Philippines: Latest economic and regulatory developments and outlook

published on May 8, 2018

The Duterte administration continues the positive developments of the past administration(s) with regards to the Philippines steadily reforming and partially liberalizing its regulatory environment.
 

• General Economic Overview

• Threshold for M&A Notifications Raised

• Update: Foreign Investment Negative List

General Economic Overview

The ASEAN-Region remains a key driving force for the global economic growth and will maintain its excellent standing in the years to come. In 2017 the Philippines clocked an annual GDP growth of 6,7 percent on par with China. For 2018 to 2020 the World Bank (as well as many other key analysts) projects the Philippines to maintain its role of one of Asia´s leading countries in terms of GDP growth. While it remains to be seen whether the Philippine Government will meet its ambitious target corridor for 2018 of an economic growth of 7 to 8 percent, it is highly likely that the Philippines will maintain if not increase its GDP-growth compared to the past years. On the other hand the Philippines have to caution that the economy is not overheating. The underperformance of the Peso as well as the increase of inflation to a 3-years high of 4 percent (January), 4.5 percent (February), 4.3 percent (March)(based on the past year´s CPI measurement) are some of the indicators that need to be monitored.

Threshold for M&A Notifications Raised

• 5 Million Peso (≈ 78 TEUR) for the “Size of a Person”; and
• 2 Million Peso (≈ 31 TEUR) for the “Size of Transaction”.

Previously the threshold stood at 1 Million Peso (≈ 16 TEUR) for each category.
The new notification requirement will become effective after the 20th March 2018.

Update: Foreign Investment Negative List

The so called Foreign Investment Negative List is published by the government of the Philippines about every 2 years. It principally summarizes and regulates the areas in which foreign ownership in a Philippine enterprise may be prohibited or limited. The 10th Regular Foreign Investment Negative List was published under former president Aquino III on 29 May 2015. In the past years the foreign ownership restrictions where consequently liberalized allowing foreign investors/companies 100 percent ownership in most areas of business. The 11th Negative List which has not been made public yet but which was presented to President Duterte for his final approval is expected to further reduce the remaining restrictions. Areas which are linked to improvement of infrastructure in the Philippines are expected to be the biggest beneficiaries in the new list. However, other areas such as retail, education, practice of professions and the restrictions public utilities are other areas where it is expected that the current ownership restrictions will fall or at least be lowered. Also in this aspect Q2/2018 will be an interesting one to monitor.