We support the plans of the Duterte administration to ease foreign ownership limitations in various industries as a way of attracting more investments in the economy, spurring competition and creating more jobs.
This welcome and exciting news about opening up the economy to greater foreign participation is vital to sustaining the dramatic Philippine economic growth achieved in recent years. It will lead to major economic expansion in many industries and signify greater Philippine engagement in the global economy.
The 11th Foreign Investment Negative List is under review and a revised list is expected to ease restrictions on foreign participation in at least eight areas, including construction, practice of the various professions, retail and trade, utilities and education.
President Duterte signed on Nov. 21 a memorandum order directing government agencies to fast-track the determination of other business sectors that can be opened up to foreign participation both through administrative means or through the amendment of pertinent laws.
The field of media and communications, including publishing, will also be opened up; but this liberalization must wait for a constitutional amendment by 2019. This will be of grave importance to the future expansion of Philippine media, including The Manila Times, its staff and its service to the nation.
The Asian Development Bank, in a recent report, observes that the prevailing 40 percent limit on foreign ownership is preventing the Philippines from pursuing more public-private partnership (PPP) in infrastructure development. This may restrict competition and will ultimately inhibit infrastructure development.
The ADB report said: “While much has been achieved in developing the PPP market in the Philippines, there remain challenges. One challenge is the current limit of 40 percent of foreign ownership in the PPP project company in infrastructure projects where the operation requires a public utility franchise.”
In terms of market maturity, the majority of the PPP projects that have reached financial closing in the country are in the energy sector (65 percent), the transportation sector (23 percent) but the other sectors vital to growth of basic economic sectors have smaller shares: Information and Communication Technology (6 percent), water (5 percent), social infrastructure (2 percent).
The multilateral bank also noted that the handling of municipal solid waste has not been receiving large investments from the private sector because of various constraints, such as the short tenure of local government executives and the lack of capacity of local government units (LGUs) to undertake PPP transactions.
Under the law, the private sector can undertake projects with the government under various modalities such as: build-operate-transfer (BOT), build-transfer-operate (BTO), build-transfer, build-own-operate (BOO), build-lease-transfer (BLT), contract-add-operate (CAO), develop-operate-transfer (DOT) rehabilitate-operate-transfer (ROT), and rehabilitate-own-operate (ROO).
Industries covered by Dutert’s memorandum order on Nov. 21 include: private recruitment for local and overseas employment, professional practice, construction and repair of public works, public services except utilities, production and processing of rice and corn, teaching at higher education levels, retail trade and domestic market enterprises.
Socioeconomic Planning Secretary Ernesto Pernia has said that Malacañang favors raising to 70 percent the foreign ownership cap in public utilities, namely telecommunications and water.
Raising the foreign ownership limit for public utilities, however, would require the amendment of the Public Service Act, which prohibits majority ownership by foreign entities in public utilities.