‘Level playing field needed for construction industry to thrive’

MANILA, Philippines — Construction industry experts have cautioned against the unregulated entry of foreign contractors in the country, saying this would create undue disadvantage to a sector where 97 percent are micro, small and medium enterprises (MSMEs) and which employs around 4.2 million Filipinos, the biggest direct job generator in the last 10 years.

Industry stakeholders gathered online last Thursday for the first Philippine Construction Arbitration Conference,  organized by the Philippine Institute of Construction Arbitrators and Mediators.

“This is the worst idea in the worst possible time,” said lawyer Enrique dela Cruz Jr., senior partner at Divina Law specializing in government contracts, particularly those involving public-private partnerships and build-operate-transfer projects.

He noted that the unrestricted market access of foreign contractors in the country would create undue competition against SMEs which comprised bulk of licensed contractors.

While the Supreme Court has declared as unconstitutional a regulation by the Philippine Contractors Accreditation Board that governs the entry of foreign contractors, the Office of the Solicitor General has filed a motion for reconsideration of the High Court’s order.

Construction Industry Arbitration Commission commissioner Emilio Lolito Tumbocon noted that foreign contractors have actually been doing business in the country since the 1970s through joint venture arrangements.

“Strictly speaking, foreign contractors are here as we speak,” he said, adding that an average of nearly 2,500 licenses are issued to foreign contractors every year since 2015.

However, he said these foreign contractors should have some “skin in the game” to really level the playing field as construction projects carry a 15-year warranty but it would be difficult for proponents to go after foreign contractors once they have finished the project even when something has gone wrong.

Roberto Dio of the Philippine Dispute Resolution Center also pointed out that since these foreign contractors do not have assets here in the country, it would be hard to enforce judgment on them even in an arbitration case.

Ernesto de Castro, president and CEO of ESCA Inc., said this is the reason that an investment requirement for foreign contractors is needed to make sure that these foreigners have assets here.

Dio added that there is no existing reciprocity agreement with the home base of these foreigners that would guarantee the same treatment for Filipino contractors who will do business in their countries.

Tumbocon said the Philippines should look at neighboring countries like Singapore, Malaysia, Indonesia and Thailand which all have a robust domestic construction industry as they encouraged joint venture agreements between local players and foreign companies, rather than allow the unrestricted entry of foreign contractors.

“They adopted best practices and seem to show that they were successful. Let’s not reinvent the wheel as we are in a catch-up mode. Their local construction industry has regulations to level the playing field. Let’s look at best practices and try to adopt them,” he said.