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Neda, business groups pitch key reforms ahead of Cha-cha


The National Economic and Development Authority (Neda) has appealed to Congress to pass key economic reform bills before embarking on economic Charter change, an advocacy that some business groups indirectly support with their pitch for timely passage of liberalization bills.

If Charter change is not possible during the 18th Congress, Cabinet members and business groups said Congress can instead pass such liberalization measures that also seek to open the economy to foreign investments.

John Forbes, senior adviser, American Chamber of Commerce of the Philippines Inc. (AmCham) and Joint Foreign Chambers of the Philippines (JFC), said the business group supports the proposal in Resolution of Both Houses 2 to insert phrase “unless otherwise provided by law,” to leave responsibility for further reform to future Congresses.

“This signals openess but will not result in significant new FDI until corrective laws are enacted. Historically, it takes several congresses to complete investment and regulatory reform,” he said.

With this, Forbes recommended the immediate enactment of other measures that also provide new FDI opportunities such as the amendments to the Public Service Act (PSA) and Retail Trade Liberalization (RTL), and programs that increase competitiveness to surpass levels of FDI achieved by the country’s neighbors.

He said several sectors will benefit from the removal of foreign equity restrictions, such as advertising, education, energy, manufacturing, media, retirement, telecommunication and transportation.

The House of Representatives has already moved with the amendments to the Public Service Act, the Foreign Investment Act, and the Retail Trade Liberalization Act and Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), which are seen to open up the country for foreign investment significantly. The first three measures are pending with the Senate while the CREATE is with a bicameral committee.

Trade Secretary Ramon Lopez said Congress should “equally look” with favor on the ongoing legislative actions that will likewise open the  restrictions, such as the modifications to the RTL and PSA, “if only to improve investment inflows in the country and equalize opportunities with our Asian neighbors.”

“Modifying the current Retail Trade Liberalization Act will boost foreign investments in the  Philippine retail industry through amendments that lower the minimum paid-up capital  requirement for foreign-owned businesses. This would give the country greater access to diverse consumer products, more competition among retailers, more retail market access and lower entry cost for MSME products and services, further technology and skills transfer, and additional jobs for Filipinos,” he said.

Lopez said liberalizing the present PSA by refining or limiting what constitutes a public utility may take certain industries out of the coverage of the constitutional limitations on  foreign ownership.

For example, should legislators “deem it proper to remove power generation, water infrastructure, irrigation facilities, sewerage systems, or telecom from the coverage of the Public  Service Act, restrictions in these industries would be eased, and would allow for much needed  productivity and competitiveness enhancements in various industries through foreign investments and technology flows,” he said.

With a nod to CREATE, he thanked members of Congress “for helping us work towards modernizing the Philippines’s corporate tax and incentives system. We consider CREATE as a game-changer that will help the country’s economy recover much faster and stronger, with the immediate reduction of corporate income  tax rates, and modernized set of performance-based, focused and timebound incentives along  with the removal of nationality requirements and export-bias inherent in our current incentive  system.”

Neda’s pitch

Neda Undersecretary for Policy and Planning Rosemarie G. Edillon told BusinessMirror on Tuesday that while the government’s planning agency supports charter change, passing economic reform bills should be done immediately.

These economic reform bills are the amendments to the PSA and RTLA, and the Foreign Investment Act (FIA).

“Yes [we support an economic cha-cha] but we are requesting Congress to immediately pass the economic reform bills (amendments to PSA, FIA, RTLA),” Edillon said in a message.

Edillon also said the Neda has not made any assessments on the impact of such an economic charter change on the economy, at a time when it is recovering from the pandemic.

While Neda will be updating the Foreign Investment Negative List this year, Edillon told Congress some limitations require legislative actions.

“There is little we can do as we have already opened almost all sectors that the executive is allowed to do, except for professions.  That is why legislation is now needed immediately to liberalize the economy while waiting for the more permanent solution of constitutional amendment,” she added.

Negative list

Despite the economic limitations that still exist in the constitution and with the amendments to the PSA, FIA, and RTLA still pending, Edillon said Neda can still update the country’s negative list for its 12th version.

The Negative List or the regular foreign investment negative list (RFINL) consists of a list of areas or sectors and professions where foreign investment is not allowed or limited in the Philippines.

It consists of two categories: List A, or areas of investment where foreign ownership is not allowed or limited by mandate of the Constitution and specific laws.

List B, meanwhile, are areas where foreign ownership is limited due to national security, health, morals, and as protection for small and medium enterprises.

“I also don’t think we can do away with the FINL anytime soon, especially since constitutional amendments will just insert the phrase “unless otherwise provided by law,” Edillon said.

The 11th RFINL reflected amendments in existing laws such as reciprocity provisions in certain laws on professions like pharmacy and forestry), limitations on foreign participation in investment areas/activities provided in new laws (e.g., RA 10635 for marine deck/engine officers), and exclusions from limitations on foreign participation in some investment areas/activities identified that do not need legislative action.

It also liberalized foreign participation in Internet businesses, which have been excluded from mass media; Teaching at higher education levels provided the subject being taught is not a professional subject (i.e., included in a government board or bar examination); and Training centers that are engaged in short-term high level skills development that do not form part of the formal education system.

The existing negative list also liberalized foreign investment in Adjustment companies, lending companies, financing companies and investment houses and Wellness centers, which were excluded in item 4 of List B.