Government to allow 70% foreign equity in telcos, utilities

President Duterte wants to allow foreign investors to own up to 70 percent of telecommunication firms and all public utilities, according to the National Economic and Development Authority (Neda), and this will probably be reflected in the updated Regular Foreign Investment Negative List (RFINL) due in August.

Socioeconomic Planning Secretary Ernesto M. Pernia said this is in line with the President’s campaign promise to attract more foreign investors and give Filipinos better services.

“The President’s preference is up to 70-percent foreign ownership and 30-percent local ownership for utilities. [On] land, his preference is [to] lease up to 50 years, renewable for another 50 years,” Pernia said. “That is what he has said even during the campaign and he hasn’t made any changes yet on that previous decision.”

The Neda is currently in the process of crafting the 11th RFINL, which limits foreign ownership and the practice of professions in the country.

According to Finance Secretary Carlos G. Dominguez III, the economic managers will be coming out with the revised RFINL by next month. The list was last updated in 2015. Under List A of the RFINL, operation of public utilities and ownership of land have a 40-percent cap on foreign equity. This is based on Article 12 Section 11 of the 1987 Constitution.

Based on this provision, public utilities can only be operated by Philippine citizens or corporations and associations where at least 60 percent of the capital is owned by Filipinos.

While the Constitution does not define the term public utility, the Public Services Act of 1930 said these include public utilities, such as various kinds of transportation, ice plants, canals, irrigation systems, power, water and wire-based or wireless communication, among others.

“There’s a move to revise the Public Services Act so that utilities and telcos can be redefined so that they will not be on the negative list. Public utilities are part of the negative list,” Pernia said.

Earlier, Philippine Competition Commission Chairman Arsenio M. Balisacan welcomed the move to shorten the RFINL, saying it bodes well for promoting competition in the country.

Balisacan believes competition is key to addressing the country’s development constraints and struggles to attain inclusive economic growth.

He said that for one, millions of Filipino students are deprived of receiving topnotch education simply because the RFINL only allows a 40-percent foreign equity in this sector.

Balisacan said this is the reason top foreign schools are locating in other Southeast Asian countries, like Malaysia.

The RFINL contains investment areas/activities where foreign-equity participation is limited by mandate of the Constitution and specific laws.

It also consists of investment areas/activities where foreign-equity participation is limited for reasons of defense, security, risk to public health and morals, and protection of small- and medium-sized domestic market enterprises.

The amendment of the list is headed by the Neda Secretariat, as provided for under Section 8 of Republic Act 7042, or the Foreign Investments Act of 1991, which states that amendments may be made upon the recommendation of the secretary of defense or the secretary of health, or the secretary of education, endorsed by the Neda, approved by the President, and promulgated by a Presidential Proclamation.

“In May the door opens, it doesn’t close in May, so that is when we started reviewing. [Our internal deadline is] about the middle of next month,” Dominguez told financial reporters.

In May the finance chief pointed out that once the economic managers finalize their
position on the issue, they will submit the recommendation to Duterte, who will then issue an executive order removing restrictions contained in the 10th RFINL.

“We are waiting for the comments of everybody, and from there, we will move ahead with the revision of that negative list. We will determine it first among ourselves and then we will talk with the stakeholders, but we have to decide our position first,” he added.

The DOF earlier pointed out that it seeks to lift restrictions on financial, education and mass-media sectors, among others, to open up the local market to foreign players. The lifting of some of the restrictions on foreign ownership can help double foreign direct investment in the country and push growth sectors.

“The only limitation we have there is what is legislated and what is in the Constitution; that is the only limit, because we’re only reviewing those things that can be done administratively,” Dominguez added.

 

 

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A professional journalist for over a decade, Cai U. Ordinario currently writes macroeconomic and urban development stories for BusinessMirror. She has received awards for excellence in reporting on the macroeconomy and statistics. She was also cited for her contribution to statics reporting by the National Statistical Coordination Board (now the Philippine Statistics Authority). She is a recipient of journalism fellowships including the Jefferson Fellowship from the Honolulu-based East West Center. She is currently completing her Masters degree in Communication at the University of the Philippines. She graduated with a degree of Bachelor of Arts Major in Journalism from the University of Santo Tomas.