Foreign chambers call for easing of construction licensing rules

Posted on January 30, 2017

THE Joint Foreign Chambers (JFC) of the Philippines is calling for the relaxation of licensing rules that make it difficult for foreign firms to participate in the construction and engineering industry.

In a statement, JFC said that the current rules governing the functions of Philippine Contractors Accreditation Board (PCAB), particularly the provisions on licensing, have “undermined fair competition” in the country.

“In our view, it will be necessary to open up the construction industry as well as the engineering sector at large to foreign players as it will lower costs, facilitate technology transfer, and bring back Filipino engineers to the country,” the statement read.

“One of the agencies that has undermined fair competition is the Philippine Contractors Accreditation Board, which is limiting accreditation of foreign contractors to 40% despite the fact that there is nothing in Philippine law that restricts the ownership of foreign contractors.”

The JFC is a coalition of the US, Australia-New Zealand, Canadian, European, Japanese, and South Korean chambers and the Philippine Association of Multinational Companies Regional Headquarters.

The JFC said it is “encouraged” that the Philippine Competition Commission (PCC) filed an amicus curiae (friend of the court) brief at the Supreme Court in December regarding the same matter, which is at issue in an ongoing case between the Philippine Contractors Accreditation Board and the Manila Water Company, Inc. (MWCI).

“A speedy disposition of the case will benefit government’s infrastructure priorities and support faster implementation of projects,” the JFC said.

“Given the focus of the administration of President Rodrigo Duterte on Infrastructure development, which is fully supported by the business community, it will be necessary to create an environment in which infrastructure projects can be implemented effectively and timely.”

The issue involves a provision in the implementing rules and regulations (IRR) of RA 4566, also known as the Contractor’s License Law.

In its amicus curiae brief, PCC asked the high court to nullify section 3.1 of the IRR, which licenses local contractors on a yearly basis, while requiring foreign contractors to seek licenses for each new construction project.

In particular, PCAB issues two types of license to contractors — Regular and Special.

The Regular license is issued to domestic contractors and is valid for a year. The Special license is issued to joint ventures, consortia, or foreign contractors and is valid for individual projects only.

Citing PCAB data, PCC said that out of the 1,600 Special licenses issued in 2015, only 20 were issued to foreign firms while four were issued to joint ventures or consortia with foreign participation.

The move to relax regulations to ease the entry of more foreign contractors comes as the government is planning to boost infrastructure development.

This year’s P3.35-trillion national budget programs spending on public infrastructure to increase 13.79% to P860.7 billion equivalent to 5.4% of GDP in 2017, from 5.1% in 2016. — Roy Stephen C. Canivel