Last week, President Duterte signed into law Republic Act No. 11647, which amended the Foreign Investment Act of 1991.
Among others, the new law allows qualified foreigners to do business in the Philippines or invest in a domestic enterprise for up to 100 percent of its capital.
Earlier this year, the Retail Trade Liberalization Act was amended to principally reduce the minimum paid-up capital requirement for foreign retail enterprises to operate in the Philippines.
And waiting in the wings for the President’s signature is the amendment to the eight-decade old Public Service Act that would allow 100-percent foreign ownership in the telecommunications, airline and railway businesses.
All these laws are aimed at attracting more foreign investments to the Philippines to help raise the revenues needed to meet the challenges caused by COVID-19.
In a recent forum, Finance Secretary Carlos Dominguez III, citing the measures taken by the government to attract foreign investments, urged foreign investors “to be involved in the Philippines’ game-changing undertakings.”
Verily, with over P12 trillion in national debt, 3.27 million Filipinos unemployed (as of February) and thousands of businesses shuttered, the country is in dire need of foreign investments that can help it recover from the pandemic’s adverse economic effects.
A similar invitation for more foreign investments has been made by other countries in the region as they reopen their markets. This means the Philippines is in close competition with its neighbor countries in attracting foreign capital to their shores.
Past experiences have shown that there is more to liberal or investment-friendly laws to convince foreign investors to put their capital in a country and be assured of satisfactory rewards.
The beautiful words and phrases in those laws mean nothing unless they are scrupulously observed or implemented by the government officials assigned to do that task.
When foreign investors enter into contract with a government or any of its instrumentalities, or with private domestic corporations, they expect its terms and conditions to be followed strictly by the parties.
They will also want parameters under which they made their investments to remain constant and will not be changed midstream.
And that in the unlikely event that disputes in the interpretation of their contracts arise, the mechanism earlier agreed upon by the parties to resolve them, e.g., mediation or arbitration, shall be complied with in good faith.
Bottom line, foreign investors want (and demand) consistency, uniformity and fairness in the treatment of their investments.
A government that fails to observe those standards could find itself a pariah in the international investment circles. There is no dearth of countries that would welcome investors who feel they were given a raw deal in their former sites.
It is common knowledge that in recent years several foreign investors who accepted the invitation to invest in the Philippines, either on a standalone basis or in partnership with domestic corporations, had complained about abrupt changes in the terms and conditions under which they made their investments.
These include the reduction or diminution of promised tax privileges, forced reorganization of the management structure to supposedly comply with “anti-dummy” rules, and refusal to comply with awards made in duly constituted arbitration proceedings for allegedly being unconscionable.
The investors who were adversely affected by those incidents could only grumble in silence knowing that any protests will be fruitless. But they will not forget and that would be at the back of their mind for years.
Against this backdrop, Dominguez’s pitch for more foreign investments may not get a receptive ear from its intended audience, in spite of recently enacted liberal investment laws. INQ
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