It is time to amend the Foreign Investments Act of 1991 and ease restrictions on foreign direct investments (FDIs) in order to attract more multinational enterprises to the country.
Senator Imee R. Marcos asserted this as public hearings by the Senate Economic Affairs Committee which she chairs began last Monday, September 23. Three bills seeking to liberalize foreign investments were on tap including her own Senate Bill 1024.
“We need more start-ups that can generate hundreds, if not thousands, of jobs locally and multinational corporations are the biggest sources of jobs in the country and elsewhere,” the Senator said.
“The current law needs an update considering that it has not kept up with the rise of online business and the evolution of modern business practices,” Marcos added.
With Southeast Asia seeing FDI growth in digital infrastructure, data centers and e-commerce, the Marcos bill seeks to include online businesses among domestic market enterprises allowed as much as 100% foreign ownership.
Classifying businesses as domestic market enterprises will encourage greater Filipino participation, Marcos explained.
Marcos is also eyeing higher foreign ownership ceilings in the construction and retail trade sectors, which have seen marked growth in the region.
The current 60-percent Filipino-ownership restriction curtails foreign investment in construction, Marcos said, adding that the retail trade sector was also restrictive due to the required paid-up capital of more than $2.5 million for foreign investors.
Such restrictions made the Philippines a “relatively unpromising destination,” Marcos said, citing that the Philippines got only $9.8 billion or 6.6% of the total $149 billion in FDIs in Southeast Asia last year.
Singapore cornered more than half ($78 billion) of FDIs in the region, followed by Indonesia ($22 billion), Malaysia ($19.3 billion), Vietnam ($16 billion), and Thailand ($10 billion).
Lower Philippine FDI’s were also recorded in the first half of 2019, amounting to Php3.6 billion or 38.8% less than the $5.8 billion recorded a year earlier, according to the Bangko Sentral ng Pilipinas.
The government’s “negative lists,” which name business sectors where foreign ownership is limited, can be more responsive to economic trends if updated annually instead of every two years, Marcos said.
Senate Bill 1024 also called for the creation of an Investment Promotions Council and Investment Priority Plan to design government strategies in attracting more foreign investments.
A one-stop shop and online database on government rules and requirements that potential foreign investors can access will also enhance the ease of doing business, Marcos added.
Another amendment to the Foreign Investments Act (RA 7042 as amended by RA 8179) protects national security through a review mechanism that checks foreign control in the country’s crucial industries.
To address potential investors’ qualms about transparency and accountability, the Marcos bill also seeks to criminalize and punish public officials for graft, influence-peddling, and abuse of authority related to foreign investments, with fines of Php1 million to Php20 million and prison terms of six to 30 years. ###