Business groups call for passage of 3 economic reform bills

Several local business groups and foreign chambers have called on lawmakers to pass three investment reform bills aimed at opening up the economy to further foreign investments.

In a joint statement, the business groups said the three pending measures in Congress will amend the Public Service Act (PSA) of 1936, the Retail Trade Act (RTA) of 1954 as amended in 2000, and the Foreign Investment Act (FIA) of 1991.

Amending the three laws will strengthen the Philippine economy, increase national competitiveness, generate employment, and support recovery from the ongoing COVID-19 pandemic, according to the business groups.

The three measures amending the three economic laws were certified as urgent by President Rodrigo Duterte.

The signatories in the joint statement are the following:

• ACI Philippines
• American Chamber of Commerce of the Philippines        
• AmCham North Luzon Chapter
• AmCham Visayas Chapter          
• Association of Certified Public Accountants in Public Practice
• Australian-New Zealand Commerce of the Philippines
• Bankers Association of the Philippines
• British Chamber of Commerce of the Philippines
• Canadian Chamber of Commerce of the Philippines
• Cebu Business Club
• Cebu Leads Foundation, Inc.
• Dutch Chamber of Commerce in the Philippines
• EU-ASEAN Business Council
• European Chamber of Commerce of the Philippines
• ECCP Northern Luzon Business Council
• ECCP Cebu Business Council
• ECCP Northern Mindanao Business Council
• ECCP Southern Mindanao Business Council
• Financial Executives Institute of the Philippines
• FinTech Alliance Philippines
• Foundation for Economic Freedom
• French Chamber of Commerce and Industry in the Philippines
• German-Philippine Chamber of Commerce and Industry
• Institute of Corporate Directors
• Investment House Association of the Philippines
• Institute for Solidarity in Asia
• Japanese Chamber of Commerce & Industry of the Philippines
• Korean Chamber of Commerce of the Philippines
• Management Association of the Philippines
• Makati Business Club   
• Money Market Association of the Philippines
• Nordic Chamber of Commerce of the Philippines
• Organization of Socialized and Economic Housing Developers of the Philippines, Inc.
• Philippine Association of Multinational Companies Regional Headquarters, Inc.
• Philippine Life Insurance Association, Inc.
• Philippines-Swiss Business Council
• Philippine Business Coalition for Women Empowerment
• Semiconductor and Electronics Industries in the Philippines Foundation, Inc.
• Shareholders' Association of the Philippines
• Spanish Chamber of Commerce in the Philippines
• Tax Management Association of the Philippines
• US-ASEAN Business Council
• Women’s Business Council Philippines

“They are a critical reform package — first advocated immediately after the May 2016 elections as part of the administration’s socio-economic agenda — and are prominent in the Philippine Development Plan of NEDA,” the business groups said.

“Foreign investors and foreign governments have been following the progress of these reforms closely to determine whether the Philippine economy will be more open to investors or maintain its protectionist reputation,” they said.

Global foreign direct investments (FDI) in 2019 reached $2 trillion but only 0.5% flowed into the Philippines.

“For decades FDI rules in the Philippines have been more restrictive than neighboring economies which receive more FDI and enjoy higher standards of living and have less poverty and overseas workers. While FDI rules are not the sole reason the Philippines has fallen behind Indonesia, Malaysia, Thailand, and Vietnam, our economy is less likely to catch up unless we open up,” the business groups said.

The House passed all three reforms in 2019 and 2020.

The proposed amendments to the Public Service Act are seen to foster a healthier competition in the Philippine market as it eases foreign ownership restrictions in several industries, according to the National Economic and Development Authority (NEDA).

Proposed amendments to the law seek to limit the definition of public utilities to electricity distribution and transmission, water and sewerage pipelines, air transportation, ports and airports, thereby removing the 40% constitutional limit to foreign ownership.

Amendments to Foreign Investments Act, meanwhile, seek to allow foreigners to practice their professions in the country and lower the direct-hire requirement from 50 to 15 local workers for foreigners to start a small and medium-sized enterprise.

The proposed amendments to the Retail Trade Liberalization Act lowers the minimum paid-up capital requirement for foreigners to enter the retail sector.

Currently, under the Retail Trade Liberalization Act, enterprises with a paid-up capital below $2.5 million in peso equivalent are reserved exclusively for Filipino citizens and corporations wholly owned by Filipino citizens.

“A bicameral conference committee will soon decide the final provisions of the RTA amendments to encourage more foreign investment in retail trade,” the business groups said.

“Meanwhile, the PSA and FIA amendment bills are pending final approval in the Senate, where they are expected to be decided when session resumes,” they said.

The business groups said all the three measures will relax FDI restrictions and together could result in many billions of new investments in future years, creating more jobs, diversifying the economy, bringing new technology, and increasing competition, and providing better services to the benefit of Filipino consumers.

The business groups argued that higher unemployment and poverty caused by the pandemic cannot be remedied by indefinite government borrowing alone as domestic investment will remain weak for at least two years.

“Thus, we need to attract much more foreign capital at a time when UNCTAD (United Nations Conference on Trade and Development) predicts global FDI will be lower by 50% to less than $1 trillion due to the pandemic,” the groups said. —KBK, GMA News