PH construction fears domination by foreign players

The local construction industry, one of the most battered sectors during this pandemic, faces another threat with the unregulated entry of foreign players that could crowd out small and medium enterprises, which account for the bulk of licensed contractors.

This was according to panelists at the online Philippine Construction Arbitration Conference 2020 organized by the Philippine Institute of Construction Arbitrators and Mediators last week.

The unbridled entry of foreign contractors has become a hot topic following the decision of the Supreme Court to declare as unconstitutional a regulation by the Philippine Contractors Accreditation Board (PCAB) that governs the licensing of foreign contractors. PCAB requires at least 60-percent Filipino equity participation and value contribution.

“This is the worst idea in the worst possible time,” argued Divina Law senior partner Enrique dela Cruz Jr., who specializes in government contracts, particularly those involving public-private partnerships and build-operate-transfer projects.

The Office of Solicitor General has filed a motion for reconsideration of the high court order.

Cruz said the unrestricted market access of foreign contractors in the country would give undue competition to SMEs, which comprise bulk of licensed contractors.

“Foreign contractors are here as we speak,” said Commissioner Emilio Lolito Tumbocon of the Construction Industry Arbitration Commission, who said foreign contractors had actually been doing business in the country since the 1970s through joint venture arrangements.

According to Tumbocon, nearly 2,500 licenses are issued to foreign contractors yearly since 2015.

However, Tumbocon said the foreign contractors should have some “skin in the game” to level the playing field especially since construction projects typically carried a 15-year warranty.

With such a lengthy gestation period, it wouldn’t be easy for proponents to go after foreign contractors once they have finished the project even when something would go wrong, he said.

According to Roberto Dio of the Philippine Dispute Resolution Center said if foreign contractors do not have local assets, it would be hard to enforce judgment on them in an arbitration case.

Ernesto de Castro, president Esca Inc., agreed an investment requirement for foreign contractors was needed to make sure they have assets here.—DORIS DUMLAO- ABADILLA INQ