By Jenina P. Ibañez, Reporter

IMPROVEMENTS in the Philippine foreign direct investment (FDI) restrictiveness ranking would depend on the passage of laws further opening up the economy, business and government leaders said.

The Philippines ranked third most restrictive out of 83 economies on the FDI Regulatory Restrictiveness Index compiled by the Organization for Economic Cooperation and Development (OECD), based on 2020 data.

On a scale of 0 (open) to 1 (closed), the Philippines scored 0.374, behind just Palestine and Libya. Most FDI restrictions came from the primary, telecommunications, media, business services, and transport sectors.

“We are relying on the meaningful amendments and improvements in the remaining certified urgent bills,” Trade Secretary Ramon M. Lopez said in a Viber message last week.

Mr. Lopez is referring to measures proposing amendments to the Retail Trade Liberalization Act (RTLA), Public Service Act (PSA), and Foreign Investments Act (FIA) that were certified by President Rodrigo R. Duterte as urgent.

Changes to the RTLA include lowering the required minimum paid-up capital for foreign companies that seek to enter the Philippine retail sector, while amendments to the PSA would lift foreign ownership restrictions in the public service sector. The measure amending the foreign investment law will lower the number of direct local hires required for foreign companies.

“(These) will ease restrictions on the entry of foreign equity investments in the country,” Mr. Lopez said. He has been pushing for the passage of the pending bills within the third quarter.

John Forbes, senior advisor at the American Chamber of Commerce of the Philippines, said that the Philippines’ ranking could discourage foreign investors from considering the Philippines as it signals that the country’s doors are closed.

Mr. Forbes also referred to the RTLA and PSA, along with the Resolution of Both Houses 2 (RBH 2) which could amend economic provisions in the 1987 Constitution.

“If passed by the Senate and approved in a plebiscite, RBH 2 would allow the next Congress to pass new laws to open advertising, media, and other restricted sectors in the Constitution,” he said in a mobile message.

“The power to vastly improve this rating and eventually increase actual foreign investment and create new jobs is with the Congress, if it listens to the reform advocacies of President Duterte and most of the business sector.”

Government officials and business leaders had also advocated for the passage of the economic bills last year, when the Philippines also had a score of 0.374 in the same index.

British Chamber of Commerce of the Philippines Executive Director Chris Nelson said in a phone interview that the bills have been made more urgent due to the coronavirus disease 2019 (COVID-19) pandemic.

“The need I think has increased significantly. There’s always a need to increase foreign direct investment, but now with the economy under pressure… the need has increased even more,” he said.

“The government has recognized the need to pass these bills, and I think the focus and attention on opening up the economy has further amplified.”

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said that some FDI entered the country this year through progress made on tax reform, which he said narrows that tax rate gaps between the Philippines and other Southeast Asian countries and provides more certainty on investment incentives.

“More FDIs could still be spurred further by still near record low interest rates locally and worldwide, thereby making borrowings more compelling to finance investments worldwide, including those for FDIs destined for the country,” he said in an e-mail.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed FDI inflows fell by 25.4% year on year to $429 million in May. Despite the decline in May, FDI net inflows jumped 37.8% to $3.48 billion in the first five months of 2021.