More investors seen with FDI law revisions

Amendments to foreign investment laws will enable the Philippines to lure more investors.

Reforms in the Philippines’ restrictive laws on foreign direct investment (FDI) will enable the country to perform at par with its Asian neighbors, attract more foreign investors and help further expand Gross Domestic Products (GDP).

The Organization for Economic Co-operation and Development (OECD) has ranked the Philippines with the most restrictive laws on FDIs, among the 10 Association of Southeast Asian nation members, and separately, among 35 other countries in 2018.

Under the Duterte administration, the country recently achieved the “highest ever FDI percentage of GDP” in history, pushed by structural reforms and its Build Build Build Program, but still lags behind Cambodia and Vietnam.

In the House of Representatives, Albay Rep. Joey Salceda is pushing for amendments to the Public Service Act and the Foreign Investments Act through House Bills 78 and 1221, which he both authored, and the Retail Trade Liberalization Act which he co-authored, to help boost the country’s FDI performance.

According to the OECD, “reforms liberalizing FDI restrictions by about 10 percent as measured by the Index could increase bilateral FDI in stocks by 2.1 percent on average.”

Salceda’s proposed reforms will yield an additional P19 billion in 2021, P23 billion in 2022 and P28 billion in 2023 and bring FDI gains to P70 billion for the first three years after the reforms are implemented.

“My conservative analysis shows the liberalization bills, in the very bare minimum, will outright contribute to around 0.05 percent to 0.2 percent incremental GDP, every year, equivalent to billions of pesos in new GDP output with a few strokes of a pen. It’s literally free money. Let’s take it. My analysis also shows positive impacts on real wage growth. These bills will, on average, will be good for the Filipino worker,” Salceda explained.

HB 78 seeks to “break the barriers to investments and competition in certain industry sectors that hamper the country’s sustained, broader and higher trajectory of economic expansion.”

HB 1221, or the Foreign Investments Act Amendments, seeks to amend RA 7042, “deleting the provisions relating to ‘practice of professions’ from among the items listed under the Foreign Investment Negative List and by lowering the threshold of employment requirement to 15 direct employees for USD100,000 investment in small and medium-sized domestic market industries.”

He said the amendment aims to encourage foreign professionals to practice their professions in the country under reciprocal terms and share their ideas and technical know-how with their Filipino peers.

The Retail Trade Liberalization Act, on the other hand, seeks to reduce the required minimum paid-up capital for foreign entrants to the country’s retail sector.

“The Philippines has locked itself out of significant foreign investments, and therefore, job creation. We have spent trillions of pesos in foregone revenue for tax incentives, when we have not tried a simpler, cheaper solution: opening industries in need of capital to foreign investments through legislative action. Instead of sending our labor force abroad, let us attract foreign investment and create jobs here in the Philippines,” Salceda stressed.