To Philippine Bar Association president Emerico de Guzman and to all the officers and members of this illustrious association – the largest of its kind in the country – good afternoon.
It is a privilege to be here among fellow lawyers. Thank you for inviting me to your forum. The legal profession is a vital component in our country’s overall economic growth. An effective legal system is pivotal to a strong economy and to the greater influx of investments.
In her 2007 paper entitled ‘Justice and the Cost of Doing Business’, Chief Justice Maria Lourdes Sereno herself found that how well the Philippine judicial system functioned had significant implications to the growth of the economy and to foreign investments. Based on data collected from firms, her paper found that governance problems were at least as important as economic or financial problems in doing business. Moreover, difficulties in settling legal conflicts were deemed of even greater concern by responding businessmen than poor physical infrastructure and access to credit.
Clearly, the proper functioning of our country’s legal system is strongly linked to matters of good governance and economic growth.
I know this to be true in my experience as Speaker of the House of Representatives. Congress promulgates and enacts laws and policies to achieve overarching socio-economic goals. We craft laws in order to uplift the lives of our people and to further our country’s growth.
The good news is that the Philippines is in a better shape today than it was four of five years ago. Our economy has registered higher growth rates averaging at around 6.3% annually. We have improved our rankings in various global competitiveness report cards, and have been given an investment grade credit rating. However, we still have much to do to eradicate poverty in our country.
We need to make economic growth more inclusive, to create more and better jobs for our people, raise their income and enhance their living conditions. We need more investments and business activities to absorb our growing labor force.
A great source of opportunity is the continuing ASEAN integration. The ASEAN is home to some 712 million people, with a highly educated workforce, a nominal GDP of $2.4 trillion in 2013, and abundant natural resources. Economically, ASEAN may be a force to be reckoned with. It is located across major trade routes with $5.3 trillion in global trade passing through its waterways each year.
At present growth rates, it is predicted that ASEAN will be the fourth largest market, after the EU, US and China by 2030.
What’s in it for the Philippines? Increased trade in goods and services in the region and greater flows of investments and skilled labor – these will not only expand our economy but also help create more of the much needed jobs and opportunities our people need.
However, full ASEAN integration poses a challenge to every ASEAN member country. The existing legal framework may not be sufficient for the region to achieve a completely free exchange of goods and services.
On the part of the Philippines, it is essential that we continue working towards having a legal environment that is more conducive for attracting investments and enhancing our competitiveness. I am pleased to note that in this area, the 16th Congress is taking positive action. We are seeking to liberalize very restrictive legal provisions on foreign participation in strategic sectors of our economy. Our legislative priorities which are also in the priority list of the Joint Foreign Chambers and Philippine Business Group include the following:
Resolution of Both Houses No. 1 which vests upon Congress the power to set restrictions on foreign ownership in key economic sectors, including public utilities, property, mass media and advertising, educational institutions and development of natural resources. While I understand that such amendments do not constitute the only solution in attracting more investments, I believe that it is high time that we worked to attune and adjust our economic policies more strategically to the needs and demands of our time.
This is why we are also seeking amendments to our Foreign Investment Act, particularly those on the Foreign Investment Negative List. The amendments include:
– Lowering paid-in capital requirements for foreign firms, Redefining “export enterprises” to remove discrimination against foreign investors for BOI incentives,
Allowing foreign investment of up to 100 percent of equity for manufacturing and radio communication,
– Rationalizing the entry of foreign companies in the construction, operations and maintenance of large public works projects, and
– The easing of restrictions on the practice of professions.
Let me note that ASEAN integration does have an impact on the legal profession. In this era of integration, the ASEAN lawyer must learn to navigate multiple legal jurisdictions.
In the Philippines, the practice of law right now is limited only to Filipinos. However, there are efforts in our Supreme Court to liberalize the profession.
There is a proposal to welcome foreign lawyers in the Philippines to assist their clients in international matters and cross border transactions. In line with the need for the legal profession to be in accord with the ideal of ASEAN integration, the proposal for liberalization also allows for collaborative work between Filipino and foreign lawyers where the matter or transaction involves both domestic and foreign law.
Moreover, the proposal also has a procedure for registration, whereby foreign firms and lawyers may assist their clients in cross border transactions where the Philippines is involved. The proposal also requires foreign lawyers to live up to the standards and principles of lawyering in the Philippines – a practice which requires loyalty to the rule of law, and fidelity to the cause of the client.
The move or proposal to liberalize the legal profession in the Philippines, to my mind, is a key first step towards making our lawyers significant players in ASEAN integration.
Moving on with the legislative agenda, we are also seeking amendments to the Retail Trade Act, which proposes to further reduce the minimum capitalization for foreign investment in the retail trade sector to five hundred thousand US dollars, making it consistent with the Foreign Investment Act. At present, RA 8762 or the Retail Trade Act only allows foreign investments with capitalization of not less than eight hundred thirty thousand US dollars.
Another important legislative proposal is the institution of a National Competition Policy. While we already have laws regarding competition, we need a more comprehensive law that will complement ongoing market reforms. We need a well-crafted law that focuses on economic efficiency rather than on size and market structure alone, and which address improper business conduct and excessive and harmful market power that result in the reduction of output or increase in price. A national competition policy, in particular, has been identified as crucial in enhancing our country’s competitiveness amidst increasing regional integration.
We are also pursuing measures to promote the development of our infrastructure to further encourage more investments both local and foreign. We are studying amendments to the Build Operate Transfer Law, the Cabotage Law, and the Electric Power Industry Reform Act or EPIRA. Firmly embedded in these reform measures is the ethos of competition.
In the proposed amendments to the Build Operater Transfer Law, we intend to further strengthen the solicited mode of bidding out PPP projects. It is more transparent and competitive, as against the unsolicited mode, which is prone to uncompetitive practices. Also, the Amendments to the EPIRA include the proposal for competitive bidding of bilateral contracts to provide a more level playing field among industry players. Meanwhile, the amendments to the Cabotage Law would allow foreign vessels to dock in multiple ports across the country.
But of course, we also need to keep our macroeconomy on a healthy footing. We need to further empower our monetary and fiscal authorities, while making them more accountable, to respond to the changing needs of our time. In this regard, our legislative priorities include the following:
– Amendment of the Bangko Sentral ng Pilipinas Charter to strengthen the BSP’s regulatory and supervisory powers.
– Rationalization of Fiscal Incentives to consolidate all existing incentive-giving laws to avoid redundancy, tax avoidance and other inefficiencies.
– Tax Incentives Management and Transparency Act mandating a full disclosure of the tax incentives by requiring taxpayers to report availed incentives in income tax returns, and establishing a Tax Expenditure Account in the national budget to reflect the amount of tax incentives granted to private firms and individuals.
– Customs Modernization and Tariff Act that would align our Tariff and Customs Code with the simplified and harmonized customs procedures and practices adopted in the Revised Kyoto Convention and other international and legal standards; and
– Rationalization of Mining Revenues that seeks to increase the share of the State from the mining, and ensure the timely release of the LGU’s share from mining revenues.
But all these policies will come to naught if we do not have a regime where the rule of law prevails. Economic growth requires a legal order offering stable and predictable rights of property and contract. And lawyers can serve as agents of development under such legal order.
As lawyers, we must create the kind of environment whereby integration and cross border transactions are both possible and successful. In order to do so, we must embrace the principle of cooperation which is important in the liberalization of the law practice.
Today, the Philippine Bar Association has the opportunity to make its voice heard on matters of expanding markets and increasing globalization. You can serve as a creative force that will support the ends of greater regional integration. Respective laws of ASEAN countries will need to be further harmonized with each other in order for member countries to reap the rewards of regional integration. The Philippine Bar Association can be an active player in this area.
Let us work together in bridging the various gaps in ASEAN’s legal systems. We need your expertise in being able to help liberalize several other professions apart from the legal profession.
Let us also work together to help ensure that the rule of law prevails in the whole of the ASEAN region. There are significant opportunities within our collective reach today. Let us not waste these opportunities for the sake of our people and our country.
Once more, let me express my deepest thanks for the privilege of speaking before you this day. May the Philippine Bar Association continue its proud tradition of service and excellence.