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Construction sector warns against unregulated entry of foreign contractors

Construction industry experts warned over the weekend against the unregulated entry of foreign contractors, saying it will create undue disadvantage to a sector that is 97-percent dominated by micro, small and medium enterprises.

The construction industry employs around 4.2 million Filipinos, making it the largest direct job generator in the last 10 years, they said.

“This is the worst idea in the worst possible time,” said Divina Law senior partner Enrique dela Cruz Jr. during the first virtual discussion of the Philippine Construction Arbitration Conference 2020 organized by the Philippine Institute of Construction Arbitrators and Mediators.

Dela Cruz ,who specialized in government contracts, especially those involving public-private partnerships and build-operate-transfer projects, said the unrestricted market access of foreign contractors in the country would create undue competition against SMEs which comprised the bulk of licensed contractors.

Commissioner Emilio Lolito Tumbocon of the Construction Industry Arbitration Commission said foreign contractors had been doing business in the country since the 1970s through joint venture arrangements.

“Strictly speaking, foreign contractors are here as we speak,” said Tumbocon, adding an average of nearly 2,500 licenses are issued to foreign contractors every year since 2015.

Tumbocon said these foreign contractors should have some “skin in the game” to level the playing field as construction projects carry a 15-year warranty. “But it wouldn’t be easy for proponents to go after foreign contractors once they have finished the project even when something has gone wrong in the project,” he said.

The Philippine Dispute Resolution Center said if these foreign contractors did not have assets in the country, it would be hard to enforce judgment on them even in an arbitration case.

Construction stakeholders said an investment requirement should be in place for foreign contractors to make sure the foreigners have assets here.

Dela Cruz said there is also no existing reciprocity agreement with foreigners that would guarantee the same treatment for Filipino contractors who would do business in their countries.

“No other country in the world allows foreign contractors’ unregulated market access,” he said.

Tumbocon said the Philippines should look at other Southeast Asia countries like Singapore, Malaysia, Indonesia and Thailand who all have a robust domestic construction industry as they encouraged joint venture agreements between local players and foreign companies, rather than allow the unrestricted entry of foreign contractors.

“They adopted best practices and seem to show that they were successful. Let’s not reinvent the wheel as we are in a catch-up mode. Their local construction industry has regulations to level the playing field. Let’s look at best practices and try to adopt them,” he said.

The discussion on the unbridled entry of foreign contractors arose following the decision of the Supreme Court to declare as unconstitutional a regulation by the Philippine Contractors Accreditation Board that governs the entry of foreign contractors. The Office of Solicitor General filed a motion for reconsideration of the high court’s order.

Topics: Construction sector , foreign contractors , Philippine Construction Arbitration Conference 2020 , Philippine Institute of Construction Arbitrators and Mediators
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