By Elijah Joseph C. Tubayan
MALACAÑANG has zeroed in on eight sectors and activities in its bid to further ease limits to foreign participation and ownership, according to Memorandum Order No. 16 signed by Executive Secretary Salvador C. Medialdea on Nov. 21 and released to journalists on Thursday.
“To raise the Philippines’ level of competitiveness… the NEDA Board and its member agencies are hereby directed to take immediate steps to lift or ease existing restrictions on foreign participation in the following investment areas or activities,” the order read, enumerating private recruitment; practice of professions where allowing foreign participation will redound to public benefit; contracts for construction and repair of locally funded public works; public services “except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system and sewerage pipeline system”; culture, production, milling, processing and trading — except retailing — of rice and corn and acquiring these grains “and by-products”; teaching at higher education levels; as well as retail trade and domestic trade enterprises.
The same order directed departments forming part of the National Economic and Development Authority (NEDA) Board “to earnestly support, in a coordinated manner” legislation needed to eliminate or relax these restrictions “including pending legislation seeking to clarify the definition of public utilities.”
It also directed members of the NEDA Board, which President Rodrigo R. Duterte heads, “to immediately advise” him on “those restrictions which may already be lifted or eased without need for legislation” in order to provide inputs for the already delayed 11th Regular Foreign Investment Negative List (FINL). The 10th FINL — under Executive Order No. (EO) 184 issued in June 2015 and which largely retained restrictions of EO 98 of Oct. 29, 2012 — is supposed to lapse this year.
Sought for comment, John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, said: “We welcome the initiative of President Duterte in instructing the NEDA Board and member agencies to liberalize eight areas where foreign firms and professions are restricted from investing in the economic future of the country.”
“When fully implemented, we expect billions of dollars to be invested, creating tens of thousands of jobs as the result of the new opportunities,” Mr. Forbes said in a mobile phone message.
The government is trying to ease such investment restrictions without going through time-consuming, tedious amendment of the Constitution. It supports, for instance, House Bill No. 4389 — filed by former president and now Pampanga second-district Rep. Gloria M. Arroyo — to redefine public services under Commonwealth Act No. 146 of 1936 in order to open telecommunications to majority foreign ownership. Presidential Spokesperson Harry L. Roque, Jr. has said Mr. Duterte had broached to visiting China Premier Li Kequiang earlier this month the possibility of bringing in a Chinese telecommunication carrier to compete with PLDT, Inc. and Globe Telecom, Inc.
Socioeconomic Planning Secretary Ernesto M. Pernia has also voiced the need to attract foreign professors and researchers — by offering them permanent positions in universities — to improve standard of education as well as research and development.
For the Asian Development Bank (ADB), the Philippines may be “the most-developed” public-private partnership (PPP) market among its developing member countries, but “the current limit of 40% of foreign ownership in the PPP project company in infrastructure projects where the operation requires a public utility franchise” remains a “challenge”.
“This may restrict competition and, in some ways, can inhibit Philippine infrastructure development,” ADB said in its maiden annual Public-Private Partnership Monitor launched on Thursday which covered Bangladesh, China, India, Indonesia, Kazakhstan, Papua New Guinea, the Philippines, Thailand and Vietnam.
“The PPP Monitor identifies the country among the first in Asia to institutionalize private sector participation in infrastructure by enacting the BOT (build-operate-transfer) law in 1990,” it said of the Philippines, adding that it joined India and Thailand in having “the most developed financial markets with long loan repayments (above 10 years) available in local currency and a wide array of financing options including project bond financing.”
There are 119 PPP projects rolled out cumulatively worth some $56.9 billion in the Philippines: 77 in energy, 27 in transportation, six in water, seven in information and communications technology, and two in social infrastructure. In 2016, there were 62 state projects with foreign participation, 52% of which were through PPP. But Philippine infrastructure spending has been among Asia’s lowest, averaging just 2.2% of gross domestic product from 2011 to 2014, ADB noted.
The report cited other PPP challenges as coordinating several authorities for decision making; procurement delays; changes in project structure and funding source during tender; inefficient, time-consuming dispute resolution; costly court processes; uncertainty in regulatory approval of toll rate and tariff increases, auctioning off projects with unresolved right-of-way issues, as well as the fact projects have largely been dominated by a few conglomerates.