Lifting foreign equity limits through changes to the Constitution soon is unlikely, a ranking Trade official last week said, hinting however that a growing number of market liberalization deals was putting pressure on all countries to enact such reforms.
“Now is not the time for constitutional amendments to lift foreign ownership limits but we are definitely not going in the reverse direction,” Trade Undersecretary Adrian S. Cristobal, Jr. said in a phone interview on Friday.
He noted, however, that lifting the foreign ownership cap is a longstanding issue raised by trade and investment partners.
“If we intend to enter into more trade and investment agreements or economic partnerships, the trend internationally is to become more open by promoting greater foreign ownership and participation,” Mr. Cristobal said.
The Trade official’s statement comes as President Benigno S. C. Aquino III said in a gathering of alumni of US schools a couple of weeks ago that foreign restrictions enshrined in the Constitution should be retained for Filipinos to have a greater stake in the country’s development.
The Constitution allows Congress to reserve certain areas of investment to Filipinos or business entities that are at least 60% owned by Filipinos.
This restriction is operationalized in the Foreign Investments Negative List, which enumerates specific economic activities wherein foreign equity is either banned or limited.
Foreign investments are banned, for instance, in mass media, small-scale mining and the utilization of marine resources, among others.
Meanwhile, examples of areas where up to 40% foreign ownership is allowed are educational institutions, public utilities and rice or corn production.
Sought for comment, Hubert d’Aboville, president of the European Chamber of Commerce of the Philippines, said in a phone interview at the weekend that these restrictions have put the Philippines behind its Southeast Asian neighbors in terms of investments.
Based on data from the Association of Southeast Asian Nations Web site, a total of $1.71 billion in foreign direct investments (FDI) entered the Philippines in 2010, making it only the sixth highest destination of FDI in the 10-nation bloc.
The country is behind Singapore, with FDI of $35.5 billion in 2010; Indonesia, $13.3 billion; Malaysia, $9.2 billion; Vietnam, $8 billion; and Thailand, $6.3 billion.
“Much higher and long-term investments will come into the Philippines if restrictions on foreign ownership are lifted,” Mr. d’Aboville said.
He added that these limitations “will also definitely affect” the country’s entry into the Trans-Pacific Partnership and the eyed foreign trade agreement with the European Union.
John Forbes, legislative committee chairman of the American Chamber of Commerce of the Philippines, concurred, adding that many countries have lifted similar restrictions “without any loss of sovereignty or economic control.”
“The JFC (Joint Foreign Chambers of the Philippines) position is that there should be no foreign ownership restrictions on investment except on a selective basis for strategic industries,” Mr. Forbes said in an e-mail response.
“The question of whether a constitutional amendment is required to achieve higher sustained long-term foreign direct investment needs to be reviewed and decided by Filipinos themselves,” he added.
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By Kim Arveen M. Patria
Source: BusinessWorld, May 28, 2012
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