Is the removal of foreign ownership limits the answer to global competitiveness of PH higher education?

YET another misgiving on the proposed amendment is the possibility that emergent as well as established Philippine higher educational institutions (HEIs) will be somehow affected in a negative way by the entry of foreign-owned colleges and universities either as original campuses or branch campuses. I am quite certain that the association of private higher education institutions would normally react that way.

After all, many of our private HEIs as borne out by the Commission on Higher Education (CHEd) data on quality assurance, compliance with policies and standards, and even Professional Regulation Commission statistics on licensure examinations would leave much to be desired. Many of our 1,900 plus HEIs will be hard-pressed to compete with the well-funded, globally branded and qualityproofed foreign HEIs. Well, that’s global competition 101 for you!

The commentary of the incumbent University of the Philippines (UP) president downplayed the need to amend the 1987 Constitution to allow full foreign ownership of higher educational institutions as he was convinced that the issue of foreign ownership is best tackled by policy and not by law or the Constitution.

However, a closer reading of Article 14 of the 1987 Constitution seems to favor those who are advocating removal of full foreign ownership restrictions., i.e., “solely owned by Filipino citizens, 60-40 Filipino equity vs. Foreign.” To be relevant, the proposed amendments should avoid injecting percentages or ratios in the provisions but instead leave it to the regulators of the executive branch to determine in accordance with the intent of the legislature.

Is there a need to liberalize ownership?

In the Philippines today, there are practically no branch campuses of foreign universities, especially the well-known and established ones from North America, Europe, Asia, among others. While full foreign equity or ownership of private HEIs will mean direct entry of foreign investments in the Philippine education sector, this will also be a source of direct competition for existing HEIs.

In partnership with Philippine HEIs, foreign equity infusion will certainly be additional resources to support the operation of existing HEIs — resources which can be used to upgrade quality parameters such as instructional quality, educational materials, facilities and research. Other types of partnerships are also usually along the lines of delivering academic programs, international linkages, conduct of dual and/or joint degrees, twinning programs, among others.

Invariably, these do not involve control and management of the Philippine HEIs, which is reserved to Filipino citizens, thanks to the constitutional restriction limiting to no more than 40-percent foreign equity and prohibition of full ownership. As commented on during the Senate hearings, these are the types of educational undertakings involving foreign equity or partnership that are most welcome by local HEIs and encouraged by the regulator sans Charter change.

But this practice has been going on for decades and yet our best HEIs, private and state, are still far away from the world-class stature of the best HEIs of many foreign economies. In fact, in the latest QS world rankings (2024) our top four universities ranked as follows: UP was ranked at 404th place; Ateneo de Manila University at 563; De La Salle University placed in the 681-690 bracket; the University of Santo Tomas at the 801-850 bracket; and the University of San Carlos placing in the 1,201-1,400 band for the first time.

Two schools of thought

On the issue of removing FOL (foreign ownership limit) restrictions, there are two schools of thought.

The first view subscribes to the philosophy that the Philippines is already globally competitive without the necessity of opening up to full foreign ownership of private HEIs since the Filipinos are the human resource of choice worldwide. Philippine HEIs produce very good doctors, if not the best.

Unfortunately, many are overseas, and their societal valueadded to the country is nil. Our Filipino nurses and other health workers are most in demand globally as well as Filipino engineers, architects and, yes, teachers! The products of the TVET (technical and vocational education and training) sector are most sought after in both the land-based and sea-based deployment. Our maritime human resources constitute around 25 percent of the global seafaring population in 2020 and are responsible for transporting over 80 percent of the world’s goods. In terms of remittances, this translates to over $6.7 billion in 2022.

The second view looks at the status and quality of our higher education institutions vis-a-vis global standards and competitiveness issues. The underinvestment in higher education will leave many HEIs nonviable and uncompetitive both at the domestic and more so in the global arena.

At the hearings, a ranking education regulator expressed the view that opening up control and administration of higher educational institutions to foreign nationals will make them more competitive in their internationalization efforts as was already observed in other Asean (Association of Southeast Asian Nations) countries that opened up to full foreign ownership.

To my mind, the decision to remove restrictions on foreign ownership as provided in the present 1987 Constitution must be a rational one — a conscious move that is based on real need, empirical and designed to address real problems and impossible situations, if you will.

The argument that since it is the prevailing practice in the Asean or globally that foreign ownership impediments in higher education institutions are being dismantled, then the Philippines should likewise follow suit. Non sequitur!

The logical thing to do, I believe, is to lay the groundwork or the

raison d’etre for why Article 14 of the 1987 Constitution should be amended, thus doing away with foreign ownership restrictions and joining the rest of the economies which have tread this path.

Full foreign ownership in private higher education

So far, the restriction of foreign ownership pertains to FDIs, or foreign direct investments, in private education institutions. There was a time in the country when certain groups of foreigners may have retained beneficial interest in some private education entities like those offering English language courses, in the concept of equity shareholders or full owners.

Take the case of many language centers usually operated by Koreans and Japanese. Regulatory mechanisms have been put in place rationalizing the activities of these types of education entities.

Now with a liberalized education environment in terms of FDIs, a few scenarios could possibly happen. Assuming the constitutional amendments are in place, the corresponding adjustments in the Foreign Investment Act (FIA), particularly the FIA Negative List, should be made.

Likewise, the laws, rules and regulations of the education agencies have to be reviewed and amended accordingly as well as professional regulatory laws, rules and policies on the practice of profession such as those included in the FIA Negative List, which are essentially additional restriction that would tend to conflict with the thrust of globalization and internationalization of higher education as an offshoot of the liberalization effect of the constitutional amendments.