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Tuesday, March 19, 2024

BSP bullish on inflow of capital from abroad

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Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Tuesday that the amendments to the Public Service Act and other vital economic reforms is likely to attract more foreign direct investments in the Philippines.

“At the height of the pandemic, the President and Congress worked hand in hand to pass some game-changing legislation: the amendments to the Retail Trade Act, the Foreign Investment Act, and the Public Service Act,” Diokno said.

On Monday, President Rodrigo Duterte signed into law the bill amending the 85-year old Public Service Act. Also recently amended were the Retail Trade Liberalization Act (RTLA) and the Foreign Investment Act (FIA).


The amendments to the Public Services Act would allow up to 100 percent foreign ownership on telecommunication companies, airlines, and railways.

Economic Planning Secretary Karl Kendrick Chua said this latest development would encourage more foreign investments and innovation to lower prices, improve the quality of goods and services, and create more and better jobs.

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“This reform will help bring in more foreign investments and improve services especially in transport and telecommunications, where we are lagging behind,” Chua said.

The measure limits the coverage of the 60-40 percent local-to-foreign equity limitation.

Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the amendments to the Public Service Act, together with the Retail Trade Liberalization Act and the Foreign Investments Act, would not only help entice more foreign investments into the country — both FDIs and foreign portfolio investment inflows for listed local companies — but also aligned the country’s regulations with the rest of the world.

Ricafort said these reform measures also boost confidence and sent a positive signal to international investors, creditors, credit rating agencies and multilateral agencies.

But he said the continuation of these policy reform measures must be sustained by the next administration.

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.

Last year, net inflow of foreign direct investments reached a record of $10.5 billion, breaching the previous high of $10.3 billion in 2017, on the back of sustained investors’ confidence on the domestic economy.

The 2021 level represents a 54.2-percent increase from the $6.8 billion net inflow recorded in 2020. It also surpassed the $8 billion net inflow target for the year set by the BSP.

The BSP projects FDI net inflow to reach $11 billion this year and $11.8 billion in 2023.

Business and non-government groups welcomed the amendments to the 85-year-old Public Service Act.

“Along with the recently amended Retail Trade Liberalization Act (RTLA) and the Foreign Investment Act (FIA), the amended PSA provides a legal framework to encourage the inflow of more foreign investments into the country. The entry of foreign investors will foster strong competition that will benefit the consumers, create more jobs, expand
our economy, and boost our recovery from the disruptions caused by COVID-19,” said Management Association of the Philippines president Alfredo Pascual.

The Foundation for Economic Freedom also welcomed the liberalization of rules on public services.

The group commended legislators for crafting a law that not only opens the country to FDI and creates a more competitive public sector, but also safeguards the country from potential national security threats, protects the welfare of small local businesses, and ensures benefits for Filipino businessmen.

The German-Philippine Chamber of Commerce and Industry (GPCCI – AHK Philippinen) and the American Chamber of Commerce of the Philippines (AmCham) also welcomed the opening up of the public utilities sector of foreign investments.

GPCCI executive director Christopher Zimmer was among those who were invited by the President to witness the signing of Republic Act No. 11659.

“On behalf of our members, our partners in the global AHK network, and the foreign business community, we are glad to have personally witnessed the signing of this important law and we thank President Duterte for invitation. This game-changing law shall break major economic barriers in the country and will be beneficial for the economic recovery,” he said.

RA 11659 eases restrictions on foreign investments in public services by amending the 85-years-old public service law, distinguishes between “public utilities” and “public services”, and repeals provisions that limit foreign participation in certain economic activities.

The amendments will attract global players to help modernize Philippine public services telecommunications, shipping, air carriers, railways, and subways. Increased competition is seen to generate higher quality of service and competitive pricing for consumers.

AmCham said the PSA amendments will match the policies that Singapore, Thailand, and Vietnam already have in place.

“AmCham is confident that its signing, along with other recent investment liberalization bills – the Retail Trade Liberalization Act and the Foreign Investments Act – will significantly help the Philippines compete with its regional neighbors in bringing in investments to the Philippines, AmCham said.

Trade Secretary Ramon Lopez thanked lawmakers and the business chambers for supporting the country’s economic team in pushing for the legislation.

“This will surely attract more investments and more jobs for Filipinos in these sectors,” he said.

Lopez said initial investment leads in the sector is estimated at over $60 billion from telecommunications, transportation, logistics and railways.

“This is still understated as other leads have not indicated an investment amount. They can easily grow to over $100 billion in over two years,” he added.

In other developments:

• PLDT and Smart Communications welcomed the amendments to the PSA, saying these would encourage healthier competition in various industries in the country. “In the long term, it will help position the Philippines as an attractive investment destination for foreign enterprises seeking to expand their business in the Asian market,” said Al Panlilio, president and chief executive of PLDT and Smart. He said PLDT had no plans to increase its share of foreign equity at
present.

• A spokesperson for Globe Telecom Inc., Yolanda Crisanto, said the amendments would have no impact on Globe or its shareholders as they have no plans to change their existing investments at the moment. The new law, she added, would affect new players more than the incumbents.

• Senate Minority Leader Franklin Drilon, principal author of the Senate version of the bill, said economic recovery would get a significant boost from the newly amended law, which opens public services to competition. “This will compel the current players to shape up and boost our foreign direct investments, and provide our people with better choices,” Drilon said. “I am proud of shepherding its passage in the Senate both as a principal author and as a co-sponsor together with Senator Grace Poe.”

• House Deputy Speaker and Bagong Henerasyon Rep. Bernadette Herrera also welcomed the amendments to the PSA. “This is definitely one of the most important policy reforms initiated decades ago but has only been successfully legislated under the current administration, and we can’t thank President Rodrigo Roa Duterte enough for that,” she said. Herrera, as one of the authors of the law, was in Malacañang on Monday to witness the signing ceremony.

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