The pandemic has made the Philippine construction sector a laggard in the economy.
Limited public transportation as imposed by strict quarantine rules has hampered the mobility of our workers to go to construction sites, resulting in a 40-percent contraction of the sector in the third quarter of the year. And the construction industry is set to face a more destructive second wave if Congress passes a bill granting unregulated entry to foreign contractors.
Local contractors are strongly opposing House Bill (HB) 7337 that seeks to amend Republic Act (RA) 4566, or the Contractors’ License Law. The proposal plans to grant foreign contractors a regular license that is exclusive to companies with at least 60-percent Filipino equity.
Local builders naturally are alarmed by the proposed amendment. D.M. Consunji Inc. president and chief executive officer Jorge Consunji has warned that removing the current 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 cause a danger to public safety,” Consunji told the House Committee on Trade and Industry during a recent virtual hearing on HB 7337.
The committee’s chair and author of the bill, Valenzuela City Rep. Wes Gatchalian, claimed the measure would level the playing field in the construction industry by encouraging competition, and lead to a transfer of technology from foreign contractors.
Mr. Consunji is not convinced, stressing a balance between equal opportunities to foreign contractors and the protection of local players must be kept, especially those in the micro, small and medium enterprises.
“While the proposed bill seeks to provide a level playing field, this must be balanced to protect the country’s vulnerable sectors and workforce, particularly the MSMEs that have been heavily impacted by the ongoing pandemic,” says Consunji.
Philippine Constructors Association president Will Decena agrees with Consunji, citing that the MSME sector makes up some 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,” says Decena. “We reiterate that foreign contractors have the tendency to bring their own people even for jobs than can be performed by Filipinos.”
Another industry leader, DATEM Inc. chair and CEO Levi Espiritu, says industry concerns, such as reciprocity, technological transfer, capacity-building and compliance with local rules and regulations, should be fully addressed.
Espiritu said the government must assure that the same incentives and privileges extended to foreign contractors should also be given to local contractors.
“Correspondingly, foreign contractors should comply with whatever regulatory requirements such as, but not limited to, payment of necessary taxes; putting up of equity and investments; and structural warranties for materials, manpower, and equipment, which also are required for local contractors,” Espiritu said.
The local construction industry employs around 4.2 million Filipinos, making it the largest direct job generator in the last 10 years. The sector has been a major driver of economic growth until COVID-19 wreaked havoc on the Philippines.
Engineer Wilfredo Hilao Guerzon Jr. of Davao-based FGM Builders Resources & Development Corp. noted that 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,” adds Guerzon.
Fortunately, some lawmakers are on the same page with small local contractors. For one, Senate Majority Floor Leader Juan Miguel Zubiri has sought the firm commitment of Public Works Secretary Mark Villar to support a legislation he will file to limit the participation of foreign firms in local infrastructure projects.
Zubiri said his constituents in Bukidnon and Cagayan De Oro brought to his attention their serious concerns on moves to ease the rule that will allow more foreign contractors to compete with local companies.
“We have so much manpower here, especially now that the pandemic has displaced so many people from previous jobs. There are also large numbers of displaced OFWs coming home and seeking employment,” says Zubiri.
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