This column was a post yesterday to subscribers of Globalsource Partners ( by the author and Christine Tang who serve as their Philippine Advisers.

We turn our attention away from the banking turmoil in the west and look at some recent domestic policy developments. We find some of these good in terms of helping to improve the local investment climate, some less clear in terms of their economy-wide net benefit, and others, more distracting than helpful. We list them below in no particular order.

1. The ratification of the Regional Comprehensive Economic Partnership (RCEP) by the Senate last February. It has been over two years since the 15 countries (10 members of the ASEAN plus Japan, China, Korea, Australia, and New Zealand) signed the agreement. The RCEP binds its signatories to common standards, disciplines on intellectual property, rules of origin, customs processes, e-commerce, and competition policy. The hope is that with multinationals exploring alternative sites outside China, the Philippines could become a regional manufacturing and services hub that will help create higher quality domestic jobs.

2. Opening up key sectors of the economy to full foreign ownership. Most prominent are: a.) the release of the Implementing Rules and Regulations (IRR) of the Public Service Act (PSA) one year after the law was signed, which would allow 100% foreign ownership of public services, including airports, railways, expressways and telecommunications; and, b.) amendments to the IRR of the Renewable Energy Act essentially allowing 100% foreign equity in renewable energy projects. The reform is seen to expand the local renewable energy market with foreign investments starting to come in.

3. A step in agricultural reform through the condonation of P57.6 billion of debts of agrarian reform beneficiaries (ARB), a majority of whom have not been able to meet amortization payments. Although the measure may sound minor, experts say that by freeing up over 1.2 million hectares of land, it would pave the way for land consolidation through leasing, investments in modernizing farms and making them more efficient. This will only have a minimal impact on government finances since cash flow effect is only P800 million annually, the rest would be paper losses. The reform is part of the President’s priority legislation mentioned during his first State of the Nation Address.

4. Proposed charter change in order to amend the economic provisions of the Constitution that restrict foreign investments. Charter change has been attempted by successive administrations with varying support from the business sector. This time around, appetites appear more blunted with critics arguing a.) that recently approved foreign investment liberalization laws have removed many of the impediments, b.) the need for congress to attend to other more urgent legislation and, c.) the high cost of holding a constitutional convention, the approach approved by the House of Representatives. The ball is now in the court of the Senate. There may be a higher likelihood this will pass this time around, given the President’s strong electoral mandate, and that it is being initiated early in the administration’s term, blunting any charge that this is meant to extend the terms of incumbents.

5. Proposed reform of the pension system for military and uniformed personnel (MUP). This has been on the reform agenda of successive administrations but has not had the high-level political support needed to carry it through congress. Although the current congress has continued to sit on it, the odds of passage may be higher this time if the President, following Finance Secretary Benjamin Diokno’s announcement in a press briefing this week, voices unequivocal support it. Per the finance secretary, MUP pensions cost the equivalent of half of 1% of GDP in 2023 (P120 billion to 130 billion). We have repeatedly said previously that in its present form, the system will lead to ballooning and unaffordable pension costs for government.

6. The proposed merger of two major government banks, the Land Bank of the Philippines (LANDBANK) and the Development Bank of the Philippines (DBP). Again, this is not new with an executive order approving the merger issued back in 2016 that was subsequently set aside. The finance secretary announced that the President has approved the merger, expecting it to happen by the end of the year. He cited a number of benefits including cost savings for government and avoidance of needed recapitalization requirements, and with LANDBANK, the surviving entity, becoming the largest bank in the country. Doubts that have been raised about the advisability of merging the two banks are based on whether scale matters for the effective and efficient delivery of banking services to the unserved/underserved markets (agriculture for LANDBANK and small business for DBP), whether the elimination of existing competition between the two banks for public sector clients (e.g., local governments and public corporations) would reduce efficiency and service quality, and whether concentrating governance risks in one giant bank would raise investment and asset quality risks. Unclear also is what having the largest bank in the country owned by the government would mean for the banking sector. The issue of whether an executive order, rather than a law, is sufficient to effect the merger has also been raised.

7. We have discussed other policy initiatives elsewhere, including the foreign policy pivot which could help attract “friend-shoring” investments, the proposed banning of the online gaming industry which, despite its non-trivial contribution to the economy pre-pandemic, poses reputational and societal harm, including risks of money laundering, and the controversial proposal to create a sovereign investment fund that to date and despite continuing changes, remains quite divisive.


Romeo L. Bernardo is a co-founder, trustee/director of the Foundation for Economic Freedom. He serves as a board director in leading companies in banking and financial services, telecommunication, energy, food and beverage, education, real estate, and others. He has had a 20-year run in the public sector including stints in the Department of Finance (Undersecretary), IMF, World Bank and the ADB