Solons renew bid to amend foreign-investment provision in 1987 Charter
Lawmakers are now moving to amend the economic provisions of the 1987 Constitution that limits on foreign investment in public utilities.
The current initiatives are centered on proposals to redefine the term “public utility” by amending Commonwealth Act 146, or the public-service law.
Under House Bills 4389, 4468, 4501 and 4787, filed by Reps. Gloria Macapagal-Arroyo, Joey S. Salceda, Arthur C. Yap and Feliciano R. Belmonte Jr., respectively, public utilities will be limited to electric-power transmission and distribution, water distribution and sewerage systems.
All other public services, including electric-power generation and supply, crude oil and petroleum, transportation, broadcasting, telecommunications and value-added services, are excluded from the definition of public utilities.
However, Party-list Rep. Antonio L. Tinio of ACT Teachers has expressed alarm on these renewed efforts in Congress to remove restrictions on foreign investment in key sectors of the economy.
But in explaining her bill, Arroyo said consumers often experience high prices and poor quality of basic services in the Philippines, because only a few local players or oligarchs effectively control the market.
“Competition and foreign investment are inhibited, because limitations that should only apply to the operation of a public utility are usually also applied to all public services. This situation is cause[d] by [the] ambiguity in the definition of public utility that is often used interchangeably with public service under the Commonwealth Act 146, or the Public Service Act. The key to fixing this problem is to develop a clear statutory definition of a public utility by amending the Public Service Act,” Arroyo said.
For his part, Salceda said the Public Service Act is a law that was crafted in 1936 to govern public services in the Philippines.
“Understandably, it no longer sufficiently addresses the changes in the economic framework brought about by globalization and rapid technological innovation. Hence, there is a need to adjust the provisions of the law to bring it to the 21st century and enable it to fulfill its purpose of truly serving the public,” he said.
Notwithstanding numerous amendments, Salceda said this 80-year-old law is still a good law in terms of protecting the public interest, albeit outdated in certain aspects, particularly the transfer of the functions of the Public Service Commission to various administrative agencies; the definition of public service, which is often used as a proxy for public utility in reference to the 1987 Constitution; and the applicable penalties and fees for public services.
Yap, for his part, said the measure proposes to further amend the Public Service Act to effect the necessary changes in the antiquated provisions of the law to increase its relevance to contemporary concerns, in the interest of providing the general public with more choices, better services and lower prices.
“This legislative reform will significantly contribute to increasing competition, as well as protecting the public interest. More competition among providers would result in lower prices and improved quality of basic services in the Philippines, creating a more competitive economy toward a better quality of life for all,” Yap added.
This bill also prescribes a 12-percent cap on rate of return and prohibits income tax as operating expense for rate-determination purposes for public services, including public utilities, consistent with administrative and judicial pronouncements.
Alarm
Tinio said that, while past efforts focused on congressional initiatives to amend the economic provisions of the 1987 Constitution that impose limits on foreign investment in public utilities and other key sectors of the economy, current proposals in the House of Representatives are aimed at circumventing the restrictions by changing the legal definition of public utility.
“Since past efforts to amend the protectionist economic provisions of the Constitution have failed spectacularly, the proponents of unfettered foreign investment are now taking a different approach,” Tinio said, after the House Committee on Economic Affairs held its first hearing on the bills last Tuesday.
“Cha-cha [Charter change] has so far proved unsuccessful, so now they’re trying to do it in reverse. They aim to amend the law in order to subvert the intent of the Constitution,” he added.
According to Tinio, such redefinition would effectively circumvent Section 11 of Article XII of the Constitution, which states that “No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens.”
Tinio said the current initiative poses a greater threat to economic sovereignty and the public interest than previous efforts to amend the Constitution.
“Not only do the proposals open up some of the most lucrative sectors of the economy to 100 percent foreign ownership. By excluding them from the definition of public utilities, government is undermining its own power to regulate such services. The bills propose a radical liberalization and deregulation of sectors that are currently highly regulated as public utilities,” he said.
Tinio said that the proponents are intent on fast-tracking the passage into law of their proposals.
“Needless to say, this ‘reverse cha-cha’ approach to removing restrictions on foreign investment is far easier to pull off than previous efforts, since it doesn’t involve something as momentous and controversial as changing the Constitution,” he said.
The lawmaker said, “if these bills become law, then the state will surrender what little protection the public has left from the unrestricted drive for profit of foreign corporations.”
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