Duterte signs amended Public Service Act

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  • President Rodrigo Duterte on March 21 signed Republic Act 11659 amending the country’s Public Service Act, and relaxing foreign ownership restrictions in certain industries
  • The measure removes the 40% foreign investment limitation on sectors such as telecommunications, railways, shipping, airlines and airports
  • Under the law the definition of “public utilities” and “public service” was delineated
  • Identified as public utilities are 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 (including trucks)
  • Any industry not on the list will be exempt from the 60-40 ownership limitation under the Constitution and may accept up to 100% foreign investments

President Rodrigo Duterte on March 21 has signed into law the measure that amends the country’s 85-year-old Public Service Act (PSA), easing foreign ownership restrictions in certain industries.

Republic Act 11659, or An Act Amending Commonwealth Act 146 otherwise known as the Public Service Act, as amended, removes the 40% foreign investment cap on certain sectors, including telecommunications, railways, shipping, airlines and airports.

Under the law the definition of “public utilities” and “public service” was delineated. Identified as public utilities are: 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 (including trucks).

Any industry not on the list is exempt from the 60-40 ownership limitation under the Constitution and allowed to take in 100% foreign investment.

During the ceremonial signing of the law, Duterte said, the measure “will aid the country in the path towards economic recovery amid the COVID-19 pandemic.”

He added, “I believe that through this law the easing of foreign equity restrictions will attract more global investors modernize several sectors of public service and improve the delivery of essential services.”

He said RA 11659, together with the amended Foreign Investments Act, will help stimulate the economy, and is expected to generate more jobs, improve basic services, and allow for the exchange of skills in technology.

Various business groups, industry organizations, and government agencies have been pushing for the passage of the bills amending the PSA to promote foreign direct investments and boost the country’s post-pandemic recovery.

The American Chamber of Commerce of the Philippines (AmCham) on Monday (March 21) said the signing of the amended PSA and the earlier enactment of investment-easing measures made the Duterte administration “very business-friendly.”

The Joint Foreign Chambers described the amended PSA as a game-changing law.

Safeguard measures

One of the safeguard features of the law authorizes 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.

To ensure all public services in the country comply with the terms of their certificates and the relevant rules and regulations of the appropriate administrative agencies, the measure includes penal provisions with flexible amounts of fines to accommodate future developments.

House Ways and Means Committee chairman Joey Salceda, sponsor of the bill, earlier said the Philippines may attract up to P299 billion in new investments in the next five years once the amended PSA becomes law.

Senator Grace Poe, Senate committee on public services chairperson and bill sponsor, said in a February statement: “By easing the foreign equity restrictions in such industries, we are confident that our economy, which is lagging even behind our ASEAN (Association of Southeast Asian Nations) neighbors, will thrive and grow, and that more jobs will be created for our kababayans (countrymen).”