Moving Across Borders:The Philippines andthe ASEAN EconomicCommunity

2016 Investment Guideby KPMG in the Philippines

In this issue:

Is the Philippines ready for the AEC? The challenges of the AEC Strengthening the ASEAN integration

What role will the Philippinesplay in the AEC?

2015 R.G. Manabat & Co. This publication is copyrighted. No part of this publication may be reproduced by any process or means without the prior written permission of R.G. Manabat & Co. All rights reserved.

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Moving Across Borders:The Philippines and

the ASEAN Economic Community

2016 Investment Guideby KPMG in the Philippines

Contents

The Philippines: Gearing Towardsa Borderless ASEAN Economic Community

Reaping the fruits of labor mobilityin the AEC

Addressing the implementationchallenge of facilitation andconnectivity

Transforming into oneASEAN market

Establishing the Philippinesas production base

Navigating through the Single Window

4 - 10

11 - 17

18 - 28

29 - 47

48 - 64

65 - 70

Introduction 01 Contributors 03 Acknowledgements 04Glossary 71 About the Philippines 72 Directory of Government Agencies 74

About KPMG 75 Directory of Partners and Principals 76

Foreword

Roberto G. Manabat Chairman and CEO

KPMG R.G. Manabat & Co.

Since 2010, the Philippines has been taking big leaps in terms of economic performance, posting an average GDP growth rate 6.3% until the end of 2014. In the second quarter of 2015, GDP grew by 5.6%, higher than the growth rate of 5.0% in the first quarter. It is one of the most rapidly emerging markets in the ASEAN region with its sound economic fundamentals and highly skilled and productive workforce. This has also helped the country attain investment grade status from ratings agencies such as Moodys, Standard & Poors and Fitch.

As one of the strongest and fastest-growing economies in the region, what role will the Philippines play in the upcoming ASEAN integration? This is the question that KPMG R.G. Manabat & Co. (KPMG RGM&Co.) strives to answer through this latest thought leadership publication. KPMG RGM&Co. partnered with the University of Asia and the Pacific (UA&P), one of the countrys premier research universities and leading economics schools, to explore the Philippines readiness and role in the upcoming implementation of the ASEAN Economic Community (AEC).

In this guide we identify the challenges of the ASEAN integration such as labor mobility, trade facilitation and connectivity, and transforming into one ASEAN market. We also look at the opportunities that the AEC will bring about and how the Philippines can position itself as a game changer in the region. Finally, we hope to shed light on how businessmen and investors can take full advantage of the integration as the country continues to become one of the strongest economies in Southeast Asia.

About the University of Asia and the Pacific The University of Asia and the Pacific (UA&P) is a private, not-for-profit institution of higher learning that offers some of the most outstanding academic programs in Asia. UA&P began in 1967 as the Center for Research and Communication (CRC), a think tank conducting research and offering graduate courses in economics and management. The UA&P School of Economics has been recognized as a catalyst of economic progress in the Philippines and in Asia and has earned a reputation for its highly relevant economic research. The major areas of its research activities include the fields of economic forecasting, financial markets, wage determination, and macroeconomics.

1Moving Across Borders: The Philippines and the AEC

www.uap.asiainfo@uap.asia

The Philippines gearing towards a Borderless ASEAN Economic Community

Reaping the fruits of labor mobilityin the AEC

Transforming into one ASEAN market;Navigating through the Single Window

Transforming into one ASEAN market;Establishing the Philippinesas production base

Emmanuel P. BonoanBernardo M. Villegas

Kristine Joy Martin Henry D. Antonio

Henry Antonio is currently the Head of Advisory of KPMG R.G. Manabat & Co. He has extensive experience on forensic and fraud investigations, business process reviews, corporate rehabilitation, and risk management and compliance. He has over 18 years of domestic and international experience in risk management, finance, and audit, including various advisory positions in distressed-related restructure management, consolidation, transactional support and receivership.

Kristine Joy Martin is a member of the faculty of the School of Economics of UA&P. Her research and policy analysis areas cover regional integration initiatives such as the TransPacific Partnership, the ASEAN Economic Community and EU Generalized System of Preferences. She has conducted collaborative research under the East Asia Development Network (EADN). She is also a member of the International Input Output Association (IIOA) based in Austria. She handles the economic research seminar and managerial econ &P.

Dr. Bernardo Malvar Villegas is a visiting Professor of IESE Business School in Barcelona, Professor at the University of Asia and the Pacific (UA&P) and Research Director of the Center for Research and Communication, Manila. He has a Ph.D. in Economics from Harvard University (1963) and is a Certified Public Accountant, having been one of the CPA board topnotchers in 1958. His special fields of study are development economics, social economics, business economics and strategic management. He is the author of several economics textbooks widely used in Philippine schools and universities.

Emmanuel Bonoan is the Vice Chairman and Head of Tax, Chief Operating Officer of KPMG R.G. Manabat & Co. He is a former Undersecretary of the Philippine Department of Finance and exercised oversight functions over the Bureau of Internal Revenue and the customs authority.

Moving Across Borders: The Philippines and the AEC2

Contributors

We are grateful for the valuable insights of:

We are grateful for the assistance and research support of the following:

Mr. Cezar ConsingPresident

Bank of the Philippine Islands

Atty. Mark Darryl A. CanibanTax Supervisor

KPMG R.G. Manabat & Co.

Ms. Marcella Maria KaraanGraduate staff

University of Asia and the Pacific

3Moving Across Borders: The Philippines and the AEC

Andrew James GerardD. Ruiz

Establishing the Philippinesas a production base

Michael ArcatomyH. Guarin

Michael Guarin is the Head of Deal Advisory group of KPMG R.G. Manabat & Co. Mike has extensive advisory experience in the banking, mining, hospitality and media sectors in the Philippines. He has advised banking clients on the valuation of Philippine thrift banks as well as on non-performing loans portfolios. He has also successfully advised clients on core asset acquisitions. He has advised foreign investors on available market entry strategies into the Philippine mining company. In the media sector, he has been the preferred advisor for financial due diligence needs of one of the biggest media companies in the Philippines.

Andrew Ruiz is a practicing tax lawyer since 1993. He has extensive experience in Philippine Taxation having handled engagements under the whole gamut of tax practice, including tax planning, tax advocacy (including appearances at the Court of Tax Appeals), tax advisory, and tax due diligence/compliance reviews. He has assisted in the drafting of various issuances on tax industry issues for submission to the Bureau of Internal Revenue.

Navigating through the Single Window

Setting sail for the ASEANSingle Shipping Market

Carmel LynneM. Balde

Aurora M. Hipol

Nini Balde has over 15 years of experience in the audit, banking and advisory services. She has led and transitioned the audits of several KPMG global, as well as local, bank clients. She has been seconded to KPMG Hong Kong, and also coordinates closely with other KPMG offices for the testing of offshore activities of global bank