THE Philippine Competition Commission wants to open the construction sector to foreign players. A policy brief released Thursday by the anti-monopoly body highlighted nationality distinction as an anti-competitive practice embedded in the licensing rules implemented by the Philippine Contractors Accreditation Board.
The policy brief submitted by the commission to the Supreme Court stated that “nationality-based distinction hinders competition in the construction industry, creating an uneven playing field between local and foreign contractors.” Foreign firms possess capacity to construct vital projects and share technical expertise with local firms,” it said. PCC said one issue was the amount of application fee the PCAB imposed on foreign participants. A simulation showed that that foreign firms were paying as much as 12 times more in application fees compared to local firms.
It said while a regular license might be issued to partnerships and corporate entities with up to 40 percent foreign equity, foreign firms were likely to be discouraged to enter the market through such option, as it was exposed to the risk of not having full control and management over their investments. Data showed that from 2013 to 2015, foreign participation in the industry remained limited, with new special licenses accounting for just 10 percent to 15 percent of total licenses issued during the period. Actual foreign participation might be significantly lower, as special licenses were also being issued to local firms in consortium or joint venture arrangements.
It said that in 2015, out of 1,600 special licenses issued, only 20 were issued to foreign firms and four were issued to joint venture or consortiums with foreign participation. The commission said despite the decent performance of the construction sector, vital infrastructure concerns still needed to be addressed including, the increase in energy demand; insufficient transport facilities; escalating traffic congestion; and increasing housing needs for low- and middle income families. “It is clearly apparent that more investments and greater productivity are still required,” it said.
PCC cited the need to review and revise restrictive policies that hindered growth to take advantage of opportunities with a stronger economy. “Claims of protecting the interest of the public through regulatory action should be evaluated in terms of the resulting incentive distortions that reduce competition and the countervailing efficiencies arising from the regulation,” it said. “The government must ensure a level playing field where no market participant, whether from the public or private sector, is given undue advantage that would allow it to gain market share over otherwise more effective and efficient competitor.”
