I.  COMMERCIAL OVERVIEW

Restored political stability, resumption of economic growth, and new
measures designed to liberalize the Philippines' trade and investment
regime improve the outlook for increased U.S. exports to the
Philippines.  Among the most positive developments during this period
were a reduction in import duties, further opening of the
telecommunications and banking sectors, liberalization of the foreign
investment regime, and an end to the chronic power outages that dogged
the country through 1993.  While important challenges remain,
particularly in the fiscal and balance of payments areas, most observers
agree that the Philippines has turned an important corner and has
potential for sustained economic recovery.

Historical close bilateral ties and extensive people-to-people contacts
have contributed to the United States' position as the Philippines'
number one trading partner and foreign investor.  Trade with the U.S.
accounted for 29 percent of the Philippines' $28.97 billion total 1993
trade turnover.  Reflecting improved economic growth, total Philippine
imports in 1993 grew by over 21 percent to $17.7 billion.  The U.S.
share of this amount was about one-fifth, and consisted chiefly of
electronic components, telecommunications equipment, data processing
machines, and wheat.  Despite a 27 percent increase in U.S. exports in
1993, Japan was the Philippines' leading supplier for the second
consecutive year.  The U.S. remains the Philippines' largest market,
absorbing $4.9 billion in 1993, mostly electronic components, garments,
and coconut oil.

U.S. direct investment in the Philippines stood at $1.6 billion in 1992,
largely concentrated in manufacturing and banking.  American firms long-
established in the Philippines are demonstrating their confidence in the
future with plans for over half a billion dollars' worth of new
investment in the next three years.  Gradual liberalization of
Philippine foreign investment regulations, including broadening and
simplification of the build-operate-transfer (BOT) law and steps towards
improving the Foreign Investments Act, have encouraged a growing number
of U.S. companies seriously to consider the country as a new investment
location.

The Philippine Government is relying heavily on private sector
investments, both domestic and foreign, to achieve as well as sustain a
higher economic growth path.  Improving the country's inadequate and
unreliable infrastructure is a major focus of the Government's
development initiatives under the Core Public Investment Program (CPIP).
Within the CPIP, over two dozen "flagship" projects have been identified
for development by the Philippine Government's Interagency Coordinating
Committee.  While certain projects are funded by the central government,
many will require private sector financing, particularly under build-
operate-transfer and similar arrangements.  Many of these projects also
are slated to receive funding assistance from the Asian Development
Bank, the World Bank, or bilateral aid programs such as Japan's Overseas
Economic Cooperation Fund.  The Philippine Government's current "short
list" of BOT projects contains 22 specific proposals valued at $3.6
billion and covers infrastructure needs across the board, from power
generation to roadways to design and construction of water supply
facilities.

The Philippines is generally a receptive market for U.S. products and
services, and given the country's current development focus,
opportunities exist for U.S. exports of telecommunications equipment and
services, power generating machinery and distribution equipment,
computers and peripherals, construction and building products, equipment
for the tourism, hotel and restaurant industries, and environmental
technologies and equipment.

The U.S. also is the largest single supplier of agricultural commodities
to the Philippines, accounting for about one-third of total Philippine
agricultural imports.  Growth will continue for wheat, soybean meal,
forest products, snack foods and beef.  As a result of the Uruguay Round
agreement, there will be major new opportunities in 1995 for U.S.
feedgrains, pork/products, poultry/products, preserved/processed meat
products, and fresh vegetables.  However, various groups can be expected
to continue to look for ways to block or slow such imports.  Non-tariff
barriers, including imposition of sanitary/phytosanitary restrictions,
are the most likely tools to be used to constrain imports of
agricultural commodities.

The Philippines has undertaken several programs since 1991 to reduce,
restructure and simplify tariffs.  However, notable exceptions to tariff
liberalization remain, particularly with respect to imports of
agricultural products.  In addition, quantitative restrictions exist on
more than 100 agricultural and industrial commodities for health,
safety, or national security reasons.  The Philippines participated in
the GATT Uruguay Round of multilateral trade negotiations, and although
commitments were made to reduce tariffs in some sectors, in general the
Philippine offer was limited.  Overall tariff rates remain relatively
high.

The Philippines continues to use "home consumption value" (HCV), rather
than invoice value, as the basis for assessment of import duties and
taxes.  The use of HCV -- valuing the goods at prices prevailing in the
home country market, regardless of the actual price transacted between
buyer and seller -- in some cases has resulted in arbitrary and
unreasonably high valuations of U.S. exports to the Philippines.  The
Philippine Government has committed itself to replace HCV with an export
price-based system on January 1, 1995, as a transition step to a
transaction-based valuation system that will be introduced sometime
within the next five years.  Legislation for this transition step still
has to be enacted.

While other deterrents to foreign trade and investment continue to
exist--including inadequate enforcement and slow adjudication of
intellectual property rights, limitations on foreign investment in
certain industries and activities, and customs barriers outlined above--
the current Administration under President Fidel Ramos is committed to
improving the overall trade and investment climate in order to open the
Philippine economy to greater foreign participation.  The Philippines is
acutely aware of progress made by its neighbors in this regard, and of
what it must do to catch up.

Traditional Philippine affinity for, and familiarity with, American
business prowess give U.S. firms an advantage over other foreign
competitors.  Moreover, Presidents Ramos and Clinton have pledged a new
partnership in U.S.-Philippine relations, founded on enhanced trade and
economic ties.  These factors, combined with a much-improved Philippine
economic outlook, set the stage for U.S. companies to take a fresh look
at the Philippines.