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40% foreign-owned builders are now eligible for infrastructure projects

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THE Government Procurement Policy Board (GPPB) has approved a resolution raising the foreign equity requirement for infrastructure projects to 40% from the current 25%.

Under Resolution No. 06-2019, the GPPB adopted Executive Order No. 65 S. 2018, which provided that contractors with 40% foreign equity may be awarded contracts for the construction and repair of locally funded public works.

The Office of the Deputy Executive Secretary for General Administration (ODESGA) said that the resolution, dated March 8, intends to increase the foreign equity cap to “ease restrictions on foreign participation in certain investment areas or activities.”

President Rodrigo R. Duterte on Oct. 2018 issued EO No. 65, promulgating the 11th Foreign Investment Negative List (FINL), which identifies industries reserved for Filipino-owned companies and those open to foreign entities.

The Resolution amends Republic Act No. 9184, or the “Government Procurement Reform Act,” which required partnerships, corporations or joint ventures, engaged in infrastructure projects to at least have a 75% domestic interest, outstanding capital stock or ownership.

The 75% threshold was also contained in the 79-year-old Commonwealth Act No. 541, which provides that infrastructure contracts should be awarded to domestic entities.




In particular, the Resolution amends the 2016 revised implementing rules and regulation of RA 9184 by lowering the required Filipino ownership to 60% from the current 75%.

Sections 23.4.2.1 (b), (c), and (e) will now allow partnerships, corporations and joint ventures “(in) which at least 60%” of the interest or outstanding capital stock belongs to citizens of the Philippines.

It provided also that contractors with more than 40% ownership may still be awarded projects in certain cases. Section 23.4.2.1 (e) reads in part that joint ventures in which “Filipino ownership or interest is less than 60% may be eligible where the structures to be build require application of techniques and/or technologies which are not adequately possessed by a person/entity” owned by Filipinos. — Charmaine A. Tadalan

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