Liability a sticking point in liberalizing construction

FOREIGN contractors can bring much-needed expertise and investment, though stakeholders warned about the difficulty of enforcing liability rulings on foreign entities and the possible displacement of smaller Filipino-owned rivals.

Trade Undersecretary for Consumer Protection Group Ruth B. Castelo said if any problems arise with the project, enforcing a ruling against a foreign company may be difficult. Citing the Civil Code , she said foreign contractors are liable for the entire project.

“Allowing them to completely and 100% participate in construction projects in the Philippines would be detrimental to Filipino consumers. In case anything happens to the project and the foreigner is nowhere to be found, it is going to be very difficult for the Filipinos to go after them... it will be very costly for Filipino parties to go after them in international arbitration courts,” she said during a Senate hearing on proposed amendments to the Contractors’ License Law.

Philippine Constructors Association, Inc. (PCA) Executive Director Ibarra G. Paulino noted that he favors the entry of foreign contractors, provided that they bring investment and transfer of technology. However, he warned about the possible impact of their unrestricted participation on smaller contractors.

“It is too dangerous to allow the entry of foreign contractors without restrictions simply because they will compete with the smalltime contractors and that will not be good for the industry,” he said.

Senate Bill No. 1909 proposes amendments to Republic Act No. 4566 or the Contractors’ License Law. The amendments include the removal of nationality requirements in granting licenses to new contractors.

“This proposal is meant to put foreign contractors on equal footing with the local contractors. And the end goal here really is to drive down price, bring in new technology,” Senator Sherwin T. Gatchalian, author of the bill, said during the hearing.

Under the current system, foreign contractors are allowed to operate wholly-owned units in the Philippines only under the Quadruple A Category license of the Philippine Contractors Accreditation Board (PCAB), which requires them bring in P1 billion worth of capital.

Foreign chambers have expressed support for the passage of the law.

“We strongly support this amendment... We feel that this sector has been neglected in a big way because the procedure of the accreditation is so tedious and difficult. It makes very difficult for international and domestic contractors to enter this field and participate and create an competitive environment,” Federation of Indian Chambers of Commerce Philippines Inc. (FICCI) Board Member Minoo Jamaji said.

“This bill will simply make very clear the practice since the 1965 law and it’s possible, regardless of nationality, for construction companies to participate in the Build, Build, Build and the growth of the Philippine economy. There are ways of regulating them other than discriminating against them. So we welcome the development,” American Chamber of Commerce (AmCham) Senior Advisor John D. Forbes said.