THE Supreme Court (SC) has denied the appeal of the government to abandon its decision issued in March 2020 allowing foreign construction firms to obtain licenses and engage in private or government projects in the country.
In a 17-page resolution made public last March 3, the Court en banc did not give weight to the claim of the Philippine Constructors Accreditation Board (PCAB) through the Office of the Solicitor General (OSG) that the decision would deprive employment opportunities to many Filipinos who lost their jobs during the COVID-19 pandemic.
“There is no question that, as everywhere else in the world today, the Philippines must face the economic repercussions of the Covid-19 pandemic and adopt transitory measures to protect local businesses and jobs,” the Court noted.
“However, those measures are for the executive and the legislative departments to formulate and adopt rather than for this Court to conjecture out of thin air. The Court cannot engage in policy making,” the High Tribunal added.
While the High Tribunal acknowledged that putting restrictions on foreign participation might help revive the construction industry, such restrictions should be put into law and implemented through regulations.
Issuing licenses
AT present, the SC pointed out the Constitution and Republic Act (RA) 4566 (Contractors’ License Law) do not authorize restrictions in issuing licenses based on nationality.
“Apart from raising the specter of the collapse of the construction industry in the aftermath of the COVID-19 pandemic, PCAB has not cited any new argument that has legal authority to issue the questioned regulations,” the SC said.
Furthermore, the Court did not give credence to PCAB’s claim of the emergence of supervening events that should warrant the reversal of its decision.
PCAB was referring to Construction Industry Authority of the Philippines (CIAP) Board Resolution 08 dated May 29, 2015 endorsing PCAB’s proposed amendments to the implementing rules and regulations of RA 4566 to the Office of the President for approval.
Under the amendment to Section 3.1 (a), Rule 3, PCAB argued that regular licensing is now available to foreign contractors, including those that are 100 percent foreign-owned.
It added that foreign contractors would no longer be prohibited from participating in the construction industry although their participation will be regulated.
Similar capabilities
THE PCAB said they can compete against Filipino contractors having similar technical and financial capabilities and logistical resources, for projects that are capital and technological intensive.
However, foreign contractors would not be allowed to compete against micro, small and medium-scale Filipino contractors or bid on small ticket-government projects through a regular license.
However, the SC pointed out that the amendments to the IRR are not in force based on PCAB’s failure to prove that these were published in the Official Gazette or in a newspaper of general circulation, which is a prerequisite to the effectivity of administrative rules and regulations.
Even assuming that the amendments are now in force, the SC said it remains doubtful that the defects in Rule 3 of the IRR of RA 4566 have been addressed.
“It is evident that nationality-based licensing classifications are still present in the PCAB rules currently in place,” the SC noted.
In its March 10 decision, the Court declared as unconstitutional Section 3.1 of the Implementing Rules and Regulations (IRR) of RA 4566, the law creating the Philippine Licensing Board for Contractors.
The said provision classifies the licenses that may be issued by PCAB to contractors into regular and special licenses.
Foreign players
UNDER Section 3.1 of the contractors’ license law’s IRR, companies with at least 60 percent Filipino equity participation can be granted a regular license, which gives them continuing authority to engage in many contracting activities throughout a one-year period. Foreign firms can only be granted special licenses, and they need to have a separate license for each contract activity.
But, the SC declared that such provision was “a deterrent to the foreign players in the construction industry.”
It also agreed with the opinion of the Philippine Competition Commission (PCC) that nullifying the nationality requirement in the licensing scheme would level the playing field for local and foreign firms to undertake construction activities in the Philippines.
The OSG earlier argued that decision is untimely considering the effect of the COVID-19 pandemic on the unemployment rate.
Solicitor General Jose C. Calida said the decision would open the sectors’ doors for the entry of more players to the local construction market, which accounts for 10 percent of the country’s total employment.
He noted that foreign contractors usually bring their own nationals to work on their projects, thus, denying Filipino workers of employment opportunities.
Calida cited the projects being undertaken by Chinese contractors where they employed their own nationals.