EDITORS DESK
One of the major accomplishments of the legislative branch before it adjourned for the political campaign period is the passage of three critical economic reform measures.
These are the amendments to Retail Trade Liberalization Act (RTLA), Public Services Act (PSA), and the Foreign Investments Act (FIA). Amendments to these laws have been trumpeted as necessary to unlock the Philippine economy from being among the most closed and restrictive domestic economy that is averse to foreign equity in most of its economic sectors.
Amid strong lobbies for continued protection of domestic industries originally reserved for Filipinos from the entry of foreign capital, the legislative branch tried to balance between protecting Filipino interest and the need for more foreign investments to develop the domestic economy and create more jobs.
In the case of the domestic retail trade in the country, the old RTLA of 2000 or RA 11595 of 2000 was aimed at attracting big foreign retailers, but the $2.5 million capital requirement was too stiff for foreign retailers to hurdle.
As a result, no visible big retailers came into town as they skipped Manila for better opportunities in other neighboring countries.
Now, the amended RTLA has opened the domestic retail trade sector, more friendly and simple to foreign retailers.
Amid cries from the Philippine Retailers Association, the amended Republic Act No. 11595 did away with the cumbersome different categories and simply requires that a foreign entity have a minimum paid-up capital of ₱25 million. Also, RA 11595 reduced the investment per store requirement to at least ₱10 million per store.
The law also repealed certain requirements imposed by the RTLA on foreign retailers, including a five year track record in retailing abroad and public listing requirement.
But RA 11505 retained the reciprocity requirement that the foreign retailer's country of origin should not prohibit the entry of Filipino retailers.
Meantime, the legislative branch also amended the 85-year-old PSA or Commonwealth Act 146, which 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.
The amended PSA clarifies what are considered as “public utility” and “public services” and addresses the ambiguity in the present law. It contains a short list of public utilities which are considered “natural monopolies” and subject to the 60-40 percent ownership restriction in the Philippine Constitution.
The proposed measure classified “public utility” only to distribution and transmission of electricity; petroleum and petroleum products pipeline transmission systems; water pipeline distribution systems and wastewater pipeline systems, sewerage pipeline systems; seaports; and public utility vehicles. Thus, any industry not included in the list will remain as public services and be liberalized taking into account national security.
But foreign equity restrictions will be eased up in several sectors such as telecommunications, shipping, air carriers, railway, and subways, which are expected to attract more foreign investors. Easing the restrictions would allow 100 percent foreign equity participation in key sectors.
In addition, the PSA will increase competition in terms of services and products which will generate better quality of services and competitive pricing to the benefit of the consumers.
Completing the triumvirate is the amendment to Republic Act of 7042 or the FIA of 1991. The ratified bill seeks to streamline the Foreign Investment Negative List (FINL), which listed a number of sectors where foreign participation is banned. The idea is to make the FINL more positive.
The FIA also provides clarification on industries to be reviewed. They are now limited to foreign investments involving military-related industries, cyber infrastructure, pipeline transportation, or such other activities which may threaten territorial integrity and safety, security, and well-being of Filipino citizens.
Notably, the amended FIA excludes the “practice of professions” from the FINL. The amendment clarified the definition of investments in the practice of professions, in particular, adopting the Professional Regulatory Commission’s definition of “profession.”
The three economic reforms are deemed the most critical legislative reforms that complement the CREATE Law, which modernizes the grant of fiscal incentives to investors.
Foreign capital inflows in the future will create jobs, improve technology, modernize, and lower the prices of services to the benefit of Filipino consumers.
Ranked as the third most restrictive economy in the world based on the 2020 Organization for Economic Cooperation and Development report, the Philippines would benefit from the implementation of these laws, as it will attract more investments, generate more employment opportunities, introduce innovation, lower prices, and improve the quality of goods and services.
Now that we have amended the laws that were said to have kept us from reaching our economic potentials, there is no more reason to doubt why the Philippines would still lag behind among its peers in the region.
We are giving more and opening our doors wider to foreign investors. May we see what we’ve been looking for.