Rebuild the Philippine Economy by Strengthening Filipino Capabilities
When the Philippine Congress convened its regular session in July, Congressional leaders vowed to fast-track the enactment of laws that will have a long-lasting and wide-ranging impact. Certified as urgent by President Rodrigo Duterte, these bills will now allow 100-percent foreign ownership and management of vital public services and small retail businesses.
Specifically, three Senate bills are on the table:
Senate Bill Number (SBN) 2094 will reclassify key strategic sectors, previously considered public utilities under Commonwealth Act of 146 (or the Public Service Law) as “public services,” which may result in 100-percent foreign ownership in the country’s telecommunications and transportation sectors.
SBN 1156 will do away with the Foreign Investments Act of 1991 provision that reserves small and medium enterprises (i.e., valued at less than USD 200,000) to Filipinos, as it will allow foreigners to set up and wholly own businesses with a minimum of USD 100,000 under some conditions.
SBN 1840, complementing SBN 1156, will amend the Retail Trade Liberalization Act of 2000 by drastically lowering the required amount of investment of foreign retailers in the country from USD 2.5 million to USD 1.0 million.
The bills’ proponents argue that rebuilding the economy, badly hit by the pandemic, requires opening up basic services and small retail trade to foreigners. While the bills have been lauded by the foreign chambers of commerce, they present clear long-term risks for the country.
On the one hand, SBN 2094 comes at a time when the region is in the midst of great global economic and military rivalries and cyber attacks that can hold an entire economy hostage. By opening up the telecommunications and public transportation industries to foreign nationals, we may be giving them control over services that are essential to a functioning economy and society, especially during national emergencies. Such arrangement may also make communication and travel more expensive as profitability takes precedence over public interest.
SBNs 1156 and 1840, on the other hand, will open the country’s small and medium enterprise (SME) sector (which constitutes more than 90 percent of our formal economy) to foreign competition at a time when many businesses have been leveled by the pandemic.
In fact, the premises and promises of these bills are patently unrealistic and vastly exaggerated. Allowing foreign ownership of public utilities does not necessarily guarantee the entry of foreign direct investments (FDI). To encourage more FDI, the country should exert genuine efforts in combating corruption, eliminating red tape, and addressing the high cost of electricity.
We urge our lawmakers to reconsider the wisdom of these measures. Since its establishment in 1908, the nation has depended on the University of the Philippines to produce generations of educated and empowered Filipinos to serve the people. Today, we – and particularly our graduates – will be crippled in this effort if even meager economic opportunities are doled out to foreign economic interests with greater financial capacity. We call on our lawmakers to use this moment to stand with and invest in the economic capabilities of the Filipino people.
University of the Philippines Diliman
6 October 2021