THE COUNTRY is besieged with COVID-19. The government needs to take critical steps to support our economy. These include support and creation of domestic jobs.
One of the steps is loosening the strict rules on foreign direct investments.
The 1987 Philippine Constitution restricts foreign ownership. It limits foreign ownership of land and business to only 40 percent. The other 60 percent is exclusive to Filipino citizens or corporations.
Recently, the Senate approved on the third and final reading Senate Bill (SB) 2094 which amends the Public Service Act (Commonwealth Act No. 146). This will allow foreigners to fully own and control firms in key industries like telecommunications, airlines, domestic shipping, railways and subways.
What can we expect from this bill when it becomes a law?
The bill limits the definition of “public utilities.” Under Section 4 (a new Section 13 (d) of Commonwealth Act No. 146, as amended), public utility “refers to a person that operates, manages and controls for public use” the “distribution of electricity; transmission of electricity; and water pipeline distribution systems and sewerage pipeline systems.”
The classification of a public service as a public utility is based on the following criteria:
1) the person or juridical entity regularly supplies and directly transmits and distributes to the public through a network commodity or service or public consequence;
2) the commodity or service is a natural monopoly that needs to be regulated when the common good so requires;
3) the commodity or service is necessary for the maintenance of life and occupation of the public; and
3) the commodity or service is obligated to provide adequate service to the public on demand.
Once the bill becomes a law, the public service must possess a certification to effect the operation of the service from the proper administrative agency instead of the Public Service Commission.
Accordingly, certificates referred to “shall include franchises or any other appropriate form of authorization for the operation of a public service.”
To protect the interest of the public, Section 6 (Section 16 (a) and (c) of Commonwealth Act No. 146, as amended) provides that an “administrative agency may establish and enforce a methodology for setting rates, taking into account all relevant considerations, including the efficiency of the regulated public service. The rates must be such as to allow the recovery of prudent and efficient costs and reasonable rate of return.”
One of the main concerns is the risk of our national security. Section 14 provides that the President or the National Security Council shall initiate a review of a covered transaction to determine its effects on the national security of the country if the covered transaction is a foreign government-controlled transaction and the transaction would result to control of any critical infrastructure of or within the country.
To mitigate any threat, the Council or Lead Agency in behalf of the former may negotiate, enter into, or impose and enforce any agreement or condition with any party to the covered transaction.
Once the bill becomes law, the Philippines will become more competitive and it will have more foreign investors that will bring more jobs and government revenues.
It’s uncertain, actually. But is it worth the risk?/PN
