PCC: Open construction business to foreigners

The competition watchdog said P210 billion more would be invested in the private sector if the government changed the licensing rules being followed in the construction industry.

In a policy note posted on its website, the Philippine Competition Commission (PCC) renewed its call to address the nationality distinction that provides more flexible rules to domestic contractors in the construction industry, while restricting the access of foreign ones.

PCC said opening the market to more players would invite additional investments in the private market, while also boosting the public sector through knowledge transfer and the use of new technologies.

“PCC estimates that the lifting of the restrictions on foreign contractors will yield an additional P210 billion worth of private construction activities in these segments,” the policy note read. PCC did not quantify the gain on the part of the public sector.

The regulation in question, which PCC said “violates the constitutional state policy against unfair competition,” referred to the implementing rules and regulations (IRR) of the Contractor’s License Law.

According to the IRR, the Philippine Contractors Accreditation Board (PCAB) should license local contractors on a yearly basis, while mandating foreign contractors to renew licenses for each new construction project.

“Nationality-based distinctions are not mere labels and, in fact, carry with them substantial distinctions in terms of costs and benefits. It is a restriction that hinders competition in the construction industry, creating an uneven playing field between local and foreign contractors,” the policy note read.

PCC added this hindered the potential of economic growth, especially since a foreign firm pays up to 12 times more in application fees compared to a local firm doing the same level of activity.

Citing a simulation of 12 projects in a year, PCC said  a local firm would pay P14,730 in license applications, while its foreign counterpart would spend P176,760.

“The scheme fosters an uneven playing field between local and foreign contractors, thereby discouraging potential foreign firms from entering the market,” PCC said.

PCC cited detrimental effects on the economy and business down to the consumers.

The antitrust body said the practice would result in a less competitive market especially when there is a “limited threat of entry of a potential competitor.”

In December last year, the PCC filed an amicus curiae (friend of the court) brief with the Supreme Court, commenting on an ongoing case between the PCAB and Manila Water Company, Inc.

The watchdog asked the high court to nullify the restrictive sections in the IRR, which, it believed, would help open up the market.