The Philippines expects to generate over $100 billion in investments over the next two years with the opening of public services to 100-percent foreign ownership, according to Trade Secretary Ramon Lopez.
Lopez said initial investment leads in the sector total more than $60 billion in telecommunication, transportation, logistics and railways.
“This is still understated as other leads have not indicated investment amount,” Lopez said in a text message to reporters.
Lopez and Socioeconomic Planning Secretary Karl Kendrick Chua said the enactment of Republic Act (RA) No. 11659 which amended the 36-year old Public Service Act (PSA) completes the administration’s economic liberalization reforms to increase the country’s competitiveness and create more and better jobs.
The Retail Trade Liberalization Act and the Foreign Investments Act were signed on Dec.10, 2021, and March 2, 2022, respectively.
Chua and Lopez thanked Senators Grace Poe and Franklin Drilon, and Representative Sharon Garin and Joey Salceda for shepherding the reform through the 18th Congress.
Lopez said opening critical sectors such as telecommunications and transportation, shipping, railways, would allow entry of more foreign players, allowing greater competition, more technology-based innovations, better quality services that would lower costs for consumers and users.
Chua said the completion of the economic liberalization bills will revitalize the economy and encourage more investments and innovation as the continues to recover from the COVID-19 pandemic.
“The measures will also strengthen our domestic economy against external shocks, such as the Russia-Ukraine crisis,” he added.
In a statement, Al Panlilio, president and chief executive officer of PLDT and Smart Communications, said the Group has no plans to increase the share of foreign equity at present.
“We are also waiting for the release of the implementing rules and regulations of the new law, and we welcome any opportunity to support the government in the development of the IRR,” Panlilio said, adding in the medium term, RA 11659 will encourage healthier competition in various industries in the country.
In the long term, Panlilio said the law will help position the Philippines as an attractive investment destination for foreign enterprises seeking to expand their business in the Asian market.
In separate statements, the American Chamber of Commerce of the Philippines (Amcham) and the German-Philippine Chamber of Commerce and Industry (GPCCI) said they believe the PSA amendments will match policies that Singapore, Thailand, and Vietnam have in place.
Alfredo Pascual, MAP president, in a statement, said the entry of foreign investors will foster strong competition that will benefit the consumers, create more jobs, expand the economy, and boost the recovery from the disruptions caused by COVID-19.
“This game-changing law shall break major economic barriers in the country and will be beneficial for the economic recovery,” said
GPCCI executive director Christopher Zimmer who was personally invited by President Duterte in Malacañang to witness the signing of Republic Act (RA) No. 11659.
RA 11659 seeks to ease or lift restrictions on foreign investments in public services, distinguish definitions between “public utilities” and “public services”, and repeal provisions that limit foreign participation in certain economic activities. It allows foreign direct investments 100 percent foreign ownership such as telecommunications, shipping, trains and railways, airports and airlines, toll roads, and transport network vehicles.
The measure limits the coverage of public utilities to key sectors that will be subject to the 60-40 percent foreign equity limitation. In general, these are sectors considered as natural monopolies where a single firm can serve the market at lower costs than having two or more firms.
These include the distribution of electricity, transmission of electricity, petroleum and petroleum products pipeline transmission systems, water pipeline distribution systems, and wastewater pipeline systems, including sewerage pipeline systems, seaports, and public utility vehicles.
To protect the country against national security concerns, the amendments also provide the following safeguard provisions: First, the power of the President to suspend or prohibit any investments in a public service in the interest of national security upon the review, evaluation, and recommendation of the relevant government agency. Second, the provision on restrictions on investments by foreign state-owned enterprises (SOE) prevents a foreign SOE from owning capital stock in a public utility or critical infrastructure. Third, the provision on information security ensures entities engaged in the telecommunications business meet relevant ISO standards. Fourth, the reciprocity clause prevents foreign nationals from owning more than 50 percent of capital in critical infrastructure unless the country of such foreign nationals accords reciprocity to Philippine nationals. Lastly, the performance audit provision mandates the conduct of an independent evaluation to monitor a firm’s cost and quality of services to the public.
The Foundation for Economic Freedom (FEF) described the amendments as “pro-consumer, pro-security and pro-growth.“
FEF cited the significance of the provisions on vetting of potential investments in critical infrastructure, and the requirement for an ISO certification for Information Security for telecommunications investors in ensuring the Philippines will be less vulnerable to cyber threats and domination of foreign interests,.
The amended law likewise protects consumer welfare by increasing the penalties for erring companies engaged in public services, it said, adding it also provides protection for small operators in the transportation industry by retaining the 60-40 restriction for public utility vehicles such as tricycles and jeepneys.
Filipino businessmen likewise benefit, as the law includes a reciprocity provision that may open up business opportunities for them in other countries, the FEF said.
Only the following public service companies involved in the following services are considered public utilities and are subject to the 40 percent foreign ownership requirement under the Constitution: distribution and transmission of electricity; petroleum and petroleum products pipeline transmission systems; water pipeline distribution systems; wastewater and sewerage pipeline systems; seaports; and public utility vehicles.
Airports, expressways and tollways, and petroleum pipeline distribution systems are no longer considered public utilities.
Foreign nationals are allowed to own more than 50 percent of capital in public services engaged in the operation and management of critical infrastructure, but only if the country of such foreign national provides reciprocity to Philippine nationals.
