USTR says corruption pervasive in Philippines

The Office of the US Trade Representative (USTR) said corruption, piracy, preferential tariff on various goods and restrictive laws remain barriers to trade between the US and the Philippines.

“Corruption is a pervasive and longstanding problem in the Philippines. Reports of corruption remain common,” the USTR said in its 2011 National Trade Estimate Report on Foreign Trade Barriers.

“Foreign and domestic investors express concern over the propensity of Philippine courts and regulators to stray beyond matters of legal interpretation into policymaking and about the lack of transparency in these processes.

There also are reports of courts being influenced by bribery and improperly issuing temporary restraining orders to impede legitimate commerce,” the USTR said.

This is despite President Benigno Aquino 3rd’s electoral victory “on a platform of good governance” and the elimination of “government corruption as a top priority of his administration.”

The USTR also noted that the Philippines remains in the Watch List of the Special 301 Report on Intellectual Property Rights (IPR).

Among the issues raised during the recent 2010 Special 301 out-of-cycle review were ineffective enforcement of IPR, continued widespread copyright piracy and trademark counterfeiting, and amendments to the patent law that prohibit patents on certain chemical forms unless the applicant demonstrates increased efficacy.

The USTR also complained that the Philippines slaps “discriminatory taxes” on imported distilled spirits, which is the subject of a dispute between the US and the Philippines at the World Trade Organization.

Also, Manila has yet to act on a petition to extend to 30 days the five-day comment period for parties to safeguard measures, which has been pending since 2007, the USTR said. Safeguard duties are slapped on ceramic floor and wall tiles, glass, steel angle bars and testliner boards.

The USTR noted that agricultural produce, including sugar and rice, still have high in-quota tariffs that range between 30 and 65 percent, while some products are subject to a minimum access volume.

Vehicles are also slapped the highest rates of duty among nonagricultural products, with tariffs ranging from 15 to 30 percent, while “tariffs on components are low and designed to encourage local assembly,” the USTR said.

The Common Carrier Tax and Gross Philippine Billing Tax on foreign airlines operating in the Philippines are also barriers to trade, the USTR said.

The USTR said the Philippine Constitution also limits foreign investment in the areas of advertising and public utilities, as well as prohibits foreigners from owning land and practicing various professions.

The USTR said that while the Philippine Constitution allows for the leasing of land for 50 years with one 25-year renewal, “establishing clear ownership to lease land is complicated by an ambiguous deed and property system and inefficient judiciary, such that unresolved land disputes can extend for long periods of time.”

“Some US investors report that unresolved land disputes are a particularly significant barrier to investment in the mineral exploration and processing sector,” it added.

The USTR also cited complaints of “a lack of transparency in regulations and laws,” such as taxation laws and regulations hinder foreign investment in the Philippines.

The US is among the Philippines’ leading trade partners, with imports up 27.9 percent year-on-year to $7.4 billion and exports up 17.5 percent to $8 billion in the same period.

The Philippines was the US’ 30th biggest export market.

Latest data showed that US foreign direct investment in the Philippines reached $5.8 billion in 2009, higher than the $5.6-billion worth in 2008. –Ben Arnold O. De Vera, Reporter, Manila Times