Two newly amended Philippines laws are dubbed “game-changers” as they will attract more foreign direct investments.
Under President Duterte’s administration, the country has invested heavily in infrastructure through the Build, Build, Build program, which aims to usher in the “Golden age of infrastructure” in the Philippines.
With a price tag of between Php 8 to 9 trillion (~US$ 154B to 1.7T), the program seeks to raise infrastructure spending from 2.9% of its GPD to about 7.3% towards the end of the current administration to construct airports, seaports, railways, flood mitigation structures, roads, and bridges across the country (Build, build, build, 2022).
Republic Act No. 11595
The Republic Act No. 11595 (RA 11595), is “An Act amending Republic Act No. 8762 or the Retail Trade Liberalization Act of 2000 (RTLA)” is now a law and was approved on December 10 2020, and took effect on January 21 2022.
This new law opens the Philippine retail industry to 100% foreign ownership.
Philippine Public Service Act Amendment
The second law is an amendment to the Philippine Public Service Act (PSA) approved by both chambers of the Philippine Congress, which President Duterte signed in late March.
The amended law changed the coverage of public utility under the Philippine law and has exempted the following sectors – telecommunications, air carriers, domestic shipping, railways, and subways.
Under the new law, foreign investors can now own 100% of these businesses, whereas before, under the country’s 1987 Constitution, foreign ownership is capped at 40%.
Significance of these two laws to the Philippines’ infrastructure
Gulf News article, “Philippines: 100% foreign ownership of retail, telecoms, airlines, airports, railways, what you should know”, reports that these two sets of statutes could unleash the flow of investment dollars to a market of 110 million residents with a $1.47 trillion GDP, the 18th in the world.
It will also give Filipinos a chance to access billions of dollars worth of foreign capital that it so far missed out on.
Regarding receiving foreign investments, the Philippines has lagged behind Vietnam, which has received $19.74 billion worth of foreign direct investment (FDI), Thailand with $19.5 billion. The Philippines has only received $7.2 billion for 2021 (Hilotin, 2022).
The reason is the Philippines is seen as a less attractive country to invest in on account of ownership limits, poor infrastructure, and higher cost-of-doing-business measures by Oxford Economics in its October 2021 report (Hilotin, 2022).
The World Bank’s “Doing Business report 2020” places the Philippines at rank 95 out of 190 countries. Economies that are at the top of the list have regulations in places that encourage efficiency and supports freedom of business to allow ease in the following processes – business incorporation, getting a building permit, obtaining electricity connection, transferring properties, paying taxes, engaging in international trade, enforcing contracts, etc. Economies at the top of the list also share standard features like the widespread use of electronic systems like electronic filing platforms that allow electronic property transfers and construction permitting.
The new retail law, the RA11595, scrapped some provisions and lowered the capital requirements to make it easier for the foreign retail business to invest in the country would hopefully attract retail giants like Walmart and Target into the country, raise competitiveness in the country, which can deliver a lower retail price for the residents.
The second law – the revised version of the PSA, where it scrapped the 40% foreign ownership cap on public utility sectors, will open critical sectors like airports, telecommunication, railways, and domestic shipping will be extended to a much-needed influx of foreign capital, which means that Filipinos will see cheaper airfares, lower shipping, and transportation costs, faster yet more affordable internet services, and more infrastructure investments.
According to the article, these two significant changes to Philippine investment law bring an “air of optimism” to the country and usher in a “new economic era” for the country.
Changes to critical investments laws in the Philippines could see a significant influx of infrastructure investments.
The country could improve its infrastructure systems and provide a competitive edge and opportunities, boosting the economy and residents’ quality of life.
Additionally, given the Philippines’ predicted population growth over the coming decades, new infrastructure investments would be timely and essential.
References:
Build, Build, Build Projects. Subic-Clark Alliance for Development. https://scad.gov.ph/build-build-build/
Hilotin, Jay. (2022, February 7). Philippines: 100% foreign ownership of retail, telecoms, airlines, airports, railways, what you should know. Gulf News. https://gulfnews.com/special-reports/philippines-100-foreign-ownership-of-retail-telecoms-airlines-airports-railways-what-you-should-know-1.1644249259679
World Bank. 2020. Doing Business 2020. Washington, DC: World Bank. DOI:10.1596/978-1-4648-1440-2.
PHOTO CREDIT: By patrickroque01 – Taken using my camera, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=91577128
[…] boost the infrastructure improvements in the country include the following: lowering obstacles to foreign investment, implementing the ease-of-doing-business law to reduce red tape and increase transparency and […]