The Government of the Philippines has done much to improve the environment for investment: tamed inflation, adopted a market-determined exchange rate, reversed protectionist trade policies, and made a host of legal and regulatory changes to open domestic markets.

Nathan Associates assisted the Philippines in furthering liberalization and market competition through the Economic Modernization through Efficient Reforms and Governance Enhancement (EMERGE) Activity, sponsored by USAID.

Nathan helped Philippine stakeholders identify legal and regulatory obstacles, analyze policies and regulations to further economic reform, inform the public about reforms, and devise reform measures. Activities included workshops, conferences, and study tours, as well as assistance to economic research institutions and NGOs working on policy reform.

Sustainable Fiscal Position

To further fiscal reform, EMERGE supported modifications in procedures, policies, and institutional organization and responsibility. Working in the Bureau of Internal Revenue and the Department of Budget and Management, the project sought deficit reduction through policies addressing national tax and revenues and management of public sector expenditures.

Foreign Trade, FDI Performance, and

Competitiveness

As competitors in the Philippines’ main export product sectors (electronics, garments, coconuts, competing oils, fish, and fish products) negotiated free trade agreements, local producers faced immense pressure. Effective response required opening markets and making trade and investment conditions more transparent.

EMERGE helped reformers further liberalize trade and investment policies as an urgent matter, helping them reduce tariff and nontariff barriers and remove policy-induced restrictions on foreign direct investment.

Investment and Efficiency in Infrastructure

The Philippines has the highest electricity rates and the lowest ratio of paved roads to total roads in ASEAN. The resulting costs hamper trade.

Working with reformers, EMERGE devised competition policies and regulatory strategies that promote investment in infrastructure and cost-effective management by

  • Lowering the cost of interisland shipping and road transport,
  • Advancing telecommunications liberalization,
  • Strengthening the role of Local Government Units in infrastructure development, and
  • Reinforcing private sector participation in infrastructure.

Banking and Capital Markets

To compete with imports and expand production for export, local businesses need affordable short-term financing and long-term peso financing facilities to invest in productive capacity.

The Philippines capital markets are thin and narrow, its high-cost banking sector tends to invest in government securities rather than lending to industry, and local financial services are converging so rapidly that regulators are hard-pressed to keep up.

EMERGE provided competition policy analysis and technical assistance to help reformers raise banking efficiency, develop financial markets, and improve financial supervision. Accordingly, EMERGE assisted with policy measures to address two issues in banking and capital markets: the cost of financing, and the transparency and integrity of financial markets.

Details

Office

Arlington

Client

CARANA Corporation / USAID

Dates

2004 - 2008

Country

Philippines

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