PCC backs lifting of foreign equity cap

MANILA, Philippines -  The Philippine Competition Commission (PCC) supports initiatives in Congress to lift the foreign equity cap on industries such as telecommunications and transportation, saying provisions in the Public Service Act (PSA) are antiquated.

The PCC said the Constitution limits foreign ownership of the operation of public utilities such as telco and transport to only 40 percent, and reserves the other 60 percent to Filipino citizens or corporations.

Amending the PSA, it said, would address this legal obstacle by streamlining the list of activities to be considered public utilities under the Constitution.

“To begin with, the Public Service Act is antiquated. It still refers to certain business activities such as ice plants and canals as public services or public utilities. With the current economic and business landscape, it is time to update the list of business activities considered as public utilities,” PCC commissioner Johannes Bernabe said.

Bernabe said the limitation has been a concrete constraint on the inflow of foreign direct investments (FDIs) into the country as well as in increasing competition in the market.

“If you look at certain sectors like telecommunications, one way of promoting a competitive environment is to open fully the market to foreign players. The foreign equity cap unfortunately discourages entry of new foreign players in the sector that provide services to the public,” the PCC official said..

The PCC said improving competition in certain sectors and industries is incorporated in the Duterte administration’s Philippine Development Plan 2017-2022.

Enhancing competition, which is the primary mandate of the PCC, would help improve the quality of goods and services in the market, give consumers more choices, and keep prices generally affordable.

The PCC said several bills have been filed in Congress seeking to amend the PSA. Such amendments will remove certain industries considered as public services and in effect, will lift the ownership limitation imposed on foreign investors.

For its part, PCC is proposing “to define public utility as a person who operates, manages, and controls for public use electricity transmission, electricity distribution, water pipeline distribution systems, gas or petroleum pipeline distribution systems, and sewerage systems,” Bernabe said.

“So there will be only five public utilities whose foreign ownership will be restricted to 40 percent,” Bernabe said.

He said industries that would be removed from the PSA’s definition of what constitutes a public service or public utility such as telco and transport would still be regulated by a regulatory agency to protect the welfare of consumers.

“In our proposed definition, we say that those business activities that have been delisted from the Public Service Act are considered as business affected with public interest and will continue to be regulated as such by the relevant sector regulators,” Bernabe said.

“You still want consumers to be protected, ensure that there is adequate access and reasonably priced services, and the services are of a certain quality or standard that will allow reasonable download and upload speeds,” he added.