Foreign investment curbs seen lifted by 2019

Mass media and almost every sector except land ownership will be further opened up to foreign investors two years from now through an amendment of the Constitution to be pushed in Congress next year, the country’s chief economist said yesterday.

Once the government’s plan to liberalize nearly all industries by 2019 happens, foreign direct investment (FDI) inflows could “easily double,” Socioeconomic Planning Secretary Ernesto M. Pernia told reporters on the sidelines of the 2017 International Conference on Sustainable Development Goals Statistics.

Pernia, who also heads the state planning agency National Economic and Development Authority, said economic managers were asking the President to certify as urgent the proposed amendments to the economic provisions of the 1987 Constitution, especially as Mr. Duterte had sought Charter change through an appointed constitutional commission (ConCom).

Under the Constitution, no foreign equity is allowed in mass media except recording; the practice of professions, especially law; utilization of marine resources in archipelagic waters, territorial sea and exclusive economic zones as well as small-scale utilization of natural resources in rivers, lakes, bays and lagoons; as well as manufacture, repair, stockpiling and/or distribution of nuclear weapons.

Also under the Constitution, up to only 30-percent foreign equity can be allowed in advertising firms.

Meanwhile, a cap of 40 percent is being applied in foreign-led exploration, development and utilization of natural resources; ownership of private lands; operation of public utilities; educational institutions other than those established by religious groups and mission boards, and facility operator of an infrastructure or a development facility requiring a public utility franchise.

As for land, Pernia said they were looking at 50-year lease contracts to foreigners, renewable by another 50 years.

Also, Pernia said the draft 11th foreign investment negative list (FINL) was submitted to the Office of the President last Tuesday.

“Their legal staff would still review it,” Pernia said.

According to Pernia, the proposed FINL identified a “short” list of areas where foreigners can own up to 49 percent, a list of “sensitive” areas as well as activities where full foreign ownership will be allowed.

In the case of contractors in the construction industry, the government wanted to allow 100-percent foreign ownership as long as the companies have good international reputation, Pernia said.

As for retail trade, the proposal was to reduce to $200,000 from $2.5 million at present the minimum paid-up capital of foreign retailers looking to establish operations here, Pernia said earlier.

Neda officials had said that they were also considering full foreign ownership in investment houses.

Every two years, the government releases the FINL, which lists down sectors where foreign investors have only limited participation.

The 10th FINL was issued by former President Aquino in 2015 under Executive Order No. 184, which had practically kept intact the list of activities and sectors restricted to foreign equity and participation as provided for in the ninth regular FINL.

The latest Bangko Sentral ng Pilipinas data showed that the net inflow of job-creating FDI declined 14 percent year-on-year to $3.6 billion in the first half.

“I think the fundamental problem we have compared with our neighbors in the Asean economic community is that we are lagging behind in how we liberalized our FINL,” Pernia told senators last month during the hearing on Neda’s proposed budget for 2018.

“We have a FINL that is pretty long if we compare with our neighbors. It’s one of the major reasons why we are not getting enough foreign investments,” Pernia had said.

According to Pernia, President Duterte himself was “quite keen on reducing restrictions.”

“If we’re successful in doing that [reducing the FINL], we can be successful in attracting more FDI,” according to Pernia.