Senate oks bill allowing 100% foreign ownership of public services

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  • The Senate approved on third and final reading a bill that will amend the 85-year-old Public Service Act
  • Senate Bill No. 2094 allows 100% foreign ownership of public services which will no longer be defined as public utilities, including air carriers and domestic shipping
  • Bill sponsors said the measure will give consumers more choices

The Senate has approved on third and final reading the bill that will allow 100% foreign ownership of public services no longer defined as public utility, including air carriers and domestic shipping.

Senate Bill (SB) No. 2094, which will amend Commonwealth Act No. 146, otherwise known as Public Service Act or PSA, as amended, was approved with 19 affirmative, three negative, and zero abstention votes during the session on December 15.

President Rodrigo Duterte earlier certified SB 2094 as urgent.

Senator Grace Poe, who co-sponsored the bill, in a speech said, “opening our economy to a diverse set of investors, (would) provide our fellow Filipinos with more and better choices.”

Poe earlier explained that the bill, which will amend the 85-year-old PSA, aims to clear “the ambiguity surrounding the interchangeably used terms ‘public utility’ and ‘public service’.”

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, public utility vehicles (PUV) and tollways or expressways.

PUVs include road vehicles that carry passengers and/or cargo for a fee, offering services to the public, namely trucks-for-hire, UV express service, public utility buses, PUV jeepneys, tricycles, filcabs, and taxis.

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

Senator Rissa Hontiveros, who along with Senate President Pro Tempore Ralph Recto and Senator Francis Pangilinan voted no on the measure, said she supports “the objective of inviting more foreign investors who will infuse capital and know-how for the improvement of our public utilities.”

But she is “saddened that many other critical services have been opened up to 100% foreign ownership by our bill when, as Senator Recto repeatedly proposed, we could have limited foreign participation say to 70%, which allows Filipinos and even the state to have direct knowledge of what goes on inside these critical facilities.”

Hontiveros said she specifically is against the opening of the telecommunications industry at a time “when we have tech-savvy neighbors as well as rogue non-state elements that are directly targeting facilities in the region, including government and military installations and other very critical infrastructure.”

Security safeguards
Poe, during the period of interpellation, assured that the measure contains safeguards to protect national security, which include prohibiting foreign state-owned enterprises from owning capital in any public service classified as “critical infrastructure,” and review of the foreign investments by the National Security Council.

A provision was included in SB 2094 tasking the NSC to initiate a review of foreign investments that would result in the control of any critical infrastructure in the country.

Critical infrastructure refers to assets that are so vital to the country that the incapacity of such assets would debilitate national security. These critical infrastructure include telecommunications, air carriers, domestic shipping, and railways and subways.

Another safeguard, found in the reciprocity clause, 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 Philippine Inter-Island Shipping Association (PISA) earlier expressed concern that the bill’s reciprocity provision compromises the viability of critical infrastructure, and reciprocity should thus be on a “one-on-one basis” within the same specific industry sector.

“If the reciprocity clause must be retained, we recommend that the reciprocity be on a ‘one on one basis’ within the same specific industry sector—allowing foreign nationals to own more than 40% in sea, air, and land public transport asserts and infrastructure, only if their own countries accord the same privilege to Filipinos in the same business activity, with the same potential business value and opportunity, and with consideration by not only NEDA [National Economic and Development Authority] but by the Department of National Defense,” PISA said.

For example, the association said, reciprocity in the case of an Indonesian or Japanese shipping company investing in the domestic trade without a Filipino partner should allow a Filipino shipping company “to also enter the very strict Indonesian and Japanese cabotage regime which for small ships requires 100% ownership.”

Since Indonesia has more islands than the Philippines, PISA noted that reciprocity in their respective shipping industries could potentially be a more than “one-on-one,” which would not be a fair exchange.

On the other hand, if a Singaporean shipping company invests in the Philippines, “we would not have the ability to also benefit from their trade since Singapore does not have an equivalent scale for coastal trade.”

Game changer
The Joint Foreign Chambers (JFC), meanwhile, hailed the Senate’s passing of the bill, which it called “game-changing.”

“Liberalization of the economy is one of the most important measures needed to attain similar levels of foreign investment received by ASEAN neighbors and ensure the Philippine economy’s continued recovery from the pandemic,” the group said in a statement.

JFC said it pledges “efforts to bring the reform to the attention of appropriate firms in our member countries in the United States, Australia-New Zealand, Canada, Korea, Japan, and Europe” and it will encourage them to invest in the Philippines and support better public services for the Filipino people with capital and technology.

With the Senate’s approval, a bicameral conference committee will be convened to reconcile conflicting provisions of the Lower House and Senate-approved versions, or one of the chambers may decide to adopt the other’s version of the bill. The Lower House approved on third and final reading its version, House Bill No. 78, in March 2020. – Roumina Pablo