President Duterte on Monday signed into law a measure amending the Public Service Act (PSA), effectively allowing 100 percent foreign ownership of telecommunications companies, airlines, and railways. It’s about time.
For far too long, we have denied these key sectors of our economy the benefit of foreign capital and expertise, shackled as they were to a provision in our Constitution that limits the foreign ownership of public utilities to a maximum of 40 percent.
Restrictions such as these have held the country back.
The 2020 index published by the Organization for Economic Cooperation and Development showed the Philippines has some of the most restrictive foreign direct investment rules globally. The country ranked 95 out of 190 countries in the World Bank’s “Doing Business 2020” report.
In 2020, the Philippines, with foreign direct investments (FDI) inflows of $6.5 billion, ranked only fourth among countries in the Association of Southeast Asian Nations (ASEAN), behind Singapore ($90.6 billion), Indonesia ($18.6 billion), and Vietnam ($15.8 billion).
But now, the amendments exclude telecommunications, domestic shipping, railways and subways, airlines, expressways and tollways, and airports from the definition of a public utility—thereby freeing them from the 40-percent limit on foreign ownership.
The country’s economic managers are understandably upbeat about the new rules of the game.
Economic Planning Secretary Karl Kendrick Chua said the liberalized equity rules would encourage more foreign investments and innovation and would lower prices for consumers, improve the quality of goods and services, and create more and better jobs.
Trade Secretary Ramon Lopez said he expects the country to get $60 billion to $100 billion worth of investments in the next two years with the signing into law of the amendments to the PSA.
Business groups both foreign and domestic are bullish as well. The German-Philippine Chamber of Commerce and Industry, for example, says the “game-changing law” would help spur the country’s economic recovery. The American Chamber of Commerce of the Philippines says the signing of the law, along with other recent liberalization bills—the Retail Trade Liberalization Act and the Foreign Investments Act—will significantly enable the Philippines to compete with its regional neighbors in investments. The new laws, AmCham added, will match the policies that Singapore, Thailand, and Vietnam already have in place.
To be sure, there are those who continue to oppose liberalization, saying that consistent with the 1987 Constitution, certain industries should be reserved for Filipinos. Fortunately for the economy, these views are in the minority, and the new laws offer a creative way to sidestep an economically xenophobic Charter that has held us back for far too long.
The lawmakers who made this happen—and the Duterte administration—deserve our thanks.
