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Time to rethink foreign ownership law, solon suggests

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Mass transport system in the Philippines remains a challenge as officials continuously find ways to ease traffic woes and make daily commuting bearable. (Photo by DOTR Facebook)

Is it time to restructure the country’s laws on foreign ownership?

Albay Rep. Joey Sarte Salceda thinks so after he filed House Bill 78, or the amended Public Service Act (PSA) recently passed by the House of Representatives, to open up competitions in country’s three vital industries: power, telecommunications and transport.

Allowing 100 percent foreign ownership in public utilities, with certain restrictions, will solve the unending woes suffered by consumers caused by poor but costly services, Salceda said.

In a four-page message sent to House Speaker Alan Peter Cayetano and Majority Leader Ferdinand Martin Romualdez, Salceda said consumers’ woes stem from “ambiguity in the definition of public utility that is interchangeably used with public service under the 84-year old Public Service Act.”

“Monopoly, for decades, is to the detriment of consumers and progress,” noted Salceda, chair of the Ways and Means committee.

Salceda said electricity, power, telecommunications and water, with excessively strong market power for the few players, being capital intensive but subject to foreign ownership restrictions “lack competition and therefore, limited choice for consumers, ultimately resulting to market failure.”

“The 1987 Constitution restricts the operation of a public utility to Filipinos only [Sec. 11, Art. XII]. There is no definition of a public utility, however, in existing laws. The old PSA only defines a public service [Section 13 (b), Commonwealth Act No. 146], and not a public utility, hence the ambiguity,” Salceda said.

Salceda pointed out that public utilities are “clearly not the equivalent of public service.”

“The PSA defines public service very broadly to include even such sectors as ice plants and ship repair shops, sectors we would clearly not be suspicious of allowing foreign ownership into, but which are even currently subject to the limits brought about by the ambiguity,” Salceda added.

The Albay lawmaker noted that the Supreme Court, in a recent ruling, had offered the key elements of a public utility as “a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service.”

HB 78’s provisions proposes to limit public utilities to transmission of electricity; distribution of electricity; and waterworks and sewerage systems.

The amendments also propose that no other business or service shall be deemed a public utility unless recommended by the National Economic and Development Authority.

To protect the national interest, the bill provides that the President can suspend or prohibit any merger, acquisition or investment in a public service in the interest of national security; foreign nationals can only invest if there is reciprocity with Philippine nationals; fines for violations shall be substantially increased and indexed to inflation, to strengthen the regulatory powers of administrative agencies; relevant regulatory powers (e.g. rate-setting, franchise/authority to operate requirements) shall be retained; restrictions on hiring foreign labor if there are competent and able Philippine nationals to perform the service; and retention of takeover power, etc., for sectors formerly classified as public utilities because they are “businesses vested with public interest.

A noted economist, Salceda said the PSA amendments would create jobs, lay the foundation for stronger economic growth, attract more capital and know-how especially in areas that require innovation currently not present domestically, and help transfer technology developed in other countries.

Foreign investments in the next five years, he added, are expected to yield up to 0.22% higher Gross Domestic Product growth, while wages are also expected to go up by 0.14% higher than baseline.

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