Route investments from liberalization push to countryside, Marcos gov’t told

By Kyle Aristophere T. Atienza, Reporter

THE PHILIPPINE GOVERNMENT should ensure that foreign investments spurred by the liberalization of key public services benefit the countryside, economists said on Thursday.

“The amended Public Service Act is expected to push infrastructure further,” Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila University, said in a Facebook Messenger chat. “However, its impact will be significant only if it is directed to increase infrastructure in remote rural areas.”

“Otherwise, increased foreign participation will only duplicate and crowd out local projects,” he said. “Foreign investment and the technology that comes from it should make these forms of capital in areas that need it cheaper.”

The amended Public Service Act, signed by ex-President Rodrigo R. Duterte in March 2022, allows full foreign ownership in telecommunications, domestic shipping, railways and subways, airlines, expressways and tollways, and airports.

The sectors used to be subject to the 40% foreign ownership cap for public utilities under the 1987 Constitution.

Mr. Lanzona said government intervention is needed to ensure that rural areas benefit from the law. “It should incentivize foreign investments in rural areas.”

It took almost a year for the National Economic and Development Authority (NEDA) to release the rules that will enforce the law, which took effect on April 4.

Mr. Lanzona said the amended law complements the push by President Ferdinand R. Marcos, Jr. for more private-public partnerships.

“This should expand opportunities for private sector participation in terms of investments and infrastructure,” Emy Ruth Gianan, an economics professor at the Polytechnic University of the Philippines, said in a Facebook Messenger chat. “More than opening the economy for broader competition, it should also encourage collaboration.”

Mr. Lanzona said the government should create the right environment to allow public-private partnerships to complement the amended Public Service Act.

Under the implementing rules, telecommunications are the only public service classified as “critical infrastructure.” Telecommunication services are deemed “vital to the Philippines that the incapacity or destruction of such systems or assets would have a detrimental impact on national security.”

Other public services are not considered critical infrastructure unless the president says so through an executive order. The NEDA can also recommend that a public service be considered critical infrastructure upon the request of a government agency.

The implementing rules include a reciprocity requirement for foreign investment in critical infrastructure, which means foreign nationals cannot own more than 50% of a company engaged in services classified as critical infrastructure unless their country extends reciprocal treatment to Filipinos.

The rules also outline the process and criteria for a national security review of foreign investment in public services and critical infrastructure.

Terry L. Ridon, convenor of infrastructure think tank InfraWatch PH, said the government should address governance issues that would make the law less effective in attracting foreign investments.

“Governance issues remain a problem at all levels of government, as red tape continues to delay the processing of permits and licenses,” he said in a Messenger chat. “Corruption remains a problem. Without resolving governance issues, no amount of economic liberalization will foster broader foreign investment into capital-intensive sectors.”

He said the government should hold investment roadshows. “We are making a bet that while the amendments might make foreign investors take a second look at the Philippines, unresolved governance issues will remain the most significant stumbling block to increasing capital flow to the country,” Mr. Ridon said.

Ms. Gianan said the NEDA and Philippine Competition Commission have important roles in ensuring a level playing field for both domestic and foreign entities.

“The amended PSA should also be an opportunity for local government units to improve their business climates to attract new entrants,” she added.