Market integrity must take precedence over all other reforms if the Philippines is to develop a robust capital market, according to Philippine Securities and Exchange Commission ( SEC ) chairperson Francisco Lim.

Speaking with The Asset editor-in-chief Daniel Yu during a fireside chat at The Asset’s 20th Philippine Summit held at the Bonifacio Global City ( Taguig, Metro Manila ) on October 3, Lim admits that the country’s capital market has lagged behind its Southeast Asian peers. 

“Market integrity is the bedrock of robust capital development. Unfortunately, our market has long been perceived as lacking that integrity. It was the same in 2005, and it remains the same today,” says Lim, who was previously head of the Philippine Stock Exchange ( PSE ).

As the current chairperson of the SEC, Lim says regulators have a “dual mandate” to both develop and supervise markets, but integrity is the essential foundation. 

“At the SEC, we do both policy and regulation. But if you look at everything, market integrity must come first. Once we have that, everything else will follow,” he says, emphasizing that regulators must strike a balance between firm oversight and market support. 

“Regulators, especially the SEC, should be watchdogs, not lapdogs,” he stresses. However, Lim is also quick to note that regulators should also make it easier to develop the capital market: “Let’s build the market before killing it.”

Stock market lagging

Despite being the second oldest stock market in Asia, the Philippines continues to lag behind its peers. Lim recalls that Vietnam, which used to look to the Philippines for tips and tricks on listing and disclosing, now has more than 700 listed companies. In contrast, the Philippines currently has less than 300. 

Reflecting on the slow pace of reforms in the country, Lim admits that there have been some missteps in the past: “There were little things that we were supposed to do that we didn’t do, and there were little things that we weren’t supposed to do that we did.” He says this is one reason why the Philippines’ capital market is not growing at the same pace as the economy.

Reforms must be put in place to encourage a higher level of investor participation, such as prioritizing pension funds, including the voluntary Personal Equity and Retirement Account ( Pera ) scheme, which he said has not taken off due to its voluntary nature. 

“One quick fix is to make it mandatory, with proper tax incentives for investments in listed stocks and products,” Lim says, adding that making it mandatory will also help other pension funds such as the GSIS and SSS.

Personal mission

In the same fireside chat, Lim urges Philippine lawmakers to pass a bill mandating financial literacy in schools. “Children should be given the basics of the capital market and investment. I will make it my personal objective to make that law happen, the way I did with Reits and Pera,” he says, referring to real estate investment trusts and the voluntary Pera scheme, both of which he helped usher into law. 

Digital transformation is another key area of reform for the SEC. Since he took office, Lim says he has made the ease of doing business in the country a priority. 

“When I was practising law, it was difficult to register a company. Now, you can do it in two hours, including companies with foreign ownership. Ease of doing business is very high on our agenda,” he says.

Reforms also include reducing documentation requirements by about 15% and lowering fees for smaller firms.