MANILA, Philippines — Foreign investors hesitate to locate their new and expansion projects in the Philippines as they find the country’s cost of doing business too expensive and ownership rules too restrictive.
In a report, investment promotion agencies (IPAs) said the pandemic, cost of doing business, as well as foreign ownership limits, prevent firms abroad from relocating in the country.
Also, IPAs informed the Cabinet-level Fiscal Incentives Review Board (FIRB) that some of them find it difficult to pitch their respective areas on the absence of public utilities and lack of working internet.
In response, Finance Secretary and FIRB chairman Carlos Dominguez said the government would push for the passage of remaining bills opening up the economy to foreign investments. He specified the need to approve amendments to the 86-year-old Public Service Act (PSA), Foreign Investments Act (FIA) of 1991 and the Retail Trade Liberalization Act (RTLA) of 2000.
President Duterte signed Republic Act (RA) 11595, amending the RTLA, in December last year. RA 11595 brings down the minimum capital for foreign retailers to P25 million, from the original $2.5 million, or around P125 million, to attract international brands to operate here.
That leaves the government with two reforms to work on – amendments to the PSA and FIA – both of which are seen to complement the investment and job generation multiplier of RA 11595.
Legislators from the Senate and the House of Representatives ratified the bicameral committee report on changes to the FIA and submitted it to the Office of the President before 2021 ended.
On the other hand, Congress will convene in a bicameral conference committee to deliberate on the conflicting provisions in the amendments to the PSA.
Dominguez said revisions to the PSA should be signed into law to allow the entry of telecommunication firms from abroad. He stressed that by lifting foreign equity restrictions on telco, service providers can compete here in delivering internet connection.
Foreigners are barred from owning public utilities as mandated by the Constitution. Lawmakers narrowed the coverage of public utilities in amending the PSA, excluding industries like telco so that foreign investors can operate them soon.
Based on data from the Philippine Statistics Authority, foreign investments registered by IPAs fell by more than 71 percent to P112.12 billion in 2020, from P390.11 billion in 2019.
Last year, IPAs have yet to recover the confidence of foreign investors, with capital inflows dropping by over a fifth to P58.87 billion as of the third quarter, from P75.64 billion a year ago.