Professional Documents
Culture Documents
Submitted by:
Christine Aldeguer
Leticia Belliodo
Jericho Bragado
Jude Edmon Anthony Ola
2
Introduction
The balance of payments (BOP) is the method countries use to monitor all
including the price of imports and the outflow of capital and gold, along with the
total receipts from abroad, including the price of exports and the inflow of capital
and gold.
country and the rest of the world; and reports how that flow is funded. Economic
transactions include:
Exports and imports of goods, such as oil, agricultural products, other raw
materials, machinery and transport equipment, computers, white goods
and clothing;
Exports and imports of services such as international transport, travel,
financial and business services;
Income flows, such as dividends and interest earned by foreigners on
investments in a country and by such country investing abroad;
Financial flows, such as direct investment, investment in shares, debt
securities, loans and deposits;
Transfers, which are offsetting entries to any one-sided transactions listed
above such as foreign aid and funds brought by migrants to the country.
specific time period, the economic transactions of an economy with the rest of
the world.
This paper deals with the study of improving the Balance of Payment of
The researchers hope that this paper will be helpful to the Philippines, as
insights from existing laws and theories in Management may also be considered
for purposes of analyzing the different categories that comprise the Balance of
Current Account
Goods and Services
Income
4
The above table provides information of the Overrall BOP Position of the
Philippines for the years 1999-2008. In order to analyze the above table, let us
Philippines, specifically, the Current Account, the Capital Account and the
Financial Account.
Current Account
In summary this covers import and export of goods and services. Goods
which involves:
General merchandise
Goods for processing
Goods procured in ports by carriers
Non monetary gold
Services involves:
Transportation
Travel
Communication services
Construction services
Insurance services
Financial services
Computer and information Services
Royalties and license fees
Other business services
Personal, cultural and recreational services
Government services
investment income.
when it directly affect the level of disposable income and should influence the
consumption of goods or services. That is, current transfers reduce the income
and consumption possibilities of the donor and increase the income and
20000
15000
10000
Current Account
5000 Goods and Services
0 Income
Current Transfers
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
-5000
-10000
-15000
The above graph shows that from the years 1999-2008, our country has
total amount of US$7 billion dollars every year. However, the graph will also
show that our country has consistently been incurring surplus in the Current
Transfer, increasing from US$5 billion dollars for the year 1999 reaching until
US$15 billion dollars for the year 2008.The remittances of our country's
Capital Account
This component covers all transactions that involve the receipt or payment
assets. This comprises transactions associated with tangible assets that may be
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used or necessary for production of goods and services but are not actually
produced (e.g., land and subsoil assets) and transactions associated with
180
160
140
120
100
80
60
40
20
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
The above graph indicates that the Philippines is not that aggressive in its
capital account transactions within the years 1999 upto 2008, only reaching a
recorded maximum level of US$163 million in the year 1999. This is due to the
fact that the Philippines does not allow foreigners to buy real estate as prohibited
8
under the Constitution. On the other hand, foreign investors may only be allowed
to lease real property owned by Filipinos for a maximum period of 5 years and
provided that these investors shall lease such real property which shall be limited
to investment projects with an investment of not less than US$5 million, 70% of
which shall be infused in said project within years from signing of the lease
contract.1
Financial Account
changes include the creation and liquidation of claims on, or by, the rest of the
world.
Functional Type:
Direct Investment
Portfolio Investment
Reserve Assets
Other Investment
as Portfolio Investment.
are traded and tradable in organized and other financial markets. Debt securities
include bonds and notes, money market instruments, and financial derivatives
that include a variety of new financial instruments. Equity securities covers all
instruments and records acknowledging, after the claims of all creditors have
Reserve Assets - consist of those external assets that are readily available
intervention in exchange markets to affect the currency exchange rate, and/or for
other purposes.
3000
2500
2000
1500
1000
500
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-500
-1000
The above graph indicates that our country is treading the waters in
The Law
Philippine national and at least sixty percent (60%) of the fund will accrue
to the benefit of Philippine nationals: Provided, That where a corporation
and its non-Filipino stockholders own stocks in a Securities and
Exchange Commission (SEC) registered enterprise, at least sixty percent
of the capital stock outstanding and entitled to vote of each of both
corporations must be owned and held by citizens of the Philippines, in
order that the corporation shall be considered a Philippine national.3
6
-- Section 1(k), Implementing Rules and Regulations of RA 7042 (October 23, 1991) as amended by RA
8179.
7
-- Section 2, RA 8179.
8
-- Section 3, RA 8179.
9
-- Section 1 (g), Implementing Rules and Regulations of RA 7042 (October 23, 1991) as amended by RA
8179.
13
within the Negative Lists A and B or utilize raw materials from depleting
natural resources.
The Law
The law provides for the legal framework and mechanism for the creation,
operation, administration and coordination of Special Economic Zones in
the Philippines, creating for this purpose, the Philippine Economic Zone
Authority (PEZA) and for other purposes. On October 7, 2002, the
Department of Tourism (DOT) entered into a Memorandum of Agreement
(MOA) with PEZA that will grant Special Economic Zone status to tourism
development zones and tourism estates upon registration with PEZA
subject to the issuance of the required Presidential Proclamation. The
PEZA shall consider for registration tourist-oriented enterprises to be
located in PEZA-registered tourism development zones/tourism estates
which are enclosed by the DOT as enterprises that will be established
and operated with foreign tourists as primary clientele.
10
-- Article XII, Section 2 of the Constitution.
11
-- RA 7916.
14
The Law
Philippines.
d) Build-Operate-Transfer Law
The Law
12
-- Section 32, Executive Order No. 226, July 16, 1987.
17
13
-- Rule 1, Section 1.3 (e). Revised Implementing Rules and Regulations of R.A. No. 6957, "An Act
Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the
Private Sector and for Other Purposes", as Amended by R.A. No. 7718
14
-- Rule 5.1, Revised Implementing Rules and Regulations of R.A. No. 6957, "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector and
for Other Purposes", as Amended by R.A. No. 7718.
20
Period Covered
Financing Allowed
15
-- Rule 5.4, Revised Implementing Rules and Regulations of R.A. No. 6957, "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector and
for Other Purposes", as Amended by R.A. No. 7718.
21
Priority Projects
Portfolio Investment
securities in the form of bonds and notes, money market instruments and
investor holds less than 10% of the total equity of an enterprise. Also included in
this account are sale and purchase of bills, bond notes and money market
transactions.
traded and tradable in organized and other financial markets are as follows:
Debt securities
Equity Securities
Debt securities are subdivided into bonds and notes, money market
instruments.
Debt securities cover (i) bonds, debentures, notes, etc.; (ii) money market
instruments, such as options, that usually do not extend to actual delivery and
Bonds, debentures, notes, etc. usually give the holder the unconditional
income. They also provide the holder with the unconditional right to a fixed sum
shares, convertible bonds, and bonds with optional maturity dates. This category
also includes negotiable certificates of deposit with maturities of more than one
year; dual currency bonds; zero coupon and other deep discounted bonds;
the claims of all creditors have been met, claims to the residual values of
6000
5000
Debit: Assets, Residents'
4000
Investments Abroad
3000
2000
Credit: Liabilities, Non-
1000
Residents' Investment in
0
the Philippines
-1000
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Total Portfolio Investment
-2000
-3000
-4000
-5000
The graph above indicates that the Philippines Portfolio investment in the
years 2000-2004 have not been aggressive. However, the country’s portfolio
participation.
The foreign countries trust in the Philippines for possible investment has
increased dramatically in the mid-2004 onwards. It will be noted that in the mid-
2004, the Philippines have sought credit ratings from International Credit Ratings
such as the Standard and Poors, Fitch Group and Moodys. This move has given
administration, at the same time an effort to reach out to foreign investors that
Financial Derivatives
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investment.
100
50
0
-50 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
-100
-150
-200
-250
-300
-350
primitive way in transacting money market transactions, could have saved our
countries like the United States of America, United Kingdom and some of the
Goods
Services
Current Account (with emphasis on the plight of the country's OFWs)
The research proposal will also tackle the involvement of foreign investors
which might affect the Financial Account component of the Balance of Payment.
Laws such as the Foreign Investment Act, Omnibus Investment Code, BOT Law
and the Special Economic Zone Act will cover transactions that are classified as
Direct Investment and Portfolio Investment under the Financial Account. The
researchers of the study intend not to provide improvements which may affect
policies are just enough to survive the future crises that the world might
encounter.
The study primarily aims to improve certain problem areas involving the
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Account component.
This study is mainly concerned with identifying the problems areas in the
Investment and Portfolio Investment are merely incidental in line with its ultimate
data gathered for the background of the study are based on the BOP Manual, 5th
Edition and some legislation, the researchers can only make deductive reasoning
and analysis from limited data by reason of time and budget constraints.
Nevertheless, the researchers hope that this study will help improve our
Procedure:
In order to minimize cost, the government may tap business schools all over the
country to come up with various feasibility studies for potential industries and
industries that are dying in the Philippines. Government may come up with a
nationwide search for the "Best Business Plan". The winners may be given
Benefits/Advantages
What the country needs are various feasibility studies that the
Government may consider or reconsider for purposes of financing the same, for
providing funds for the training of affected stakeholders, and the possibility of
inspiring these affected stakeholders to become world class in their craft which
Procedure:
tourism zone enterprises and grant tax perks. In addition, the Department of
Tourism is given more regulatory powers in protecting the different tourist spots
Benefits/Advantages
advantage in order to attract more tourists, thus the possibility of improving the
Recommendation #3. Create a tax incentive measure for enterprises that will
especially provide or input technology for the country. The tax incentive will
depend on the number of Filipino workers that will be employed by such
enterprise.
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Procedure:
Be that as it may, let us consider the following labor practices that should
enterprises:
regulations;
meet on a regular basis with representatives from the management and labor, to
committee.
recommendation.
under investigation.
Benefits/Advantages
This concept will definitely create more jobs for Filipinos. In addition, this
with the possibility of not only creating jobs, but also providing technology for our
preferable that foreign investors should study the country’s different labor
Procedure
This concept will involve approval of the lawmakers of the country. The
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reputation so as to help the country develop, not to destroy, its natural resources.
Benefits/Advantages
This concept will attract foreign investors in helping explore and develop
our country’s wealth. The technology that the foreign investors will provide for
the utilization and exploration of the country’s wealth and natural resources will
create an open mind to the Philippines on how it will generate resources and
Procedure
Additional tax incentives should also be considered for the study in case of
Benefits/Advantages
This concept will generate more jobs to Filipinos. In addition, this will also
attract foreign investors who wish to put up businesses in the Philippines that are
exports.
Procedure
Presidential Issuance in accordance with the BOT Law and the Omnibus
Benefits/Advantages
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country’s balance of payment in terms of exports. The reason for this is that
period will not only improve the country’s agribusiness, but will also provide a
Procedure
remitting part of the earnings at the SSS by the OFWs. The remittance of the
OFWs to the SSS shall be under the supervision and responsibility of the
be provided in order for the concerned OFW to avail of the maximum benefits
Benefits/Advantages
38
The funds that have been remitted by the concerned OFW to SSS will
help him to enjoy a contingency benefit (such as retirement) upon his return to
the Philippines.
Procedure
minimum criteria for qualification by the OFW who shall avail of the incentives.
(i.e. minimum remittances at the Social Security System, years of service, etc).
Benefits/Advantages
Conclusion
institutions) to align their curricula to the industry needs of the country. These
educational institutions should also establish network linkages with the different
current industry needs that will help devise a rich curriculum that will fully equip
productive.
has been the ultimate goal of the government to have a balanced budget in terms
of its fiscal administration. This policy should be the primordial aim of every
leader of the country in properly managing the funds belonging to the Filipino
citizenry. As part of the principle that public office is a public trust, every leader
must bear in mind that graft and corruption is not a cancer sickness that cannot
prevented and eradicated provided every leader has the right mindset in doing
the right things all the time. Should this right mindset continue across public
office, our country will have a chance to have an opportunity to be a perfect place
to live in.