The Role of the Philippine Government in the Marketplace PDF

ECOo9-32: managerial economics I BSA1-2 The role of the Philippine government in the market place Topic 1: government intervention in markets: rationale and effects GROUP 4 I PROF. DR. MA...

ECOo9-32: managerial economics I BSA1-2 The role of the Philippine government in the market place Topic 1: government intervention in markets: rationale and effects GROUP 4 I PROF. DR. MARELYN BUENTIPO I WRITTEN REPORT REPORTER: ESTANISLAO, CRYSTALLYNE NEVAEH GOVERNMENT INTERVENTION  It is an action of the government to influence the financial markets or industries. RATIONALE There are 2 main rationales or reasons for government interventions. 1. EFFICIENCY RATIONALES - this focuses more on improving the function and performance of the economy. The government may step in when the economy is not performing well. Example: - Market Failures: If the market fails to produce the best possible result, the government will correct the failure and improve the outcome. Example: Monopoly. - Public Goods: Can benefit public goods without paying for them and some companies will produce and sell them. In this situation, the government will step in and will make sure that the public goods are available to all. - Imperfect Competition: When there are some firms that control a market, like oligopolies or monopolies, the economy will not work like a perfect competitive market. This can lead: higher prices, reduce output and lower the quality of the product. - Macroeconomic Stability: In this, the economy experiences low inflation, low unemployment and a balanced environment. (balanced fiscal and monetary). Through effective monetary and fiscal policies, governments and central banks are essential for supporting macroeconomic stability. 2. SOCIAL RATIONALES - this focuses with the outcomes of economic activity and how they affect the society, like in issue of fairness and justice This reflects to the choices made by the society to prioritize outcomes like: - Redistribution of wealth - through taxation and social welfare programs to reduce poverty and inequality - Ensuring access to essential services - Healthcare, education, and housing were not provided by the market. GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE REPORTER: DE LEON, GIENELLE FORMS OF GOVERNMENT INTERVENTION 1. MARKET REGULATION: The government makes a rule to prevent or encourage the consumption of certain goods and services. 2. SUBSIDIES: The government may provide subsidies to certain industries (such as agriculture or renewable energy). 3. PRICE CONTROLS: Governments can use price controls to control supply and demand by setting maximum or minimum prices for goods and services. 4. INDIRECT TAX: This indirectly affects the production costs, affecting how much the firms sell their products. 5. PUBLIC PROVISION OF GOODS AND SERVICES: The government can directly provide goods and services that are essential for public welfare, such as infrastructure, education, healthcare, and defense, which are often undersupplied by the private market. BENEFIT OF GO LOKAL PROGRAM BENEFIT TO LOCAL MSMEs  The Go Lokal program is a government initiative in the Philippines designed to support local Micro, Small, and Medium Enterprises (MSMEs) by providing them with opportunities to showcase their products and expand their market reach, particularly through partnerships with larger retail platforms. ELIGIBILITY CRITERIA FOR THE GOVERNMENT ASSISTANCE PROGRAMS FOR MSMEs EXAMPLE: PONDO SA PAGBABAGO AT PAG-ASENSO (P3)  is a program by the Philippine government to help first-time entrepreneurs and micro, small, and medium enterprises (MSMEs) in the Philippines by providing access to affordable loans. The goal of P3 is to make sure that small businesses, like sari-sari stores, food vendors, or other small shops, can grow and improve without paying too much for their loans. You are eligible to apply for the P3 program if you are self- employed or a micro entrepreneur engaged in legitimate livelihood or business activity for at least one year. REPORTER: FRANCISCO, RENE ANDREUI EFFECTS OF GOVERNMENT INTERVENTION IN MARKETS  Market Efficiency: Government intervention can correct market failures, such as externalities and information asymmetry, to lead the market to more efficient outcomes. For example, regulations can ensure fair competition and prevent businesses from exploiting consumers or workers. On the other hand, this can lead to over-regulations or poorly designed policies and lead to high compliance costs for business and market imbalances.  Consumer Protection: Regulations like product safety standards and price controls can protect consumers from harmful products, exploitation, or price increase, ensuring basic needs are met. However, strict regulations and price controls can lead to shortages, lower product quality, or higher prices.  Public Goods and Services: Government provides goods and services to consumers who lack access to basic necessities like healthcare and education. GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE ECo9-32: managerial economics I BSA1-2 The role of the Philippine government in the market place Topic 2: ANTI-TRUST LAW AND PUBLIC POLICY IMPLICATIONs GROUP 4 I PROF. DR. MARELYN BUENTIPO I WRITTEN REPORT REPORTER: GARCIA, ESMERALDA WHAT IS ANTI-TRUST LAW?  Antitrust laws are regulations that encourage competition by limiting the market power of any particular firm. This often involves ensuring that mergers and acquisitions don’t overly concentrate market power or form monopolies, as well as breaking up firms that have become monopolies.  Antitrust laws also prevent multiple firms from colluding or forming a cartel to limit competition through practices such as price fixing. Due to the complexity of deciding what practices will limit competition, antitrust law has become a distinct legal specialization. KEY TAKEAWAYS: ‒ Antitrust laws were designed to protect and promote competition within all sectors of the economy. ‒ The Sherman Act, the Federal Trade Commission Act, and the Clayton Act are the three pivotal laws in the history of antitrust regulation. ‒ The Federal Trade Commission, sometimes in conjunction with the U.S. Department of Justice, is tasked with enforcing federal antitrust laws.  Antitrust laws are the broad group of state and federal laws that are designed to make sure businesses are competing fairly. The “trust” in antitrust refers to a group of businesses that team up or form a monopoly to dictate pricing in a particular market.  Supporters say antitrust laws are necessary and that competition among sellers gives consumers lower prices, higher-quality products and services, more choices, and greater innovation. Most people agree with this concept and the benefits of an open marketplace, although there are some who claim that allowing businesses to compete as they see fit would ultimately give consumers the best prices.  The Philippine Competition Act or PCA (R.A. No. 10667): the primary law governing competition in the Philippines. Enacted in 2015, it aims to promote economic efficiency, protect consumer welfare, and penalize anti-competitive behavior. Functions:  Prohibits abuse of dominant market positions.  Prevents anti-competitive agreements (e.g., price-fixing, bid-rigging).  Reviews mergers and acquisitions that may reduce competition.  The PCA was passed in 2015 after languishing in Congress for 24 years. It is a game-changing legislation envisioned to improve consumer protection and help accelerate investments and job creation in the country, consistent with the national government’s goal of creating more inclusive economic growth GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE  Enforcement of this law helps ensure that markets are open and free, challenging anti-competitive business practices while maintaining an environment where competition is driven by business acumen. A competitive market means a market with multiple buyers and multiple sellers, driving market prices lower and offering consumers more choices. A truly competitive market encourages efficiency and innovation, and forces businesses to excel. The act reflects the belief that competition:  promotes entrepreneurial spirit;  encourages private investments;  facilitates technology development and transfer, and  enhances resource productivity. The Impact of Philippine Competition Act in Small businesses  The Philippine Competition Act (PCA) protects small businesses by prohibiting anti-competitive agreements and the abuse of dominant market positions  Anti-competitive agreements: These include price fixing, bid rigging, market sharing, and output limitation.  Abuse of dominant market position: This can include selling goods or services below cost, establishing barriers to entry, and limiting markets or technical development.  Mergers and acquisitions: The PCA prohibits anti-competitive mergers and acquisitions. - The PCA applies to all persons or entities in the Philippines that are involved in trade, industry, or commerce. The Philippine Competition Commission (PCC) is responsible for enforcing the PCA. The PCA helps small businesses by:  Promoting competition: The PCA promotes competitive market conditions, which can lead to lower prices and improved quality of products and services.  Protecting from abuse: The PCA protects small businesses from abuse by larger companies. TO ENSURE THAT DIGITAL TRANSFORMATION BENEFITS ALL BUSINESSES EQUALLY, SEVERAL MEASURES ARE IN PLACE, INCLUDING:  Inclusive policies  Collaboration platforms  Anti-monopoly regulations  Monitoring and evaluation  Infrastructure development  Cybersecurity measures  Financial support  Support ecosystems for SMEs  Education and training  Equity-based approach  Access to technology REPORTER: EGUIA, JASMINE REIGN Other Antitrust Laws:  Executive Order No. 45, Series of 2011: Executive Order No. 45, Series of 2011 was issued by President Benigno Aquino III, designating the Department of Justice (DOJ) as the Philippine Competition Authority. GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE  This order aimed to promote fair market competition and prevent monopolistic practices, thereby protecting consumers and ensuring a level playing field in the marketplace.  It ensures that competition policies are enforced to protect consumers from abusive or fraudulent business practices.  The DOJ is tasked with investigating and prosecuting violations of competition laws, specifically addressing monopolies, cartels, and unfair trade practices. Functions:  monitoring market practices  promoting transparency  conducting investigations  preparing reports on competition-related matters.  Philippine Competition Commission (PCC): The Philippine Competition Commission (PCC) is the independent, quasi-judicial body established to implement and enforce the Philippine Competition Act (RA 10667). It plays a critical role in promoting competitive markets and ensuring fairness in businesses in the country.  The PCC promotes fair practices to protect smaller businesses from being sidelined by larger competitors, contributing to a more balanced economic landscape. Functions:  Monitors and investigates anti-competitive behavior.  Ensures that mergers don't create monopolies.  Promotes a culture of competition and educates the public. GOVERNMENT SUPPOT MSME’S IN THE CURRENT MARKET  To support MSMEs, various initiatives and policies have been implemented, focusing on financing, capacity-building, digitalization, and regulatory assistance. REPORTER: DIEZMOS, BRENT DAVID PUBLIC POLICY IMPLICATIONS OF ANTI-TRUST LAWS  CONSUMER PROTECTION: Antitrust laws help to protect consumers by preventing companies from engaging in anti-competitive practices that may lead to higher prices, reduced quality, and less innovation.  MARKET FAIRNESS: Such laws make sure every enterprise is offered an equal opportunity to contend, leading to the enhancement of creativity and productivity. That prevents monopolistic firms from using their market power to limit competition.  ECONOMIC STABILITY: By maintaining competitive markets, antitrust laws contribute to economic stability. They prevent the concentration of market power in a few hands, which can lead to economic distortions and inefficiencies. GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE  ENCOURAGEMENT OF SMALL BUSINESSES: Antitrust laws help small businesses by ensuring they are not unfairly pushed out of the market by larger, more powerful companies. This promotes a diverse and dynamic business environment.  Notable case: A notable antitrust case in the Philippines involved Urban Deca Homes Manila Condominium Corporation and its parent company, 8990 Holdings, Inc. The Philippine Competition Commission (PCC) found their exclusivity deal with in-house ISP "Fiber to Deca Homes" anti-competitive because it prevented residents from choosing other ISPs. The companies were fined PHP 27.11 million and ordered to cease the practice. This case marked the first abuse of dominance resolution by the PCC. Philippines has implemented various measures to prevent future financial crises, building on lessons learned from past economic downturns. These include: Workers’ Income Augmentation Program (WINAP)  It provides assistance to minimum wage earners and other low-income earners. Popularly dubbed as “Dagdag-Kabuhayan para sa mga Manggagawa.” The program provides beneficiaries a livelihood activity that would give them additional sources of income and employment for their families. https://dictionary.cambridge.org/us/dictionary/english/government-intervention https://vgls.sdp.sirsidynix.net.au/client/search/asset/1015370#:~:text=The%20rationale%20for%20gover nment%20intervention,feature%20of%20the%20economy%20itself. https://www.vaia.com/en-us/explanations/microeconomics/market-efficiency/government-intervention-in- the-market/ https://www.adb.org/sites/default/files/publication/939871/governance-brief-054-tax-incentives- investment.pdf GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE ECo9-32: managerial economics I BSA1-2 The role of the Philippine government in the market place Topic 3: IMPACT OF GOVERNMENT POLICIES ON BUSINESS DECISIONS GROUP 4 I PROF. DR. MARELYN BUENTIPO I WRITTEN REPORT REPORTER: FERNANDEZ, ALHAINE EIHRA M. 1. TAXATION POLICIES - are the set of laws and guidelines that determine how much tax businesses must pay to the government. These taxes can include income tax, corporate tax, sales tax, value-added tax (VAT), and others.  The tax burden—such as corporate income tax (CIT), value-added tax (VAT), and local business taxes— directly affects the cost structure of businesses. Higher taxes can increase operational costs, leading to a reduction in profit margins or an increase in product prices, which may affect demand. On the other hand, tax reductions or simplifications encourage business growth by improving profitability.  Taxation influences the pricing strategies of businesses. VAT, for example, is typically passed onto consumers in the form of higher prices. The level of VAT and its exemptions significantly affect industries like retail, food, and services, where the cost to consumers can be directly impacted by tax rates.  Tax incentives and exemptions, such as income tax holidays and duty exemptions, are key factors in attracting investments. Favorable tax policies can boost business profitability, competitiveness, and innovation, while high taxes can have the opposite effect. Businesses must adapt their strategies to align with changing tax regulations, balancing tax minimization with the risk of non-compliance. 2. LABOR AND EMPLOYMENT POLICIES - are guidelines, regulations, and laws set by a government or organization that govern the rights, responsibilities, and conditions of work for both employers and employees.  The implementation of regional minimum wage laws can affect business operations by determining the cost of labor. Employers in various regions must comply with these wage requirements, which may increase operational costs, especially in labor-intensive. While the goal of minimum wage laws is to ensure fair compensation, businesses in low-wage regions might face challenges in adjusting their wage structures without impacting profitability.  The Philippine government mandates several employee benefits, including the Social Security System (SSS), PhilHealth, and Pag-IBIG Fund contributions, which add to the cost of employment. For businesses, these contributions represent non-wage labor costs that must be factored into budget and payroll decisions. Some businesses might be motivated to reduce their workforce size or opt for more flexible contract arrangements to control these expenses  Labor and Employment policies in the Philippines shape business decisions in several ways, particularly regarding labor costs, productivity, and the legal obligations businesses must fulfill. While these policies GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE  aim to protect workers' rights, businesses must carefully navigate them to maintain profitability and ensure long-term viability. REPORTER: JARON, PRINCESS MARGARETTE 3. ENVIRONMENTAL POLICIES - Are regulations set by the government concerning the environment —to address the consequences of human activities or various environmental problems like pollution and climate change. 4. INVESTMENT POLICIES - Are laws and regulations implemented by the government or regulatory agencies designed to encourage, regulate, and protect investments. BOARD OF INVESTMENT PLAY IN PROMOTING INCLUSIVE GROWTH  The board of investment is an agency that promotes local and foreign investments which foster employment opportunities and boost economic growth. It plays an important role in promoting inclusive growth as it builds an environment in which investment not only drives economic growth but makes sure that the benefits of this growth are shared throughout the society. REPORTER: COMPETENTE, ALEXZA NICOLE 5. COMPETITION POLICIES- Competition policy refers to government rules designed to foster fair market competition, prevent anti-competitive behavior, and protect consumers.  Antitrust laws to stop practices like price-fixing and monopolies  Merger control to prevent harmful market concentration.  Market regulation to ensure competition in industries like utilities.  Consumer protection against unfair practices.  State aid rules to avoid government favoritism that distorts competition. The aim is to create a competitive environment that benefits businesses, encourages innovation, and offers consumers more choices and lower prices. 6. TRADE POLICIES- are the rules and strategies a country uses to control its trade with other nations. This may involve imposing tariffs, setting import or export limits, forming trade agreements, and providing financial support to local industries. Such policies aim to safeguard domestic businesses, boost economic development, and ensure equitable trade relationships. MAIN CHALLENGES IN IMPLEMENTING PRICE CONTROLS IN THE PHILIPPINE MARKET  Market distortions  Black markets  Enforcement difficulties  Impact on producers  Inflationary pressures  Public resistance  Sector-specific issues  Global vulnerabilities GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE  INFLUENCER COMPETENTE, ALEXZA NICOLE DE LEON, GIENELLE FRANCISCO, RENE ANDREUI DIEZMOS, BRENT DAVID EGUIA, JASMINE REIGN ESTANISLAO, CRYSTALLYNE JARON, PRINCESS FERNANDEZ, ALHAINE EIHRA GARCIA, ESMERALDA MARGARETTE GROUP 4 – BSA1-2: THE ROLE OF THE PHILIPPINE GOVERNMENT IN THE MARKETPLACE