This information comes from the assessment conducted in country for the Philippines report, which was published in July 2007.
Company law and, in particular, corporate governance present a challenge, if not an obstacle, to economic development in the Philippines. Resulting from the historical underpinnings of colonialism, much of the corporate wealth in the Philippines is concentrated in a few families and large companies. Despite reforms that, for the most part, put the corporation code in line with international norms, these companies have been able to influence corporate law and policy to limit both domestic and international competition.
As a result, this concentration in corporate ownership and control leaves relatively few shares on the market for public trading and, similarly, few opportunities for others to succeed in the market. In this environment, minority shareholders find that they have no meaningful opportunities to influence business decisions or even to enforce their rights under the black letter of the law. At present, numerous reform programs that should be supported are under way through a variety of donors.
As with many areas of law and trade in the Philippines investigated in this report, the legal framework with respect to contracts is sound and aligned with modern commercial practice. The institutions responsible for the enforcement of contracts and contract law, however, lack predictability and efficiency, causing a chilling effect on some forms of commerce in the country. The recommendations with respect to case dispute resolution and court administration, discussed in the full report, apply here as well as to those areas that investigate the bodies responsible for contract law and enforcement, in particular the courts.
Amid a pervasive sense that the Philippine economy is underperforming and the barriers that foreign investors face are significant, certain areas of optimism do emerge. Factors that point toward “more sustainable, stronger growth” and overall improved investor confidence in 2007 and beyond include a recently reduced deficit, a decreased rate of inflation, a “remittances boom” that creates new potential markets for investors, growing opportunities in business process outsourcing and mining, and a strengthened banking sector. A variety of steps can still be taken to further bolster this situation, including greater availability of timely trade statistics, improvements in the agriculture and tourism sectors to attract greater foreign investment, and continued efforts to ameliorate corruption, which has been cited as a deterrent to the interest of foreign investors in the country.
