Trade and Industry Secretary Ramon M. Lopez has urged Congress to pass the 3 pending economic reform bills in this third quarter or before the filing of candidacy for the national elections in October to sustain growth in foreign direct investments (FDI) and drive economic recovery post COVID.
The three critical economic bills that will drive FDI inflows are amendments to the Foreign Investments Act (FIA), Public Services Act (PSA), and Retail Trade Liberalization Act (RTLA).
In his last state of the nation address, President Duterte also made a last ditch appeal to Congress to pass the amendments to these laws. The Duterte government has only 11 months left in office, but filing of candidacy for all elective national and local positions for the May 2022 elections will already start from October 1-8 this year.
“We hope that these three laws will be put into effect by this third quarter and hopefully before October,” Lopez said adding there is still time for Congress to pass these bills. Filing of candidacy for national elections
He said that the passage of these laws will improve the investment climate and a more liberal structure will allow higher foreign equity participation in this critical sectors like retail and public service.
“We can still see some benefits I mean as of the first quarter of this year, I think, you know that some months we had posted already triple digit growth in FDI so the last one was I think 114 percent growth, April or May,” he noted.
After the passage of the CREATE law last year that helped propel FDI inflows, he said the approval of the three economic bills will further sustain the growth in FDIs.
Once these bills are passed, foreign ownership in these economic sectors in the country will be opened to foreign majority control. At present, foreign equity is limited up to 40 percent only.
Aside from FDIs, opening the economy to more foreign ownership is expected to create more jobs, technology transfer, heightened competition, and ultimately better lives for all Filipinos.
The House version or HB 59 of the RTLA amendment has called for a lower investment hurdle for foreign retailers with minimum capital requirement of only $200,000 while the Senate version has pegged a higher foreign retailer’s entry fee of $1 million. These proposed new investment hurdles are already a far cry from the current $2.5 million minimum investment requirement.
One of the proposed amendments to the Foreign Investments Act under Senate Bill No. 2227, sponsored by Senator Win Gatchalian, is to amend Section 4 of the FIA to expressly exclude the practice of professions from the coverage of the law, thus emphasizing that the law governs only equity investments in the Philippines by non-Filipinos.
SBN 2227 mandates the National Economic and Development Authority, in cooperation and consultation with other pertinent government agencies, to conduct an annual review of the country’s Foreign Investment Negative List (FINL) to ensure that the list is aligned with this policy.
Under the present set-up, the government releases the FINL – an enumeration of sectors where foreign investors can only exercise limited participation — every two years.
Under the proposed PSA reforms, the bill proposes to define public utilities and differentiate them from pubic services.
Only “natural monopolies” involving distribution and transmission of electricity, water, and sewerage will be considered to be public utilities.
As prescribed in the Philippine Constitution, public utilities must be 60 percent Filipino-owned, but the Constitution provides no definition of public utilities. For 85 years Commonwealth Act (CA) 146 has regulated public services and includes a long list of 25 services which are not natural monopolies and would not usually be considered public utilities under best international practice.
When enacted, the amendments to CA 146 will allow and encourage new investments from foreign firms in telecommunications, transportation, and other services.