JFC backs bill amending law on foreign investments

MANILA, Philippines - The Joint Foreign Chambers (JFC) support a proposed measure seeking to change the foreign investments law by removing restrictions on practice of professions and lowering the employment threshold for small and medium enterprises.

“We recommend the passage of the two amendments sought in SB (Senate Bill) 1424,” the JFC said in a statement yesterday.

SB 1424 filed by Sen. Joseph Victor Ejercito seeks to amend Republic Act 7042 or the Foreign Investments Act (FIA)  by excluding the practice of professions from the Foreign Investment Negative List (FINL) and by reducing the employment threshold to 15 direct employees for a $100,000 foreign investment in small and medium sized enterprises.

The JFC expressed the view that the practice of professions is not a germane provision in the FINL.

It noted that there are 47 laws governing the practice of specific professions, and 42 contain reciprocity provisions allowing foreigners to practice their profession in the Philippines, provided their countries of origin also allow Filipinos to practice these.

“Considering that certain laws governing each profession allow foreign nationals to practice in the Philippines under reciprocity arrangements, it is extremely misleading to include such item in the FINL as a nationalized activity. This effectively discourages foreign professionals who could otherwise be allowed to practice here by virtue of reciprocity from working in the Philippines and sharing their ideas and technical know-how, contrary to the inclusive policy of the FIA,” the JFC said.

With many Filipinos working abroad and supporting the Philippine economy with their remittances, the groups noted that it should be in the national interest to seek the reduction of restrictions on professionals in other countries, for example, in the negotiations on the General Agreement on Trade in Services under the World Trade Organization and the Association of Southeast Asian Nations Framework Agreement on Services.

“At the same time, having more foreign professionals practicing in the Philippines can bring new skills, ideas, connections and integration into global networks of service providers, and support sunrise sectors like R&D (research and development), medical travel and retirement,” the groups said.

The JFC also said that while the FIA allows 100 percent foreign ownership in domestic market activities above a minimum investment of $100,000 with advanced technology or employing 50 direct employees, the amount of investment which is only a little over P4.3 million operationally speaking,  cannot immediately sustain a labor force of 50 persons.

When the law was enacted in 1991, the minimum wage in the National Capital Region was P142 and today, it is P466.

“So as not to render pointless this provision of the law, and to align it with the spirit of the FIA, there is a need to retain the employment requirement but lower the threshold to a more reasonable number,” it said.

Such, the groups said, would allow smaller investments to come in and go into industries like tourism which would facilitate the entry of more foreign nationals and investments.

The groups added that the government should look at Thailand where the minimum investment amount is 1 million baht (approximately $33,000), excluding the cost of land and working capital, and small and medium foreign-owned enterprises in certain activities with minimum investment of 500,000 baht (approximately $16,700), excluding the cost of land and working capital, are also allowed.

“The low threshold of the foreign investment capital requirement in Thailand has enabled the Thais to attract  many smaller foreign investors who have enriched the country’s vibrant tourism industry by providing a larger variety of cuisines and special services for foreign visitors, including in a variety of languages,” it said.

In addition, the low threshold has enabled the development of many small foreign-owned enterprises in the creative industries such as design and IT (information technology) applications and similar businesses that starts small and subsequently steadily grows employing increasing number of Thai workers.

The JFC has the  American, Australia-New Zealand, Canadian, European, Japanese and Korean foreign chambers along with the Philippine Association of Multinational Companies Regional Headquarters as its core members.