SolGen asks SC to reverse decision favoring foreign contractors

The Office of the Solicitor General is asking the Supreme Court to reverse its decision that allows foreign construction firms to secure regular Philippine licenses.

In a 29-page motion for reconsideration, the OSG argued that limitations on foreign participation in the contracting industry should be upheld to protect the interests of Filipino contractors and workers.

"Allowing the issuance of regular license to foreign contractors would result [in] unbridled influx of foreign contractors to the detriment of local contractors in micro, small and medium enterprises (MSMEs), including the concerned professionals and Filipino workers, among others," the OSG said in its motion.

OSG's motion was signed by Solicitor General Jose Calida, Assistant Solicitor General Ma. Antonia Edita Dizon, and State Solicitor II Perfecto Adelfo Chua Cheng. It was filed on behalf of the Philippine Contractors Accreditation Board (PCAB).

The motion comes as the Supreme Court, in a decision promulgated March 10, upheld a lower court resolution that voided the Section 3, Rule 3 of the Implementing Rules and Regulations (IRR) of Republic Act. 4566.

Under this, companies with at least 60% Filipino can be granted a regular license, while foreign firms can only be granted a special license which is needed for each contracting activity.

According to the OSG, the IRR already allows foreign firms to have "regular license with annotation," provided they have a capitalization of at least P1 billion.

"Should the assailed provision in the IRR be nullified, the easier entry of foreign contractors will allow foreign contractors to compete with local MSME contractors in relatively similar projects," said the OSG.

Citing data from the PCAB, the OSG said a total of 12,931 special licenses were issued from July 2015 to December 2019.

Out of the total, 12,448 were issued for joint ventures or 75% foreign-owned and 25% Filipino, while 263 were for consortia or 40% foreign-owned and 60% Filipino.

The same data indicated that foreign construction companies scored projects with a total value of P1.1 trillion, and contractors with special licenses worked on projects with a cumulative worth of P2.98 trillion.

"Plainly, actual foreign participation belies the conclusion that Section 3.1 of the IRR of RA 4566 is effectively restrictive rather than purely regulatory," the OSG said.

"Such conclusion is merely based on incomplete or outdated information presented by the PCC to show that the assailed regulation tends to deter the entry of foreign players in the construction industry," it added.

Earlier, the National Economic and Development Authority (NEDA) called for President Rodrigo Duterte to allow foreign contractors to operate in the Philippines under the foreign investment negative list (FINL), a list of activities and sectors where foreign participation is prohibited.

However, this did not come about under FINL released by Duterte in 2018.

The Philippine Competition Commission (PCC) also earlier said that the IRR of RA 4566 was "a substantial barrier to the entry of foreign contractors in the construction industry."

According to the PCC, a foreign firm spends some 12 times more for license applications versus local firms, stunting the growth of the industry given the few special licenses granted. —LBG, GMA News