DTI chief warns against fully opening construction sector to foreign groups

Trade and Industry Secretary Ramon Lopez cautioned against a move to further liberalize the construction industry in favor of foreign contractors, saying that the government should first give preference to local players.

Lopez defended the interests of local industry in a business forum yesterday after being asked by the media for the industry’s outlook amid plans to further liberalize it possibly through its removal from the foreign investments negative list (FINL).

The FINL is a document released every two years that details which industries would have limited participation from foreign companies. The list’s 11th edition is expected to be released before the end of the year.

Socioeconomic Planning Secretary Ernesto Pernia wants foreign players to be allowed full ownership of their projects in the construction industry.

“What we’re saying is there is no big need to change the system right now,” Lopez said.

At present, full foreign ownership is allowed but only for certain projects. Under a 2013 resolution by DTI-attached agency Philippine Contractors Accreditation Board (PCAB), full foreign equity is allowed if the capitalization of the contractor is at least P1 billion.

PCAB data showed that only nine contractors were given the license after meeting the P1-billion threshold, among other conditions, during the contracting fiscal year August 2016 to July 2017.

Foreign contractors, in general, are limited to 40-percent equity participation in construction projects in the country. This ownership limitation was criticized by some foreign business groups based in the Philippines.

“In principle, they are allowed. But up to what point [in terms of sizes of these projects and sourcing of these funds] we can allow the 100 percent, we would have to consult and work with the industry. To me, there are a lot of players in the local industry already,” he said.

“If we can allow the local players to prosper first, that would [lead] to a better breed of contractors. We’re not yet at that stage where there is full employment,” he added.

The trade chief’s statement in defense of local players in the construction industry is a stark contrast of his approach in the retail industry.
Lopez supported the liberalization of the retail industry in spite of the opposition business groups.
Pernia wants to further liberalize retail trade by cutting the minimum capital threshold from $2.5 million to $200,000. Lopez agreed, saying this would further enhance competition in the industry.