P299B new investments seen with passage of amended Public Service Act

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The amended Public Service Act removes the 40% foreign investment cap on certain public utilities, including telecommunications, railways, shipping, airlines and airports.
  • Up to P299 billion in new investments will pour into sectors liberalized under the amended Public Service Act (PSA)
  • The measure, which removes the 40% foreign investment cap on certain public utilities, including telecommunications, railways, shipping, airlines and airports, is awaiting the signature of President Rodrigo Duterte
  • The Philippine Exporters Confederation, Supply Chain Management Association of the Philippines and Cold Chain Association of the Philippines welcomed the passage of the measure

The Philippines may attract up to P299 billion in new investments in the next five years once the amended Public Service Act (PSA) becomes law, according to House Ways and Means Committee Chairman and Albay Rep. Jose Ma. Clemente Salceda.

Congress ratified on Feb 2 the bicameral committee report on the bill, which relaxes foreign ownership restrictions on public services–including telecommunications, domestic shipping, railways and subways, airlines, expressways and tollways and airports. The bill effectively exempts the sectors from the 40% foreign ownership restriction under the Constitution.

The development paves the way for the transmittal of the measure to Malacañang for President Rodrigo Duterte’s signature.

Salceda in a statement said he expects “an increase in FDIs (foreign direct investments) by around P299 billion over the next five years from the final version of the sectors that will be opened up as a result of the PSA amendments.”

Gross value-added growth in liberalized areas, he added, may cause a gross domestic product growth rate 0.47 percentage point higher than the baseline.

In a statement, the Joint Foreign Chambers said the measure once it becomes law would generate more foreign investments, bringing the Philippines more in line with the region’s market-opening norms.

“With enactment of the PSA amendments, important new investment opportunities in telecommunications, most forms of transportation, and other public services will now be open, creating significantly larger foreign capital inflows in future years,” the JFC said.

Industry associations also welcomed the development.

“The cold chain sector looks upon this legislation as an opportunity for accelerated growth of the industry as it allows access to the latest technologies available in refrigeration and supply chain management, thereby enabling better operating efficiencies and enhancing value creation as support mechanisms to the country’s agribusiness development thrust,” The Cold Chain Association of the Philippines told PortCalls.

“Moreover, it is expected that foreign investments in cold chain facilities will also create export market opportunities to countries that have expressed interest in procuring Philippine agricultural products but which require stringent processing standards and minimum economies of scale. This in turn, is anticipated to spearhead upgrading of sanitation standards in the food processing and distribution sectors to ensure compliance with internationally accepted practices.”

The Philippine Exporters Confederation said the PSA amendments are “consistent with the thrust towards recovery and competitiveness especially for our exporters. With more investors and service providers coming in, we expect the cost of doing business to go down and address gaps in the supply chain, particularly in the logistics sector.”

For its part, the Supply Chain Management Association of the Philippines believes the measure “will foster further competition, enable innovation, and drive lower costs in the logistics and supply chain sectors, which play a critical role in resilient and responsive businesses. We hope that the amendments would help in the recovery of our economy from the long-term impacts of the COVID-19 pandemic. We pray for its signing by the President at the soonest possible time.”

Safeguards

Senator Grace Poe, Senate committee on public services chairperson and bill sponsor, earlier pointed out the liberalization of certain public utilities “should not be misunderstood as an invitation for hostile countries to take advantage of our resources.”

She said “adequate safeguards and security provisions are in place to protect our national security and sovereignty.”

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

Foreign nationals are also prohibited from owning 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, Poe said the measure includes penal provisions with flexible amounts of fines to accommodate future developments.

“The ratified measure has made its intentions clear and unequivocal by adding a provision that says that ‘nothing in the bill shall be interpreted as a requirement for legislative franchise where the law does not require any’,” Poe said.

The measure also provides that “no person shall be deemed a public utility unless otherwise subsequently provided by law.” – Roumina Pablo