Easing of investment rules pushed

The country’s chief economist expects more foreign investment flows once Congress amends three key laws to liberalize restrictive sectors.

“Besides our growth story that tells of the Philippine economy’s higher growth trajectory, there are several policy reforms already in place to accommodate more foreign investors in the country. These are the amendments to the retail trade act, the Foreign Investment Act and the public utilities act, which are all near passage in Congress,” Socioeconomic Planning Secretary Ernesto Pernia said during the latest Philippine Economic Briefing in Osaka, Japan.

Pernia, who also heads state planning agency National Economic and Development Authority, said House Bill No. 4595 and Senate Bill No. 1639 aimed at amending the existing retail trade liberalization law should improve investments in the manufacturing sector, including small and medium-sized enterprises (SMEs).

Under Republic Act No. 8762, or the Retail Trade Liberalization Act of 2000, enterprises with paid-up capital of less than $2.5 million “shall be reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens.”

As such, only enterprises with a minimum capitalization of $2.5 million or more may be owned fully by foreigners, a provision that has been deemed “restrictive” by foreign investors.

Pernia earlier said they wanted to reduce to $200,000 the minimum paid-up capital needed by foreigners to participate in domestic retail trade.

“We are also proposing modifications in the Foreign Investment Act to reduce the threshold for foreign investors investing $100,000 in SMEs from 50 to only 15 direct employees. It also proposes to exclude ‘practice of professions’ from the coverage of the Foreign Investment Act,” Pernia added.

As for the amendment to Commonwealth Act No. 146, or the Public Service Act, the pending bill SB 1754 wanted to limit “public utilities” to the following activities: electricity distribution and transmission, as well as water works and sewerage systems.

Pernia had said that redefining public utilities would eventually allow foreign companies to own up to 100 percent of domestic telecommunications ventures.

To recall, Pernia had said the 11th Foreign Investment Negative List issued by President Duterte last year contained liberalization measures that were only “marginal improvements” such that more could be done by amending restrictive economic laws.

Amid a widening trade deficit as the surge in imports outpaced weak exports, Pernia has urged legislation that would “allow foreign investments in firms catering to the domestic market, in addition to expanding their exporting activities.”

“We like to be sufficiently competitive with, at least, our Asean neighbors. For that to happen, there would have to be legislation or amendments to our laws so that more areas can be opened to foreign participation. So we need a lot more work in terms of getting more areas and activities liberalized. That is the desire of the economic managers and that is what is needed to be competitive in Asean,” Pernia told reporters last year.