Amended Public Service Act a significant reform to fuel economic rebound –Trade Secretary

Paving the way to attract more investments in the Philippines, the ratification of the amendment to the Public Service Act (PSA) plays a vital role for the country to progress closer to economic recovery, the Department of Trade and Industry (DTI) Secretary and Board of Investments (BOI) Chairman Ramon Lopez said.

“This is a monumental reform that will further strengthen the government’s economic recovery efforts as it liberalized the 85-year old restrictive policy of the PSA, this will also significantly improve the country’s investment climate.” said the Trade Secretary.

Secretary Lopez expressed gratitude toward the Senate and Congress for passing the said act, which is part of the major economic reform agenda, strongly endorsed by the Executive branch’s economic managers, and certified urgent by President Rodrigo Duterte. Senate President Vicente Sotto III and House Speaker Lord Allan Velasco, together with Senate Panel Chair Grace Poe-Llamanzares, House Panel Chair Sharon S. Garin, and their respective committees led the deliberation in their chambers in ratifying the said amendment.

“Once President Rodrigo Duterte signs the bill into law, foreign equity restrictions will be eased out which shall attract more global players that will modernize several sectors such as telecommunications, shipping, air carriers, railway, and subways. Similarly, there will be increased competition in terms of services and products which will generate better quality of services and competitive pricing to the benefit of the consumers.  Higher investments will also generate more jobs and income for the people.” Secretary Lopez added.

The proposed measure classified “public utility” only to distribution and transmission of electricity; petroleum and petroleum products pipeline transmission systems; water pipeline distribution systems and wastewater pipeline systems, sewerage pipeline systems; seaports; and public utility vehicles. Thus, any industry not included in the list will remain as public services and be liberalized taking into account national security.

Secretary Lopez called this a major progress to step up competition in the Philippine market. Enumerating what is public utility and limiting critical infrastructure to telecoms and such other vital services will effectively open up other public services under the old version of the law to foreign investors. The ratified measure will exponentially increase foreign direct investments.

“I am confident that we can make economic recovery happen in the Philippines this year. With the amended Public Service Act, we expect the entry of new foreign investors and the introduction of modern and new technologies in the aforementioned sectors,” he added.

Ranked as the third most restrictive economy in the world based on the 2020 Organization for Economic Cooperation and Development (OECD) report, the Philippines would benefit from the eventual passage of the law, as it will attract more investments, generate more employment opportunities, introduce innovation, lower prices, and improve the quality of goods and services.

Undersecretary Rafaelita M. Aldaba, meanwhile, noted the indirect positive impact of the PSA amendment to the entire economy and highlighted that “A more competitive services sector will have indirect consequences toward economic growth. High quality transport or telecommunication infrastructures, for example, could influence the production costs and competitiveness of all firms across all sectors of the economy.”

Another feature of the amended PSA is the barring of foreign nationals from owning more than 50% of the capital of companies engaged in the operation and management of critical infrastructure without their country according reciprocity to Philippine nationals.

The President is also granted the authority to suspend or forbid any proposed merger or acquisition, or investment in a public service “that effectively results in the grant of control to a foreigner or a foreign corporation.”

On 2 February 2022, the Congress ratified the bicameral conference committee report amending the PSA, clarifying what are considered as “public utility” and “public services” and addressing the ambiguity in the present law. Easing the restrictions, would allow 100% foreign equity participation in key sectors.

With the economic headwinds brought by the prevailing pandemic, the amended PSA, the Retail Trade Liberalization Act (RTLA), as well as the Foreign Investment Act (FIA) are expected to hasten the country’s recovery from the present global health crisis.