April 13th, 2021
Duterte certifies 3 investment liberalization bills as urgent; Salceda says sponsored bills will be “one-two punch” at economic crisis along with CREATE
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) has thanked President Duterte for certifying the Amendments to the Public Service Act, the Retail Trade Liberalization Act, and the Foreign Investments Act. Salceda is a principal author of all 3 bills, and has explained all three bills in the Committee and plenary levels.
“The certification as urgent of the three trade liberalization bills signals to the economic community that we are serious about attracting foreign investments. Currently, we are the most closed economy in the whole of ASEAN. It is no coincidence that we are struggling to gain foreign direct investments,” Salceda said.
“In parallel with the Resolution of Both Houses No. 2, which would amend the economic restrictions in the Constitution, these bills will help us recover from the COVID-19 economic crisis,” Salceda added.
The proposed amendments to the Public Service Act will include public markets in the coverage of the term “public service”; provide a clear definition of “public utility” in the following sectors: i.) distribution of electricity, ii.) transmission of electricity, and iii.) water pipeline distribution and sewerage pipeline systems The House has already passed its version on third and final reading on March 10, 2020. The Senate version is pending in the Committee on Public Services.
The Retail Trade Liberalization Act (RTLA) amendments will remove barriers to foreign investments in the local retail sector as it aims to amend RA 8762 or the Retail Trade Liberalization Act of 2000. The House approved its version on third and final reading on March 10, 2020. The Senate version is pending in the Committee on Trade, Commerce and Entrepreneurship.
The Foreign Investments Act (FIA) amendments will amend the Foreign Investments Act (FIA) given that its last amendments were made in 1996. The proposal mandates pertinent government agencies to conduct an annual review of the Regular Foreign Investment Negative List (RFINL). In addition, it also excludes the practice of professions from the coverage of the FIA, which emphasizes that the law only governs equity investments in the Philippines by non-Filipinos. The House passed its version on third and final reading (September 9, 2019), while the Senate version is awaiting second reading in the Senate plenary (currently in period of sponsorship).
In a speech to the plenary titled “The Philippines and Vietnam, a tale of two countries,” Salceda explained that “The figures from that era onward, for both countries, show a history of contrasts. As Vietnam opened its economy, FDIs began to flow. Vietnam began to overtake us in FDI-to-GDP by 1990, just 3 years after Doi Moi and the 1987 Constitution.”
“Indeed, Vietnam was so successful in attracting foreign investments with its market openness that in the next decade, starting this year, the average Vietnamese will now be richer than the average Filipino.”
“In 2019, the latest OECD FDI restrictiveness index shows that the Philippines is among the world’s most restrictive countries to FDI. The same index shows that we are the most closed economy in ASEAN. To be the worst in ASEAN, an international success story in lifting millions of people out of poverty, is shameful,” Salceda explained.
“In fact, we are so restrictive that we are the tightest in the region across almost every key sector, except manufacturing.”
“The Philippines has locked itself out of significant foreign investments, and therefore job creation. We have spent hundreds of billions of pesos in foregone revenue for tax incentives, when we have not tried a simpler, cheaper solution: opening industries in need of capital to foreign investment through legislative action,” Salceda added in the speech.
Following President Duterte’s certification, Salceda says that “I thank President Duterte for certifying my bills now pending in the Senate. If we will keep our economy closed to the world’s know-how and capital, we will always have to reinvent the wheel on our own. If we want to learn and earn from the world, we have to open our doors.”
“Reforming our FDI restrictions is critical to our country’s ambitions. The fatal flaw of the 1987 Constitution is that it hardcoded the paranoia of the era. Because there are some abusive foreign business practices, we decided that we will build barriers on almost all foreign business. We thought we were keeping them out. In fact, we were caging ourselves in,” Salceda said.
“There will be many winding arguments against investment openness, but the case for it is simple. Opportunities do not come when you shut the door to them,” Salceda added
Complementary to CREATE
The House tax chair, who is also principal sponsor of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, says that the loosening of FDI restrictions will work best with the new incentives law.
“CREATE will definitely work better if it can accommodate even industries currently restricted by our FDI laws,” Salceda said.
“Once the BOI finalizes the Strategic Investment Priorities Plan, or the list of incentivized industries under CREATE, having our doors open to investment will be the best way to invite foreign capital and technology,” Salceda said.