Philippines inclusion in JP Morgan index under review

MANILA, Philippines — The Philippines remains under consideration for inclusion in the JP Morgan Government Bond Index for Emerging Markets (GBI-EM), but the process may take longer due to extensive review, National Treasurer Sharon Almanza said.

In a chance interview with reporters, Almanza said the country is “still under the radar” and that the next review by JP Morgan would start next year.

“I think (JP Morgan’s review will begin) in the first quarter of 2025 and may stretch until the middle of the second quarter,” she said. “After that, they will do another round of consultation with the investors.”

The inclusion in the JP Morgan GBI-EM is seen as a significant boost for the Philippines as it would attract more foreign investments into the local bond market, enhancing liquidity and potentially lowering borrowing costs.

However, Almanza said there are still issues that need to be addressed to improve the country’s chances of being included in the bond index. Key concerns raised by investors include the liquidity of the local bond market and tax-related matters.

To address these, the government has implemented measures such as the enforcement of tax treaties with major investment countries, including UK and the US.

“Hopefully that one will address the issue on the withholding tax,” Almanza said.

The Bureau of the Treasury (BTr) has implemented a streamlined tax treaty procedure for non-resident investors of government securities to attract foreign participation in the GS market and strengthen the domestic capital market.

Under the streamlined process, foreign investors no longer need to submit several tax documents to claim tax treaty benefits on specific GS income items.

Non-resident investors will also no longer have to repeat application processes for each new GS income event. This removes the risk of claim denial and eliminates the need to file for tax treaty relief.

Currently, the Philippines has 43 double tax agreements or tax treaties that provide preferential tax rates ranging from 10 to 15 percent, depending on the country.