JVs pushed in construction

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    Warning of the possible unregulated entry of foreign companies in the construction industry, local players have stressed the importance of having a minimum investment requirement as a safety net for accountability.

    Rather than opening fully the construction sector to foreign players, construction experts believe joint venture is the best practice that should be adopted in the construction sector for technology and knowledge transfer to local players in the country.

    Construction experts also cited the need for the Philippines to forge reciprocity agreements with countries whose contractors are allowed to operate here to give equal opportunities to Filipino contractors in those countries.

    There were some of the highlights of the first panel of the Philippine Construction Arbitration Conference 2020 organized by the Philippine Institute of Construction Arbitrators and Mediators (PICAM) held online last week.

    These observations were made following the decision of the Supreme Court declaring as unconstitutional a regulation by the Philippine Contractors Accreditation Board (PCAB) that restricts the entry of foreign contractors. The Office of Solicitor General has filed a motion for reconsideration of the high court’s ord

    Enrique dela Cruz Jr., senior partner at Divina Law, said the unrestricted market access of foreign contractors in the country will create undue competition against small and medium enterprises which comprise bulk of licensed contractors.

    Commissioner Emilio Lolito Tumbocon of the Construction Industry Arbitration Commission (CIAC) said foreign contractors have been doing business in the country since the 1970s through joint venture arrangements, with an average of nearly 2,500 licenses issued to foreign contractors every year since 2015.

    Tumbocon said these foreign contractors should have some “skin in the game” to really level the playing field and make them accountable if and when a project goes wrong.

    Roberto Dio of the Philippine Dispute Resolution Center said if these foreign contractors don’t have assets in the country, it would be hard to enforce judgment on them even in an arbitration case.

    Dr. Ernesto de Castro, president, and chief executive officer of ESCA Inc., said this is the reason that an investment requirement for foreign contractors is needed to make sure these foreigners have assets here.

    Dio said there is no existing reciprocity agreement with the home base of these foreigners that would guarantee the same treatment for Filipino contractors who will do business in their countries. “No other country in the world allows foreign contractors’ unregulated market access,” Dela Cruz said.

    Tumbocon said other countries in the region Singapore, Malaysia, Indonesia, and Thailand have a robust domestic construction industry because they encourage joint venture agreements between local players and foreign companies, rather than allow the unrestricted entry of foreign contractors.

    “They adopted best practices and seem to show that they were successful. Let’s not reinvent the wheel as we are in a catch-up mode. Their local construction industry has regulations to level the playing field. Let’s look at best practices and try to adopt them,” Tumbocon said.