House Ways and Means Committee chairman, Albay Rep. Joey Sarte Salceda, has lauded the ratification by both the House and the Senate of the Bicameral Conference Committee Report on HB No. 78 and SB No. 2094, which seeks to amend the 85-year-old Public Service Act (PSA).
The measure offers massive reforms that open up foreign capital into the country by lifting the tight restrictions on foreign investments. It also mandates the refund to consumers of excess rates collections. It can now be transmitted to President Duterte for signing into law.
Salceda, first principal author and sponsor of HB 78, describes the measure as a “most important reform after the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, because it effectively opens up to 100% foreign equity in all economic sectors of the country except the transmission and distribution of electricity, water pipeline and sewerage, seaports, petroleum pipeline, and public utility vehicles.”
Salceda said the twin new laws – CREATE and PSA – “will direct investments to the countryside, and modern infrastructures, such as the newly opened Bicol International Airport in my home province, Albay, and the well-educated workforce will make us competitive.”
He said the measure is the closest solution formulated to overcome the country’s “growth overhang caused by the foreign equity restrictions in the 1987 Constitution.
“It’s a massive reform because it opens us to foreign capital. We need a lot of foreign capital. We have plenty of domestic talent, but they leave for abroad because the capital required to hire them is invested abroad,” Salceda explained.
“It’s no surprise that we lag behind our neighbors in terms of foreign direct investment. We are the most restrictive economy in the ASEAN. The PSA amendments change things massively,” he added.
Salceda also lauded the bicameral panel for coming up with a more liberal version of the measure. “The final version no longer requires burdensome reviews by the entire national security council for so-called critical infrastructures, which the Senate introduced,” he said.
The lawmaker, a respected economist, said he expects the amended PSA to yield “massive” impacts on job creation and investments: “We expect an increase in FDIs by around P299 billion over the next five years, and in the sectors that will be opened up. We also expect gross value added (GVA) growth in these areas to cause a GDP growth rate that is 0.47 percentage points higher than the baseline,” he added.
Salceda said “the main economic benefit of the PSA amendments is that it provides local (and oligopolistic) players in key sectors with a credible threat of external competition which is seen as a pro-competitive influence that reduces monopoly or oligopoly power (to set prices or provide services at low quality) and encourages local players to improve efficiency.”
“Empirically, certain sectors appear to be responsive to the threat of new sectors by trying to generate customer loyalty among existing clients through lower prices,” Salceda explained, noting that the ratified version will be “a boon to consumers.”
“Apart from the fact that more competition means lower prices generally, the amended PSA provides that if public utilities and public services exceed the rates set by the regulators, they have to refund the excess collections from the public, and also pay fines,” he added.
“Now we have something squarely and explicitly in the law that will allow us to punish public services that charge excessive rates. Consumers stand to benefit from the PSA amendments immediately. In the long run, we are also bound to create more jobs and perhaps attract many OFWs to come home, as we expect more FDIs to the capital-starved public services,” Salceda concluded.