Interview: Augusto A. San Pedro Jr.
What are the major challenges faced by multinational corporations entering the Philippine market?
AUGUSTO SAN PEDRO: Restrictions on foreign ownership in certain sectors, such as construction, real estate and telecommunications, are a major challenge for multinational corporations intending to enter the market. These requirements restrict competition and prevent the entry of major international players that are able and willing to put up the capital that local companies may not have. This affects funding for projects which will introduce innovations in infrastructure and technology that local companies may learn from or improve upon. High capitalisation requirements mandated by laws such as the Retail Trade Act and the Foreign Investments Act present another hurdle, as they restrict consumer choice and foreign direct investments.
Bureaucratic red tape in setting up a business is an issue as well, particularly when dealing with local government units. The requirements and time frame need to be streamlined, as red tape creates an environment conducive to corruption and dilutes the faith of foreign firms in public institutions.
Intellectual property (IP) protection must also be strengthened, especially regarding online infringement. IP enforcement mechanisms have to adapt to the reality that a bulk of commerce now occurs online, without physical establishments that are easily monitored.
There is also the perennial problem of a justice system that is slow and unpredictable. This is underscored by disputes between foreign investors and local partners.
How can the commercial litigation and dispute arbitration process be simplified and accelerated?
SAN PEDRO: Philippine court procedures have been in a state of flux over the last few years in view of ongoing judicial reform initiatives, which range from mandatory continuous trial, to e-court systems and adopting best practices from other jurisdictions. Perhaps it is just a matter of waiting for these reforms to settle before we begin to reap the benefits, and improving or fine tuning reforms that are already there.
For example, the creation of specialised trial courts in various fields (commercial, family, environment and others) has contributed in no small part to the efficient dispensation of justice, since a judge that is specialised in the matter of the dispute can adjudicate quickly and fairly. There is still room to create more specialised courts in other fields, including extending the system to appellate courts. The the commercial arbitration space could also be expanded via the creation of industry-based arbitral institutions, such as the Construction Industry Arbitration Commission.
Another example is the judicial dispute resolution (JDR) mechanism, where a judge, who is not the adjudicating judge, mediates between the litigants. Given the length of time of and costs attendant to litigation, there is a strong incentive for litigants to reach an early amicable settlement. Thus, there is great potential for JDR to be an effective tool in declogging the court dockets. But there is room to improve the JDR system, including more advanced mediation training for judges.
Where can the Philippines improve in terms of ease of doing business for foreign businesses?
SAN PEDRO: Apart from improving key areas in the legal framework, the lack or failure of critical infrastructure is a major concern. Its effects resonate in all areas of business – from the transportation of raw materials made difficult by poor roads, to workforce productivity being compromised by employees commuting on a barely functional public transportation system.
While the government has embarked on a $180bn scheme to improve infrastructure through 75 projects, it may be a while before the programme translates to the improvement of on-the-ground conditions, particularly in underdeveloped rural areas to which the government hopes to attract businesses to reduce the congestion in Metro Manila and other major cities.
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