The legal and political sectors in the Philippines are electric with tension and excitement due to pending change. The economic future of this tiger economy and its people depend on it, writes John Church

In the Philippines these days, it seems, it’s all about politics. When Asia Business Law Journal wrote about plans to revive the nation through ambitious infrastructure projects almost a year ago, under maverick President Rodrigo Duterte’s “build, build, build” programme, lawyers were cautiously optimistic that change may be on the way, even though the Philippines’ track record in this area had been, at best, unremarkable for many years.

Now, there is the crackle of electricity in the political air. Duterte is pressing ahead with constitutional changes in a move that should herald a new wave of foreign investment into the country. However, he also has other plans – the most controversial being ushering in an era of federalism, with much of the government’s central power and authority decentralized to the provinces.

Critics of this fear a nation divided into dynasties and warring factions. Also under consideration, is the removal of term limits for elected politicians and a possible extension of incumbent politicians’ terms until federalism is established. This may mean Duterte’s term is extended – he would also be eligible for re-election as either president or prime minister – fueling fears of a return to authoritarian-style rule reminiscent of Ferdinand Marcos. In this regard, Duterte’s appalling human rights record is not helping to allay concerns.

The imminent vacancies of two key positions, the ombudsman and commissioner of the Securities and Exchange Commission, plus an impeached chief justice thrown into the mix creates an atmosphere that is truly charged for an intriguing year for law, business and politics.

On the brighter side, as Editha Hechanova, president and CEO of Hechanova Bugay Vilchez & Andaya-Racadio points out, the Philippines is one of the fastest growing economies in the world with GDP growth of 6.7% last year, and expected to increase to 7-7.5% this year. The low cost of doing business, the country’s friendly people, and educated and skilled English-speaking workforce as well as a young population are all positive factors for
potential investors.

Editha-Hechanova,-Hechanova-Bugay-Vilchez-&-Andaya-Racadio

There may be issues on corruption, political stability and infrastructure that remain as challenges to potential investors but efforts are under way to institute reforms to liberalize investment laws, consider changes in government systems to distribute power and resources, and cut down on the bureaucracy of business licence approvals. The recent TRAIN (Tax Reform for Acceleration and Inclusion) law is also envisioned to increase the purchasing power of consumers, and hopefully be good for prospective retail business.

Constitutional change

“One of the goals of the Duterte administration is to amend the constitution and install a federal government in the Philippines,” says Hechanova. “In terms of commercial implications, this shift will enable federal states to impose their own tax laws on businesses within their jurisdiction. Fortunately, this will also enable them to enact their own tax incentives to attract investors. This competitive environment could prove beneficial to potential investors who are looking to branch out of Metro Manila.”

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