MANILA, Philippines — The private sector on Tuesday lauded the signing of the amended Public Service Act (PSA) that allows full foreign ownership of companies in telecommunications, airlines, shipping, railways and toll roads.
The Management Association of the Philippines (MAP) said the revised PSA would encourage the flow of more foreign investments into the country and “foster strong competition that will benefit consumers, create more jobs, expand our economy, and boost our recovery from the disruptions caused by COVID-19.”
“A more open Philippine economy will enable us to catch up with our more progressive neighbors in Asean (Association of Southeast Asian Nations),” MAP president Alfredo Pascual said in a statement.
The German-Philippine Chamber of Commerce and Industry (GPCCI) said the signing of the law would lure global players that will help modernize essential public services such as telecommunications and shipping.
The amended PSA limited the definition of public service to the distribution and transmission of electricity, petroleum and water, seaports and public utility vehicles. Public service sectors not covered by this definition are thus no longer covered by the 40-percent foreign ownership cap set under the 1987 Constitution.
“This game-changing law shall break major economic barriers in the country and will be beneficial for the economic recovery,” said GPCCI executive director Christopher Zimmer.
The American Chamber of Commerce of the Philippines (AmCham) also noted that the signing of the investment liberalization bills “will significantly help the Philippines compete with its regional neighbors in bringing in investments to the Philippines. It will also be extremely helpful to the long-run recovery of the economy after the pandemic.”
Opposition
Taking a different view, House deputy minority leader and Bayan Muna Rep. Carlos Isagani Zarate said the new law “will only result in more spikes in the prices of goods and services.”
“These PSA amendments that now allow full foreign control of utilities used the same economic framework that created the rapacious oil deregulation law as well as the Electric Power Industry Reform Act. Now look at the exorbitant rates of electricity and incessant oil price hikes in the country,” he said on Tuesday.
Zarate went on: “In due time, these PSA amendments will further jack up the prices of telecommunications, shipping and airfares. They may also take over local Filipino companies due to this law.”
However, House ways and means panel chair and Albay Rep. Joey Salceda saw the revised PSA as “the most important economic reform” since the law reducing corporate income taxes was signed last year.
In a statement, Salceda said the modified PSA “will usher in a decade of unprecedented growth in foreign investments, as long as the next President can back the reforms up with market-friendly policies and actions.”
Salceda added: “It’s a massive reform because it opens us to foreign capital. We need a lot of foreign capital. We have plenty of domestic talent, but they leave for abroad because the capital required to hire them is invested abroad.”
He expressed optimism that foreign direct investment will increase by P299 billion over the next five years as a result of the easing of restrictions to foreign investments.
“The main economic benefit of the PSA amendments is that it provides local and oligopolistic players in key sectors with a credible threat of external competition. 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,” Salceda said.
He added that “confidence-inspiring policies and appointments, especially in the economic team of the next leader, will be absolutely crucial.”
Safeguards
The state planning agency National Economic and Development Authority (Neda) also assured the public that the amended PSA has safeguards “to protect the country against national security concerns.”
“First, the power of the President to suspend or prohibit any investments in a public service in the interest of national security upon the review, evaluation and recommendation of the relevant government agency. Second, the provision on restrictions on investments by foreign state-owned enterprises (SOE) prevents a foreign SOE from owning capital stock in a public utility or critical infrastructure,” Neda noted.
“Third, the provision on information security ensures entities engaged in the telecommunications business meet relevant ISO standards. Fourth, the reciprocity clause prevents foreign nationals from owning more than 50 percent of capital in critical infrastructure unless the country of such foreign nationals accords reciprocity to Philippine nationals. Lastly, the performance audit provision mandates the conduct of an independent evaluation to monitor a firm’s cost and quality of services to the public,” Neda added.
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