RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/149 
7 June 2005  
 
(05-2263) 
Trade Policy Review Body Original:  English 
   
 
  
 
TRADE POLICY REVIEW 
 
Report by  
 
THE PHILIPPINES 
 
  
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statement by the Philippines is attached. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Polic y Review Body on the Philippines. The Philippines WT/TPR/G/149 
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CONTENTS 
Page 
I. DEVELOPMENTS IN THE ECONOMY:  1999-2004 5 
 (1) O VERALL ECONOMIC PERFORMANCE  5 
 (2) S ECTORAL GROWTH  5 
 (3) E XTERNAL TRADE  6 
II. LIBERALIZATION THROUGH DOMESTIC REFORM 7 
 (1) S TRUCTURAL REFORM  7 
 (2) F OREIGN INVESTMENT LIBERALIZATION  9 
III. TRADE POLICY  DEVELOPMENTS 10 
 (1) T HE PHILIPPINES AND THE WTO 10 
 (2) T HE DDA  NEGOTIATIONS  11 
 (3) B ILATERAL AND REGIONAL TRADE RELATIONS  13 
IV. FUTURE POLICY  DIRECTIONS 13 
 The Philippines WT/TPR/G/149 
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I. DEVELOPMENTS IN THE ECONOMY:  1999-2004  
(1) OVERALL ECONOMIC PERFORMANCE  
1. Since its last review in 1999, gross domestic product (GDP) grew annually by an average of 
4.5% and in 2004, GDP grew by 6.1%, the highest rate since 1997. The growth was attended by 
strength in the services, industry and agriculture sectors. Gross national product (GNP) also expanded 
by 6.1% in 2004.  The improvements in the economy can be attributed to the Government’s sound 
economic management as well as the consistent demand for overseas Filipino workers especially 
professional workers, the increase in minimum wage s for non-agricultural workers and the continued 
investments in the information and communicat ions technology (ICT) sector and power and 
construction industry. 
Table 1 
Selected Macroeconomic Indicators 
 1999 2000 2001 2002 2003 2004 
Real GNP (growth rate in %) 3.7 4.8 3.5 4.3 5.6 6.1 
Real GDP (growth rate in %) 3.4 4.4 3.0 4.3 4.7 6.1 
Source: National Statistical  Coordination Board;  National Economic Development Authority. 
2. The Philippine economy continues to demonstr ate resiliency and grow th, although a fiscal 
problem has emerged which is currently being addressed as a priority.  Certain events and factors during the past five years did pose challenges to  the country’s economic performance, ranging from 
the external shocks of the September 2001 World Trade Center and October 2002 Bali bombings, the 
US-Iraq war, Severe Acute Respiratory Syndrome (S ARS) and the avian virus epidemics, as well as 
internal events, such as terroris t threats, a failed military mutiny in 2003, the May 2004 elections, and 
a series of calamities towards the end of 2004.  
(2) S
ECTORAL GROWTH  
3. In 2004, the services sector was the most important driver of the economy, contributing about 
3.4% to GDP growth and accounting for 47% share of the total GDP.  All services sub-sectors posted 
accelerated growth with the highest rate reflected in the communications industry, brought about by the Government’s previous liberalization efforts in  telecommunications and retail trade.  The mobile 
cellular services industry continues to widen its consumer base through innovative methods and 
applications, which in turn created  new businesses and retail channels. 
4. Industry contributed 1.8% to total GDP growth  in 2004 and accounted for 33% share to total 
GDP.  In 2001, the global economic slowdown disrupted the upward direction of the industry sector with the decline in construction and mining and qu arrying.  Manufacturing and electricity, gas and 
water growth performance also slackened during this  year.  This has since improved.  Manufacturing 
performed strongly and construction rebounded in  2004, although mining and quarrying growth 
decelerated during the year as metal mining compani es (gold, copper and nickel) suffered cutbacks in 
production. With the latter, the Supreme Court’s decision in 2004 to allow foreign firms to take the 
lead in exploration and production is expected to revive the mining industry in future years. 
5. The Agriculture, Fishery and Forestry sector , which accounted for 20% of total GDP, 
contributed 0.97% points to GDP growth in 2004. The Agriculture sector was the top contributor to 
GDP growth.  Agriculture benefited from favour able weather conditions as well as from the 
government’s infrastructure, financial and techni cal support programs such as the construction and WT/TPR/G/149 Trade Policy Review 
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rehabilitation of irrigation and post-harvest facilities,  aggressive distribution of high-yielding variety 
and hybrid seeds, fertilizer a nd financial/credit programs. 
Table 2 
Sectoral Growth Rates and Share of GNP 
(Percent) 
 1999 2000 2001 2002 2003 2004 
Agriculture       
Growth rate 6.5 3.4 3.7 3.8 3.8 4.9 
Share 20.2 20.0 19.9 19.7 19.8 19.5 
Industry       
Growth rate 0.9 4.9 0.9 3.6 3.8 5.3 
Share 34.5 34.7 34.8 34.5 33.5 33.2 
Services       
Growth rate  4.0 4.4 4.3 5.1 5.8 7.3 
Share 45.3 45.3 45.3 45.8 46.7 47.2 
Note: Details may not add up to totals due to rounding. 
Source:  National Statisti cal Coordination Board;   National Economic De velopment Authority. 
(3) EXTERNAL TRADE  
6. Free enterprise continues to guide the governme nt’s policies and programs in stimulating 
business and promoting competition.  However, the export of goods and services (at constant prices) 
grew only by a modest average of 7.26% for the fi ve-year period.  The rate was pulled down by a 
slump in world semiconductors industry in 2001.   Electronics continue to dominate a large portion of 
total exports (in current dollars) with semic onductors alone accounting for 47% of goods in 2004, 
followed by garments (5.5%) and machinery a nd transport equipment (4.0%).  The top three 
destinations for exports are Japan , United States and Netherlands.   Services exports rebounded in 
2004 after several years of decline.  Growth came  from increased travel, transportation and business 
processing outsourcing activities. 
7. Imports of goods and services (at constant pri ces) also grew at an average of 5.02%.  
Electronics and components, office and EDP machines,  telecommunications equipment, mineral fuel 
and lubricants, industrial machinery and other cap ital equipment constituted majority of imports. 
Table 3 
Trade Performance 
(Growth rate in percent, constant 1985 prices) 
 2000 2001 2002 2003 2004 
Total exports of goods and services  17.7 -3.4 3.6 4.4 14.0 
Merchandise exports 22.7 -1.6 5.0 5.4 13.8 
(Non-factor services) -3.3 -13.0 -4.6 -2.2 15.6 
Total imports of goods and services 4.0 3.5 4.7 10.2 6.3 
Merchandise imports 10.2 7.1 6.4 10.2 6.3 
(Non-factor services) -31.2 -28.2 -16.8 10.2 5.5 
Source : National Statistical Coordination Board. The Philippines WT/TPR/G/149 
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II. LIBERALIZATION THROUGH DOMESTIC REFORM 
(1) STRUCTURAL REFORM  
8. Structural reforms have long been recognized by  the Government as fundamental elements to 
achieve economic prosperity and growth.  Subseque ntly, a number of critical economic reform bills 
were passed and new policies were implemente d during the period of review from 1999-2004 to 
strengthen the banking sector, improve access to credit, restructure the electric power industry, address the fiscal problem and improve governance. 
Financial Sector 
9. The General Banking Act of 2000 increased the capacity of the Bangko Sentral ng Pilipinas ’ 
(Central Bank or BSP) to take prompt corrective action against problem banks.  In 2001, guidelines 
were issued to reinforce the Bank’s regulatory oversight functions and to tighten provisionary 
requirements as well as to level the playing field between foreign currency and peso intermediation. 
10. The Anti-Money Laundering Act of 2001 and its amendments (RA 9140) introduced in 2003 
lowered the deposit threshold at which bank regulator s may inspect from four million pesos to half a 
million pesos.  The Act demonstrates the Governme nt’s commitment in the global crusade against 
money laundering. 
11. In 2003, Congress passed the Sp ecial Purpose Vehicle (SPV) Act, providing the framework 
for banks to sell nonperforming assets to third pa rties and granting fiscal incentives and regulatory 
relief for such transfer or sale by banks and other fi nancial institutions. The Securitization Act of 2004 
strengthens further the SPV framework.  It is intended to create an enabling environment for 
securitization as a means of developing the domestic ma rket and to harness its potential in generating 
long-term funds to support broader business undertakings. 
Microfinance 
12. In 2000, the BSP declared microfinance as its flagship program in support of the 
government’s thrust of poverty alleviation. In se tting the path for the development of a sustainable 
microfinance sector, the BSP focu sed on fostering a favourable policy and regulatory environment, 
providing training and capacity build ing and incorporating promotion and advocacy in its programs. 
13. More specifically, on the policy reform side, the BSP issued circulars to jumpstart the 
development of microfinance. These circulars are enumerated below: 
 - Circular No. 272 defines microfinance loans as small loans not exceeding P150,000 
granted to the basic sectors, poor and low-income households for their 
microenterprises and small businesses. These lo ans are granted on the basis of the 
borrowers’ cash flow and are typically unsecured; 
 - Circular No. 273 lifts the general moratori um on the licensing of new thrift and rural 
banks to allow the entry of microfinance-oriented banks; 
 - Circular No. 282 sets the guidelines gove rning the Rediscounting Facility available to 
rural banks and cooperative banks for the purpose of providing liquidity assistance to 
support and promote microfinance programs; WT/TPR/G/149 Trade Policy Review 
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 - Circular Nos. 340, 365, 369, set rules and regulations for the establishment of 
branches of microfinance-oriented banks/loan collection and disbursement points; 
 - Circular No. 364 provides a lower risk weight for banks’ SME and microfinance loan 
portfolios that meet prudential standards. Th is reduction in risk weight allows banks 
to support a potential expansion in SME and microfinance loans and helps promote 
growth and development of SMEs throughout the country. 
Creation of Credit Information Bureau 
14. To support banks’ access to credit information, the BSP is pushing for the formation of a 
central credit bureau, which would hold a centralized  databank of borrowers’ history of transactions. 
This would allow banks to lower their interest  rates since the bureau could pare down losses by 
carefully assessing customers’ credit history. The en abling law which will create a central bureau is 
still pending in Congress.  In the interim, the BSP issued guidelines in June 2004 governing the 
development and implementation of banks’ internal credit risk rating systems to ensure that banks’ 
credit management processes are sound and effective. 
SEC Reforms on Non-bank Financial Sector 
15. In 2004, the SEC spearheaded the creation of a blueprint for the development of the non-bank 
financial system. Though, still in the finalization stag e, parts of the blueprint are already undergoing 
implementation. 
16. Following the banking sector’s lead, the SEC has la id out the guidelines for the eventual shift 
to a risk based capital adequacy framework among its regulated and monitored entities. Likewise, 
SEC approved the creation of a Fixed Income Exch ange (FIEX) in 2004. The FIEX serves as a 
secondary market for government securities and an alternative source of funds from the traditional 
banking system. The system is expected to be fully operational in 2005. 
Trust Funds 
17. Through Circular No. 447, the BSP paved the wa y for the creation of Unit Investment Trust 
Funds (UITF) by authorized trust entities. UITF  is an improved version of Common Trust Funds 
(CTF) which is a collective investment scheme simila r to a mutual fund that pools the investments of 
small investors into a larger fund under professional management that is able to access more superior 
investment opportunities that are not normally available to individual players. 
18. However, unlike CTFs, UITFs are not subject to reserve requirements and are not considered 
in single borrowers limit calculations because BSP considers UITFs to have clearer safeguards that 
effectively distinguish them from deposit substitutes.  The BSP expects UITFs to completely replace 
CTFs over time. 
Power Sector 
19. The Electric Power Industry Reform Act of 2001 w as signed into law in 2001.  It is designed 
to bring down electricity rates and to improve th e delivery of power to end-users by encouraging 
greater competition and efficiency in the electric power industry.  The Act also created the Power 
Sector Assets and Liabilities Management Corporati on (PSALM) to oversee the privatization of the 
National Power Corporation (NAPOCOR). The Philippines WT/TPR/G/149 
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20. NAPOCOR was granted an increase of 98 cen tavos per kilowatt-hour and the government 
also absorbed P200 billion of the corporation’s debt. These are expected to improve NAPOCOR’s 
financial position. 
Fiscal Policy 
21. In support of fiscal consolidation efforts, th e Philippine Government sought to improve the 
operations of revenue collecting groups, such as th e Bureau of Internal Revenue and Bureau of 
Customs to meet its revenue targets.  Informa tion and communication technology was an important 
tool to modernize these agencies’ operations and enhance productivity. 
22. On the legislative front, the President signed into law on 20 December 2004 the bill on 
indexation of excise taxes on alcohol and cigarettes,  one of the measures to address the weakness of 
the current excise tax system. The law became eff ective on January 1, 2005.  The Lateral Attrition 
Law (RA 9335) which seeks to improve the collection performance of the Bureau of Customs and the 
Bureau of Internal Revenue through a rewards a nd penalty system was also signed into law in 
January 2005. Meanwhile, VAT reform and the rationa lization of fiscal incentives are currently being 
deliberated at the Senate. 
23. The Government also pursued expenditure rati onalization and management programs, such as 
the adoption of the Organizational Performance Indi cators Framework to enable agencies to focus on 
strategic programs and projects and establish the linkage between the agencies’ major financial outputs and the objectives. Other aspects of the pr ogram include the conduct of Agency Performance 
Reviews, which is the basis for resource alloca tion decisions and the implementation an e-Budget 
System for the computerized processing of budget releases and preparation of accountability reports. 
Good Governance 
24. To create greater transparency, accountability,  efficiency and equal opportunity in the 
government procurement system, the Government Pr ocurement Reform Act of 2002 was enacted into 
law in January 2003.  As part of the government’ s effort to widen public access, it implemented the e-
Procurement System (EPS), an internet-based service which include: a Public Tender Board for 
procurement notices; a catalogue and virtual store for procurement service transactions with 
government agencies; and a suppliers’ registry to provide agencies a common list of accredited 
suppliers to support invitations to bid. 
25. The Government also stepped up efforts to make  the Bureau of Internal Revenue and Bureau 
of Customs its showcase agencies in the fight agai nst corruption.  Administrative cases and formal 
charges have been filed against delinquent personnel.   The Government also solicited the assistance of 
civil society groups in identifying priority areas in the drive to reduce red tape and corruption. 
(2) F
OREIGN INVESTMENT LIBERALIZATION  
26. To attract and promote local and foreign invest ments, the Government continued to undertake 
reforms aimed at investment liberalization, deregul ation and privatization.  Executive Order No. 95, 
issued in April 2002, amended the Fourth Regular  Foreign Investment Negative List  (Executive 
Order 286; issued in 2000) to allow foreign nationals  authorized by the Secretary of National Defense 
to engage in defense-re lated manufacturing or repair activities, provided a substantial percentage of 
output is exported.  Under the Fifth Regular Fore ign Investment Negative Li st (Executive Order 129; 
issued on 22 October 2002), full foreign participatio n is allowed for retail trade enterprises (a) with 
paid up capital of US$2.5 million or more provided th at investments for establishing a store is not less WT/TPR/G/149 Trade Policy Review 
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than US$830,000; or (b) specializing in high-end or  luxury products provided that the paid up capital 
per store is not less than US$250,000 (Section 5 of RA 8762). 
27. Executive Order 389, promulgating the Sixth Foreign Investment Negative List, was issued 
on 30 November 2004 and took effect on 7 January 2005.   It reflects two changes to List A, which 
limits foreign ownership by mandate of the Constitu tion and specific laws.   Item 7 of List A was 
clarified to indicate that small-scale utilization of natural resources in rivers, lakes, bays and lagoons 
is also reserved to Filipino citizens as provided un der Article XII Section 2 of the Constitution.  In 
Item 18, “Ownership of private lands,” Section 4 of RA 9182 or the Special Purpose Vehicle Act was 
added as a legal basis for the 40 percent forei gn equity limitation for private land ownership in 
addition to Article XII, Section 7 of the Philip pine Constitution and Chapter 5, Section 22 of 
Commonwealth Act No. 141. 
28. No changes were made to List B, which cont ains activities where foreign ownership is limited 
for reasons of security, defense, risk to health and morals as well as protection of domestic market enterprise with paid-in equity capital of  less than the equivalent of US$200,000. 
29. The rules and guidelines on the establishment a nd maintenance of multinational companies’ 
Regional or Area Headquarters (RHQs), Regional Operating Headquarters (ROHQs), and Regional 
Warehouses (RWs) was signed into law in Nove mber 1999 (Republic Act No. 8756).  The law 
provides for favourable tax treatment and other no n-fiscal incentives, for both the RHQs and ROHQs 
and their alien and Filipino employees.  It expands  the eligible locations of regional warehouses to 
include economic zones and relaxes the limitations on the storage period of goods and the withdrawal 
of goods for domestic use.  The law also sets out new immigration procedures, providing for a longer 
residence visa to expatriate personnel. 
30. Starting 2002, the Philippine Annual Investment s Priorities Plan (IPP) was shortened but 
made more focused.  The Plan focused on identif ied economic priority areas and activities, at the 
national and regional levels, with the objective of accelerating the promotion of domestic and foreign 
investments to sustain the country’s growth momentum.  In 2004, the IPP gave emphasis on 
sustaining globally competitive industries given an environment of increasing trade liberalization. 
New areas such as medical tourism and environmen tal services packaging were included in the 2004 
IPP. 
31. The Government filed a motion for the Supreme Court to reconsider its January 2004 decision 
on the unconstitutionality of fore ign ownership in the Mining Act of 2005 under the provision on 
Financial or Technical Assistance Agreement and Mineral Processing Permits. In December 2004, the 
Supreme Court reversed the negative legal decision.   The development is expected to revive the 
under-performing mining industry with the projected investments in large-scale metallic mining and 
mineral exploration activities. 
III. TRADE POLICY DEVELOPMENTS 
(1) T
HE PHILIPPINES AND THE WTO 
32. The Philippines holds with importance its memb ership in the World Trade Organization and 
recognizes the value of the WTO’s achievements in fostering a more open, transparent, predictable 
and competitive environment.  With its member ship in 1995, the Philippines made substantial 
commitments on market access and at the same time  continued to consolidate the liberalisation 
programme under the Tariff Reform Program , undertaken unilaterally since the 1980s. The Philippines WT/TPR/G/149 
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33. The Philippines also completed implementati on of its commitment under the Information 
Technology Agreement with the issuance of Ex ecutive Order 395 on 31 December 2004 eliminating 
the duty on certain sensitive IT products.  
(2) THE DDA  NEGOTIATIONS  
34. The Philippines is an active participant in all negotiations and meetings including the various 
committees and working parties.  It fully suppor ts the Doha Development Agenda (DDA), stressing 
consistently that the multilateral trading system can genuinely contribute to economic growth and 
development if the negotiations remain true to  its developmental spirit.  Developing countries 
constitute majority of WTO members and priority mu st be given to their needs and concerns.  As a 
founding member of the G-20, the Philippines is d eeply concerned with and will continue in the 
course of the negotiations to work towards correc ting the imbalances on the distribution of benefits 
accruing from the multilateral trading system.  
Agriculture  
35. The Philippines believes that the DDA should lead towards the balanced emphasis on the 
three pillars of the negotiations, namely market ac cess, export subsidies and domestic support.  It will 
continue to support for substantial and permanen t reforms in domestic support disciplines and the 
elimination of export competition measures with cl ear deadlines.  The Philippines fully supports  
paragraph 11 (Annex A) of the Ge neral Council (GC) Decision of July 2004 which affirms the policy 
space for developing countries to pursue deve lopmental goals.  Paragraph 11 exempts from any 
reduction commitments developing count ries that have allocated or intend to allocate most of their de 
minimis support for subsistence and resource-poor farmers. 
36. The Philippines is committed to ensure that pa ragraph 41 (Annex A) of the GC decision 
recognise fully the concept of Special Products  a nd the fundamental right of developing country 
Members to designate products as vital to thei r food security, livelihood security, and rural 
development needs.  The GC decision assures that Special Products, which is separate and distinct 
from sensitive products, will be entitled to the most favourable and flexible treatment. 
Non-Agriculture Market Access  
37. To preserve the flexibilities of developing countries, the Philippines supports a formula 
approach using two coefficients: one for develope d and another for the developing countries.  The 
outcome of the negotiations should take into  account the tariff reduction programmes pursued 
unilaterally by developing countries.  The binding of  unbound tariff lines should, in itself, be accepted 
as a major concession and, hence, there should be no reduction commitments for these tariff lines. For 
unbound tariffs, there should be flexib ilities for developing countries to bind at levels higher than 
what is proposed in Annex B of the July GC d ecision and to exempt a greater percentage from 
binding.  The Philippines also recognizes the importa nce of addressing non-tariff barriers (NTBs).  It 
would be useful to have a focused discussion on NTBs and how to address them beginning with 
products of export interest to many developing  countries such as the textiles and clothing sector. 
Services  
38. The Philippines joined other countries in  submitting proposals on the guidelines and 
procedures for negotiations in trade in services and on  the liberalization of Mode  4.  Liberalization of 
temporary movement of natural persons addresses important market access concerns of developing 
and developed countries alike.  The Philippines shares the disappointment of some members on the 
quality of commitments in areas where developi ng countries have comparative advantages, WT/TPR/G/149 Trade Policy Review 
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specifically for categories of personnel not related to commercial presence and at lower skill levels.  
Current offers essentially do not provide substan tial improvements to existing specific commitments 
in Mode 4. 
Implementation Issues 
39. On the negotiations on TRIPs, the Philippines has joined developed and developing countries 
in opposing any moves towards a legally binding mu ltilateral system of registration and notification 
of geographical indications (GIs) for wines and spirits .  It believes that participation in the multilateral 
system of notification and registration of GIs for wines and spirits must be voluntary. 
40. On special and differential treatment (S&D), the Philippines shares the view that S&D be 
strengthened and not limited in app lication to providing longer time frames for developing countries.  
This position confirms Philippine support for the need to ensure that the high level of ambition in the 
DDA comes with a strong and renewed emphasis on development.   
Rules  
41. The Philippines supports the negotiations to cl arify and improve exis ting WTO agreements on 
anti-dumping, countervail and subsidies (includi ng fisheries subsidies) and regional trading 
agreements (RTAs). The Philippines is a user of anti-dumping provisions, although it has not yet 
utilized the countervailing and subsidies provisions . Negotiations should lead to improvements of 
certain provisions of the agreements to prevent gr oss misuse without limiting a country’s ability to use 
valid contingent protection. 
42. The Philippines also supports the development of  further disciplines on subsidy practices and 
predictable disciplines on fisheries to reverse over- capacity and over-fishing.  On RTAs, negotiations 
should ensure that RTA rules will remain faithfu l to the MFN principle and will not result in the 
marginalization of non-RTA participants. 
Trade Facilitation 
43. The Philippines agreed to adopt Annex D of the July decision on the modalities for 
negotiations on trade facilitation, a position consiste nt with the statement adopted by APEC Trade 
Ministers in its June 2004 meeting in Pucon, Chile.  Alt hough trade facilitation per se  offers 
numerous benefits especially in reducing inefficien t procedures and increasing transparency, the costs 
for infrastructure development are substantial.  Annex D highlights the importance of technical 
assistance and support for capacity building for developing and least-developed countries to allow 
them to participate actively and benefit from th e negotiations.  The Philippines agrees that while 
negotiations may lead to implementation commi tments requiring infrastructure development, 
developing countries are not legally bound to impl ement such commitments if infrastructure 
assistance and support from developed countries are not  forthcoming and if developing countries and 
least-developed members continue to lack the necessary capacity. 
Dispute Settlement Understanding  
44. While the WTO dispute settlement mechanism is an improvement over its GATT 
predecessor, the Philippines believes that certain aspec ts need to be reviewed and amended to make 
the system more useful especially for developing co untries.  Together with Thailand, it re-tabled its 
proposal regulating carousel, the practice of rotating or indiscriminately changing the products to be 
subjected to retaliatory treatment by the aggrieved member. The Philippines WT/TPR/G/149 
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(3) BILATERAL AND REGIONAL TRADE RELATIONS  
45. Apart from its engagement in the WTO, bilatera l and regional trade rela tions remain equally 
important, with a bulk of the Philippines’ interna tional economic engagement taking place within the 
ASEAN.  ASEAN has completed negotiations an d signed the related framework agreement and 
protocols to implement the Priority Integration Programme (PIP) covering 11 priority integration 
sectors that aims to accelerate further the almost completed Common Effective Preferential Tariff Scheme under the ASEAN Free Trade Area (CEPT-A FTA) by reducing tariffs to zero by 2007 rather 
than 2010. 
46. In addition to the ASEAN Free Trade Area, AS EAN is engaged with its various Dialogue 
Partners to implement or discuss free trade areas.  The Philippines is set to implement this year the 
ASEAN-China FTA in goods for completion in 2010 w ith flexibility to 2012.  The country is also 
negotiating with ASEAN and India a similar FTA to be complete d by 2011 between Brunei 
Darussalam, Indonesia, Malaysia, Singapore, Th ailand and India; and by 2016 between CLMV 
(Cambodia, Laos, Myanmar, and Vietnam), the Philippines and India. 
47. Similarly a possible FTA between ASEAN and Japan is being worked out for completion in 
2012 with flexibility particularly for the CLMV.  Likewise, an ASEAN-Korea FTA is envisioned to 
be realized by 2009 for the original ASEAN-6 a nd Korea and by 2014 for the CLMV and Korea.  
Negotiations will commence this year.  Meanwhile , the ASEAN and the Closer Economic Relations 
(CER) countries of Australia and New Zealand are set to  negotiate also starting th is year an FTA to be 
realized within a 10-year period.  
48. Bilaterally, the Philippines has taken a cautious  approach on FTAs with only one bilateral 
FTA envisioned so far.  In 2004, the Philippines a nd Japan reached an agreem ent in principle on the 
major elements of the Japan-Philippines Economic Partnership Agreement which aims to promote a 
freer trans-border flow of goods and services betw een the two countries including a comprehensive 
partnership that covers, among others, HRD, ICT, and SMEs.  
49. The Philippines is committed to constructive par ticipation to forge the planned partnerships 
with emphasis on maintaining policy flexibility but fu lly consistent with the existing rules under the 
multilateral trading system, particularly GATT Article XXIV, GATS Article V as well as the 
Enabling Clause.  
IV. FUTURE POLICY DIRECTIONS 
50. The eradication of poverty is our biggest  development challenge. The Medium-Term 
Philippine Development Plan of  2004-2010 recognizes the significant contribution of trade and 
investment to achieve the Government’s goal of economic development and jo b creation.  Based on 
the Plan, internally determined measures relati ng to macro-economic stability, employment, trade and 
investment, agribusiness, power sector reforms, infrastructure, science and technology and anti-
corruption will be pursued to strengthen Philippines’  competitiveness and contribute to creating jobs. 
The Plan also acknowledges the need for fundame ntal reforms and a review of the economic 
provisions of the Constitution, especially th e provisions which do not encourage economic 
innovations and reforms, to attract more foreign capital and investment.  All these reforms will be 
considered to promote empl oyment and economic growth. 
__________