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More economic liberalization rules seen to quadruple investments in PH

Economic Planning Secretary Ernesto Pernia expects foreign direct investments to triple or quadruple annually once the existing investment rules and regulations are further liberalized.

Pernia said the existing “restrictive” investment environment in the country had been driving away foreign investors, who preferred more open investment sites in the region.

“The Philippines is one of the more restrictive in terms of foreign investments…. So there is a need to pass into law more key reforms that will attract more investments such as the Foreign Investment Act, Retail Trade Act, and Public Service Act…,” Pernia said during the 2019 Pre-Sona Economic and Infrastructure Forum at the Philippine International Convention Center in Pasay City.

“If these are passed into laws, we see a triple or even quadruple increase in foreign direct investments,” Pernia said.

Republic Act No. 7042 as amended by RA 8179, also known as the Foreign Investments Act of 1991, is the basic law that governs foreign investments in the Philippines. It is considered a landmark law because it liberalized the entry of foreign investments into the country.

Republic Act 8762, or the Retail Trade Liberalization Act, is a law that intends to promote both Filipino and foreign investors to forge efficient and competitive retail trade in the interest of empowering the Filipino consumer through lower prices, higher quality goods, better services, and wider choices. 

Senator Grace Poe earlier said the amendments to the  81-year-old Public Service Act were needed to remedy the country’s restrictive economic environment, provide more jobs and ensure reasonable rates of services.

Poe, the chairperson of the Senate committee on public services, said the proposed amendments aimed to address the confusion in the definition of a public utility and public services, which, for several decades, hampered economic growth.

“Foreign entities would be allowed to come in and invest. The goal is to increase competition, provide better quality services and also to create jobs,” Poe said.

The 1987 Philippine Constitution restricts the operation of a public utility to companies whose ownership is at least 60-percent Filipino-owned. The Commonwealth Act No. 146 or the Public Service Act passed in 1936 only provides a list and not a definition of public services and no definition of a public utility. 

Foreign equity restrictions also apply to public utilities like telecommunications, electricity, water, and transportation, among others.

Latest data from the Bangko Sentral ng Pilipinas showed that net inflows of foreign direct investments in March declined by 13.9 percent to $586 million from $681 million a year ago.  On a cumulative basis, net inflows of FDI in the first quarter fell 15.1 percent to $1.9 billion from $2.3 billion a year ago.

Net inflows of FDIs fell 4.4 percent in 2018 to $9.802 billion from a record $10.256 billion in 2017.