PHILIPPINES: An Introduction

Overview of the Political, Economic, and Legal Landscape in the Philippines (2025)

In 2025, President Ferdinand R Marcos Jr’s administration is going to focus its economic and socio-political policies on promoting structural reforms outlined in the Common Legislative Agenda of the Legislative-Executive Development Advisory Council. These reforms aim to improve economic efficiency, governance, and regulation in key sectors. They centre on expediting the implementation of critical infrastructure projects; accelerating national efforts toward a more energy-secure country; enhancing tax and administrative incentives available to companies; and ensuring an equal playing field between local and foreign digital service providers, among others.

Economic Performance

The Philippine Statistics Authority reported that the inflation rate for October 2024 had stabilised at 2.3%, which is within the government's target range of 2% to 4%.

The National Economic and Development Authority emphasised the significance of Executive Order No 62/2024, issued by President Marcos Jr in June 2024, in maintaining stable commodity prices. This Executive Order reduced rice tariffs from 35% to 15% to ensure a sufficient rice supply and keep prices affordable amidst rising global costs.

Furthermore, the President's signing of the Anti-Agricultural Economic Sabotage Act or Republic Act (RA) No 12022/2024 on 26 September 2024, is pivotal. This legislation aims to eliminate hoarding, anti-competitive practices, and other illegal activities that drive up agricultural prices.

The GDP growth rate of the Philippines for the third quarter of 2024 was 5.2%, a decrease from the 6.4% growth recorded in the second quarter and slightly below the target of 6% to 7% for 2024. The slowdown was due to a contraction in agriculture and moderated growth in industry and services. The agriculture sector saw a 2.8% year-on-year decline, impacted by the El Niño phenomenon during planting and typhoons, along with the monsoon during harvest. Meanwhile, the industry and services sectors recorded moderate year-on-year growth rates caused by class suspensions and work disruptions due to typhoons, leading to administrative delays and supply chain issues.

Government agencies are working to accelerate recovery efforts in typhoon-affected areas. The Department of Agriculture has allocated PHP541 million for agricultural inputs and PHP500 million for the Survival and Recovery Assistance Programme while the Department of Human Settlements and Urban Development is providing cash and housing materials to help rebuild damaged homes.

To bolster infrastructure development, the government aims to provide more fiscal support for flagship projects and streamline processes for timely public and private investments. This requires enhancement of the ease of doing business to improve investor confidence.

The Philippines is also pursuing new free trade agreements (FTAs). FTA negotiations have resumed with the United Arab Emirates and the EU to enhance market access for non-traditional products, including halal commodities, and services like finance, information technology (IT) – business process management, and engineering.

The following laws designed to enhance revenue collection while attracting investments to stimulate economic activities and generate jobs have been enacted.

• On 5 December 2023, the President signed the Internet Transaction Act of 2023 or RA No 11967/2023 (ITA) into law. The ITA establishes the Electronic Commerce Bureau. It aims to regulate e-commerce to safeguard consumer rights and data privacy, foster innovation, promote competition, secure online transactions, protect intellectual property rights, ensure compliance with product standards and safety, and support environmental sustainability.
• On 2 October 2024, the President signed the Value Added Tax (VAT) on Digital Services Law or RA No 12023/2024, which imposes VAT on non-resident digital service providers (DSPs) for digital services consumed within the Philippines into law. The law defines “digital service” as any service delivered over the internet or another electronic network using information technology, where the service provision is primarily automated.
• On 11 November 2024, the President signed the Corporate Recovery and Tax Incentives for Enterprises to Maximise Opportunities for Reinvigorating the Economy Act or RA No 11534/2024 (CREATE MORE Act) into law. It reduces the corporate income tax for registered business enterprises from 25% to 20%.

Escalating Maritime Disputes in the West Philippine Sea and Economic Implications

The Philippines’ maritime territorial disputes with China in the West Philippine Sea (WPS) have reached an all-time high. In August 2024, the two countries experienced six confrontations both in the air and at sea within the disputed waterway.

In October 2024, President Marcos Jr urged the Association of Southeast Asian Nations (ASEAN) and China to accelerate the long-delayed code of conduct for the WPS and to engage in negotiations aimed at preventing further escalation of tensions in the region.

On 13 November 2024, China held joint military drills amid escalating maritime disputes with the Philippines. These latest drills come after President Marcos Jr signed the Philippine Maritime Zones Act or RA No 12064/2024 and the Philippine Archipelagic Sea Lanes Act or RA No 12065/2024, pertaining to the disputed WPS into law on 8 November 2024. The Philippine Maritime Zones Act establishes the rights of the Philippines over its maritime zones for social, economic, and commercial activities. The Archipelagic Sea Lanes Act designates sea lanes and air routes for the efficient passage of foreign ships and aircraft through its waters and adjacent territorial sea.

The ongoing maritime dispute in the WPS could disrupt trade and supply chains in the Philippines, restrict access to vital resources like energy and food, exacerbate environmental degradation, increase crime in international waters, limit freedom of navigation, and undermine national sovereignty. The government is focused on developing its energy and technology sectors to reduce dependence on China in terms of trade and investment linkages.

Artificial Intelligence and Workforce Development

The influence of technological advancements and digital automation in the Philippines is significant, especially in the fields of artificial intelligence (AI), and IT. The legislation on generative AI is vital for the Philippines due to the significance of its business process outsourcing sector.

At the World Economic Forum Meeting 2024 in Davos, the Philippine representative said that the Philippines would present a legal framework to set rules on AI to the ASEAN when it chairs the bloc in 2026. This will be based on the country's own draft legislation.

To keep growth in the services sector, collaboration with industry and academic institutions to provide reskilling, upskilling, and lifelong learning programmes that align the workforce with AI developments is required. The successful implementation of the Digital Workforce Competitiveness Act and the National AI Strategy 2.0 are crucial to this effort.

The Energy Sector and Nuclear Power

The Philippines is facing a growing energy crisis as the Malampaya natural gas fields, which supply 30% of Luzon’s energy, are expected to be depleted by 2025. The government aims to increase renewable energy’s share in the supply mix to 35% by 2030 and 50% by 2050, while promoting energy efficiency and emerging technologies for energy security.

In light of this, the Philippine government has allowed 100% foreign ownership of renewable energy (RE) projects to encourage faster investment. It has prioritised the building of port infrastructure and has issued policies to facilitate offshore wind development. To support the RE market, various policies have been established, such as RE portfolio standards, net metering, and green energy option programmes. Current developments include low enthalpy geothermal technologies, offshore wind projects, energy efficiency initiatives, and energy storage solutions, all at different stages of evaluation.

To address the energy concerns of the Philippines, the United States and the Philippines signed a 123 Agreement on civil nuclear co-operation in November 2023, which entered into force on 2 July 2024. It provides the legal framework for exports to the Philippines of nuclear material, equipment, components, and information for nuclear research and civil nuclear energy production.

Conclusion

While the Philippines continues to experience economic challenges and geopolitical tensions, the Marcos Jr administration is steadfast in its goal of achieving social and economic transformation, leading the country closer to realising a matatag, maginhawa, at panatag na buhay (or a stable, comfortable and secure life) for all Filipinos through its programmes and policies.