Thailand
Philippines: Tariffs, foreign ownership cap are barriers to US investments
MANILA, Philippines — Tariffs on certain goods and restrictions on foreign ownership were among the main barriers cited by US firms in doing business in the Philippines.
In its 2021 National Trade Estimate report, the Office of the US Trade Representative (USTR) said concerns on intellectual property (IP) protection, as well as corruption, are likewise weighing down the country’s attractiveness to American companies.
“US agricultural exports are significantly inhibited by the high in-quota tariffs for agricultural products under the Philippines’ tariff-rate quota program known as the Minimum Access Volume (MAV) system,” the USTR said.
Imports of agricultural products, including sugar, corn, coffee and coffee extracts, potatoes, pork, and poultry products within the MAV are slapped with tariffs ranging from 30 to 50 percent.
The USTR said the Philippines also continues to apply high tariffs on finished automobiles and motorcycles, with completely-built passenger vehicles with capacity of less than 10 passengers, as well as motorcycles, slapped with 30 percent tariff, and commercial vehicles subject to a 20 percent duty.
Another trade barrier cited by the USTR is the Philippine government procurement system which generally favors Filipino-controlled enterprises and domestic goods.
Limits to foreign ownership or participation in certain sectors were also cited as barriers.
In particular, the Philippine Constitution prohibits foreign ownership in mass media, including cable television and broadcasting, as well as film distribution and pay television.
In terms of domestic express delivery services, foreign equity participation is limited to 40 percent.
As for the retail sector, foreign firms need to have paid-in capital of $2.5 million, make a minimum investment of $830,000 per store, and have a parent company with net worth of over $200 million.
The USTR also cited the foreign-equity ownership limit in telecommunications companies at 40 percent.
At present, there are pending bills seeking to lower the paid-in capital of foreign retailers by amending the Retail Trade Liberalization Act and to exempt telecommunications from the definition of a public utility to pave the way for increased foreign ownership.
The USTR said US firms have raised concerns on the proposed Internet Transactions Act which seeks to promote electronic commerce, consumer protection, and equal treatment of resident and non-resident online platforms, as well as require registration of platforms and online businesses selling to customers in the Philippines.
There are also concerns on IP protection in the Philippines.
“While the Philippines has made progress in IP protection and enforcement since its removal from the Watch List under Special 301 in 2014, the US continues to have concerns. US right holders report issues with increasing online piracy, counterfeit drugs, and counterfeit apparel,” the USTR said.
Given the counterfeiting and piracy concerns, Manila’s Greenhills Shopping Center was included in the USTR’s Notorious Markets List.
“Stakeholders also criticize weak provisions in patent law that may preclude the issuance of patents on certain chemical forms unless the applicant demonstrates increased efficacy,” the USTR said.
It added that there are concerns on ineffective IP enforcement, as well as lack of capacity and expertise.
USTR said corruption in the Philippines likewise remains a concern for US firms.
“Corruption is a pervasive and longstanding problem in the Philippines. National and local government agencies, particularly the Bureau of Customs, are beset with various corruption issues,” the USTR said.
It said there are concerns on the propensity of Philippine courts and regulators to stray beyond matters of legal interpretation into policy-making, as well as the lack of transparency in judicial and regulatory processes.
“Investors have also raised concerns about courts being influenced by bribery and improperly issuing temporary restraining orders to impede legitimate commerce,” the USTR said.
The USTR said the US goods trade deficit with the Philippines was at $3.4 billion last year, 18.2 percent lower than 2019.
Source: https://www.philstar.com/business/2021/04/05/2088849/tariffs-foreign-ownership-cap-are-barriers-us-investments