‘Foreign ownership of public utilities to benefit consumers’

MANILA, Philippines — Allowing 100-percent foreign ownership of public utilities, with certain important restrictions, will ultimately benefit Filipino consumers who want lower costs and better services, the House bill’s author said over the weekend.

Albay Rep. Joey Salceda, chairman of the ways and means committee, maintained that House Bill 78 (the Amended Public Service Act) that the House passed recently would open up competition in vital industries all over the country and create more jobs. 

These industries include power, telecommunications and transportation. 

Known as “the resident economist” in the chamber, Salceda pointed out that consumers’ woes stem from the ambiguity in the definition of public utility that is interchangeably used with public service under the 84-year-old Public Service Act (PSA).

Electricity, power, telecommunications and water, with excessively strong market power for a few players, being capital intensive but subject to foreign ownership restrictions, “lack competition and limit choice for consumers, ultimately result in market failure,” he said. 

These contentions are contained in a four-page “aide memoire” Salceda sent to Speaker Alan Peter Cayetano and House Majority Leader Ferdinand Martin Romualdez. 

“The 1987 Constitution restricts the operation of a public utility to Filipinos only. There is no definition of a public utility, however, in existing laws. The old PSA only defines a public service and not a public utility, hence the ambiguity,” he said.

Salceda stressed that public utilities are “clearly not the equivalent of ‘public service,’ but are more plausibly just a subset of the latter.” 

Amendment needed

The Bicolano lawmaker said it’s about time government relaxes its rules on national patrimony. 

He said laws that govern the country also need to be fine-tuned to keep abreast with the times like in this digital age where the dynamics of practically every industry have leveled up for the sake of survival.

He underscored this reality in the wake of objections to his pet bill, which was approved by the House on second reading late last month.

The bill seeks to lift the country’s Filipino-first policy and allow “full foreign ownership” of public service sector industries such as transportation and communications.

“Just to point out how absurd keeping the PSA is – even ice plants are included in the foreign ownership restrictions. Our definition of what a public utility goes back to the Commonwealth Act 146, which was passed in 1936,” Salceda said. 

HB 78 may be approved on third and final reading in the House of Representatives anytime soon. The measure seeks to provide a clear statutory definition of a public utility. 

Unsettling  oligarchs

Enacting HB 78 into law simply means that a narrower set of services, including electricity distribution, electricity transmission, and water pipeline distribution or sewerage pipeline system, will be subject to foreign equity ownership restrictions imposed on public utilities.  

Salceda used as argument, among others, that Filipino “consumers often experience high prices and poor quality of basic services because only a few local players or oligarchs effectively control the market.” 

“Our laws are riddled with unfair and irrational protection for so many sectors. It’s the consumer who pays the price – bad, expensive, unreliable service. Meanwhile, protected sectors grow complacent and they stagnate,” Salceda said.

“Unfair protectionism brings economic stagnation,” he stressed. “In fact, many of our protectionist policies are so irrational that among some 80 countries surveyed by the OECD, we were found to be the ‘most restrictive economy’ in 2018.” 

OECD stands for Organization for Economic Cooperation and Development – a group of 34 member-countries that develop economic and social policy, and composed of democratic free countries that support free market economies. 

Tech industry

Salceda cited how the PSA amendment will bring forth benefits like in the tech industry where “investments in telecommunications tend to bring costs down for consumers.” 

“Large-enough investments attracted by the PSA may bring overall inflation down from baseline. Unemployment is likely to decline by 0.1 percent, following growth in output due to more investments,” he said. 

“Overall, the amendments are expected to yield up to 0.22 percent higher GDP growth compared to baseline. Real wages are also expected to go up, by 0.14 percent higher than baseline, following more investments in the country,” the Bicolano legislator projected.