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HomeEconomyBusiness groups push for Public Service Act amendments before Congressional recess

Business groups push for Public Service Act amendments before Congressional recess

  • Various business groups strongly support ratification of the consolidated bill amending the Public Service Act before Congress goes on recess starting on February 5, 2022
  • The Export Development Council, Philippine Chamber of Commerce and Industry, Philippine Exporters Confederation, Inc., and Supply Chain Management Association of the Philippines encouraged the Congressional Bicameral Conference Committee to adopt the most liberal provisions between two versions of the bills

Various business groups “strongly support” ratification of the consolidated bill amending the Public Service Act (PSA) and called on Congress to adopt “the most liberal” provisions for the final draft of the bill before Congress goes on recess on Feb 5.

“This reform is one of the key policy measures for promoting foreign direct investment (FDI) in the country and enabling the economy to attain even pre-pandemic rates of economic growth,” the Export Development Council, Philippine Chamber of Commerce and Industry, Philippine Exporters Confederation, Inc., and Supply Chain Management Association of the Philippines said in a joint call to Congress.

The groups added they “highly encourage the Congressional Bicameral Conference Committee to adopt the most liberal provisions between the two versions…” of the bills.

The House of Representatives in March 2020 approved on third and final reading House Bill (HB) No. 78 while the Senate in December 2021 approved on third and final reading Senate Bill (SB) 2094.

Both bills will amend Commonwealth Act No. 146, otherwise known as PSA, by revising the definition of public utility and limiting it to several public services. Those not classified as public utility will be recognized as public service and not be bound by the 60%-40% ownership restriction under the Constitution.

With the Senate’s approval, the bill is now up for bicameral conference to reconcile or thresh out differences on any provision of the bill.

The groups suggest that operation and maintenance concessions for airports and seaports be allowed for fully foreign-owned companies. Airports and seaports are classified as public utility under SB 2094 but not under HB 78.

“The world’s best airport and seaport operators could bring world-class standards and technology to serve the Philippine public who travel by air and sea,” the groups noted.

They also said it is essential to lift foreign ownership restriction in air carriers “to allow an option for our existing air carriers to access foreign capital in case they need it to help them recover from the pandemic and improve or expand their operations.”

Air carriers are not included in the definition of public utility but are classified as “critical infrastructure”, which means that while they are not covered by the foreign ownership limitation, any investments in these will have to be reviewed by the National Security Council.

The groups noted: “Lifting the restrictions will also lay down an enabling environment for more players, thereby increasing competition in the industry and reducing the cost and improving the quality of air travel for the public, and making our air carriers competitive with international air carriers.”

The groups said tollways and expressways, which they noted are vital logistics arteries, should be liberalized for foreign investment in the same way as railways and subways. SB 2094 classifies tollways as public utility but not railroad and subways, which the groups said is illogical. As an example, they noted that Indonesia is seeking foreign investors for its 2,818-kilometer Trans-Sumatra Toll Road with 24 segments costing US34 billion. “The Philippines could do the same,” they said.

Moreover, the groups said public utility vehicles (PUVs) should also be excluded from the definition of public utilities, saying “in no way are they natural monopolies.” Under SB 2094, PUVs are included in the definition of public utility, but not under HB 78.

The groups said this will be advantageous to the country’s economy as it will “increase competition in vital domestic land transportation services and result in increased foreign investment helping to modernize the industry.”

They noted that Filipino workers in land transportation businesses will not be displaced as they will remain drivers and mechanics that service PUVs.

Moreover, the groups said this will also allow international carriers to undertake their first and last-mile delivery services to pick up and deliver to customers in the Philippines, as they do in most countries.

“Allowing this will encourage these global firms to invest more in international gateways, as they have at Clark, and increase the role of the Philippines as s regional air cargo hub, which in turn will attract new export manufacturing firms to locate in the country. Overall, this reform can result in improvement in the quality and cost of logistics in the country, thereby increasing our economic competitiveness,” the groups stated.

Telecommunications, meanwhile, must also be excluded from the definition of public utility, according to the groups. Further, they said passive infrastructure and value-added services must be excluded from the definition of telecommunications to avoid erecting a new and substantial barrier to the entry of competition in the market for internet services which would stifle the growth of community internet.

In both bills, telecommunications is considered a public service.

 

Reciprocity

On the reciprocity provision, particularly in SB 2094, the groups said it should not prevent important foreign investment from coming into the Philippines.

The reciprocity provision is one of the safeguard measures under SB 2094 to protect the country’s national security. It provides that foreign nationals may only own more than 40% of the public services identified as critical infrastructure if their country accords a reciprocal right to Filipinos by law, treaty or international agreement.

The groups, however said it “should not be a barrier to needed investment.”

“When the Philippine economy needs more foreign capital, the law should not require that a Filipino firm be allowed the same in the country of the investor,” the groups said.

Under SB 2094, public utility refers to a “public service that operates, manages or controls for public use” any of the following: distribution or transmission of electricity; petroleum and petroleum products pipeline distribution systems, water pipelines distribution systems and wastewater pipeline systems; as well as airports, seaports, PUVs, and tollways or expressways.

Those not classified as a public utility will be considered as a public service, which will not be bound by the 60%-40% ownership restriction under the Constitution. Public services include telecommunications, air carriers, domestic shipping, railways and subways.

HB 78, meanwhile, limits the definition of public utility to any person or entity that operates, manages, or controls for public use the distribution of electricity, transmission of electricity, water pipeline distribution, and sewerage pipeline.

Public services include marine repair shop, wharf or dock, canal, public market, irrigation system, gas, electric light, heat and power, water supply and power, petroleum, sewerage system, telecommunications system, and wire or wireless communication system.

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