Foreign investors will soon be allowed to own up to 100 percent of companies in the telecommunications, transportation and other public services, a development that is expected to attract more investments from overseas and benefit Filipino consumers.
The House of Representatives and the Senate on Wednesday ratified the bicameral conference committee report on House Bill No. 78 and Senate Bill No. 2094, or the amendments to the 85-year-old Public Service Act (PSA). The reconciled version is now just awaiting President Duterte’s signature.
Natural monopolies
The changes will allow full foreign equity in all economic sectors except in so-called natural monopolies, such as the transmission and distribution of electricity and water as well as in seaports and public utility vehicles.
Marikina City Rep. Stella Quimbo, one of the authors of the bill, said in a statement that telecommunications, airports, railways, expressways, tollways and shipping were among the industries excluded from the definition of “public utility” in the ratified amendments.
Under the 1987 Constitution, these public utilities must secure a legislative franchise and are subject to the 60-40 ownership limitation.
Under the revised PSA, Quimbo said these public service sectors would now be open to full foreign ownership, adding that this would result in cheaper airfares and transportation costs as well as lower shipping costs that would benefit exporters.With more investment and competition in the telecoms sector, she said the public could also expect faster and more affordable internet services.
House tax chief and Albay Rep. Joey Salceda, one of the primary authors of the bill, pointed out that the Philippines has been lagging behind its neighbors in terms of foreign direct investments (FDIs) because the country has “the most restrictive economy” in Southeast Asia.
Citing 2020 data from the Organization for Economic Cooperation and Development (OECD), Quimbo said the Philippines ranked third among 83 countries with the most restrictive economies.
“Such a business climate has dissuaded foreign investments from entering the country, and the lack of competition in public services has led to high prices and subpar quality of services,” she said.
Investment inflows
The Joint Foreign Chambers of the Philippines (JFC), which represents more than 2,000 companies, on Thursday applauded the ratification of the amended PSA, which it said would match policies in Singapore, Thailand, Vietnam and Indonesia.
The JFC, recalled how more than $100 billion in foreign investments entered Southeast Asia before the pandemic, but “too little reached the Philippines, and neighboring competing economies moved ahead.”
If signed into law, Salceda projected that the amendments to the PSA would yield “massive” impacts on job creation and investments.
“We expect an increase in (foreign investments) by around P299 billion over the next five years from the final version of the sectors that will be opened up as a result of the PSA amendments,” he said.
Quimbo agreed with Salceda that the influx of FDI would bring more jobs and opportunities into the country.
Consumer benefits
“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,” she added.
The PSA amendments, according to Salceda, would provide increased competition to local oligopolistic players.
“Credible threat of competition is seen as a procompetitive measure that reduces monopoly or oligopoly power (to set prices or provide services at low quality) and encourages local players to improve efficiency,” he said.
Salceda said this would benefit consumers in the country.
He pointed out that certain sectors already appeared to be responsive to the threat of new players by trying to generate customer loyalty among existing clients through lower prices.
“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.
Consumers, according to him, would benefit immediately, but in the long run, it would create more jobs and could even send many overseas Filipino workers home “as we expect new FDI due to the reform to come from capital-starved public services.”
Foreign takeover
Gabriela Rep. Arlene Brosas, who opposed the bill, warned that the amendments would enable the foreign takeover of key economic sectors, such as telecommunications and transport.
“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,” Brosas said.
House Deputy Minority Leader and Bayan Muna Rep. Carlos Zarate also warned that broadcast, telecommunications and power generation could now be infiltrated by foreigners due to the amendments.
However, Quimbo explained that investments in public services that result in foreign control or ownership could be reviewed by the President particularly when it would involve national security concerns. —With a report from ROY STEPHEN C. CANIVEL