff quota 
commitments is for 2004 (G/AG/N/PHL/34, 28 April 2006). 
19 WTO document G/AG/N/PHL/38, 14 November 2008. 
20 Cororaton (2008).   
21 Cororaton (2008). The Philippines WT/TPR/S/261 
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  (ranging from PHP 25 per kg (wholesale) to PHP 27 (retail)).22  Farmers are not required to sell their 
paddy to the NFA and may sell directly to millers and traders.  They also have the option to buy-back 
the same volume of rice sold to the NFA within six months and resell it, to benefit from any rice price 
increases above the NFA support price (F armers Option Buy Back scheme).   
18. The Philippines is one of a few countries that have benefitted from the Uruguay Round 
Agreement on Agriculture (AOA) special treatm ent clause (Annex 5), which has allowed it to 
maintain an import quota on rice, under certain cond itions.  In 2006, the Philippines negotiated the 
continuation of this regime un til 30 June 2012.  The Philippines must import a minimum of 
350,000 tonnes of rice at an in-quota tariff rate of 40%.  It is required to allocate country-specific 
quotas each year to:  Australia (15,000 tonnes);  Ch ina (25,000 tonnes);  India (25,000 tonnes), and 
Thailand (98,000 tonnes).23  Imports of rice above the 350,000 tonnes threshold are subject to the 
MFN duty rate of 50%.  Over the review period, the Philippines' imports of rice have well exceeded the 350,000 tonnes minimum access commitments.  In 2010 imports were (2.2 million tonnes);  
2009 (1.6 million tonnes);  2008 (2 .3 million tonnes);  2007 (1.8 million tonnes);  2006 (1.6 million 
tonnes);  and 2005 (1.6 million tonnes).   
19. The NFA has control over imports of rice:  it has the authority to import rice itself or to 
allocate import quotas to licensed importers (i.e. F ilipino farmers, cooperatives, or private grains 
businesses).
24  The review period has seen much greater private participation in rice importing, in line 
with the government policy:  all country-specific quota allocations are now imported by the private 
sector.25  All out-of-quota rice is imported by the NFA dir ectly.  It is hoped that greater private sector 
participation will help the NFA to address some of its very substantial debts, which amounted to 
PHP 177 billion in 2010.  The authorities noted that wh en the NFA imports directly, it has to resort to 
foreign borrowing and hence incurs signi ficant interest rate repayments.  
20. In 2010, the DOA launched a 2011-2016 Rice Self  Sufficiency Roadmap (RSSR) which has 
evolved into the Food Staples Self-Sufficiency Road map.  This programme has three components:  (i) 
increasing and sustaining the gains of production th rough the use of production interventions and 
establishment of enabling mechanisms;  (ii) management  of consumption;  and, (iii) diversification of 
staples. 
Sugar  
21. In 2010, the Philippines produced 1.7 million tonn es of raw sugar.  In the same year it 
exported sugar to the United States (89,380 tonnes at a value of US$44,361,224) and to Japan 
(9,000 tonnes at a value of US$1.9 million).  Th e Philippines benefits from a preferential quota 
allocation to the U.S. market, but since 2011 has also  exported to the United States at the MFN rate.  
The authorities noted that exports enter Japan at the MFN rate.   
                                                      
22 NFA online information.  Viewed at:  http://www.nfa.gov.ph/index.php?id1=3&id2=1&id3=0 and 
http://www.nfa.gov.ph /index.php?id1=3&id2=4&id3=0. 
23 WTO documents WT/Let/562, 8 February 2007, and G/MA/TAR/RS/99/Rev.1, 27 September 2006. 
24 The legal basis for the NFA's authority is the National Grains Authority Act (Presidential Decree 
No. 4).  Viewed at http://www.nfa.gov.ph/files/PD-04.pdf , as amended by the Agricultural Tariffication Act 
(Republic Act 8178).  View ed at:  http://www.chanrobles .com/republicactno8178.htm. 
25 The NFA makes an announcement in  January each year inviting the pr ivate sector to import.  There 
is a maximum allocation per importer which, over the review period, has varied between 2,500 tonnes and 
5,000 tonnes.  Customs duties must be paid up-front.  In some years a percentage of the quota has been set aside 
for Farmers Organizations.  The rice must be imported by mid-year otherwise an escalating fine is applied. WT/TPR/S/261 Trade Policy Review 
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  22. As reported in the Philippines' previous TPR, the Sugar Regulatory Administration (SRA), an 
"attached agency" of the Department of Agricu lture, manages sugar production and supply, through 
the "quedan system".26  In addition to NFA's occasional role  in importing sugar, SRA-registered 
international sugar traders may im port and export sugar.  The authorities noted that traders must 
receive clearance from the SRA to release the impo rted sugar from Customs.  The SRA will either 
classify the sugar as "domestic" or "reserve".  If classified as "domestic" it may be sold domestically.  Reserve sugar must be stored and may only be re leased onto the domestic market once authorization 
has been obtained from the SRA for it to be recl assified from "reserve" to "domestic".  The SRA 
authorizes traders to export once it has ensure d that domestic demand has been satisfied. 
23. Sugar remains highly protected.  Imports are restricted by a tariff quota with in-quota rates for 
cane sugar of 50% and out-of-quota rates of 65%.  A ke y challenge facing the sector is to prepare for 
sugar tariff liberalization under ASEAN Free Trade Area (AFTA).  Liberalization will be completed 
in 2015, rather than in 2010, as a result of the Philippines' invocation of the Protocol to provide special consideration for rice and sugar.
27  The SRA has developed a Sugarcane Industry Roadmap 
(2011-2016), which identifies targets to increase la nd area for production, productivity, and yields.  
The Roadmap, envisages, inter alia , farm consolidations;  the pr ovision of R&D and extensions 
services;  as well as infrastructural improvements, in particular farm to mill roads.28  I t  i s  a l s o  
envisaged that sugar mills will co-generate power to sell to the power grid, and be used as biofuel.  
With respect to the latter,  the Philippines introd uced mandatory incorporation of locally sourced 
biofuel into gasoline and diesel in 2007 (Box IV.1).   However, the Philippines needs to enhance its 
refining capacity to satisfy the demand expected fr om this measure.  The authorities indicated that 
there are three bioethanol production plants in the country with an annual total capacity of 79 million 
litres.  Another plant is under construction which will  have an annual capacity of 54 million litres;  it 
is expected to be operational in mid 2012.  Ho wever, the mandated requirement is well above 
domestic production levels (461 milli on litres), and the balance is being imported by oil companies.  
Box IV.1 
Biofuel Act:  summary of main provisions 
Bioethanol requirements 
Gasoline   
Requirement for 5% locally sourced bioethanol blend in gasoline by  2009, and 10% by 2011.  If there is a supply shortage of loc ally 
produced bioethanol, oil companies may import bioethanol to the ex tent of the shortage as determined by the National Biofuel Bo ard.  
A 2011 Department Circular subsequently ma ndated that the 10% bioethanol blend by volume should commence in August 2011, with 
3 gasoline grades exempted until February 2012.  
Diesel  
Requirement for 1% biodiesel to be  blended into diesel engine fuels.  Within tw o years, consideration to be given to raising th is to 
minimum 2% (in February 2009, the minimum biodi esel blend by volume was increased to 2%). 
Box IV.1 (cont'd) 
                                                      
26 The "quedan" system of production quotas is described in WTO (2005).  
27 On 21 May 2010, the AFTA Council endorsed the Philippines' request for a waiver of its 
commitments on sugar products through the invocation of the Protocol.  Hence, tariffs on cane or beet sugar will 
be reduced from 38% in 2010 to 5% in 2015.  See Tariff Commission online information.  Viewed at:  http://www.tariffcommission.gov.ph/eo_892.htm;  and "ASEAN 2007 Protocol to Provide Special 
Consideration for Rice and Sugar".  View ed at:  http://www.asean.org/22975.pdf. 
28 Department of Agriculture (2011). The Philippines WT/TPR/S/261 
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  Incentives 
Specific tax  
The specific tax on local or imported biofuels content to be zero (gasoline and diesel fuel components to be subject to prevail ing tax rates). 
VAT  
Sale of raw material used in bi ofuels to be exempt from VAT. 
Water effluents  
Water effluents from the producti on of biofuels used as liquid fertilizer and for other agricultu ral purposes are exempt from w aste water  
charges. 
Financial assistance 
Government financial institutions to give high priority to extend fina ncing to Filipino citizens or entities in which at least 60% of the 
capital stock belongs to Filipino citizens and th at will engage in biofuel-related activities. 
Source:  Biofuels Act 2006 (R.A. 9367).  Viewed at:  http://www.senate.gov.ph/ republic_acts/ra%209367.pdf.  
(ii) Fisheries 
24. In 2010, 1.5 million people were employed in the fisheries industry.29  Under the Constitution 
and Fisheries Code (R.A. 8550), fishermen must be Filipino citizens;  the use and exploitation of 
fishery and aquatic resources is reserved exclusively to Filipinos;  and forei gn equity in the operation 
of deep-sea fishing vessels is capped at 40% (Tab le AII.2).  Fish processing plants in special 
economic zones may be fully foreign owned. 
25. In 2009, the value of fisheries production in the Philippines was nearly PHP 215 billion.  
During the review period, there has been a relative decline in the importance of the commercial catch 
and a corresponding increase in the relative share of aquaculture in total production (Table IV.2).  All 
certified fisheries enterprises are exempt from the pa yment of customs duties on imports of all types 
of fisheries inputs, equipment, and machinery until 2015.30  The Bureau of Fisheries has been 
constructing hatcheries for aquaculture purposes,  in collaboration with local governments. 
Table IV.2 
Value of fish production, by type of fishing operation (2005-10) 
(PHP million and %) 
Date Total (PHP million) Commercial (% of total)a Municipal (% of total)b Aquaculture (% of total)c 
2005 146,392.9 32 34 34 
2006 163,374.4 30 36 34 
2007 180,545.2 30 36 34 
2008 215,813.5 29 33 38 
2009 215,582.1 27 35 38 
2010 221,050.8 27 35 38 
a Production from commercial fishing vessels. 
b Capture activities in various marine and inla nd bodies of water.  Various marine bodies  of water includes the municipal waters 
 that are 15k from the shoreline.  Only sm all-scale fishing is allowed in municipal wa ters and fishing boats should be less tha n 3 
 gross tonnes. c
 Production from aquaculture activities. 
Source:  2010 Philippine Statistical Yearbook. 
26. Tariffs on fish (live, fresh, chilled, frozen, dr ied, etc.) range from 1% to 15% (2011).  As 
reported in the Philippines' previous review, non-tari ff barriers mainly restrict fish imports.  Imports 
of fresh chilled or frozen fish are only allo wed when certified as "necessary" by the DOA in 
                                                      
29 Bureau of Agricultural Statistics online informati on.  Viewed at:  http://countrystat.bas.gov.ph. 
30 R.A. 9281.  Viewed at:  http://nafc.da.gov.ph/afma/PDF/ra9281.pdf. WT/TPR/S/261 Trade Policy Review 
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  consultation with the Fisheries and Aquatic Resources Management Council (FARMC).  Fish 
imported for canning or processing does not require a certificate but must have a permit.  The regulation of imported live exo tic species and live prawn and shrimp is based on "import risk 
analysis" and existing biosafety laws (Chapter 3(1)(vi)(b)). 
(2) M
ANUFACTURING  
27. The Philippines' manufacturing industry mainly comprises:  food and beverages, electronics, 
chemicals, petroleum refining, mineral processing, motor vehicles, and tobacco (Table IV.3). 
Table IV.3 
Manufacturing production, 2005-10  
(PHP billion) 
 
 2005 2006 2007 2008 2009 2010 
Food and beverages 569 541 -  655 ..  ..
Radio, television and communica tion equipment 488 514 - 479 ..  ..
Coke, refined petroleum and othe r fuel products 341 400 - 461 ..  ..
Chemicals and other chemical products 221 203 - 216 ..  ..
Basic metals 146 213 - 196 ..  ..
Office, accounting and computing machinery 263 298 - 154 ..  ..
Electrical machinery and apparatus 122 128 - 140 ..  ..
Motor vehicles, trailers and semi-trailers 126 129 - 134 ..  ..
Non-metallic mineral products 86 85 - 91 ..  ..
Tobacco products 61 65 - 74 ..  ..
Other manufacturing 581 600 - 497 ..  ..
.. Not available. 
Source:  National Statistics Office (2008 and 2005), Annual Survey of Philippine Business  and Industry ;  and (2006) Census 
of Philippine Business and Industry . 
28. Based on COMTRADE data (SITC Rev.3), manuf actured goods accounted for 85.1% of total 
merchandise exports in 2010.  The Philippines' main exports were machinery and transport 
equipment, such as electronic inte grated circuits, other electrical machines, and automotive products.  
In the same year, manufactures accounted for 66.8% of merchandise imports, principally office 
machines and telecommunications equipment.  Invest ment in manufacturing is significant (Chapter I). 
29. In 2011, the simple average applied tariff on manufactured products (ISIC definition) was 
6.4%, with tariffs ranging from 0-65%.  Cane suga r (with an applied tariff of 65%), rice and beet 
sugar (50%), and automotives, motorcycles, a nd waste materials (30%) are among the products 
receiving the highest tariff protection.  Tariff quotas apply to 49 tariff lines, representing 0.6% of the 
total tariff.  
30. A variety of incentives are offered to assist manufacturing industries.  These include tax and 
other incentives offered by the Philippine Economic  Zone Authority (PEZA) for enterprises operating 
in export processing zones (EPZs), and tax incentives from the Board of Investments (BOI) under the 
Omnibus Investment Code for enterprises producin g non-traditional exports or engaged in sectors 
listed in the Investment Priorities Plan (IPP) (Chapter III(3)(i)).   
31. The electronics industry includes mainly se miconductors, electronic data processing 
equipment, office equipment, telecommunications equipment, automotive, and consumer electronics.   The Philippines WT/TPR/S/261 
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  Most of these industries are foreign-owned, with multinational companies assembling imported 
components in EPZs.  The Government intervenes minimally in the sector.  
32. Government assistance to the automotive sector  is channelled through the Motor Vehicle 
Development Programme (MVDP).  The objective of the Programme is to encourage domestic 
automobile production by imposing low tariffs (bet ween 0 and 1%) on motor vehicle components and 
high tariffs on finished automobiles and motorc ycles (between 15-30%).  This programme was 
revised in 2010, but the revisions have not yet been implemented (see Ch apter III(2)(vi)(b)).  The 
authorities indicated that incentives offered under th e Automotive Export Program expired in 2009.  
There are no foreign investment restrictions.  Japan ese firms dominate, mainly as joint ventures, some 
with majority equity.   
33. Over the review period, the textiles and clothing  industry has declined dramatically, with the 
abolition of the quota system in 2005, and its guarant eed access to the U.S. ma rket.  Whereas in 2005, 
textiles and clothing accounted for US$2.6 billion of  export earnings and 311, 000 employees, in 2010, 
it had declined to US$1.9 billion of export earning s and 150,000  employees.  The United States 
remains the largest export market, taking 80% of Philippine apparel exports  in 2009.  A Garments 
Industry Transformation Plan, developed to revive th e industry, is to be implemented by the newly 
created Garments and Textile Industry Developmen t Office (GTIDO).  The authorities indicate that 
barriers to the growth of the Philippines' garments and textile industry include tariff protection, GSP 
standards, and rules of origin restrictions in key exports markets.  
34. Legislation has been in place since 2004 (t he Footwear, Leather Goods and Tannery 
Industries Development Act) to support the develo pment of small and medium-scale footwear, leather 
goods, and tannery industries.  These industries have  been identified as having potential to generate 
employment and increase exports.31  A variety of incentives are offered to enterprises that have been 
accredited by the Philippine Economic Zone Authority (PEZA) and the Board of Investments (BOI).  These include:  zero duty on imports of capital equipm ent, and a tax credit on domestically purchased 
supplies, raw materials, and semi-manufactured produc ts equivalent to 100% of the value of internal 
revenue taxes and customs duties due on imports of these items.  At end 2011, five footwear 
enterprises were accredited under the Act, none of which had availed themselves of the available 
incentives.  The authorities confirmed that, in sp ite of provisions in the Act, no sector-specific 
financing facilities are targeted solely at the footwear, leather goods, and tanneries industries. 
35. The Government continues to use procuremen t of official uniforms containing Philippine 
tropical fabrics as well as and footwear and leathe r goods manufactured in the Philippines as a means 
to support local industries.
32   
                                                      
31 In 2008, (the latest year for which data are available) the value of output for footwear, bags and 
luggage amounted to PHP 15 billion. 
32 Under the 2004 Tropical Fabrics Law (RA9242), the use of Philippine tropical fabrics is required for 
the official uniforms of government officials and employees.  (R.A. 9242 and its implementing regulations.  Viewed at:  http://excell.csc.gov.ph/c scweb/RA9242.html).  Procurement pr ovisions relating to footwear and 
leather goods are set out in the Footwear, Leather G oods and Tannery Industries Development Act (R.A. No. 
9290).  Viewed at:  http://www.tar iffcommission.gov.ph/ra_9290.htm. WT/TPR/S/261 Trade Policy Review 
Page 74 
  
  (3) SERVICES  
(i) Services commitments under the GATS and FTAs 
36. The Philippines has undertaken GATS commitments in 4 of the 12 sectors listed in the 
Services Sectoral Classification List (communications services, financial services, tourism services, 
and transport services) and in a total of 35 of its  156 subsectors (Table IV.4).  Following domestic 
ratification, the Fourth Protocol to the GATS (b asic telecommunications) entered into force on 
25 April 2006 and the Fifth Protocol to the GAT S (financial services) on 16 March 2011.  The 
horizontal commitments the Philippines has taken under the GATS limit the positions foreigners may 
occupy in corporations;  acquisition of land (m arket access, mode 3);  access to domestic credit 
(national treatment, mode 3);  and entry and tempor ary stay of natural persons supplying services 
(market access, mode 4).  MFN exemptions have been  taken for the entry and stay of natural persons 
supplying services;  maritime transport services (liner cargo trade and cabotage);  and commercial banking and investment houses.
33  The Philippines has submitted an initial conditional offer on 
services in the context of the Doha De velopment Agenda (DDA) negotiations.34 
37. The Philippines also has serv ices commitments under the ASEAN Framework Agreement on 
Trade in Services (AFAS), signed in December 1995 (see Chapter II).  The AFAS aims to enhance 
cooperation in and substantially elim inate restrictions to trade in services among member states, with 
a view to realizing a free-trade area in services.35  ASEAN has concluded seven packages of AFAS 
commitments through five rounds of negotiations si nce January 1996.  In addition, there have been 
five packages of commitments in financial services a nd six on air transport.  Individual commitments 
contain horizontal and sector-specific commitments and MFN exemptions36;  the latest  package was 
signed in February 2009.37  The Philippines has also made services commitments under the ASEAN 
FTAs with Australia and New Zealand;  China;   and Korea, as well as through its Economic 
Partnership Agreement with Japan (Table IV.4). 
Table IV.4 
Summary of Philippines' specific commitments under the GATS and FTAs 
 GATS AFAS ASEAN-
Australia-
New Zealand ASEAN-
China ASEAN-
Korea Philippines-
Japan 
1.   Business services  X X X X X 
2.   Communications services X X X X X X 
3.   Construction services  X X X X  
4.   Distribution services  X    X 
5.   Education services   X   X 
6.   Services related to the environment  X X X X X 
7.   Financial services X X X  X X 
8.   Social and health services  X    X 
Table IV (cont'd) 
                                                      
33 WTO documents GATS/EL/70, 15 April 1994, and GATS/EL/70/Suppl.2, 26 February 1998. 
34 WTO document TN/S/O/PHL, 15 June 2005. 
35 ASEAN Framework Agreement on Services (AFAS).  Viewed at:  http://www.aseansec.org/ 
6628.htm.   
36 The horizontal commitments undertaken by the Philippines in its AFAS schedule are identical to 
those in its GATS commitments.  Its MFN exemptions are also the same, with the exception of provisions on 
financial services.  
37 ASEAN Secretariat online information.  View ed at:  http://www.aseansec.org/23986.htm. The Philippines WT/TPR/S/261 
 Page 75 
 
 
   GATS AFAS ASEAN-
Australia-
New Zealand ASEAN-
China ASEAN-
Korea Philippines-
Japan 
9.   Tourism and travel related services X X X X X X 
10.  Recreational, cultural and sports   services  X     
11.  Transport services X X X  X X 
12.  Other services  X  X  X 
 
Source : WTO documents GATS/SC/70, 15 April 1994 and MT N.GNS/W/120, 10 July 1991 (Services Sectoral 
 Classification List);  WTO Services Database ;  ASEAN online information.  Viewed at:  
 http://www.aseansec.org/23986.htm;  http://www.asean.org/22262.htm;  h ttp://www.asean.org/19105.htm and;  
 http://www.asean.org/23340.htm;  and MO FA online information.  Viewed a t:  http://www.mofa.go.jp/region/asia-
 paci/philippine/epa0609/annex6.pdf. 
(ii) Financial services 
38. At end 2010 there were 758 banks (an average of  9 banks per 100,000 population) and 119  
insurance companies operating in the Philippines.   The Philippine banking system's deposits 
amounted to 77% of GDP, and for the insurance industry the deposit to GDP figure was 1.04%.  The small size of the insurance services market is, inter alia , attributed to a lack of priority being placed 
on insurance products by citizens, and a low fina ncial literacy level among low-income households.
38  
The insurance industry employed nearly 60,000 pe ople (end 2010), and the banking industry just over 
136,000 (mid 2011).   
39. The Philippines is a signatory to the Fifth Protoc ol to the GATS (on financial services), which  
entered into force on 16 March 2011, following domestic ratification.39  The Philippines' 
commitments cover insurance and insurance-relate d services, banking, and other financial services.  
Its GATS commitments on all financial services pr ovided through mode 3 (commercial presence) are 
subject to a "public interest" test and the require ment for foreign institutions to demonstrate their 
capacity to contribute to the Philippines' development objectives.  Moreover, it is stipulated that the Bangko Sentral ng Pilipinas (BSP) Monetary Board must ensure 70% of the banking system's 
resources or assets are held by domestic banks that are at least majority Filipino owned.  For most 
financial services the Philippines' specific comm itments require commercial presence and contain 
citizenship requirements and foreign equity limitations.  In banking, prior authorization is required in 
the provision of certain services, and there are limita tions on the number and location of foreign bank 
branches.  With respect to th e Philippines specific commitments on insurance, life and non-life 
insurance must be provided by companies auth orized by the Insurance Commission to transact 
business in the country.  However, th is is not the case for reinsurance.
40  For market access through 
modes 1 and 2 for reinsurance and retrocession, th e Philippines' specific commitments require that 
risks must first be offered to authorized  insurance or reinsu rance companies.  
40. The Philippines' financial services commitmen ts under the AFAS, ASEAN-Australia-New 
Zealand FTA (AANZFTA), the ASEAN-Korea Agreem ent on Trade in Services (AK-ATS), and the 
Philippines-Japan FTA are largely th e same as those under the GATS, but with the higher thresholds 
for foreign capital participation in commercial banks.41  In addition, the Philippines AFAS schedule 
                                                      
38 NEDA (2011). 
39 WTO documents S/L/382, 8 March 2011, and WT/Let/759, 23 March 2011. 
40 WTO document GATS/SC/70/Suppl.3, 26 February 1998. 
41 Under the GATS, the thresholds for foreign capital participation in commercial banks are:  
(a) acquisition of up to 51% of the voting stock of an existing domestic bank, or (b) investing in up to 51% of 
the voting stock of a new locally incorporated banking subsidiary.  Under the AANZFTA the thresholds are WT/TPR/S/261 Trade Policy Review 
Page 76 
  
  contains commitments on bancassurance, stockbroker dealers and stockbroker dealer salesmen.  It 
also has more liberal commitments on all forms of insurance, comprising higher foreign equity 
thresholds, and mode 4 commitments on the temporar y stay of foreigners employed in technical 
positions.42 
41. MFN exemptions under the GATS and the other FTAs contain reciprocity provisions with 
respect to commercial banks, investment houses, and financing companies.  
(a) Banking services 
42. The BSP is the Philippines' principal banking re gulatory and supervisory body sector, and is 
responsible for competition policy issues within th e sector.  It derives its authority from the New 
Central Bank Act (RA 7653, 1993).  There have been no changes to this Act over the review period, 
but amendments to it are pending in Congress.  The BSP has some overlapping responsibilities with 
the Securities and Exchange Commission and the Insurance Commission with respect to 
quasi-banks.43   
43. The Philippine Deposit Insurance Corporation (PDIC) , an attached agency of the Ministry of 
Finance, is responsible for:  providing depos it insurance;  conducting bank examinations in 
coordination with the BSP;  acting as receiver in  the event of bank failure;  and, under certain 
conditions, providing support to ba nks in danger of closing.  Depos it insurance through the PDIC is 
compulsory for all banks, and deposits are insured up to a maximum of PHP 500,000 (up from PHP 250,000 in 2004).  The PDIC's Deposit Insura nce Fund (DIF) stood at PHP 66.03 billion in 
August 2011.  Amendments to the PDIC Charter in  2009 have given the PDIC authority to:  conduct 
independent special bank examinati ons;  examine deposit accounts in ailing banks if there is a finding 
of unsafe banking practices;  and to determine insured deposits.
44 
44. Banks in the Philippines may take one of a numbe r of forms.  Universal banks are commercial 
banks that have expanded functions, such as:  performing activities of investment houses;  investing in 
non-allied enterprises45;  owning up to 100% of thrift banks , rural banks, or a llied financial or non-
financial enterprises, or 51% of insurance compan ies.  Commercial banks may do likewise, but they 
may not own insurance companies, and their equ ity in other non-bank financial institutions (e.g. 
leasing and credit-card companies) is capped at 40%.   Thrift banks comprise savings and mortgage 
banks, private development banks, stock savings a nd loan associations, and microfinance institutions.  
                                                                                                                                                                     
55% and 51% respectively, under the AK-ATS they are 60% and 51%, and under the AFAS and the bilateral 
agreement between Japan and the Ph ilippines they are 60% and 60%. 
42 Protocol to implement the first to fifth packages of commitments on financial services under the 
AFAS.  Viewed at:  http://www.asean.org/agreements/AEC/Finance/Protocol-5th.pdf;  and 
http://www.asean.org/agreements/AEC/F inance/Protocol-5th-schedule.pdf. 
43 Quasi-banks engage in borrowin g funds through issuin g, endorsing, or accep ting deposit substitutes 
for re-lending or purchasi ng receivables and other obligations (WTO, 2005). 
44 The PDIC's responsibilities are set out in RA 3591, as amended by R.A. 9576 (2009).  Viewed at:  
http://www.pdic.gov.ph/index.php? nid1=10#sec2, and http://www.lawphil.net/statutes/repacts/ra2009/ 
ra_9576_2009.html.  With respect to its investigative function, the PDIC may undertake bank examinations with 
the prior approval of the BSP Monetary Board.  If it finds that banks are performing unsound banking practices 
or acting illegally, then it must submit a report of the examination to the Monetary Board.  The Monetary Board or the PDIC Board of Directors may take corrective action, which may include the imposition of a fine. 
45 A list of what constitutes a non-allied undertaking is provided in the Manual of Regulations for 
Banks.  Viewed at:  http://www.bsp .gov.ph/regulations/reg_MORB.asp. The Philippines WT/TPR/S/261 
 Page 77 
 
 
  Rural banks are privately owned and provide basi c banking services in rural areas, as do Cooperative 
banks which are owned by cooperativ es or federations of cooperatives.46   
45. The banking sector is dominated by private dom estically-owned and constituted institutions.  
While rural banks are significant in numerical te rms, universal and commercial banks together 
account for the lion's share (89%) of total bank assets (Table IV.5).   
46. There are three fully government -owned banking institutions:  the Development Bank of the 
Philippines (DBP);  Land Bank of the Philippines (L BP);  and Al Amanah Islamic Development Bank 
of the Philippines.  Together these account for 13% of the total assets of the banking sector.  The DBP 
and LBP provide commercial banking services  as well as development financing.47  The Al Amanah 
Islamic Bank offers capital or project financing pr ogrammes (public and private sector).  In 2007, the 
Government sold all of its remaining sh ares in the Philippine National Bank (PNB).48  T h e  
Government owns 13.99% of Union bank, through the Philippines Social Security System;  95.59% of 
the Government Service Insurance System (GSIS) Family Savings Bank, thr ough GSIS;  and 100% of 
the Philippine Postal Savings Bank, through the Philippine Postal Corporation.  
Table IV.5 
Philippines' banking institutions, March 2011  
Bank type Number Tota l assets (PHP billion) 
Universal and commercial banks 38 6,048.3 
Private 35 5,146.8 
- domestica 19 4,378.9 
- foreignb 16 767.9 
State owned 3 901.5 
Thrift banks 73 569.3 
Rural banks 595 164.7 
Cooperative banks 40 15.4 
a Banks constituted in the Philippines.  
b Branches and subsidiaries of banks constituted abroad.  
 
Source:  Information provided by the authorities. 
47. Banking services remain underdeveloped in certain parts of the country:  around 37% of the 
Philippines' municipalities are either unserved or under served in terms of access to basic infrastructure 
and services.  Various reforms have been proposed  in the Philippine Development Plan 2011-16,  
including the promotion of alternative means of de livering financial services in underserved parts of 
the country, and encouraging the development of  new banking products and services aimed at the 
poor.49  In this regard, authorities indicated that  the BSP and the Department of Finance are 
developing e-banking and microfinance programmes.  
48. According to the IMF and confirmed by the au thorities, the Philippines banking system was 
resilient in the face of the global financial crisis:  the major banks were we ll capitalized and liquid, 
                                                      
46 BSP online information.  Viewed at:  http://www.bsp.gov.ph/banking/bspsup.asp;  and WTO (2005). 
47 The DBP offers development financing in four areas:  infrastructure and logistics;  social services;  
micro, small and medium enterprises;  and the environment.  The LBP, being mandated to spur countryside 
development, mainly offers loans in the areas of agriculture, energy (including renewable energy and biofuels) and non-agricultural countryside development projects. 
48 The Government of the Philippines had a 12.5% share in the PNB. 
49 NEDA (2011). WT/TPR/S/261 Trade Policy Review 
Page 78 
  
  and asset quality was generally high.50  BSP measures taken to address some strains in the distribution 
of liquidity included:  an expansion in the a llowable collateral for the BSP repo facility and a 
relaxation in the valuation of this collateral;  an increase in the budget of the BSP's rediscounting 
window;  a reduction in the deposit reserve requireme nt;  dollar liquidity in the spot and swap 
markets;  a reduction in the policy interest rate;  and relief to banks through allowing reclassification 
of financial assets measured at fair value in accordance with international best practice.  
The authorities noted that while there have been ba nk closures following the crisis, were not crisis-
related, since they mainly affected thrift and rura l banks, neither of which ha ve foreign clients, nor 
deal with foreign exchange transactions.   
49. As noted in the Philippines' previous Revi ew, the BSP prevented the opening of new bank 
offices and branches from September 1999, and the en try of new banks from 13 June 2000, to slow 
down the expansion of the banking system and to co nsolidate the industry.  The moratorium on new 
banks remains in place.  However, in an effort to  make the financial system more competitive, in 2005 
restrictions on new bank offices and branches were  lifted for all areas of the country with the 
exception of Metro Manila.  In July 2011, the BSP started a two-phased lifting of prohibitions on bank 
branching in Metro Manila.51 
50. The Strengthening Program for Rural Banks, launc hed by the PDIC and BSP in August 2010,  
is a two-year programme to encourage weaker rural banks to merge with stronger ones.  The 
incentives offered are:  financial assistance from the PDIC and regulatory relief from the BSP.52  As at 
September 2011, 16 applications, involving 28 rural banks had been submitted to the PDIC.53 
51. Foreign investment in the banking sector in the Philippines is governed by the Act 
Liberalizing the Entry and Scope of Operations of  Foreign Banks in the Philippines and for Other 
Purposes (R.A. 7721 of 1994), which sets out the c onditions and legal structures permitted for the 
commercial presence of foreign banks.54  Under the law (Sections 3 and 8), 70% of the assets of the 
entire banking system must be held by domestic banks .  In principle, three forms of foreign entry are 
allowed:  (i) establishment of a branch with full banking authority;  (ii) investment of up to 60% of the 
voting stock of a new banking subsidia ry;  and (iii)  investment of up to 60% of the voting stock of an 
existing domestic bank.55  In practice, the first and second options  are not available:  a limit was fixed 
on the number of banks that could set up branches with  full banking authority, and this limit has been 
satisfied, and, as above-mentioned, a mo ratorium on new banks remains in place.56   
                                                      
50 IMF (2010). 
51 BSP online information.  Viewed at:  http ://www.bsp.gov.ph/publications/media.asp?id=392 
&yr=2005 and http://www.bsp.gov.ph/regula tions/regulations.asp?type=1&id=2757. 
52 PDIC online information.  Viewed at:  http://www.pdic.gov.ph/files/PDF%20SPRB%20 
Implmenting%20Guidelines.pdf. 
53 As reported by the authorities, of these 16 applica tions, 4 have been approved by the PDIC;  two are 
in the process of initial evaluation;  one has been deferre d;  three have been referred to the PDIC's electronic 
matching facility and six were either denied or unqualified. 
54 R.A. No. 7721.  Viewed at:  http://www.bsp.gov.ph/downloads/laws/RA7721.pdf.  
55 Under the Thrift Bank Act, R.A. No. 9706 (1995), there was a ten year window for full foreign 
ownership of thrift banks.  This window closed in 2005. 
56 As set out in implementing regulations to R.A. 7721 (1994), the BSP Monetary Board may only 
authorize ten new foreign banks to establish branches with full banking authority.  Each foreign bank is entitled 
to three branches.  However, should they wish to do so, three additional branches may be established provided 
that they remit to the new branch the U.S. dollar equivalent of PHP 35 million per additional branch, and 
provided further that the locations of these three are to be assigned by the Monetary Board (BSP circular No. 51, 
"Rules and Regulations Implementing Republic Act No. 7721.  Viewed at:  http://www.bsp.gov.ph/ The Philippines WT/TPR/S/261 
 Page 79 
 
 
  52. Except for cooperatives, whose ownership is limited to Filipino citizens, there are no 
restrictions on the type of bank that foreigners  may invest in, and foreign banks are permitted to 
perform the same functions, enjoy the same privileg es, and are subject to the same limitations as 
imposed on domestic banks of the same category.57 
53. The minimum capital requirements are PHP 4.95 billion for a universal bank, and 
PHP 2.4 billion for a commercial bank.  For a thrift bank, the requirement ranges from PHP 250 million to PHP 1 billion and for a rural bank, from PHP 5 million to PHP 100 million, 
depending on the location of the head office.  At  end-December 2010, the average risk-based capital 
adequacy ratio for all banks was 17% on a cons olidated basis, and 16% on a solo basis. 
(b) Insurance services 
54. In 2010, 119 companies were providing insuran ce or reinsurance services in the Philippines 
compared with 132 at the time of the Philippin es' previous Review.  Seventeen of these are 
foreign-owned companies,  which account for 59% of  total insurance sector premiums (at end 2011) 
and for the most part, have chosen to incorporate domestically rather than establish through a branch 
(Table IV.6).
  
Table IV.6 
Market structure of insurance companies, 2005-10  
Insurance company type 2005 2006 2007 2008 2009 2010 
Composite (offering both life and non-life) 3 3 3 3 3 4 
Domestica 2 2 2 2 2 3 
Foreign       
- Domestically incorporated 1 1 1 1 1 1 
- Branch - - - - - - 
Life 33 33 32 32 35 30 
Domestic  24 25 23 25 27 22 
Foreign       
- Domestically incorporated 8 7 8 6 7 7 
- Branch 1 1 1 1 1 1 
Non-life 94 93 87 85 84 84 
Domestic 84 83 80 78 76 76 
Foreign       
- Domestically incorporated 5 5 4 4 5 5 
- Branch 5 5 3 3 3 3 
Professional reinsurer 2 1 1 1 1 1 
Domestic 2 1 1 1 1 1 
Total: 132 130 123 121 120 119 
- Nil. 
a Domestic means at least 60% Filipino-owned. 
Source: Insurance Commission online information.  View ed at:  http://www.insuran ce.gov.ph/_@dm in/upload/ 
statistics/Key_data%202009.pdf;  and http://www.insura nce.gov.ph/_@dmin/upload/st atistics/Key%20Life%20 
Insurance%20Statistics%202010.pdf. 
                                                                                                                                                                     
regulations/regulations.asp?type=1&id=1492).  The Manual of Regulation for Banks (Section X102.2(b)) states 
that the suspension of the grant of new banking licences extends to the organization and incorporation by 
foreign banks of new commercial banking subsidiaries. 
57 Sections 4 & 5 of the Rural Bank Act, which originally stated that rural banks should be fully owned 
by Filipinos and should likewise have a Filipino Board of  Directors, was amended with  the entry into force of 
R.A. 7721. WT/TPR/S/261 Trade Policy Review 
Page 80 
  
  55. Through the Government Service Insurance System (GSIS), the Government of the 
Philippines owns 24.25% of the National Reinsura nce Corporation, which provides life and non-life 
insurance services for domestic and regional clients.   Reinsurance companies doing business in the 
Philippines are required to cede to the Corporation at least 10% of outward reinsurance placements.58  
Under the Property Insurance Law (R.A. 656), the GSIS, has responsibility for administering the 
General Insurance Fund, which provides insurance coverage for government assets and properties.59  
According to an external source, a 1994 order requi res sponsors of build-operate-transfer projects and 
privatized government corporations to secure thei r insurance and bonding from the GSIS at least to 
the extent of the Government's interests:  this is considered by private insurance firms to be a 
significant market-access barrier.60  At end-December 2010, the total risks underwritten by the GSIS 
amounted to PHP 867.26 billion. 
56. There have been no changes to the ins titutional and regulatory framework governing 
insurance services in the Philippin es since its last Review.  The Insurance Commission (IC) is 
responsible for regulating the sector:  including licensing companies and persons;  surveillance;  
adjudication of claims and complaints;  and approval of insurance premiums and products.  The 
governing legislation is the 1978 Insurance Code.61  Amendments to the Code are pending with 
Congress:  these relate mainly to prudential and solvency requirements.  
57. In order to provide insurance services in th e Philippines, companies must obtain a licence 
(Certificate of Authority) from the IC.  Licensing re quirements also apply to individuals in various 
insurance-related jobs.  Foreign insurance compan ies may operate as branches, subsidiaries or joint 
ventures, provided they have been in the top 20 0 world foreign companies for the past ten years.62  
There are no limits on foreign equity participation.63   
58. Motor car third party liability insurance is compulsory as well as passenger personal accident 
insurance for public utility vehicles.  Tariffs  are evaluated and approved by the IC upon 
recommendation of the Philippine Insurers and Reinsurers Association (PIRA). 
59. New minimum capitalization requirements were in troduced in 2006 for existing insurance and 
reinsurance companies, with  compliance deadlines ranging from 2006 to 2011 (Table IV.7).64  The 
authorities indicated that the minimum paid- up capital requirements differ depending on the 
percentage of foreign equity participation because the Government wishes to ensure that foreign 
investors are committed to staying in the country, and that they are bringing in new investment funds and not funds sourced through domestic borrowings.  More stringent requirements for the start-up 
                                                      
58 Presidential Decree No. 1270, Section 4.  View ed at:  http://www.chanrobles.com/presidential 
decrees/presidentiald ecreeno1270.html. 
59 The GSIS's main responsibility is to provide so cial security benefits to Government employees. 
60 USTR (2011). 
61 1974 Insurance Code.  Viewed at:  http://www.insurance.go v.ph/htm/pd612.htm. 
62 This requirement is set out in IC Department Order No. 100-94, October 24, 1994.   
63 WTO (2005). 
64 Prior to 2006, the minimum paid-up capital requirements for insurance companies were:  (a) 
PH P250 million and a contribution of PHP 50 million to a surplus fund, where foreign equity was 60% or more;  
(b) PHP 150 million and a contribution of PHP 50 million to  a surplus fund, where foreign equity was more than 
40% but less than 60%;  and PHP 75 million and a contribution to a surplus fund, where foreign equity was less than 40%.  For reinsuran ce companies, the minimum paid-up capital wa s PHP 500 million where foreign equity 
was 60% or more;  PHP 300 million where foreign equity was more than 40%, but less than 60%;  and 
PHP 150 million where foreign equity was 40% or less. The Philippines WT/TPR/S/261 
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  operations were set at PHP 1 billion for life and non -life insurance companies (regardless of level of 
foreign equity participation) and PH P 2 billion for reinsurance companies65. 
60. Foreign companies and foreign reinsurance co mpanies must deposit with the IC approved 
securities valued at PHP 300 million and PHP 500 million, respectively, for each branch.66  
The Philippines maintains security funds of PH P 5 million each for life companies and non-life 
companies.  Insurance companies make a one-time c ontribution to this fund in an amount proportional 
to their net worth during the year of assessment.   The security funds are used for payments to 
claimants and reinsurance companies in the event of insolvency of an author ized insurance company. 
Table IV.7 
Minimum paid-up capital require ments for existing insurance and reinsurance companies, 2011 
Minimum statutory 
net worth  
(PHP Million)  Minimum paid-up capital (PHP Million)  
 Insurance (life and non-life) Reinsurance 
 Wholly Filipino-
owned foreign equity  
≤ 40% foreign equity > 40% 
but < 60% foreign equity at 
least 60%  
100 50 - - - -
150 75 - - - -
200 100 100 - - -
250 125 - - - -
300 - 150 150 - -
350 175 - - - -
400 - 200 200 - -
500 250 250 250 250 -
600 - 300 300 300 -
700 - - 350 350 -
750 - - - - 375 
850 - - - 425 - 
1,000 - - - 500 500 
1,250 - - - - 625 
1,500 - - - - 750 
2,000 - - - - 1,000 
- Nil. 
 
Source:  IC online information.  Viewed at:  http://www. insurance.gov.ph/_@dmin/ upload/reports/DO%2027-06.pdf. 
61. Taxes levied on life insurance companies include a 2% premium tax, a documentary stamp 
tax (for insurance policies over PHP 100,000) ranges from PHP 10 to PHP 100 depending on the 
value of the policy.  Life insurance is VAT exempt .  Non-life insurance is subject to 12% VAT and a 
documentary stamp tax of 12.5% of the premium valu e.  Local governments also levy a fire services 
tax for fire policies, ranging from 0.5% to 1%.  These taxes are applied equally to domestic and 
foreign companies. 
                                                      
65 Insurance Commission online information.  Vi ewed at:  http://www.ins urance.gov.ph/_@dmin/ 
upload/reports/DO%2019-06.pdf. 
66 WTO (2005). WT/TPR/S/261 Trade Policy Review 
Page 82 
  
  62. Reinsurance services may be obtained from abro ad upon the authorization of the IC.  The 
reinsurer must have a resident agent registered with the IC.  
63. Since 2009, the IC has been responsible for li censing and regulating pre-need companies, 
which partially compete with insurance (previous ly they were regulated  by the Securities and 
Exchange Commission (SEC)).  The pre-need industr y provides for payments at the time of need for 
memorial or burial services, education or pensions.  Under the Pre-Need Code of the Philippines, new 
pre-need companies must have a minimum paid- up capital of PHP 100 million.  Rates for existing 
companies may be lower depending on the number of different plans sold.  Companies must also make monthly deposits into a trust fund for each pre- need plan in order to ensure that the benefits 
promised under the contract may be met.  At leas t 10% of the trust fund must be invested in 
government securities.  Liquidity reserves must be sufficient to cover at least 15% of the trust fund but in no case less than 125% of the amount of the availing plans for the succeeding year.
67  T h e  
authorities confirmed that there are no restrictions  on foreign equity participation in pre-need 
companies.   
(iii) Telecommunications  
64. Telecommunications in the Philippines is entirely private-sector driven:  the Government does 
not have a stake in any telecommunications co mpany.  In 2008, the Philippines was ranked 90th out of 
159 countries in the ITU's ICT Development Index.68  The share of communications services (postal 
telecommunications) in GDP was 3.1% in 2010.  
65. The Philippines is a signatory to the Fourth Prot ocol to the GATS, which entered into force in 
April 2006.  It also has telecommunications co mmitments under the ASEAN Framework Agreement 
on Trade in Services (AFAS), the ASEAN FTAs with China, Korea, and Australia and New Zealand, 
as well as through its Economic Pa rtnership Agreement with Japan.  
66. There have been no changes to the laws and regulations governing telecommunications since 
the Philippines' previous Review (Table IV.8).  At  that time three ICT-related bills were pending in 
Congress, the Convergence Bill, DICT bill, a nd National Telecommunications Commission (NTC) 
Reorganization Bill.69  None of these has yet been enacted , but they remain on the Government's 
reform agenda as articulated in th e Philippines Development Plan 2011-16.70  In addition the 
Government intends to reassess out-dated aspects of the Public Telecommunications Policy Act and to develop a competition policy framework for the ICT sector.  
                                                      
67 Pre-Need Code of the Philippines (Republic Act No. 9829).  Viewed at:  http://www.lawphil.net/ 
statutes/repacts/ra2009/ra_9829_2009.html.  Implementing Rules and Regulations of Republic Act No. 9829.  Viewed at:  http://www.insurance.gov.ph/htm/pre-need.htm. 
68 The ICT Development Index comprises 11 indicators covering ICT access, use, and skills.  Viewed 
at:  http://www.itu.int/dms_pub/itu-d/opb/i nd/D-IND-ICTOI-2010-U2-SUM-PDF-E.pdf. 
69 WTO (2005). 
70 As reported in the Philippines Development Plan 2011-16, the DICT Bill would establish a 
Department of Informati on and Communications Technology (DICT) to  replace the Commission on Information 
and Communications Technology.  The DICT's functions would be to coordinate and implement a national ICT 
development agenda.  The NTC Reorganization Bill would, inter alia , make the NTC's charter more responsive 
to technological and market changes.  The Convergence Bill would rationalize all pertinent laws;  provide a technology-neutral legal basis to encourage investment into the ICT sector and the deployment of infrastructure 
and services to rural and unserved areas;  permit the continued development of new technologies;  and 
criminalize cable theft.  The Philippines WT/TPR/S/261 
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  67. The NTC, an attached agency of the Office of the President, is responsible for administering 
the provisions of the Public Telecommunicati ons Policy Act.  This includes:  ensuring 
telecommunications services are provided in underserved areas;  granting Certificates of Public Convenience and Necessity (CPCN) (see below);  est ablishing rates and tariffs in circumstances 
where there is not free competition;  and resolving in terconnection disputes.  It is also responsible for 
allocating radio-frequency spectrum.  The NTCs deci sions may be appealed to the Court of Appeal 
and the Supreme Court.  
Table IV.8 
Telecommunications laws and regulations, 2011 
Law/Regulation Selected features 
Constitution (Article XII, 
Section 11) Sets out FDI restrictions for public utilities  
Public Telecommunications Policy 
Act (RA 7925, 1995) Sets out the regulatory responsibilities of the NTC (see below);  lists the categories of 
telecommunications entities for which a congressional franchise is/is not required 
EO 59 (1993)  Guidelines for 
Compulsory Interconnection of 
Authorized Public 
Telecommunications Carriers 
 Sets out rules on interconnection.  Interconnec tion is mandatory on a non-discriminatory basis 
between authorized public telecommunications carrier s as well as with respect to connecting other 
value-added telecommunications services.  In terconnection to be effected through bilateral 
negotiations between the parties, subject to t echnical, operational and traffic settlement rules 
issued by the NTC.  Parties may request the NT C to determine interconnection terms in the event 
that they fail to reach an agreement.  NTC has the authority to impose penalties for any violation 
of the provisions of the Order.  
EO 109 (1993) Policy to improve 
the provision of local exchange 
carrier service Sets out universal service requirements:  intern ational gateway operators are required to provide 
minimum of 300 local exchange lines per interna tional switch termination and at least one rural 
exchange line must be provided for every ten urban ones. 
EO 467 (1998)  Providing for a 
national policy on the operation and 
use of international satellite communications in the country Providers of basic telecommunications services allowed to access all international fixed satellite 
systems.  Direct access to international m obile satellite services allowed for maritime, 
aeronautical and land mobile uses subject to NTC regulations.  Operation and use of global 
mobile personal communication by satellite (GMPCS) to contribute to attainment of universal 
access allowed.  Non-discriminatory interconn ection between GMPCS and existing systems   
 
Source:  NTC online information.  Viewed at:  http:// portal.ntc.gov.ph/wps/porta l/!ut/p/_s.7_0_A/7_0_LU. 
Licensing system  
68. Companies wishing to provide public telecoms services (i.e. those involving the establishment 
of a fixed network) must obtain a "congressional franchise", which requires the approval of both 
Houses of Congress.71  The maximum period for which a franchi se may be granted is 50 years.  Upon 
expiry, the franchisee must go back to Congress if it wants for an extension.  In practice franchises 
have generally been granted for 25 years.  No  information was available on whether Congress has 
rejected any such applications.  Telecoms services are regarded as a public utility and foreign equity 
in telecoms companies (both public (i.e. basic) and value added) is limited constitutionally to 40%.72  
Foreigners may not become executives or managers  of telecoms firms and the number of foreign 
directors must be proportionate to the firm's aggregate share of foreign capital. 
69. Franchised public telecoms companies must obt ain a CPCN from the NTC in order to provide 
the relevant service.  To obtain a CPCN, a petition must be filed with the NTC, supported by 
                                                      
71 Under Republic Act No. 7925 (Article IV), a congressional franchise must be obtained for:  local 
exchange operators;  inter-exchange car riers;  international carriers;  mobile radio services;  and radio paging 
services.   
72 The authorities indicated that, according to a Depart ment of Justice opinion, if the service is not 
provided directly to consumers or the public, then the 40% limit does not apply. WT/TPR/S/261 Trade Policy Review 
Page 84 
  
  financial, legal, and technical documents;  the petition undergoes a public hearing.  No information 
was available with respect to the criteria applied at  the public hearing to determine whether the CPCN 
is granted.  The CPCN specifies geographical area, type or  classification of activities, regulations for 
providing the services and, in some cases, the rates chargeable.   
70. Value-added telecoms services providers need not obtain a franchise but are required to 
register with the NTC.73   
71. Cross-ownership restrictions apply, a nd no entity can have a franchise in both 
telecommunications and broadcasting (radio or tele vision), either through airwaves or by cable.  
Foreign equity in a private radio communications network is limited to 20%.  Broadcasting and TV 
are constitutionally reserve d for Filipino nationals.74   
Regulatory developments over review period 
72. The authorities indicated that over the review period, interconnection negotiations have been 
brought to the NTC for intervention:  some remain in arbitration;  others have resulted in the 
commercial activation of interconnection facilities.   
73. In 2008, the NTC made interconnection of backha ul operations to international optical cable 
system landing sites mandatory, thereby giving companies without their own cable landing stations a 
choice in the backhaul network used. 75  This was aimed at driving down prices for international calls, 
but no information was available as to whether this has been the case.  In addition, in 2008, the NTC 
approved mandatory interconnection of wireless fi xed-line providers without access charges within 
local calling areas:  the authorities did not elaborat e on the purpose of this measure and its intended 
impact.   
74. The NTC indicated that it has prepared memo randum circulars on interconnection charges for 
mobile voice service and on short messaging service (SMS).  These are intended to set the interconnection charges for voice calls between mobile  operators with separate networks at PHP 4 to 
PHP 1 per minute, and for SMSs between two sep arate networks from PHP 0.36 to PHP 0.15 per 
SMS.  
75. The Public Telecommunications Policy Act requires the NTC to allocate spectrum to the 
"best qualified" provider(s).  Since the Philippin es' previous Review, there has been one spectrum 
auction, for 3G services (in 2006).  The authorities indicated that applicants were pre-qualified based 
on a set of criteria relating to their track record, rollout plan, and schedule rates for their services.  
This was to be followed by an auc tion in the event there were more qualified applicants than available 
spectrum blocks.
76  Since there were five blocks available for assignment and four applicants found to 
                                                      
73 Value-added services may be provided by franchised public telecoms services provided:  they may 
not discriminate against othe r value-added services providers with resp ect to rates or deny them equitable access 
to their facilities.  In addition the value-added services they offer may not be cross-subsidized from their utility 
operations. 
74 Article XVI, Section 11 of the Constitution. 
75 As at August 2011, the Philippines was connected by five submarine cables:  Tata TGN-Intra Asia 
cable (landed at Ballesteros);  APCN-2 (Batangas);  Asia-America Gateway (Currimao);  EAC-C2C (Batangas);  
SeaMeWe-3 (Batangas).  A further submarine cable, Southeast Asia Japan cable, to be landed at Nasugbu, is 
planned (Telegeography online information.  Viewed at:  http://www.telegeography.com). 
76 Award of the 3G spectrum was made following the provisions of NTC Memorandum Circular No. 
07-08-2005, which provides the Rules and Regulations on the Allocation and Assignment of 3G Radio 
Frequency Band. The Philippines WT/TPR/S/261 
 Page 85 
 
 
  have met the qualification criteria, the four (Sma rt, Globe, Digitel, and Cure) were awarded the 
spectrum blocks.  The fifth block has yet to be allocated, pending court proceedings. 
76. In the Philippine Development Plan (2011-16), it is noted that there is a need for greater 
efficiency and transparency in spectrum regulation and allocation.  The authorities indicated that the 
NTC is looking to automate its spectrum management  and radio monitoring system, which would help 
in frequency planning and allocati ons;  licensing and billing;  surve illance and monitoring;  and data 
collection. 
77. The NTC sets tariffs for telecoms providers.  Ho wever, if a service has sufficient competition 
to ensure fair and reasonable rates or tariffs, the NTC may exempt the service from its rate or tariff 
regulations.  The authorities did not clarify the criteri a used to determine "sufficient competition", or 
which providers' tariffs ar e currently regulated.  
78. Since 2005, five cases concerning NTC decisions have  been appealed to the Court of Appeal.  
Petitions were denied in four of the cases, and dismissed in one.  
Market developments 
79. The fixed-line market is dominated by Philippine Long Distance Telephone Company 
(PLDT), which had 53.15% share of subscribed lines in 2010.77   
80. Nine cellular mobile providers were in opera tion in 2010.  The main players were Smart 
(53.7% market share), and Globe (31.9% market share).  
81. Over the period 2005-10, the Philippines saw a su rge in mobile cellular use, with coverage 
over doubling from just over 40% to just over 85%.  Fixed-line subscriptions grew very gradually 
over the review period, but remain low overall at just over 7% (Chart IV.1).  
82. According to a 2008 study on the regulatory  and policy environment in the Philippines, 
telecoms tariff rates have been going dow n, particularly in the cellular sector.78  Overall the 
Philippines is ranked 113th out of 161 countries in the ITU's ICT Price Basket (2009).  This study 
finds that measured as a percentage of GNI per cap ita, fixed-line and broadband prices are high in the 
Philippines;  this may account for the relatively low number of internet subscriptions (both for fixed-
line and fixed broadband).  Mobile cellular pr ices, on the other hand are relatively low.79 
83. VOIP is permitted in the Philippines.  However,  VOIP providers or sellers are required to 
register with the NTC, like any other value-added ser vice provider.  Carrier portability is unavailable.  
 
                                                      
77 The other main fixed line companies are:  Bayantel (11.38% of subscribed lines);  Bell Telecom 
(0.03%);  Digitel (7.82%);  ETPI/TTPI (0.57%);   Innove (16.02%);  and  PT&T (0.42%).   
78 Alampay (2008). 
79 ITU (2010). WT/TPR/S/261 Trade Policy Review 
Page 86 
  
  0102030405060708090
2005 2006 2007 2008 2009 2010Per centChart IV.1
Fixed-line and mobile subscriptions, 2005-10
Source :  ITU online information. Viewed at:  http://www.itu.int/ITU-D/ict/statistics/.Fixed per 100 
inhabitantsMobile per 100 
inhabitants
 
(iv) Transport 
84. Transportation services in the Philippines are bei ng developed in the cont ext of both national 
and regional plans, and priorities as articulated in the Government's National Transport Plan and the 
ASEAN Strategic Transport Plan (2011-15), ot herwise known as the Brunei Action Plan (BAP).80     
85. Under the GATS and under its FTAs, the Philip pines has made specific commitments on 
maritime and air transport services, as well as rail a nd road transport and certain services auxiliary to 
all modes of transport (cargo-handling services;  storage and warehousing services;  container-yard and depot services;  and freight forwarding services).  
(a) Maritime transport services  
86. The Maritime Industry Authority (MARINA), an  attached agency of the Department of 
Transportation and Communications (DOTC), h as overall responsibility for regulation and 
development of the four maritime sectors in  the Philippines (domestic and overseas shipping, 
shipbuilding/ship repair, and maritime manpower).  Its mandate includes:  policy development;  
registration and licensing of ships;  and provision of certificates required for carriers to operate 
domestically.
81 
87. MARINA has responsibility for registering vessels under the Philippine Register of Ships.  
Only Filipino nationals or domestic corporations or  overseas companies that are at least 60% Filipino-
owned may register vessels.  The Chief Executive and Chief Operating officers must be citizens and 
permanent residents of the Philippines.  Furtherm ore, the crew must be 100% Filipino.  These 
requirements are the same as those applied at the time of the Philippines' previous Review. 
                                                      
80 DOTC (2010);  and ASEAN (2010). 
81 MARINA's functions are set out in Executive Order No. 125 (1987), as amended by Executive Order 
No. 125-A (1987).  Viewed at:  http://www .marina.gov.ph/policies/execorders.aspx. The Philippines WT/TPR/S/261 
 Page 87 
 
 
  88. Ships are registered to provid e either domestic or international shipping.  MARINA grants 
certificates to domestic shipping operators taking into consideration the economic and beneficial 
effects the proposed service should have to the port, province or region it proposes to serve.  
89. There are 7,223 Philippines-registered ships (excluding fishing vessels) involved in the 
domestic transport of cargo and passengers (representing 1.9 million gross tonnes as at June 2011).  
There are 169 Philippine registered ships engaged in international voyages, (3.8 million gross tonnes).  
The authorities noted that Philippines-registered ship s generally operate intern ationally, and do not 
tend to transport Philippine cargo.   
90. While cabotage is reserved to Philippine ship s registered to provide domestic shipping, a 
domestically flagged ship registered to provide overseas trade, may offer domestic services if granted 
a special permit by MARINA.  This special permit ma y be granted if:  (a) there is no existing vessel 
operating in the proposed route or area of operation;  (b) there is no available local vessel to transport 
the cargo to meet the shipping requirement;  (c) th e proposed vessel is contracted by a public or 
private entity;  or (d) in the case of a vessel carrying or bringing in foreign tourists, operation calls at 
domestic ports are part of its itinerary.82   
91. Foreign-registered vessels are prohibited fro m providing cabotage services, although a special 
permit may be granted by MARINA when no domestic  vessel is available or suitable to provide the 
service required, and the public interest warrants the same.83  The authorities indicated that these ships 
are mostly involved in oil exploration projects contracted by the Government, which require 
specialized ships not normally av ailable from the domestic fleet. 
92. It was noted in the Philippines' previous Re view, that domestic shipping was relatively 
expensive and highly concentrated.  In the context of the current Review, the authorities noted that 
lower freight costs are being realized as a result of the Government's "Strong Republic Nautical Highway Roll-On-Roll-Off Transport System" launched in 2002.
84  The Nautical Highway connects 
the islands of Luzon, Visayas, and Mindanao, and a llows for the continuous movement of cargo using 
land and water transport.  
93. The Philippines is a signatory to the 1974 Un ited Nations Convention on a Code of Conduct 
for Liner Conferences (UN Liner Code), but the auth orities indicated that this is not applied.   
94. Government cargos are reserved for Philippine-re gistered vessels.  An exemption may be 
obtained from the Philippine Shipper's Bureau if suitable Philippine-flagged vessels are unavailable at 
reasonable freight rates within a reasonable period.85 
95. All Philippine vessels must be repaired, altere d, reconditioned, converted and dry docked at 
domestic shipyards or ship-repair facilities registered  with MARINA.  Exemptions apply, subject to a 
waiver from MARINA, such as when emergency repa irs are required overseas, when repairs or works 
                                                      
82 These conditions are set out in MARINA Circular No. 105. 
83 R.A. No. 9295, Chapter III, Section 6;  and MARINA Circular No. 105/105-A. 
84 The RORO system is a network of roads and ports using a roll-on-roll-off ship designed to carry 
wheeled and tracked vehicles as all or most of its cargo.  These vehicles are driven or  towed on and off the ship 
either by the ship's owner ramps or shore-based ramp s.  These systems reduce co sts associated with cargo 
loading (crane systems and skilled crane operators are no t required) and enable RORO vessels to call at small 
ports. 
85 Cargo Reservation Law (PD 1466).  Viewed at:  http://www.lawphil. net/statutes/presdecs/ 
pd1978/pd_1466_1978.html. WT/TPR/S/261 Trade Policy Review 
Page 88 
  
  cannot be accommodated by Philippine shipyards or  when the Philippines is not a port of call.86  
There are no foreign equity limits in shipbuilding a nd ship repair, and the authorities indicated that 
this policy was upheld by a Supreme Court decision in 2000.  
96. The Philippines has a significant maritime manning  industry.  It has been reported that in 
2005, Filipino seafarers contributed to between 25%  and 28% of global manning, and US$2.5 billion 
to the Philippines' economy.87 
Ports 
97. The Philippines has around 950 ports including fishing ports and wharves, most of which 
serve inter-island trade.  Fifteen government-owned ports and several private ports serve international 
trade;  three ports handle foreign transhipment cargos.88  The principal port is the Manila Port, 
comprising the North Harbour, which mainly handles domestic trade, and the South Harbour and Manila International Container Terminal  (MICT), which handle foreign trade. 
98. The Philippine Ports Authority (PPA) is res ponsible for administering most state-owned 
ports:  it has 119 ports under its jurisdiction, comprising 23 base ports and 96 terminal ports.
89  In 
2010, 166 million tonnes of cargo we re transported through the PPA -administered ports;  42% was 
domestic.  There were nearly 44 million passenge r transport movements through these ports in the 
same year.  
99. Under its Charter, as revised, the PPA has the corporate powers to supervise, control, 
regulate, construct, maintain, opera te, and provide facilities and services in the ports belonging to it.  
The PPA has granted private corporations long-term  contracts to manage a nd operate some of its 
major ports:  the MICT is managed by Internatio nal Container Terminals Services Inc.;  South 
Harbour, Manila and the Port of Batangas are mana ged by Asian Terminals Inc.;  and Manila North 
Harbour is managed by Manila North Harbour Port  Inc.  The authorities reported that cargo handling 
services in various PPA ports have been privati zed and PPA-owned passenger terminal buildings in 
various ports are also being operated by private enti ties.  Foreign equity in port management, which 
includes cargo handling, passenger terminal a nd other related services, is capped at 40%. 
100. State-owned ports that are not under the PPA's juri sdiction are:  the Port of Cebu;  Port Irene;  
Poro Point, San Fernando Port;  Subic Bay; and the  Port of Polloc.90  Fishing ports are under the 
authority of the Philippines Fisheries Development Authority (PFDA) 
101. Private corporations may apply to the PPA for a licence to own, finance, develop, construct, 
and operate ports.  Foreign equity in port ownership is limited to 40%.  The construction of the port 
                                                      
86 Presidential Decree No. 1211 " Requiring all Philippine  owned and/or registered vessels to undertake 
repairs and drydocking with MARINA-registered ship repair yards".  
87 PDP Australia Pty Ltd and Meyrick and Associates (2005). 
88 Government-owned ports that serve international tr ade are:  South Harbour (Manila);  Manila MICT;  
Limay;  Batangas;  Legazpi;  Puerto Princesa;  Dumaguete;  Iloilo;  Cagayan de Oro;  Iligan;  Nasipit;  Surigao;  
Davao;  General Santos;  Currimao;  Salomague;  and  Zamboanga.  The ports that handle foreign transhipment 
cargos are:  Currimao, Salomague, and MICT.  
89 As clarified by the authorities, a base port is the center or hub of operations and is normally the 
busiest terminal in a Port Management Office (PMO).  A terminal port, on the other hand, is a port under the 
administration of the base port. 
90 The Port of Cebu is administered by the Cebu Port Authority;  Port Irene by Cagayan Economic 
Zone Authority;  Poro Point, San Fernando by Bases Conversion Development Authority;  Subic Bay by Subic 
Bay Metropolitan Authority;  and Port of Polloc by Autonomous Region of Muslim Mindanao. The Philippines WT/TPR/S/261 
 Page 89 
 
 
  must conform with the overall national port devel opment plan.  While the port facility and back-up 
area of the port may be privately owned, the for eshore area belongs to the Government.  In 2010, the 
426 private ports handled 58% of the Philippines' total cargo, mainly oil, petroleum products, and 
wheat. 
102. With respect to port auxiliary services, ther e is a constitutional requirement that customs 
brokers must be Filipinos.  Information was not av ailable on the regime applied for freight forwarding 
and maritime agency services.   
Incentives 
103. Certain passenger and cargo vessels and accessories may be VAT exempt to assist the 
domestic shipping industry.  However, VAT may only be exempt on imports when there is 
insufficient domestic production.91  This incentive scheme expires in 2014.  
Commitments under the GATS and FTAs 
104. The Philippines has made GATS commitments in maritime transport.  With respect to 
international passenger and freight transport (exc luding cabotage transport and government-owned 
cargos), the only limitations relate to market access mode 4, whereby it is specified that for 
specialized vessels, aliens may be employed as supe rnumeries only for a six-month period.  The only 
limitations with respect to leasing/rental of vessels without crew are that contracts must be approved 
by MARINA.  The Philippines inscrib ed a market-access limitation requiring repairs, conversion or 
drydocking of Philippine-owned or registered vessels to be done at MARINA-registered domestic ship-repair yards.  The Philippines has schedul ed MFN exemptions relating to preferential 
cargo-sharing arrangements granted to parties of the UNCTAD Liner Code
92, as well as cabotage 
transport, which is reserved for Philippine owned or registered vessels.  Limited access to cabotage 
transport is allowed on a reciprocal basis, with  countries with which the Philippines has concluded 
agreements on amity, commerce, and navigation.   
105. The Philippines specific commitments on maritime transport under the AFAS and ASEAN 
FTAs with Australia-New Zealand and Korea are identical to its GATS commitments.  Under the 
bilateral agreement between Japan and the Philip pines, non-discriminatory access to certain port 
services is scheduled as an additional commitment.  In addition, the Philippines has made specific 
commitments on maritime agency services, pushing and towing services, port and waterway operation services, and other supporting services for water transport. 
(b) Air transport 
Airlines and air services agreements (ASAs) 
                                                      
91 The VAT exemption applies to purchases of passenger and cargo vessels of 150 gross tonnes and 
above under a certain age, as well as other items such as  engines and spare parts, life-saving equipment, safety 
and rescue equipment, communication and navigational equipment, and metal plates used for transport 
operations.  For imports to be eligible for the VAT exemption, they must have the prior approval of MARINA and be imported by a MARINA-registered domestic supping operator. 
92 Under the arrangement, a party to the UNCTAD Liner Code effectively implementing the Code is 
assured of at least 40% share of its bilateral expor t and import liner cargo trade with the Philippines. WT/TPR/S/261 Trade Policy Review 
Page 90 
  
  106. In 2010, the Philippines recorded 41 million passenger movements by plane and 
563 million tonnes of cargo transported by air (bot h within the country and abroad).  Passenger 
transport increased steadily over the review  period, while cargo volumes fluctuated.93  
107. The Civil Aeronautics Board (CAB), an attached  agency of the Department of Transportation 
and Communications (DOTC), is responsible for li censing domestic and international airlines and 
regulating competition within the sector.94  The Civil Aviation Authority of the Philippines (CAAP), 
created in 2008, has responsibility for the regulation of technical, operational, safety, and security aspects of aviation.  It is a Government agency  attached to the DOTC with quasi-judicial and 
legislative powers, and has corporate attributes.  It replaces the Air Transportation Office.
95 
108. Under the Constitution, and as reflected in th e Civil Aviation Authority Act (2008), foreign 
equity in domestically licenced airlines is capped at 40%.96  Five major airlines are operating in 
the Philippines as of October 2011.  In addition, Ai r Asia, has been granted a provisional licence but 
has not yet commenced operations (Table IV.9).  Philippine Airlines (PAL) serves the majority of 
international scheduled routes;  34 small air carriers (a ir taxi operators) are cer tified to operate in the 
country.  All airlines are privately owned corpora tions.  Philippine carriers operate flights to 23 
territories.97   
109. The domestic market was opened for competiti on among domestic airlines in the 1990s (PAL 
previously had a monopoly).  While there are no  specific legal provisions limiting cabotage to 
domestically licenced airlines, this is achieved th rough the exclusion of these rights in air services 
agreements.  In 2010, the cabotage market account ed for 16.6 million passenger movements (up from 
7.1 million in 2004). 
Table IV.9 
Domestic airlines:  market share and foreign equity participation, October 2011 
Carrier Market share (%) Foreign equity 
participation (%) 
 Domestic International  
PAL 32 64 3 
Cebu Pacific Air 48 34 0 
Air Philippines 11 0 0 
Zest Air 8 2 0 
SEAir 1 0 40 
 
Source: Information provided by the authorities. 
110. International air services (cargo and passenger) are governed by bilateral ASAs.  ASAs are 
negotiated by the Philippine Air Negotiating Pane l and/or the Philippine Air Consultation Panel 
                                                      
93 For Philippine aircraft, passenger, and cargo statistics over 2001-10, see CAAP online information.  
Viewed at:  http://www.caap. gov.ph/web/downloads.htm. 
94 As noted in the Philippines previous review, the CAB is responsible for eliminating rate 
discrimination, unfair competition, and deceptive practi ces, and for approving airline mergers.  These matters 
are handled by public hearings, particularly if there are opposing parties or complaints. 
95 An Act creating the Civil Aviation Authority of the Philippines, authorizing the appropriation of 
funds therefore and for other purposes (R.A. 9497, 4 March 2008).  Viewed a t:  http://www.lawphil.net/ 
statutes/repacts/ra2008/ra_9497_2008.html. 
96 Civil Aviation Authority Act (2008) R.A. No. 9497, Section 44. 
97 Australia;  Bahrain;  Brunei Darussalam;  Canada;  China;  Hong Kong, China;  India;  Indonesia;  
Japan;  Kingdom of Saudi Arabia;  Korea;  Kuwait;  Malaysia;  Macau, China;  Netherlands;  Papua New 
Guinea;  Qatar;  Singapore;  Chinese Taipei;  Thailand;  United Arab Emirates;  United States;  and Viet Nam. The Philippines WT/TPR/S/261 
 Page 91 
 
 
  (together known as the Philippines Air Panels).98  In negotiating ASAs, the Philippines Air Panels are 
guided by the principles of promoting tourism, i nvestment, trade, employment, competition, and the 
competitiveness of Philippine domestic carriers.   
111. Current government policy is to pursue ASAs  more aggressively.  Under Executive Order 29 
(2011), the Philippines Air Panels are authorized to o ffer third, fourth, and fifth freedom rights to all 
airports other than the Ninoy Aquino Internatio nal Airport (NAIA) (which is approaching full 
capacity), and may do so without imposing restrictions  on frequency, capacity, or type of aircraft.  For 
ASAs already in force, the CAB has the authority to grant foreign air carriers increased frequencies 
and capacities beyond the terms of the relevant AS A.  These increases must be approved by the 
President and may have conditions a ttached, including that they may ap ply only for a specific period.  
112. The Philippines has signed 65  ASAs, all of which are in force (either fully or provisionally);  
14 agreements were signed over the review period (Table IV.10).  There was no noticeable shift 
towards a more liberal approach to ASAs over the re view period.  Most ASAs are restrictive, covering 
only third and fourth freedoms (fifth freedom tra ffic rights are permitted under 24 agreements).  All 
ASAs require substantial ow nership and effective control of the ai rline and dual approval of tariffs.  In 
addition, capacity is generally predetermined, with  a few exceptions.  On the other hand, multiple 
designation is the general rule.   
Table IV.10 
Key characteristics of the Philippines' ASAs, 2005-11  
Partner Signed Traffic 
rights 
(freedoms) Ownershipa 
 Tariffsb 
 Capacityc Designation 
Papua New Guinea 08/2011* 3,4 SOEC DA PreD Multiple
Malaysia  07/2011* 3,4 SOEC DA PreD (route 1,2) free (route 3) Multiple
Singapore 05/2010* 3,4,5 SOEC DA PreD Multiple
Turkey 02/2010* 3,4,5 SOEC DA PreD Multiple
Russia 12/2009* 3,4 SOEC DA PreD Multiple
Libya 10/2009* 3,4 SOEC DA PreD Multiple
United Kingdom 07/2009* 3,4 SOEC DA PreD Multiple
Spain 05/2009* 3,4 SOEC DA PreD Multiple
Australia 03/2009* 3,4,5 SOEC DA PreD (route 1) free (route 2) Multiple
Finland  09/2008 3,4,5 SOEC DA PreD Multiple
Iran 08/2008 3,4 SOEC DA PreD Multiple
Cambodia 06/2008* 3,4 SOEC DA PreD Multiple
Canada 06/2008* 3,4,5 SOEC DA PreD Multiple
New Zealand 11/2007 3,4 SOEC DA PreD Multiple
Note:  Agreements marked with an asterisk (*) have entered in to force on a provisional basis. 
 SOEC - substantial ownership and effective control; 
 DA - dual approval;  PreD - predetermination; 
 Free - free determination (free). 
Source:  Information provided by the authorities. 
113. Several agreements were signed over the revi ew period, to implement the ASEAN Open 
Skies Policy.  In addition, an ASA has been signed between ASEAN and China (Table IV.11).  The 
                                                      
98 As set out in Executive Order (EO) No. 28, 2011 , the Philippine Air Negotiating Panel is responsible 
for negotiations to conclude ASAs and the Philippine Air Consultation Bo ard is responsible for any succeeding 
negotiations.  Viewed at:  http://www.gov .ph/2011/03/14/executive-order-no-28-2/. WT/TPR/S/261 Trade Policy Review 
Page 92 
  
  authorities indicated that, to the extent there are conflicting provisions in bilateral and ASEAN air 
services agreements, the more liberal provision would prevail. 
114. Major challenges facing the CAAP have been the recent FAA-IASA downgrading (in 2008), 
the EU-EASA blacklisting (2010), and ICAO-USOAP specific safety concerns (2010).  These have 
had a negative implication for the eligibility of Philippine licenced aircraft to operate in these 
territories.  The authorities noted that to resolve th ese issues, the CAAP is in the process of amending 
its civil aviation rules;  employing the necessary qualified personnel;  stre ngthening its information 
database and aviation oversight functions; and co mplying with all other civil aviation safety 
requirements. 
115. The Philippines imposes a 3% common Carriers Ta x (CCT) and a 2.5% gross billings tax on 
carriers.  Tax reforms are being considered in Congress to reduce disincentiv es for long-haul carriers 
and thereby encourage tourism.  
Table IV.11 
ASEAN air services agreements signed since 2005 
Agreement Signed/entry into 
force (Philippines) Description 
 
ASEAN Multilateral 
Agreement on Air Services 
(MAAS) May 2009 / May 
2010  Requires substantial ownership and eff ective control of carriers.  Multiple 
designation applies.  Predetermination for capacity.  Covers 3rd, 4th and 5th freedom 
rights.  
ASEAN Multilateral Agreement on the Full 
Liberalization of Passenger 
Air Services (MAFLPAS) November 2010 / 
has not yet entered 
into force Builds on the MAAS to allow designated ai rlines of ASEAN Member States to 
provide air services from international ai rports in one territory to international 
airports in another territory, with full 3
rd, 4th and 5th freedom rights. 
ASEAN Multilateral Agreement on the Full 
Liberalization of Air Freight Services (MAFLAFS) May 2009 / May 
2010 The agreement offers a choice of owne rship (either substantial ownership and 
effective control; community of interest;  or principal place of business);  tariffs 
may be freely determined.  Covers 3
rd, 4th and 5th freedom rights. 
ASEAN-China Air Transport Agreement (AC-ATA) November 2010 / 
has not yet entered into force Allows designated airlines of ASEAN to pr ovide air services from any city with 
an international airport in its  territory to any ci ty with an international airport in 
the territory of China and vice versa with th ird and fourth freedom traffic rights.   
Discussions are being held to expand th e Agreement to include fifth freedom 
traffic rights.  
 
Source:  ASEAN online information.  Viewed at:  http://www.aseansec.org/7365.htm. 
Airports, airport management, and ground handling services 
116. The Philippines has 86 airports:  of these 10 ser ve international flights and 41 serve domestic 
scheduled services.  NAIA is the main airport for international flights.99  CAAP regulations provide 
that airports can be government or privately owned . 
117. As noted in the Government's National Tr ansport Plan, the Philippines air transport 
infrastructure needs rationalizing and upgrading:  airport infrastructure development has not kept pace with increased passenger traffic, and the NAI A is approaching full capacity.  Moreover, 
                                                      
99 Civil Aviation Authority of the Philippines online information.  Viewed at:  
http://www.caap.gov.ph/web/air ports.htm#.  The ten international airpor ts are:  Laoag, Subic Bay, Clark, 
Manila, Puerto Princesa, Kalibo, Cebu, Zamboanga, Tambler, and Davao.  Airports are classified as (a) international airports (airports with border-control facilities used for international flight s);  (b) principal airports 
(used for domestic scheduled flights either by jets (cla ss 1) or propeller planes (class 2);  and (c) community 
airports (used for general aviation aircraft). The Philippines WT/TPR/S/261 
 Page 93 
 
 
  The Philippines has more national airports than  justified by its size (geographically and 
economically). 100   
118. The Mactan-Cebu Airport and the Ninoy Aquino International airport are managed by the 
Mactan-Cebu International Airport Authority (M CIAA) and the Manila International Airport 
Authority (MIAA), respectively, which are governme nt-owned and controlled corporations, attached 
to the DOTC.101  The authorities noted that the management and operation of Caticlan Airport was 
recently awarded to the private sector.  There is al so a plan to privatize the operation and maintenance 
of Laguindingan Airport, which is due to be comp leted in 2012.  All other airports are operated and 
maintained by the CAAP.  Landing fees for international flights are around double those levied on 
domestic flights.  Fees are computed based on aircra ft gross weight.  For international operations the 
fees are US$2.48 per 500 kg, and for domestic operati ons the fee is PHP 48.18 per 500 kg.  The fees 
for international flights are a pplied regardless of ownership.   
119. Air traffic services are provided exclusively by the CAAP.  With respect to ground handling 
services, the authorities indicated that self, mutual, and third-part y handling are permitted.  
Sales, reservation, marketing, repair, and maintenance services 
120. The Philippines has undertaken GATS and FTA co mmitments on the maintenance and repair 
of aircraft;  and, on selling and marketing services.102  The authorities indicated that since air transport 
is considered to be a public utility, foreign equity  restrictions apply maximum of 40% to all mode 3 
market-access commitments.  This is specified in th e Philippines' horizontal commitments.  Subject to 
horizontal provisions, the Philippines has scheduled an  open regime for the maintenance and repair of 
aircraft, whereas specific commitments on selling an d marketing services vary slightly according to 
the respective agreement (Table IV .12).  Information was not available on the applied regime for 
sales, reservation, marketing, repair, and maintenance services.  
Table IV.12 
Philippines' specific commitments on sales, reservation, mark eting, and repair and maintenance services (modes 1-3) 
(Commitments:  full ■;  partial ◘;  unbound □) 
Sub-sector GATS/FTA coverage Market access National treatment 
Maintenance and repair of aircraft GATS;  ASEAN - Korea;  AANZFTA  M1 □* M1 □* 
  M2 ■ M2 ■ 
  M3 ■ M3 ■ 
 Philippines - Japan M1 □* M1 □* 
  M2 ■ M2 ■ 
  M3 ◘ M3 ■ 
Selling and marketing services       
Off-line carriers AANZFTA  M1 ◘ M1 ■ 
  M2  ■ M2  ■ 
  M3 ◘ M3 ■ 
   Philippines - Japan  M1 ◘ M1 ■ 
Table IV.12 (cont'd) 
                                                      
100 DOTC (2010).  
101 MCIAA online information.  Viewed at:  http://www.mactan-cebuairport.com.ph/corporate 
_mciaa.php. 
102 In addition, the Philippines has undertaken commitments on rental of aircraft without crew under the 
GATS, ASEAN-Korea FTA, and the AANZFTA.  Contracts fo r the lease of aircraft ar e subject to the approval 
of the Civil Aeronautics Board. WT/TPR/S/261 Trade Policy Review 
Page 94 
  
  Sub-sector GATS/FTA coverage Market access National treatment 
  M2  ■ M2  ■ 
  M3 ■ M3 ■ 
General Sales and Cargo Sales Agency GATS;  and, ASEAN - Korea. M1 ◘ M1 ■ 
  M2  ■ M2 ■ 
      M3 ■ M3 ■ 
 AANZFTA M1 ■ M1 ■ 
  M2  ■ M2  ■ 
  M3 ■ M3 ■ 
 Philippines - Japan M1 ◘ M1 ■ 
  M2  ■ M2  ■ 
  M3 ◘ M3 ◘ 
* Unbound due to lack of technical feasibility.  
Notes: These specific commitments should be read together with  the respective horizontal limitations scheduled by the Philippin es 
under the GATS and its FTAs.  These mainly affect mode 3.  
 Off-line carrier:  any foreign air carrier not certified by the CA B, but who maintains an office or who has agents/employees i n 
 the Philippines, who sells air transportation on the carrier's behalf.   
 General Sales Agent:  a person not employed by an air carrier , who is authorized by it to se ll air transportation (either by 
 him/herself or through an agent).   
 Cargo sales agent:  a person not employed by an air carrier, who sells air transport of cargo.  
Source: GATS and FTA commitments (see Table IV.4 source).  Information was not available on the Philippines air 
 transport services co mmitments under ASEAN. 
(v) Tourism 
121. The tourism sector contributed 5.8% to GDP and 10.3% to employment (2010).  Tourist 
arrivals to the Philippines rose to 3.5 million in 20 10, up from 2.3 million in 2004, but lower than the 
growth projections in 2004 (to 5 million by 2010).  Most visitors were from Korea (21%) the 
United States (17%) and Japan (10%). 
122. The Philippines has made GATS commitmen ts on tourism accommodation facilities;  
speciality restaurants;  professional congress organizers;  and travel agencies.  In its specific commitments, foreign equity is limited to 40% for pension houses, tourist i nns, apartels, professional 
congress organizers, and travel agencies.  No foreign equity is allowed if specialty restaurants are not 
part of hotel facilities.  There are also various restrictions on employment of foreigners and/or 
residency and citizenship requirements.   
123. The tourism sector is considered to be cen tral to the Philippines social and economic 
development.  In the Goals and Growth Stra tegies of the Department of Tourism 2010-2016, 
the Government's objective is to double tourist arriva ls by 2016, and create a substantial number of 
jobs.  The authorities indicated that the main bottle neck to tourism development is infrastructural 
weaknesses, particularly highways, hotels, and t ourist facilities.  Other problem areas include air 
transport shortcomings (including airline safety i ssues and tax disincentives (see air transport section 
above)) as well as security in key tourist destinati ons.  The Department of Tourism has identified 
some key pillars in its long-term growth strate gy:  enhancing airline access;  building tourism 
infrastructure;  upgrading the quality of tourism products and services.  The authorities noted that a 
National Tourism Development Plan 2011-16 has been drafted, but has not yet been approved by 
the President.   
124. Notwithstanding the importance the Government attaches to growth, significant market access 
and barriers to foreign investment remain in the tourism sector (Table IV.13). The Philippines WT/TPR/S/261 
 Page 95 
 
 
  Table IV.13 
Market access and investment co nditions, tourism services, 2011 
Service Investment restrictions  Legislative basis (if any) 
Accommodation facilities 100% foreign equity is allowed in accommodation facilities, 
however, lands may be leased to foreign investors only for a 
period of 50 years, renewable once for not more than 
25 years.  For tourism projects, private land may only be leased to foreigners for investments of a minimum of 
US$5 million 
 Constitution 
Restaurants  Minimum paid-up capital for 100% foreign-owned 
restaurants is US$2.5 million; otherwise foreign ownership 
is limited to 40%.  Land ow nership restrictions apply  
 Retail Trade Liberalization Act 
(R.A.7042, 1991, as amended) 
Tourist guides 
 Foreigners may be employed as tourist guides only if no 
Filipinos are available  
 Labour Code (section 40) 
 
Source:  WTO Secretariat. 
125. The enactment of the Tourism Act in 2009 (Rep ublic Act 9593) developed the concept of the 
Tourism Enterprise Zone (TEZ), for which special incentives are offered.  TEZ's are geographical 
areas with certain specified characteristics.103  Applications for designation as a TEZ must be made to 
the Tourism Infrastructure and Enterprise Authorit y (TIEZA), and be accompanied by a development 
plan.104  The minimum required investment in order to benefit from incentives is US$5 million.105  
The TIEZA is responsible for issuing all relevant licences and permits to TEZ operators and registered 
tourism enterprises operating within a T EZ, as well as for granting incentives.  
126. Available fiscal incentives under the Tourism Ac t include income-tax holidays, customs-duty 
exemptions, tax credits for locally sourced goods and services, and a social responsibility incentive 
(Table IV.14).  Under the Act, foreign-owned and domestic enterprises are entitled to incentives on 
the same basis.  Several TEZ applications are being evaluated.   
127. Enterprises operating within TEZs are required to pay a 5% tax on their gross income earned 
on registered activities.106 
                                                      
103 The characteristics are specified in Chapter IV(A ) of the Tourism Act of 2009:  (a) the area is 
capable of being defined into one contiguous territory;  (b) it has historical and cultural significance, environmental beauty, or existing or potential integrated leisure facilities within its bou nds or within reasonable 
distance from it;  (c) it has, or may have, strategic access through transpor tation infrastructure and reasonable 
connection with utilities infrastructure systems;  (d) it is su fficient in size, such that it may be further utilized for 
bringing in new investments in tourism establishments and services;  and (e) it is in a strategic location such as 
to catalyse the socio-economic development of neighbouring communities. 
104 The TIEZA is governed by a Board of Directors, chaired by the Secretary of the Department of 
Tourism and largely comprises Filipino nationals, incl uding representatives from tourism-related service 
providers.  
105 Guidelines for the Designation and Supervision of Tourism Enterprise Zones and the Administration 
of Incentives under R.A. 9593.  Viewed at:  h ttp://www.tieza.com.ph/pages- laws-and-issuances.php. 
106 This is in lieu of all other national and local taxes and licence fees (excluding any real estate taxes 
and any other TIEZA fees). WT/TPR/S/261 Trade Policy Review 
Page 96 
  
  Table IV.14 
Fiscal incentives offered under the 2009 Tourism Act  
Incentive Application 
Income-tax holiday 6-year income -tax exemption for new enterprises in greenfiel d and brownfield TEZ's (extendable for up to 6 
additional years if the registered enterprises undertak e a substantial expansion or upgrade of their facilities 
amounting to 50% of the original investment).  Net operating loss of a TEZ operator or registered tourism 
enterprise may be carried over as a deduction from gross income for the 6 consecutive years immediately 
following the year of such loss 
 6-year (non-renewable) income-tax exemption for existing enterprises in brownfield t ourism zones if enterprises 
undertake an extensive expansion or upgrade of their facilities  
Customs-duty 
exemptions 100% exemption from all taxes and cu stoms duties for imports of goods consumed in the course of services 
rendered by or through en terprises within TEZs 
Tax credit for locally 
sourced goods Tax credit equivalent to all national in ternal revenue taxes paid on locally s ourced goods and services directly or 
indirectly used by the registered enterprise for services rendered within the TEZ.  Taxes include:  income tax; 
estate and donors tax; VAT; excise tax;  documentary st amp tax;  and other such taxes as collected by the 
Bureau of Internal Revenue 
Social responsibility incentive Tax deduction from income or other national taxes equivalent to a reas onable percentage (maximum 50%) of 
the cost of environmental protection or cultural pres ervation activities, sustainabl e livelihood programmes for 
local communities and similar  
Source : Tourism Act of 2009. 
128. Non-fiscal incentives include:  employment of foreign nationals in certain positions for 
reasonable periods and resident visas for foreign na tionals investing US$200,000 or over.  Investors 
have the right to repatriate the proceeds of the li quidation of an investment and may remit earnings as 
well as money to meet loan commitments.  Th ere are guarantees that investments will not be 
requisitioned unless in time of war or national emergency (with due compensation paid).   
129. Tourism enterprises outside of TEZs are entitle d to incentives offered under:  the Omnibus 
Investments Code;  the Foreign Investments Act;  the Special Economic Zone Act;  and the Bases 
Conversion and Development Act (Chapter III(3)(i)). 
(vi) Professional services 
130. The Philippines Professional Regulation Commi ssion (PRC) has responsibility for regulating 
and licensing 46 professions, which it does through its sector-specific Professional Regulatory Boards (PRBs) and the respective profession-specific laws.
107  The only profession not regulated by the PRC 
is law, which is the responsibility of the Supreme Cour t.  To practice as a lawy er in the Philippines, 
the Supreme Court Philippine Bar Examination must be  passed.  In order to be a candidate for the bar 
examination, the academic requirements are:  a professional degree in law from a recognized law 
school in the Philippines or from a foreign law sc hool that has been accredited by the Philippine 
Government (introduced in 2010), and a bachelor's de gree (with academic credits in required subjects) 
from a recognized college or university in the Ph ilippines or abroad.  Lawyers must be Filipino 
citizens and residents.  
                                                      
107 The 46 regulated professions are:  accountancy;  aeronautical engineering;  agricultural engineering;  
agriculture;  architecture;  chemical engineering;  chemistry;  civil engineering;  criminology;  customs brokers;  
dentistry;  electrical engineering;  electronics engineering;  environmental planning;  fisheries;  forestry;  
geodetic engineering;  geology;  guidance counselling;  interior design;  landscape architecture;  librarians;  marine deck officers;  marine engineer officers;  master plumbers;  mechanical engineering;  medical 
technology;  medicine;  metallurgical engineering;  midwifery;  mining engineering;  naval architecture and 
marine engineering;  nursing;  nutrition and dietetics;  optometry;  pharmacy;  physical therapy and occupational therapy;  professional teachers; psychol ogy;  radiologic and x-ra y technology;  real estate service;  respiratory 
therapy;  sanitary engineering;  social workers;  sugar technology;  and veterinary medicine (PRC online 
information.  Viewed a t:  http://www.prc.gov.ph). The Philippines WT/TPR/S/261 
 Page 97 
 
 
  131. Under the Constitution (Article XII (Section 14), and as outlined in the Eighth Regular 
Foreign Investment Negative List, the practice of  all professions in the Philippines is limited to 
Filipino citizens, except in cases pres cribed by law.  However, Article 40 of the Labour Code provides 
that non-resident aliens may be admitted to th e Philippines to supply a service after it has been 
determined that a competent and willing Filipino is not available at the time of application.  
Moreover, the Philippines Professional Regulation Commission Modernization Act (2000) allows the 
PRC, upon the recommendation of the professional regulatory body concerned, to approve the 
licensing and registration of foreign professionals, w ith or without examination, when substantially 
the same requirements for licensing and registration for the profession exist in the respective country, 
and on the basis of reciprocal treatment.  Licences or special temporary permits may be granted to:  
foreign professionals under reciprocity and other in ternational agreements;  consultants engaged in 
foreign-assisted government projects;  and employees of foreign private firms or institutions pursuant to law
108, or health professionals engaged in  time-limited humanitarian missions.109   
132. The authorities noted that, generally, private organizations make the request for their 
profession to be recognized and regulated by the PRC.  In order for a new profession to be PRC-
regulated, legislation must be passed in Congress.  Th e PRC has a role in ensuring that new legislation 
does not conflict with existing laws. 
133. Over the review period, the Philippines in cluded specific commitments on professional 
services in its regional and bilateral trade agreements, i.e. the ASEAN Framework Agreement on Services (AFAS);  the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA);  the 
ASEAN-Korea Agreement on Trade in Services (AK-ATS);  and the bilateral FTA between the 
Philippines and Japan.
110  The limitations inscribed against se ctor-specific commitments vary widely 
(Table IV.15).  In order for these commitments to  be implemented, mutual recognition agreements 
(MRAs) need to be developed.  Concrete progress has been achieved only under the AFAS, whereby 
framework arrangements to facilita te MRAs between countries have been concluded on engineering 
(2005);  nursing (2006);  architectural services (2007);  surveying (2007);  medical practitioners 
(2009);  dental practitioners (2009);  and accountancy services (2009).111  These framework 
arrangements are a first step towards concluding the MRAs themselves.  The authorities indicated that 
MRA negotiations in health-related areas under the AF AS are the most advanced.  However, they 
were not able to give an estimate of when  these or other MRAs would be concluded. 
Table IV.15 
Specific commitments on professional services undertaken in FTAs 
 AFAS AANZFTA AK-ATS Philippines-
Japan 
All subsectors of professional services X X X X 
Legal (861) - - - - 
Accounting, auditing and bookkeeping (862)     
  - Accounting - X - - 
  - Auditing Services including finan cial auditing and accounting review 
 (86211, 86212) X - - X 
  - Bookkeeping services, except tax returns (86220) X - - - 
Taxation (863) X - - - 
Architectural (8671) X - - X 
Table IV.15 (cont'd) 
                                                      
108 The authorities clarified that "pursuant to law" in the context of R.A. No. 8981 refers to the 
domestic/national regulatory laws governing the 46 regulated professions under the jurisdiction of the PRC. 
109 PRC Modernization Act (R.A. No. 8981, 2000).   Viewed at:  http://www.chanrobles.com/ 
republicactno8981.htm. 
110 No GATS specific commitments have been taken on professional services.  
111 ASEAN online information.  Viewed at:  http://www.aseansec.org/23986.htm. WT/TPR/S/261 Trade Policy Review 
Page 98 
  
   AFAS AANZFTA AK-ATS Philippines-
Japan 
Engineering (8672)     
  - Aeronautical engineering         - - - X 
  - Agricultural engineering - - - X 
  - Chemical engineering - - - X 
  - Civil engineering X X - X 
  - Mechanical engineering X X - X 
  - Sanitary engineering X X - X 
  - Electrical engineering - - - X 
  - Naval architecture and marine engineering - - - X 
  - Metallurgical engineering X X - X 
  - Electronics engineering X - - X 
  - Mining engineering X - - X 
  - Geodetic engineering X - - X 
Urban planning and landscape architectural (8674)     
  - Urban (environmental) planning (86741, 91123) X - - X 
  - Landscape architectural (86742) X X - X 
Medical and dental (9312)     
  - Medicine (9312**) - - - X 
  - Dentistry (9312**) - - - X 
  - Optometry - - - X 
  - Medical Technology - - - X 
  - Radiologic Technology  - - - X 
Veterinary (932) - - - X 
Services provided by midwives, nurses,  physiotherapists and para-medical 
personnel (93191)     
  - Nursing (93191**) - - - X 
  - Midwifery (93181**) - - - X 
  - Physical and occupational therapy (93191**) - - - X 
Other services     
  - Criminology - - - X 
  - Chemistry - - - X 
  - Forestry - - - X 
  - Librarianship - - - X 
  - Merchant marine professional - - - X 
  - Master plumber - - - X 
  - Social work - - - X 
  - Agriculture - - - X 
  - Fisheries  - - - X 
  - Interior design - X - X 
  - Geology - - - X 
  - Professional teachers - - - X 
  - Customs brokerage    X 
 
Source: WTO document MTN.GNS/W/120, 10 July 1991. The Philippines WT/TPR/S/261 
 Page 99 
 
 
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