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From Gold to Gas: How The IPPA Lays the Investment Landscape for UAE and PH

Last February 11, it closed deals with the Philippines for an Investment Promotion and Protection Agreement (IPPA), bringing its investments to Philippine shores and boosting its trade relations with Filipino businessmen.
investment

The United Arab Emirates (UAE) has long commanded economic superiority with its sovereign wealth funds have a combined asset of over USD 1.4 trillion. Last February 11, it closed deals with the Philippines for an Investment Promotion and Protection Agreement (IPPA), bringing its investments to Philippine shores and boosting its trade relations with Filipino businessmen.

The UAE Ministry of Finance thus published in their website the specific provision of the agreement.

“Intending to promote its developmental goals, the UAE concluded 106 BIT, with most of its trade partners, these agreements aim to:

  • Protect investments from all non-commercial risks like nationalization, expropriation, sequestration and freezing.
  • Allow the establishment of investments and licensing such investments.
  • Confirm the free transfer of profits and other returns in a freely transferable currency.
  • Granting national treatment in accordance with the laws enforce in the State, and the most favored nation treatment, with respect to management, maintenance and expansion of investments.
  • Fair and prompt compensation for the investor in the case of expropriation of his investment for the purpose of public interest, in accordance with the law and without discrimination, the compensation should amount to the fair market value on the investment before the expropriation.
    • Set the dispute settlement procedures between the investor and the State:Amicable solution.
    • Local courts or international arbitration.”

United Arab Emirates Ministry of Finance, Protection, and promotion of investments, https://www.mof.gov.ae/en/StrategicPartnerships/DoubleTaxtionAgreements/Pages/InvestorProtection.aspx (last visited Feb. 28, 2022).

A promising partnership

The IPPA allows Filipino investors to tap into the trillion-dollar valued UAE sovereign wealth funds. With three Emirati firms already signing several Letters of Intent and one Memorandum of Understanding, USD 580.5 million worth of investments as well as a conservative estimate of 4,000 jobs can be expected from the accord. These pledged investments are anticipated to elevate local healthcare and medical equipment supply, renewable energy projects, oil and gas, tourism and hospitality, dairy production, and even theme park development. Baladna Qatar Public Shareholding Company (QPSC), the largest producer of food and dairy in the UAE, is also already planning to invest half a billion USD for an integrated dairy facility in the Philippines.

The Philippines in return has much to offer to the Emirati economy. Their investors can take advantage of the Philippines’ rising tourism and hospitality sectors, real estate development, IT-BPM/shared services, manufacturing, food security, agri-industrial/agribusiness, and renewable energy. Automotive, aerospace, electronics, and hyperscalers are also key expanding industries in today’s business climate, offering good potential. A favorable return of investment can be expected from the abovementioned industries as the Philippine government has been introducing various legal developments and significant economic regulatory reforms for its protection, which includes: the Public Service Act, Retail Trade Law, Foreign Investments Act, the CREATE Act, and aggressive Build Build Build efforts.

“Modern, business-friendly, and comprehensive.”

DTI Trade Secretary Ramon Lopez described the IPPA as “modern, business-friendly, and comprehensive,” as it forges for the parties a National Treatment, Most Favored Nation Treatment, freedom from expropriation, Transfers, and access to Investor-State Dispute Settlement Mechanism, among other arrangements. Better explained by the Secretary himself:

“These initiatives are expected to boost trade and investments between two countries, leading to more diversified economic activities, development of new industries, employment generation, and higher consumer spending as we partner for shared prosperity. Active engagement between government and business sectors is key in ensuring that both countries will maximize benefits of the Agreements, including diversifying and expanding economic interests,” Lopez said.

IPPA also establishes a Joint Committee on Investments (JCI) tasked to closely collaborate and convene for the rapid and effective implementation of the above-stated promotions.

The next step

Now is an opportune time for global players to venture into the Philippine market.

Outside of this agreement, the Philippine government had been setting up the country for the global stage—legislation on Ease of Doing Business that streamlines government processes and cuts bureaucratic red tape, tax improvements and incentives, and initiatives on amending the Public Service Act to lift of foreign investment restrictions, are liberalizing the Philippine economy and positioning the country as a premium investment destination.

With the aforementioned regulatory reform to foreign investment merely awaiting President Duterte’s signature, coupled with the easing of quarantine restrictions to open the country back in business, it is only a short matter of time before barriers to foreign entry are removed and retail and trade with foreign investors find fast modernization.

Synchronous with the recent conclusion of the IPPA, the signing of another more extensive agreement—the Philippines-UAE Comprehensive and Economic Partnership Agreement (CEPA)—is already underway.

Lopez expects to sign the IPPA by March.  

Written by: Emille Llorente

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