The Joint Foreign Chambers of the Philippines (JFC) said passage of a Duterte administration priority measure amending the Republic Act 7042 or the Foreign Investments Act (FIA) of 1991 to exclude the “practice of professions” from the Foreign Investment Negative List (FINL) can mean more jobs for Filipinos.

Members of the House of Representatives, through viva voce voting, approved on second reading late Wednesday House Bill 300 to further attract productive foreign investments.

The bill aims to exclude the “practice of professions” from FINL coverage so as to attract foreign professionals to the country.

It also lowers to 15 the minimum number of direct local hires required of foreign investors, from 50.

The measure, authored by Albay Rep. Joey Salceda, Deputy Speaker Raymund Villafuerte and Tarlac Rep. Victor Yap, was opposed by the Professional Regulation Commission (PRC), which said the Constitution had deemed the practice of professions among those nationalist provisions that should be limited to Filipinos.

The JFC, in its position paper submitted to the House, backed these two amendments sought in HB 300.  “Having more foreign professionals practicing in the Philippines can bring new skills, ideas, connection and integration into global networks of service providers, and support sunrise sectors including creative industries, R&D, medical travel and retirement,” the JFC said.

“The [Philippine] Constitution creates a policy bias in favor of Philippine citizens, but not a strict legal barrier to the participation of foreign nationals,” it noted.

Although Section 14, Article 12 of the Constitution states that “the practice of all professions in the Philippines shall be limited to Filipino citizens,” the JFC said this statement is immediately followed by “save in cases prescribed by law.”

JFC noted 45 laws governing the practice of specific professions all contain “reciprocity” provisions allowing foreigners to practice their profession in the Philippines, provided their countries of origin also allow Filipinos to practice these.

“The individual practice of profession is not an investment activity under the scope of the Foreign Investment Act and therefore, should not be included in the FINL,” the JFC said.

The JFC added that if the threshold of employment requirement is reduced to 15 workers, as stated in the bill, they will see more investments for the Philippines.

“For example, 100 foreign investments at the minimum of $100,000 employing at least 15 Filipinos will invest at least $10 million and employ at least 1,500 Filipinos,” it added.

The group said the absence of minimal restrictions will enable the development of many small foreign-owned enterprises in fintech and the creative industries such as design and IT application, and similar businesses that start small and subsequently grow, employing an increasing number of local workers as they do so.

“They can also attract smaller foreign investors who can enrich the country’s tourism industry by providing a larger variety of cuisines and special services for foreign investors, including in a variety of languages,” the group added.

The JFC is a coalition of the American, Australian-New Zealand, Canadian, European, Japanese and Korean chambers; and the Philippine Association of Multinational Companies Regional Headquarters Inc.

Most restrictive

In defending the bill, House Committee on Economic Affairs Chairman Sharon Garin, principal sponsor, said the Philippines was found to be the most restrictive among 69 economies by the Organization for Economic Cooperation and Development (OECD).

“For one, we need to acknowledge that several of our laws need to be updated to keep up with our present economic activities.  The 28-year-old Foreign Investments Act [FIA] imposed minimum requirements upon foreign investors which, upon close examination, are already unrealistic in our present context,” she said.

“Allowing skilled professionals to work in our country would boost the competitiveness of our human resource. By working with professionals from more advanced countries, Filipinos gain fresh perspectives and new knowledge, broadening the skills set they may already have,” she added.

Trade and Industry Committee Chairman Weslie Gatchalian said since the enactment of FIA, the business landscape has significantly changed.

“While the FIA aims to attract, promote and welcome productive investments from foreign individuals and entities, certain provisions of the law create substantial barriers in the achievement of its objective—specifically the Foreign Investment Negative List which specifies areas of economic activity wherein foreign equity is restricted or limited,” he said.

Citing the OECD Foreign Domestic Investments (FDI) Regulatory Restrictiveness Index for 2018, Gatchalian said the Philippines is one of the most restrictive countries in the world when it comes to FDI rules.

Quoting the World Bank, he said the restriction in the Philippine FIA providing that the minimum capital requirement for foreigners of approximately $200,000 is substantially greater than the minimum capital requirements imposed on foreigners by industrializing or newly industrialized countries such as China, Indonesia, India, and Russia, and Asean countries like Malaysia, Thailand and Vietnam.

“Ownership limitations as well as paid-up capital requirements effectively prevent smaller foreign entities with insufficiently large investments to open business in the Philippines. Given this existing regulation, foreign firms are always placed at a disadvantage, compelling them to partner with local firms,” he said.

Another bill author, Representative Yap, cited two provisions in the FIA deemed to be inconsistent with FIA objectives. First is the inclusion of “practice of professions” in the items listed in the FINL, and second, the high number of direct local hires required.

“While FIA allows foreign investors to establish small- and medium-sized enterprises with a minimum paid-in capital of $100,00, they are required to employ at least 50 direct local hires. However, operationally speaking, a small- and medium-sized enterprise cannot immediately sustain a labor force of 50 employees. Thus, there is a need to lower the threshold of employment requirement to 15 direct local hires,” he said.

PRC vs exclusion

Earlier, Professional Regulation Commission (PRC) Chairman Teofilo Pilando Jr. said the PRC opposes excluding the practice of profession from coverage of the Republic Act 7042.

“While we understand the intent of the proposed amendment, the PRC is of the view that practice of profession is still a partially nationalized activity given that under the Constitution, the same falls under National Economy and Patrimony albeit with exceptions,” said Pilando.

“To remove it absolutely in the negative list may not be transparent on the limitation to professional practice by foreigners, and may engender an impression that there exists no restriction at all to their practice,” he added.

Source: https://businessmirror.com.ph/2019/09/06/fia-changes-secure-house-2nd-reading-ok/