Confidence is growing that the Philippine economy will rebound in 2021 despite the pandemic’s economic impact and the P16 billion damage and losses to infrastructure and agriculture wrought by Typhoon Ulysses in Luzon. The government’s “Build, Build, Build” program and the private sector’s rebuilding efforts will help fuel next year’s economic growth. This is good news for the country’s construction industry, which saw a 33-percent contraction in the second quarter due to strict quarantine controls implemented to help prevent the spread of Covid-19.
Before the Covid-19 pandemic, the Philippine construction industry was seen growing 18 percent this year. Recent projections, however, see the industry suffering a 10-percent decline in 2020. But experts said the industry will bounce back in 2021 if the government can win its battle against the pandemic. Fitch Solutions, a unit of the Fitch Group, earlier said: “We have made an upward adjustment to our growth forecasts for real growth of the Philippine construction industry in 2021 to 9.5 percent year-on-year, with the major assumption that the country is able to contain the spread of Covid-19 and that normal construction activity can be resumed.”
As the industry gears up to full construction reopening, a brewing storm threatens industry players making preparations to recommence operations. A House measure has been filed to open the Philippine construction industry to foreigners. House Bill 7337 seeks to amend Republic Act 4566 or the Contractors’ License Law by allowing foreign firms to obtain a regular license that was originally exclusive to companies with at least 60 percent Filipino equity.
Local contractors have expressed their strong opposition to the bill that would fully open the construction business to foreigners, saying it will spell the demise of the local construction industry, which employs more than 4 million Filipinos.
The bill’s author, Valenzuela City Rep. Wes Gatchalian, said the measure would level the playing field in the construction industry to encourage competition, transfer of technology and sharing of knowledge between Filipino and foreign contractors.
DMCI President and CEO Jorge Consunji, however, warned that removing existing regulations favoring Filipino contractors will open the floodgates to unregulated entry of foreign-owned construction companies. “This will kill the local construction industry, and the entry of unqualified foreign contractors can cause a danger to public safety,” Consunji told the House Committee on Trade and Industry during its recent virtual hearing on HB 7337. He said it is important to balance extending equal opportunities to foreign contractors and protecting local players, especially those in the micro, small and medium enterprises (MSMEs).
Philippine Constructors Association President Wilfredo Decena shared the same concerns for the MSME sector, which makes up about 97 percent of local contractors. “The unregulated entry of foreign contractors will adversely affect small and medium-sized Filipino contractors. We will even deprive Filipinos of job opportunities in our own country,” Decena said. He encouraged the House panel to be mindful in safeguarding and ensuring the survival of local players and the more than 4 million workers in the industry because “foreign contractors have the tendency to bring their own people even for jobs than can be performed by Filipinos.”
The issue of potential displacement of over 4 million workers in the construction industry was brought to light in a recent Senate budget hearing after Majority Floor Leader Juan Miguel Zubiri sought the commitment of Public Works Secretary Mark Villar to back a legislation he will file to limit the participation of foreign firms in local infrastructure projects. Industry players welcomed this development. “This support by our legislators is very crucial especially in these difficult times when the very survival of the MSMEs in the construction sector is being threatened by the adverse impact of the pandemic. And with the entry of foreign companies under the guise of leveling the playing field, it will hasten the death of many small local players reeling from the economic slump,” said Engineer Wilfredo Hilao Guerzon Jr. of FGM Builders Resources & Development Corp.
House Bill 7337, which seeks to open the Philippine construction industry to foreigners, may help level the playing field. But our lawmakers must understand that the greatest challenge we face in the current crisis is striking the right balance between opening up a strategic industry to foreign players and protecting our own. For all we know, some foreign players may have an unfair advantage. If a foreign construction company, for example, that is state-backed were to compete with local construction companies, wouldn’t that be considered an assault on one of the country’s strategic industries?