Congress lifts foreign investment restrictions, except in some public utilities

Congress has passed a law lifting foreign investment restrictions on all sectors, except the transmission and distribution of electricity, water pipeline and sewerage, seaports, petroleum pipeline, and public utility vehicles.

The Senate and the House of Representatives ratified the bicameral conference committee report on House Bill 78 and Senate Bill 2094 — or the amendments to the Public Service Act — which redefines public utilities that remain sealed off to foreign investments.

One of the movers of the measure in the Lower House — House Ways and Means Committee Chair, Albay 2nd District Rep. Joey Salceda — lauded the passage of the bill, which will next be transmitted to President Rodrigo Duterte for signature.

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In a press release, Salceda explained that the measure effectively opens up to 100 percent foreign equity all economic sectors in the country, except the transmission and distribution of electricity, water pipeline and sewerage, seaports, petroleum pipeline, and public utility vehicles.

For Salceda, the measure is the closest that the country has been in overcoming the “growth overhang caused by the 1987 Constitution’s foreign equity restrictions.”

“It’s a massive reform because it opens us to foreign capital. We need a lot of foreign capital. We have plenty of domestic talent, but they leave for abroad because the capital required to hire them is invested abroad,” he said.

“It’s no surprise that we lag our neighbors behind in terms of foreign direct investment. We are the most restrictive economy in ASEAN, bar none. The PSA amendments change things massively.”

Salceda said he is happy that the bicameral panel for coming up with a more liberal version than the Senate version. “The final version no longer requires burdensome reviews by the entire national security council for so-called critical infrastructure, which the Senate introduced,” he said.

For Salceda, the proposal will yield “massive” impacts to job creation and investments

“We expect an increase in FDIs by around P299 billion over the next five years from the final version the sectors that will be opened up as a result of the PSA amendments. We also expect gross value added (GVA) growth in these areas to cause a GDP growth rate that is 0.47 percentage points higher than the baseline,” Salceda added.

“The main economic benefit of the PSA amendments is that it provides local (and oligopolistic) players in key sectors with a credible threat of external competition. Credible threat of competition is seen as a pro-competitive measure that reduces monopoly or oligopoly power (to set prices or provide services at low quality) and encourages local players to improve efficiency.

“Empirically, certain sectors appear to be responsive to the threat of new sectors by trying to generate customer loyalty among existing clients through lower prices.”

Salceda also maintained that the bill protects consumers.

“Apart from the fact that more competition means lower prices generally, we also imposed a provision that if public utilities and public services exceed the rates set by the regulators, they have to refund the excess collections from the public, and also pay fines,” Salceda said.

“Now we have something squarely and explicitly in the law that will allow us to punish public services that charge excessive rates.

“Consumers stand to benefit from the PSA amendments immediately. Of course, in the long run, we are also bound to create more jobs and maybe even be able to send many OFWs home, as we expect new FDI due to the reform to come from capital-starved public services.”

The House contingent of the Bicameral panel was composed of Econ Affairs Committee Chair Sharon Garin, Deputy Minority Leader Stella Luz Quimbo, Rep. John Reynald Tiangco, Rep. Joet Garcia, Deputy Speaker Rimpy Bondoc, and Deputy Speaker Kristine Singson-Meehan.

Like Salceda, another mover of the bill, Marikina 2nd District Rep. Stella Quimbo explained that the passage of these amendments will be a game-changer in liberalizing the public services market and providing new opportunities for investment and capital to enter the country. 

"Ultimately, the Filipino wins. This amendatory law is for the Filipino people. Opening up the economy will bring with it advanced technology, more jobs, and a more competitive business environment. Bababa ang presyo at tataas ang kalidad ng mga serbisying publiko; tiyak na maginhawa ang buhay ng lahat. With more foreign investments comes more jobs. A more open economy means greater competition. With more competition comes lower prices, better products and services, wider consumer choices and more innovation. Panalo ang consumer. Panalo ang Pilipino.” Quimbo said.

In a press release, Quimbo’s office explained that telecommunications, airports, railways, expressways, tollways, and shipping were among the industries excluded from the definition of "public utility" in the ratified amendments. 

"Therefore, these public service sectors shall be open to foreign investment and competition. This development would inevitably result in cheaper airfares and transportation costs, lower shipping costs that would benefit our exporters. With more investment and competition in the telecoms sector, the public can also expect faster and more affordable internet services.” Quimbo’s office said.

Her office cited that under the 1987 Constitution, public utilities must secure a legislative franchise and is subject to the 60-40 ownership limitation. “This has deterred foreign investment from entering industries that were considered ‘public utility’ in nature. Thus, providing a concrete and narrow definition of public utility shall effectively open up other public services to foreign investment,” she said.

Quimbo’s office also explained that in the PSA amendments, investments in public services that result in foreign control or ownership may be reviewed by the president particularly when it involves national security concerns. 

Gabriela Women’s Party Rep. Arlene Brosas said: “Mr. Speaker, ipinapahayag ng Gabriela Women’s Party ang pagtutol sa ratipikasyon sa amyenda sa Public Services Act (PSA) dahil binubukas nito ang tarangkahan para pagkopo ng dayuhan sa mga mahahalagang sektor ng ekonomiya, kabilang ang telekomunikasyon at transportasyon. “

“By providing a limited definition of public utility, this measure exploits the loophole in the 1987 Constitution to allow the circumvention of foreign ownership limits for all other types of public services. Pahihintulutan ang 100% foreign ownership ng telekomunikasyon, railways, airlines, at logistical facilities . Ironically, we are ratifying this measure on the anniversary of the 1987 Constitution,” Brosas added.

Bayan Muna Rep. Carlos Zarate said: “Ang pag-amyenda sa Public Service Act upang alisin ang ang mga negosyo o serbisyo bilang mga public utility ay ang pag-alis sa mga proteksyon ng publiko sa makatwirang singil para sa mga rito, at ang tuluyag pag-alis ng kontrol at otoridad ng gobyerno sa mga ito. Samakatwid, mahaharap ang mga konsumer sa walang kontrol na pagtaas na presyo at bayarin kung buong-buo na itong na itong kontrolado ng mga negosyo.

“Sa paglilimita sa mga mga serbisyong kabilang sa public utility, tinatangkang ikutan ng HB 78 ang pag-amyenda sa Saligang Batas upang makapagpasok ng dayuhang pamumuhunan sa public utilities. Kabilang na rito ang dayuhang pagmamay-ari, kontrol, at operasyon sa mga public utilities.”

Zarate pointed out that broadcast, telecommunications, power generation and supply may now be infiltrated by foreigners. 

"Ang broadcasting, telekomunikasyon, power generation at supply, ay ilan lamang sa mga public utilities na maaari nang pasukin ng mga dayuhan kung isasabatas ang panukalang batas na ito. Hindi ito ang gusto ng mamamayan. Humaling na humaling ang mga economic manager sa ‘dayuhang pamumuhunan’ na tila ito ang liligtas sa ating pabulusok at atrasadong ekonomiya ng Pilipinas," he said.

Source: ABS CBN News | February 3, 2022

February 03, 2022