More laws needed to ease investment restrictions – NEDA

Further easing restrictions on foreign investments after the recent signing of the 11th Foreign Investment Negative List (FINL) would fall largely on Congress through the amendments of laws that cap foreign equity in viable industries, the National Economic and Development Authority (NEDA) said.

Socioeconomic Planning Secretary Ernesto Pernia said a lot still has to be done to improve the country’s attractiveness to foreign investors and enable it to compete with other investment destinations in ASEAN.

“We’d like to be sufficiently competitive with at least our ASEAN neighbors. For that to happen, there would have to be an amendment to our laws so that more areas can be opened to foreign participation. These are really marginal improvements. I call this baby steps to improving our attractiveness to FDIs (foreign direct investments). So we need a lot more work in terms of getting more areas and activities liberalized. That is the desire of the economic managers and that is what is needed to be competitive in ASEAN,” he said in a briefing yesterday.

The Philippines is one of the most restrictive countries in ASEAN in terms of foreign direct investments, but Pernia said this could be changed if there is political will to change the country’s investment environment.

The 11th FINL, which was signed on Oct. 29, has been touted to be the most liberal so far. Even so, it only acts on areas where restrictions on foreign equity can be relaxed administratively. The list is reviewed every two years.

With the issuance of the executive order, five investment areas would now allow up to 100 percent foreign participation.

These are: internet businesses, which has been excluded from mass media; teaching at higher education levels provided the subject being taught is not a professional subject covered by board or bar examinations; training centers that are engaged in short-term high level skills development that do not form part of the formal education system; adjustment companies, lending companies, financing companies and investment houses; and wellness centers.

NEDA said the five areas may be amended by executive power, and do not require legislative action.

The 11th FINL also allows up to 40 percent foreign participation in contracts for the construction and repair of locally-funded public works, subject to applicable regulatory frameworks; and private radio communications network. The 10th FINL allowed only up to 25 percent and 20 percent foreign participation, respectively, in these areas.

Several investment areas that were first intended for easing under the new negative list could not push through because these would require legislative action. These include the proposed lowering of the minimum capitalization requirement for foreign investments in retail trade to $200,000 from $2.5 million as well as the partnership of foreign universities with local universities which are already being done in China, Vietnam, Malaysia, Thailand, and Indonesia.

“I want to encourage our legislators. The President also wants to encourage our legislators to liberalize some more. So we don’t have to wait for the next round of revision to the 11th FINL. This can be done in the meantime,” said Pernia.

Several bills are being deliberated on in Congress to lift restrictions on foreign participation in other investment areas.

Among these is House Bill 5828, which seeks to amend the Public Service Act. It was approved on third reading by the House of Representatives on September 2017, and was transmitted to Senate in the same month. Senate Bills 695, 1261, 1291, 1441 and 1594 also seek to amend the Public Service Act.

FDIs—brick and mortar investments—have jumped 52.1 percent to $6.7 billion in the first seven months of the year from $4.38 billion in the same period last year. Pernia expects this year’s FDI inflows to exceed last year’s total of $10 billion.

It would take some time for the foreign investment community to realize the gains from the new FINL, he said.