The Joint Foreign Chambers (JFC) of the Philippines yesterday criticized
the recently released 9th Foreign Investment Negative List (FINL) as being more
negative as it failed to remove restrictions in sectors that would otherwise
encourage more investments.
In a five-page statement issued
to the media yesterday, the JFC said despite continuous advocacy over the past
decade, the government has yet to shorten
the list of activities where foreigners are not allowed to participate.
The FINL, issued every two
years, is one of the windows where the
Philippines can loosen restrictions on several sectors.
The group said while
constitutional restrictions on foreign capital and foreign professionals are
hard to change, restrictions in legislation and/or in interpretations of what
should or should not be in the FINL should be easier to liberalize.
As it is, the JFC said
restrictions are scattered through various laws, some quite old, and most have
rarely been reviewed.
The JFC in particular cited as
one way to make the FINL less negative fast is to remove the practice of all
professions from the negative list.
“This is not germane in a
document that concern “investment.”
There are 46 individual laws that provide for the regulation of as many
professions,” the JFC said.
The group is seeking
clarification and explanation on some of the provisions of the FINL on the
practice of professions.
All but the laws on professions
allow for reciprocity. The Professional Regulatory Commission (PRC) decides
whether reciprocity exists when a foreign national applies to practice in the
Philippines. The current FINL does not explain this.
It said that with some
exceptions, there is a distinction between ownership of a company that employs
professionals (certified by the PRC) and employees who execute professional
services. The FINL needs clarification, as it is incorrectly worded in its
present form.
The 9th FINL bars foreigners from
engaging in psychological and respiratory therapy and real estate services, on
top of other professions already set aside for Filipino nationals: engineering,
medicine, nursing, veterinary medicine, accountancy, architecture, customs
brokerage, interior design and law.
The JFC called these as four new
minor restrictions legislated during the 14th Congress in 2007 to 2010.
EO. 98 expanded the list of
sectors reserved for Filipinos to include real estate and psychological and
respiratory therapy as industries based on foreign ownership and foreign
practice limitations imposed under four separate laws: the Real Estate Service
Act of the Philippines, Philippine Respiratory Act, Philippine Psychology Act
and the Lending Company Regulation Act of 2007.
The negative list comprises List A and List B.
List A specifies the areas of
economic activity where foreign ownership is prohibited or limited by the
Constitution or laws. These include mass media, practice of all professions,
cooperatives, private security, small-scale mining, private radio
communications, private recruitment for local or overseas employment,
advertising, ownership of private lands, lending, financing, and investment
houses regulated by the Securities and Exchange Commission.
List B contains limitations on
economic activities regulated by law such as small-and medium-scale domestic
enterprises, defense-related industry (i.e., manufacture of firearms, etc.),
and businesses that have implications on public health and morals (i.e., gambling,
sauna, massage clinics, etc.).
List A may be amended any time to
reflect changes brought about by new laws. List B may be amended not more than
once every two years.
The JFC said while net foreign
direct investment inflow into the Philippines remains very low compared with
five other ASEAN countries, there is good reason to expect the amounts to rise
in 2013 due to encouraging reports of foreign interested to expand or invest in
the Philippines.
But it noted that a “Negative
List that is too negative is one of the factors effecting FDI that can be
further liberalized.”
“The government can build on the
growing optimism about improved opportunities to invest in the Philippines by
making a serious effort to make the negative list less negative,” the JFC said.
JFC said the economy remains more
closed to foreign investment than its neighboring large ASEAN economies, citing
the World Bank in its Investing Across Borders 2010 report, which measures how
87 economies facilitate market access and operations of foreign companies.
Among the 87 countries surveyed,
the Philippines and Thailand have some of the strictest foreign equity rules
and fall below the East Asian and Pacific average. In mining, oil and gas, the
equity restriction in the Philippines is 40 percent when the average is 75.7
percent in East Asia and the Pacific; agriculture, the cap is 40 percent when
the average is 82.9 percent; light manufacturing, 75 percent versus 86.8
percent; telecom, 50 percent compared to 64.9 percent; electricity, 65.7 percent
versus 75.8 percent; banking, 60 percent compared to 76.1 percent; transport,
40 percent against 63.7 percent.
Among ASEAN countries, it is only
the Philippines and Vietnam which restrict foreign participation in media.
The Philippines, however, is open
to 100 percent equity in insurance, construction, tourism and retail and
healthcare.
The group said since the Foreign
Investment Act was passed in 1991, only two major changes have been made to the
FINL: the Retail Trade Liberalization Act in 2000 which opened retail trade to
foreign investors investing at least $2.5 million, and Executive Order 158 in
2010 or the 8th FINL which allowed 100 percent foreign equity in gambling in
economic zones by presidential proclamation.
The JFC said a review is overdue
on the FINL to be done by an inter-agency committee taking into consideration
whether restrictions impede investment, job creation, and competitiveness in
time for 16th Congress.
Although reissued every two
years, the FINL rarely contains any significant reforms, and that year after
year, government departments passively apply the same legal restrictions and
add new ones when Congress creates them.
The group urged government to be
more proactive and make the 10th FINL in 2014 “less negative.”
As ASEAN moves towards the Asean
Economic Community there will be more advocacy under the 2007 AEC Blueprint to
lower barriers to cross-border investment in priority sectors. The same is true
for other free trade agreements where the Philippines is engaged in.
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