The US government has pointed out that “pervasive bribery and corruption” and foreign ownership limitation continue to pose as barriers to trade and investments in the Philippines.

Released on March 29 by the US Trade Representative (USTR) office,  the 2024 National Trade Estimate (NTE) Report on Foreign Trade Barriers provides a comprehensive review of significant foreign barriers to US exports of goods and services, US foreign direct investment, and US electronic commerce export markets for the United States. Published annually since 1985, this year’s NTE Report covers significant foreign trade barriers in 59 markets, including the Philippines.

“Corruption is a pervasive and longstanding problem in the Philippines. National and local government agencies, particularly the Bureau of Customs (BOC), are beset with various corruption issues. Both foreign and domestic investors have expressed concern about 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 report stated.

The 2024 NTE has recognized the country’s BOC modernization program, which was launched in 2021, to address customs and corruption concerns. However, it cited reports of “widespread corruption and irregularities” in customs processing,  including incidents of undue and costly delays, irregularities in the valuation process, 100 percent inspection and testing of some products, and inconsistent assessment of fees.

The report pointed out that in 2020, the BOC implemented the Enhanced Value Reference Information System, which is a database of information on the value and classification of imports for reference purposes in support of the implementation of the WTO Customs Valuation Agreement (CVA). Despite the submission of documentary evidence of payments, the NTE said that some importers still report that the BOC continues to use reference prices for the valuation of meat and poultry products.

On motor vehicles, the USTR said that while country eliminated tariffs for completely built up units of certain electric vehicles, it did not include hybrid EVs. Likewise, it noted of the Philippines’ failure to issue regulations on its commitment to implement a US work program on automotive standards, including US Federal Motor Vehicle Safety Standards.

On food, the report included complaints by stakeholders regarding burdensome nature of the Memorandum Circular 26 issued by the Bureau of Animal Industry of the Department of Agriculture on the importation  of meat and poultry products and other rules on sanitary and phytosanitary issues. The measure has not been notified to the WTO, it added.

It also said that the Philippine regulations on the handling of imported frozen fishery products limits the sale to institutional buyers only.

On government procurement, the USTR noted of the Government Procurement Reform Act, which specifies a minimum Filipino ownership requirement of at least 60 percent in the procurement of goods, consulting services, and infrastructure projects.

Domestic goods are also given preferential treatment over imported products in the bid evaluation process, the report stated. In particular, it said that While US cloud service providers are active in the Philippine market, “they continue to face constraints that limit their participation, particularly in competing for government projects.”

The Philippines requires government agencies to procure cloud computing services from the Government Cloud (also known as GovCloud), a cloud infrastructure set up by the Department of Information and Communications Technology. The Philippines is not a party to the WTO Agreement on Government Procurement, although it has been an observer to the WTO Committee on Government Procurement since June 2019,.

While the Philippines has made progress in intellectual property (IP) protection and enforcement since its removal from the Watch List in the 2014 Special 301 Report, the United States continues to have concerns, including limited enforcement activities. Stakeholders report issues with online piracy and sales of counterfeit goods, including apparel, shoes, watches, jewelry, perfume, and electronics. Such counterfeiting and piracy concerns led to the continued inclusion of Manila’s Greenhills Shopping Center in the 2023 Review of Notorious Markets for Counterfeiting and Piracy (Notorious Markets List). Other stakeholder concerns include slow prosecution and conviction of cases.

On investment, the NTE pointed to the Philippine Constitution, which prohibits foreign ownership in mass media up to 40 percent.

On financial services, qualified foreign banks may own up to 100 percent of domestically incorporated banks, or enter the market as foreign branches. However, ownership restrictions apply to nonbank investors, regardless of their nationality. Nonbank foreign individuals and enterprises, like nonbank Filipino investors, are restricted from owning more than 40 percent of the total voting stock in a domestic commercial bank and more than 60 percent of the voting stock in a thrift or rural bank. Banks that seek entry as foreign branches cannot open more than five subbranch offices.

Further, it pointed out that the Philippine Central Bank ensures that majority Filipino-owned banks control at least 60 percent of the total banking system assets.

In particular stated that the country’s Insurance Code provides that all insurance companies operating in the Philippines must seek to cede risks to reinsurance companies authorized to conduct business in the country before entering outward foreign reinsurance arrangements.

Moreover, insurance companies operating in the country must cede 10 percent of outward reinsurance placements to the state-controlled National Reinsurance Corporation of the Philippines.

Generally, it said, only the state-owned Government Service Insurance System may provide insurance for government-funded projects and coverage for all government properties, assets, contracts, rights of action, and other insurable risks to the extent of the government’s interest.

In addition, the Philippine Constitution limits foreign ownership of advertising agencies to 30 percent. It further said while RA 7925 or the Public Telecommunications Policy Act of 1995 requires the conduct of open tenders in allocating spectrum, no public bidding has ever been carried out to allocate spectrum (e.g., spectrum auctions). Evaluation of applications typically involves the submission by an applicant of a letter of request to the National Telecommunications Commission for its spectrum needs. “This model is inherently non-transparent, constituting an administrative approach by which applicants are chosen based on the government’s prioritization of certain criteria (like financial or technical capacity),” it added.

It, however, cited the liberalization on certain sectors as reflected in the 2022 Foreign Investments Negative List to reflect amendments to the Retail Trade Liberalization Act, the Public Services Act, and the Foreign Investment Act.

The NTE also mentioned the Philippine Constitution’s limits on the practices of certain professions to Philippine citizens. However, various laws and regulations offer exceptions on a reciprocal basis, such as medicine, pharmacy, nursing, dentistry, accounting, teaching, architecture, and engineering. The practice of law is still reserved for Philippine citizens.