THE chairman of the House Committee on Ways and Means said passage of the bill amending the 84-year-old Public Service Act (PSA) will be beneficial to the Philippine economy over the next five years.
In an aide memoire addressed to the leadership of the House of Representatives, Albay Rep. Joey Sarte Salceda, the principal author of the measure, said the amendments are expected to yield up to 0.22 percent higher gross domestic product (GDP) compared to baseline.
He said real wages are also expected to go up, by 0.14 percent higher than baseline, following more investments in the country.
“The PSA amendments are expected to have little, if any, inflationary impact. The limitation of the DSGE [dynamic stochastic general equilibrium analysis] model is that it is blind to the kind of investment the law attracts. Typically, investments in technology-driven sectors like telecommunications tend to bring costs down for consumers,” he added.
Salceda said large-enough investments attracted by the PSA may bring overall inflation down from baseline while unemployment is likely to decline by 0.1 percent, following growth in output due to more investments.
House Bill 78 or the proposed new Public Service Act is expected to be approved on third and final reading this week.
Moreover, he said a cross-country study titled, “Impact of FDI Inflows on Poverty Reduction in the Asean and SAARC Economies” by F. Ahmad et. Al (2019) found that increased foreign direct investments positively impact the quality of life as measured by the Human Development Index in Asean countries.
“More important, the bill will lead to better lives for the people. This is especially true, according to the study, when access to better tele-communications services is achieved,” he added.
Salceda, an economist, said basic services that are almost universally in use in the country, such as electricity, water, power and telecommunications, are currently subject to foreign ownership restrictions.
However, he said there is consumer and business dissatisfaction with these services, which are often characterized by high prices and poor service.
He also said there are few local players in these capital-intensive sectors, which means a lack of competition in the sectors, a lack of choice for consumers, excessively strong market power for the few players, and ultimately market failure.
“The lack of competition is caused by ambiguity in the definition of public utility that is used interchangeably with public service under the Public Service Act. This ambiguity is caused by the following: 1987 Constitution restricts the operation of a public utility to Filipinos only [Section 11, Article XII],” said Salceda.
The bill seeks to provide a clear statutory definition of a public utility. This means that a narrower set of services, including electricity distribution, electricity transmission and water pipeline distribution or sewerage pipeline system, will be subject to foreign equity ownership restrictions imposed on public utilities.
The bill distinguishes “public service,” whose definition under the law is retained, from “public utility.”
According to Salceda, public utilities are clearly not the equivalent of a public service, but are more plausibly just a subset of the latter.
“The Public Service Act defines a public service very broadly to include even such sectors as ice plants and ship repair shops, sectors we would clearly not be suspicious of allowing foreign ownership into. Alas, even these sectors are currently subject to the limits brought about by the ambiguity,” he said.
“There is clearly a need to end the ambiguity and clearly define what a public utility is. The Supreme Court has already attempted a definition. To the Court, a public utility is ‘a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service.’ [JG Summit Holdings vs. Court of Appeals, GR 124293, September 24, 2003],” Salceda added.
Presumption of constitutionality
For her part, House Committee on Economic Affairs Chairman Sharon Garin of AAMBIS-OWA said the PSA Bill is entitled to the presumption of constitutionality which every treaty, executive agreement and statute enjoys.
“The burden of proof is on the petitioner to clearly demonstrate that the assailed statute is unconstitutional. This is particularly so as regards economic regulations as opposed to statutes which infringe upon fundamental rights. This strong predilection for constitutionality is based on the deference the Judicial branch accords to the legislature as a coordinate branch. It is self-evident that the PSA Bill is an economic regulation,” she said.
Also notable, Garin said, is that Legislative power is plenary unless clearly limited.
“The Supreme Court has stated: Legislative power is the authority, under the Constitution, to make laws, and to alter and repeal them…. The grant of Legislative power to Congress is broad, general and comprehensive. The Legislative body possesses plenary power for all purposes of civil government…. In fine, except as limited by the Constitution, either expressly or impliedly, Legislative power embraces all subjects and extends to matters of general concern, or common interest,” she added.
According to Garin, there is no unequivocal statement in the text of the Constitution itself, nor the jurisprudence interpreting it, defining public utility and stating that it is immutable.
As such, she said it is within the plenary and comprehensive power of Congress to legislate a definition, as in fact, the Supreme Court has upheld such laws.
Earlier, Albay Rep. Edcel C. Lagman said the HB 78 allows traditional public utilities like transportation and telecommunication companies to be owned by aliens or corporations which are wholly owned by foreigners.
“This is contrary to Section 11 of Article XII of the Constitution which reserves the ownership, operation, control and management of public utilities to Filipino citizens, or to corporations or associations at least 60 per centum of whose capital is owned by Filipinos,” he said.
According to the lawmaker, there is no distinction between public utility and public service as ruled by the Supreme Court in several cases.
Also, he explained that the proposed “New Public Service Act,” if enacted into law, is a mere statute which cannot amend the fundamental law.
Safeguards
Before approving the bill on second reading last week, Salceda, meanwhile, said the lower chamber assured that there are safeguard measures in HB 78.
Salceda said the House has provided safeguards to protect the national interest and these include:
1) The President can suspend or prohibit any merger, acquisition or investment in a public service in the interest of national security;
2) Foreign nationals can only invest if there is reciprocity with Philippine nationals, in other words, if Filipinos can also invest in their countries;
3) Fines were substantially increased and indexed to inflation, strengthening regulatory powers of administrative agencies;
4) Regulatory powers were retained where relevant;
5) Restrictions are in place on hiring of foreign labor if there are Philippine nationals competent, willing and able to perform service; and
6) Retention of takeover power, and other powers for sectors formerly classified as public utilities because they remain “businesses affected with public interest.”
Salceda said the amendments also propose that no other business or service shall be deemed a public utility unless otherwise provided by law upon recommendation by the National Economic and Development Authority.