The Senate opened plenary deliberations Monday on a proposed law to further promote foreign investments by updating the “Foreign Invesments Act of 1991.
In his co-sponsorship speech endorsing early approval of Senate Bill 1156, Senator Sherwin Gatchalian affirmed support for the remedial legislation stressing the measure’s immediate passage, saying “It is high time for our country to start enjoying the economic benefits that our neighbors have reaped from foreign investments for the longest time.”
Gatchalian pointed out that Republic Act No. 7042, otherwise known as the Foreign Investments Act, was enacted in 1991 to invigorate the Philippine economy by substantially liberalizing foreign investment laws and policies. He said foreign direct investments, or FDIs, are “important to a developing country like ours as they provide tangible economic benefits in the form of technical expertise, technological transfer, foreign exchange from exports, employment, and higher tax revenues, among others.”
He recalled that when the Foreign Investments Act was passed in 1991, the law “did a fair job” in accomplishing its mandate to increase foreign investor access into the country.
According to the Joint Foreign Chambers in a 2010 policy document, FDI accumulation in the Philippines grew from US$4.711 billion between 1990 and 1994, to US$11.183 billion between 2005 and 2009, representing a 237% increase over a 20-year period.
He noted, however, that “despite this progress, we have the second lowest FDI accumulation figures among the ASEAN 6 from 2015-2017, according to the World Bank.”
“Our FDI accumulation for that period stood at US$23.98 billion. Meanwhile, Singapore’s FDI accumulation for the same period stood at US$208.48 billion; Indonesia had US$45.79 billion; Vietnam had US$35.5 billion; and Malaysia had US$32.84 billion. Only Thailand recorded a lower FDI accumulation, at US$19.78 billion,” he added.
Gatchalian pointed out that the Organization for Economic Cooperation and Development or OECD’s FDI Regulatory Restrictiveness Index for 2018 also listed the Philippines as one of the most restrictive countries in the world when it comes to FDI rules.
Of the 68 economies covered by the index, “the Philippines ranked among the most restrictive in terms of FDI rules in the business services, telecommunications, media, electricity, and transport industries, with a restrictiveness score way above the OECD average,” he said, noting that “we fared a little better in the financial services industry, although we still scored above the OECD average.”
“All in all, the OECD found the Philippines to have the most restrictive FDI rules among the 68 economies included in the study, with an overall restrictiveness score almost six times higher than the OECD average,” Gatchalian added.
He further recalls “It has been 28 years since the enactment of the Foreign Investments Act, yet our current foreign investment laws and policies are still relatively restrictive, standing in the way of economic attractiveness and employment opportunities.”
“We remain a relatively unattractive investment destination, because our investment laws are less open and generally more inhibitory compared to those of our neighbors in the ASEAN,” the senator said, suggesting that “given the current global and regional economic climate, there is a need to take a look at the Foreign Investments Act in its current form and face the fact that it may not be living up to its potential as a vital piece of legislation.”
The remedial legislation seeks to amend several provisions of the Foreign Investments Act which, he said, “will help us take advantage of global and regional economic dynamics.”
“If passed into law, this bill will help make the Philippines more attractive as an investment destination, which, in turn, could open up more employment opportunities for the Filipino people,” the Senator said, adding that the updated policy declaration “puts a premium on the major role played by technological advancements as well as global and regional economic realities on the Philippine economy.”
Moreover, Gatchalian says the proposal also “provides for a review mechanism over foreign investment transactions that threaten to impair national security, ensuring that the State does not take for granted national security issues in the name of gaining more FDIs.”
Gatchalian affirmed that the endorsing Committee Report carries certain provisions which “reflect the intent of my proposal” under Senate Bill No. 919 on the establishment of a web portal that will serve as a central database and “make it easier for investors to learn about the country’s pertinent laws, rules and regulations, and policies, including restrictions, on foreign investments.”
This, he said, will provide potential foreign investors access to what legal and practical issues they might need to face – sending a clear message that transparency and ease of doing business are as important to the State as it is to businesses and investors.
“Taken together, these amendments will result in a foreign investment regime that is more fine-tuned to the changing economic climate and its accompanying demands,”adds Gatchalian, noting that “our receptiveness to these changes may very well determine whether we can live up to our true economic potential or remain in the doldrums compared to our next-door neighbors.”
In endorsing early passage of the measure’s immediate passage, Gatchalian asserted “it is high time for our country to start enjoying the economic benefits that our neighbors have reaped from foreign investments for the longest time.”
Image credits: Nonie Reyes