Duterte orders NEDA Board to ease foreign ownership limits

MANILA, Philippines — President Rodrigo Duterte has ordered the National Economic and Development Authority Board to “exert utmost efforts” to relax restrictions on certain investment areas with limited foreign participation.

The president’s order came after he invited China to be the Philippines’ third telecoms operator to break a longstanding duopoly that has angered consumers in a country said to have the slowest internet speed in the Asia Pacific.

No specific Chinese company had been lined up to take on the project.

In a memorandum order dated November 21, Duterte tasked the NEDA Board to “take immediate steps” to ease existing restrictions on foreign participation in the following investment areas/activities:

• Private recruitment, whether for local or overseas employment;
• Practice of particular professions, where allowing foreign participation will redound to the public benefit;
• Contracts for the construction and repair of locally-funded public works;
• Public services, except activities and systems that are recognized as public utilities such as transmission and distribution of electricity, water pipeline distribution system, and sewerage pipeline system;
• Culture, production, milling, processing, and trading except retailing, of rice and corn and acquiring by barter, purchase or otherwise, rice and corn and the by-products thereof;
• Teaching at higher education levels;
• Retail trade enterprises; and
• Domestic market enterprises

“The members of the NEDA Board are hereby directed to earnestly support, in a coordinated manner, such legislative efforts as may be necessary to eliminate or relax the aforesaid restrictions, including pending legislation seeking to clarify the definition of public utilities,” Duterte said.

“The NEDA Board is likewise directed to immediately advise the President regarding those restrictions on foreign participation which may already be lifted or eased without need of legislation,” he added.

Foreign Investment Negative List

Socioeconomic Planning Secretary Ernesto Pernia earlier said NEDA would push for an aggressive liberalization of the Foreign Investment Negative List, particularly in the areas of retail trade, practice of professions, public utilities and infrastructure contractors.

Last month, Pernia said the 11th version of the FINL had already been transmitted to Malacañang for review.

Restrictions on foreign ownership, however, cannot be all lifted administratively as several prohibitions need legislative action.

The negative list determines investment areas where foreign participation is prohibited or limited. The FINL was last updated in 2015.

The list will be presented for approval during the next meeting of NEDA. Once cleared, an executive order promulgating the 2017 FINL is expected to be signed before the end of the year.

In its proposed version, NEDA said several economic areas where restrictions on foreign ownership and participation will be relaxed.

These include the removal of restrictions on foreign-owned investment houses and financial activities in line with the liberalization of the banking sector, practice of several professions, foreign infrastructure contractors, and lowering the paid-up capital requirement for foreign retailers from $2.5 million to $200,000.

For other areas such as public utilities (telecommunications and water), President Duterte has expressed interest in the imposition of a 70 percent foreign ownership cap, according to Pernia.

Raising the foreign ownership limit for public utilities, however, will require the amendment of the Public Service Act which prohibits majority ownership by foreign entities in public utilities.

A bill is already pending in the House of Representatives to amend the statutory definitions of public utility to open industries including telecommunications, transport, power and water to increased foreign ownership.

READ: 11th FINL slated for Palace review