In the fourth part of ALB’s web-only series on what the Year of the Monkey will look like for Asia’s key markets, we speak to Pearl Liu, head of the Corporate & Commercial Practice Group, Energy, Mining & Infrastructure Industry Group, and Competition Focus Group at Quisumbing Torres on what 2016 holds for the Philippines.
Read the first part of the series on Hong Kong here, the second part on Singapore here, and the third part on India here.
ALB: What are some of the most important legal and regulatory developments you expect to see in the Philippines in 2016?
Liu: Among the most important legal and regulatory developments we expect to see in the Philippines in 2016 is the promulgation of the Implementing Rules and Regulations (IRR) of the Philippine Competition Act (PCA). The PCA, which took effect on 8 August 2015, is the first comprehensive competition law in the Philippines. It was enacted in light of the Philippines' commitment under the AEC Blueprint, to introduce a competition law by 2015. The PCA brings the Philippines into greater conformity with other jurisdictions and is expected to have far-reaching implications on businesses and transactions in the Philippines. The PCA contains regulations on anti-competitive agreements, abuse of dominant position, and anti-competitive mergers and acquisitions. The PCA also creates a new quasi-judicial agency, the Philippine Competition Commission (PCC) , which is armed with broad powers to investigate violations, review mergers and acquisitions, issue injunctions, require divestment and disgorgement of excess profits, and impose penalties on companies violating the PCA. On 24 January 2015, the Office of the President announced the appointment of the Chairman and four commissioners of the PCC. One of the first tasks of the PCC will be to issue the IRR of the PCA. The IRR will provide more details with respect to the implementation and interpretation of the provisions of the PCA, including the guidelines on anti-competitive conduct and transactions. As the PCA provides for a transitional period of two years during which businesses can renegotiate agreements or restructure their business to comply with the PCA and its IRR, businesses would be well-advised to monitor very closely the IRR that will be promulgated by the PCC and take every opportunity to voice any concerns that the same may have on their business.
We also expect the Philippines to pass certain legal and structural reforms in 2016 to maintain its competitiveness in light of the ASEAN economic integration. Among the reforms we expect to see are (i) the liberalization of foreign ownership restrictions in certain nationalized activities, to facilitate the entry of foreign investments, (ii) reforms to facilitate the ease of doing business in the Philippines by simplifying administrative and bureaucratic requirements and processes, and (iii) improvement of corporate governance compliance, especially among publicly-listed companies. There are pending bills in Congress to amend the Constitution to authorize Congress to pass laws that would liberalize foreign ownership restrictions. A bill lifting foreign ownership restrictions on adjustment companies, lending companies, financing companies, and investment houses may also be passed within the year.
ALB: From an investors’ perspective, what were some of the trends you saw in 2015? Do you expect these to continue in 2016?
Liu: Some of the trends we saw in 2015 were a rise in investments in the services sector, such as (i) private and public construction and infrastructure projects, (ii) business process outsourcing (“BPO”), specifically in legal, accounting, tax consultancy, bookkeeping and auditing, business and management consultancy, engineering services, and computer and information technology services, (iii) online Internet and mobile platforms, such as those for the posting of services, marketing, trading, and even retail trade. We also saw a number of mergers and acquisition transactions in consumer, finance, healthcare, and manufacturing sectors. We expect these trends to continue in 2016, especially growth in (i) infrastructure, as government spending on infrastructure projects is expected to increase, (ii) the consumer sector, as consumer spending in the Philippines is expected to continue to rise, (iii) the services sector, particularly the BPOs, as the Philippines moves towards becoming a part of the regional and global value chains, and (iv) power, real estate, and public utilities, such as telecommunications and transportation services, to meet the increasing demands of the growing economy.
ALB: What were some of the trends when it came to the kind of work your firm did in 2015?
Liu: When it comes to the kind of work that our firm did in 2015, we were involved in a number of big transactions involving (i) entry of several multinational companies, specifically BPOs into the country, that want to establish their presence in the Philippines, (ii) public infrastructure projects, (iii) online Internet and mobile platforms, such as those for the posting of services, marketing, trading, and retail, and (iv) pharmaceuticals and healthcare. We were also involved in a number of M&A transactions in pharmaceuticals, insurance, telecommunications, transportation, and manufacturing.
ALB: How do you see the legal industry in the Philippines evolving in 2016?
Liu: With the Philippine services and professional sector becoming more regionally and globally integrated, we expect to see the Philippines doing more legal outsourcing work, particularly for clients based abroad, including multinational companies and professional firms. As the practice of law continues to be fully nationalized, we do not expect to see an influx of foreign lawyers or foreign firms coming into the Philippines. However, we might see foreign firms setting up a “presence” in the Philippines through tie-ups or affiliations with local firms or local lawyers. The Integrated Bar of the Philippines is currently formulating draft rules and regulations with regard to foreign lawyers or foreign firms that want to establish a presence in the Philippines. We expect that these rules may only allow foreign lawyers or foreign firms to advise or assist in matters relating to foreign law, and may require foreign lawyers or foreign firms to work with Filipino lawyers in rendering advice relating to Philippine law.
ALB: What kinds of advice are you giving clients about the coming year?
Liu: The national elections in May 2016 will usher in a change in administration. A change in the ruling political party may result in a change in national policies and investment priorities. Among the changes that may occur are: (i) tax policy reforms, (ii) ease of doing business reforms, (iii) changes in the investment priorities plan, which identifies areas of investments that are eligible for incentives, and (iv) changes in government policies in the mining sector, as the current murky regulatory environment has been to impede expansion in this sector. The next administration will also likely set the tone for the implementation of the PCA.
