Foreign Equity and Professionals News

DTI eyes 5 measures to relax the foreign equity rule

This is an article repost.

MANILA, Philippines — Government is crafting five measures that would allow full foreign ownership in restricted industries and reduce the high cost of doing business, Trade and Industry undersecretary Cristino L. Panlilio said.

In a press conference at the Communication and News Exchange Forum of the Philippine Information Agency yesterday Panlilio said that part of these measures include relaxing rules on equity participation in the construction industry and operations for large-scale contracts for PPP (Public Private Partnership) projects.

An industry official earlier said that government is crafting a measure that would lower power cost to big investors. Panlilio refused to mention the two other measure.

“These five measures are subject to discussions before the LEDAC (Legislative Executive Development Advisory Committee) while some can be addressed via Executive Orders.

“We are working on 5 measures to make our country even more foreign investment-friendly,” he said.

During the forum, Panlilio cited the case of the 40-60 foreign ownership on contracts like the operation and maintenance of an international airport. He said that since the contract is good for 25 years or 30 years only, the 60-40 (Filipino-Foreign) equity ruling can be amended.

There could be no need to tinker the economic provision of the Constitution because these issues can be addressed via legislation, he said.

Earlier, DTI Secretary Gregory L. Domingo also divulged plans to review the participation of foreign construction firms in the country’s infrastructure projects.

It could be also that the 60-40 can be reversed in favor of foreign investors and the Filipino group as minority investors.

Foreign investments have not stopped howling over what they call as discriminatory treatment of foreign investments and blamed this 60-40 rule in the Constitution as major reason of the country’s poor foreign direct investment inflow.

Panlilio, however, explained that there are actually only very few industries where full foreign equity is restricted to 40 percent only.

In the case of mining, he said, large- scale mining projects with minimum investments of $50 million are actually 100 percent foreign-owned. The same is true for foreign retailers with minimum of $2 million per branch investments.

Panlilio, however, said he was ‘‘ambivalent’’ over the strong clamor to open up land ownership in the country for full foreign ownership.

“I am ambivalent on this,” he said noting that the Philippines is just a small country and that opening up full foreign ownership on real estate would only jack up prices of properties to the detriment of the government’s objective to provide housing to poor Filipinos.

He expressed apprehension that opening up even the agriculture sector would only create food security problem in the country.
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By: Bernie Cahiles-Magkilat
Source: Manila Bulletin, July 22, 2011
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