Amended Public Service Act to drive economic rebound, investments—DTI

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  • Ratifying the measure amending the Public Service Act will further strengthen economic recovery efforts and improve the investment climate in the country, says Trade Secretary Ramon Lopez
  • Once the PSA law is amended, foreign equity restrictions will be relaxed, attracting more global players in several sectors such as telecommunications, shipping, air carriers, railways and subways
  • The PSA amendment will produce a more competitive services sector, which will have an indirect positive impact on economic growth

Amending the Public Service Act (PSA) will further strengthen economic recovery efforts and significantly improve the country’s investment climate, according to Trade Secretary Ramon Lopez.

Once the bill amending the 85-year-old Commonwealth Act No. 146, or the PSA, is signed into law by the President “foreign equity restrictions will be eased out which shall attract more global players that will modernize several sectors such as telecommunications, shipping, air carriers, railway, and subways,” Lopez said in a statement.

He added: “Similarly, there will be increased competition in terms of services and products which will generate better quality of services and competitive pricing to the benefit of the consumers. Higher investments will also generate more jobs and income for the people.”

The Senate and Lower House on February 2 approved the bicameral conference committee report that harmonizes conflicting provisions between Senate Bill (SB) No. 2094 and House Bill (HB) No. 78 and proposes changes to the PSA.

READ: Public Service Act one step away from becoming law

The measure identifies public utilities as follows: distribution and transmission of electricity; petroleum and petroleum products pipeline transmission systems; water pipeline distribution systems and waste water pipeline systems, including sewerage pipeline systems; seaports; and public utility vehicles.

Any industry not on the list will remain as public services and will be liberalized and not be bound by the 60%-40% ownership principle under the Constitution.

Lopez called the measure a major progress toward stepping up competition in the Philippine market. It will not only effectively open up other public services to foreign investors, it will also “exponentially increase foreign direct investments.”

“I am confident that we can make economic recovery happen in the Philippines this year. With the amended Public Service Act, we expect the entry of new foreign investors and the introduction of modern and new technologies in the aforementioned sectors,” Lopez said.

He said the Philippines, ranked as the third most restrictive economy in the world based on the 2020 Organization for Economic Cooperation and Development report, will see many benefits from the eventual passage of the law. These include attracting more investments, generating more employment opportunities, introducing innovation, lowering prices, and improving the quality of goods and services.

Trade undersecretary Rafaelita Aldaba, meanwhile, noted the indirect positive impact of the PSA amendment to the entire economy, noting that “a more competitive services sector will have indirect consequences toward economic growth.”

“High quality transport or telecommunication infrastructure, for example, could influence the production costs and competitiveness of all firms across all sectors of the economy,” Aldaba said.

The measure comes with safeguard measures, including allowing the President to suspend or prohibit any proposed merger or acquisition transaction, or any investment in a public service that will grant control to a foreigner or a foreign corporation.

Another safeguard provision prohibits foreign state-owned enterprises from owning capital in any public service classified as public utility or critical infrastructure.

Foreign nationals are also not allowed to own more than 50% of the capital of entities engaged in the operation and management of critical infrastructure, unless their country accords reciprocity to Philippine nationals.

Various business groups, industry organizations and government agencies have been pushing for amendments to the PSA to promote foreign direct investments and boost the country’s post-pandemic recovery. The bills amending the PSA were earlier certified as urgent by the President.