House Ways and Means Committee chair, Albay Rep. Joey Sarte Salceda, has hailed President Duterte’s recent signing of the new law amending the 85-year-old Commonwealth Act No. 146, or the Public Service Act Principally authored by Salceda in the Lower House, the measure would now allow foreigners to completely own businesses in the country, and encourage foreign investments in sectors that are essential to public welfare, which in turn would help close the investment gap in the country.
“It is the closest that the country has been to overcome the growth overhang caused by the 1987 Constitution’s foreign equity restrictions,” Salceda said.
The measure effectively opens up to 100 percent foreign equity across economic sectors, except in the transmission and distribution of electricity, water pipeline and sewerage, seaports, petroleum pipeline, and public utility vehicles.
“The PSA amendments will be very crucial for economic recovery. Our freed-up fiscal space will be limited due to Covid-19 debts. So, in place of government spending, we need another source of capital for our public investment needs. Foreign direct investments will help fill that gap,” explained Salceda, a noted economist.
“Prior to these amendments, we were the only country to limit foreign equity in certain industries on the basis of implication. We just assumed that all public services are public utilities. The Constitution only explicitly limits foreign capital in the latter, not the broader category,” he pointed out.
Salceda stressed that the PSA amendments would yield massive impacts on job creation and investments. He expects an increase in foreign direct investments by around PHP299 billion over the next five years from the final version of the sectors that will be opened up as a result of the PSA amendments.
“Why do other countries pay more for our labor, attracting OFWs (overseas Filipino workers)? They have the capital that we do not have for our own national development. Abroad, our workers build public services with foreign capital on foreign soil. Why don’t we just bring the foreign capital here and let our workers build our own country with foreign investments instead?” he further explained.
The lawmaker-economist said there would be strong jobs growth in telecommunications, heavy transport, and other key public services as a result of foreign capital infusions due to the amendments. It may also encourage OFWs to devote their skills and expertise in the country without leaving their families, Salceda added.
According to Salceda, the main economic benefit of the PSA amendments is that it provides local players in key sectors with a credible threat of external competition that is seen as a pro-competitive influence that helps deter monopoly or oligopoly and encourages local players to improve efficiency.
More competition means lower prices generally, he said, and if public utilities and services exceed the rates set by the regulators, they have to refund the excess collections from the public and pay fines, the amended PSA envisions.