The Capital Markets Efficiency Promotion Act Bill

The Philippine capital market is essential for sustainable economic development, facilitating capital formation, investment diversification, and financial inclusion. However, it lags behind ASEAN peers due to high transaction costs, regulatory inefficiencies, and low domestic savings, limiting private investment, public-private partnerships, and increasing reliance on external financing.

This policy brief examines the Philippine capital market's challenges and evaluates the proposed Capital Markets Efficiency Promotion Act (CMEPA). CMEPA aims to address inefficiencies by reducing stock transaction taxes, harmonizing regulations, and granting tax exemptions for collective investment schemes such as mutual funds and Unit Investment Trust Funds (UITFs). These measures are expected to improve market efficiency, attract investments, and broaden participation.

However, CMEPA’s success depends on complementary reforms, such as strengthening corporate governance, improving financial literacy, and expediting the Personal Equity and Retirement Account (PERA) Law to boost domestic savings. A phased fiscal adjustment is critical to balance short-term revenue impacts with long-term economic gains.

Implemented alongside these reforms, CMEPA has the potential to transform the Philippine capital market into a transparent, inclusive, and resilient system that aligns with the country’s economic development goals.