ONE of the things that is always expected of the president's annual State of the Nation Address (SONA) is an explanation from the chief executive of the government's plans and intentions for the coming year and in particular the new legislative session, the beginning of which is traditionally marked by the president's address. Along these lines, there have been some criticisms of what seemed to be left out of President Rodrigo Duterte's sixth and final SONA this past Monday, but that should not distract anyone from several substantial points that he did make.
During his speech, Duterte urged Congress to address several key pieces of legislation, "to ensure nothing less than the full recovery and revitalization of our country" from the profound impact of the Covid-19 pandemic.
"I would like to renew my call to Congress to immediately pass amendments of priority legislative measures such as the Foreign Investment Act, the Public Service Act and the Retail Trade Liberalization Act," Duterte said.
These are not the only economic measures that will presumably be considered by Congress, but we believe they are, next to the timely passage of the General Appropriations Act (national budget) for 2022, the most important work facing lawmakers in the new legislative session. Along with tax reform measures passed by Congress in the past couple of years, the proposed revisions to these three laws will have a lasting positive impact on the Philippine economy and its prospects for attracting increased foreign and domestic business investment.
The Foreign Investment Act, which specifies restrictions on foreign ownership of businesses in the Philippines based on provisions in the Constitution, has long been criticized as being an obstacle to investment growth and the follow-on benefits of technology transfer and increased employment foreign investment can bring.
The fact that many of these criticisms are aired by would-be foreign investors, along with data that year after year shows the Philippines consistently lagging behind its regional competitors in terms of foreign investment is enough glaring evidence that changes need to be made. While there is justification for some restrictions to be maintained - for example, in areas that pose risks to national security or where the risk of exploitation is high - Congress must carefully consider which restrictions are doing more harm than good to the country and make the appropriate revisions.
Amending the Public Service Act (PSA) is necessary because it has in some ways led to exploitation of Filipino consumers. The proposed amendments to the PSA would differentiate public utilities from public services, limiting the definition of public utilities to those enterprises involved in the distribution and transmission of power, water and sewerage, that is, businesses wherein "natural monopolies" can exist. By the same token, public services would be opened to greater competition, which should lead to more consumer choice, better services and more competitive prices for services such as telecommunications and transportation.
Finally, the Retail Trade Liberalization Act, which complements the Foreign Investment Act, primarily seeks to reduce the required paid-up capital for foreign retail enterprises from the current P120 million ($2.5 million) to P50 million (about $1.04 million). This would open opportunities in the Philippines to a greater number of retail businesses, benefiting Filipino consumers. Of course, there is a risk of overdoing it and encouraging too much foreign competition for domestic businesses, something that critics of this measure have pointed out, but there are already sufficient controls in place to prevent that from happening.
Even under good economic conditions, such as the country was enjoying before the onset of the Covid-19 pandemic, these three measures were viewed as important facilitators of future economic growth. Now that the Philippines is struggling - along with every other country throughout the region and in the rest of the world - to overcome the economic downturn caused by the pandemic, the measures are more critical than ever to help the country be competitive and recover. We urge lawmakers to heed the call of President Duterte in his SONA and act swiftly - but prudently - to pass these bills.