By Butch Fernandez, May 28 2019; Business Mirror

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THE chairman of the Senate Committee on Economic Affairs is moving to update the 28-year-old Foreign Investment  Law, aiming to lure more foreign direct investments (FDI) into the country to create more jobs.

Sen. Sherwin Gatchalian, in filing the remedial legislation embodied in Senate Bill 2227, sought to amend certain provisions of the 1991 Foreign Investment Law embodied in Republic Act 7042, in a bid to “take advantage of global and regional economic dynamics.”

In asking Congress to front-load passage of the amending bill to “make the Philippines a more attractive investment destination,” Gatchalian said early adoption of the proposed amendments will “result in a foreign investment regime more fine-tuned to the changing economic climate and its accompanying demands.”

He added, “our receptiveness to these changes may very well determine whether we can live up to our true economic potential or remain in the doldrums compared to our next-door neighbors.”

The senator acknowledged concerns that the Philippines is perceived to be a relatively unattractive investment destination “because our investment laws are less open and generally more inhibitory compared to those of our neighbors in the Asean.”

To address this, the Gatchalian bill proposed to update the 1991 Foreign Investment Act’s policy declaration to recognize advancements in technology and the importance of global and regional economic realities to the local economy.

It also seeks to amend Section 4 of the FIA to expressly exclude the practice of professions from the coverage of the law, thus emphasizing that the law governs only equity investments in the Philippines by non-Filipinos.

Gatchalian’s bill likewise sought to mandate the National Economic and Development Authority (Neda), in cooperation and consultation with the Board of Investments (BOI), the Department of Trade and Industry (DTI), the Securities and Exchange Commission (SEC), and other pertinent government agencies, to “conduct an annual review of the country’s Foreign Investment Negative List (FINL) to ensure that the list is aligned with this policy.” He noted that under the current setup, the government releases the FINL—an enumeration of sectors where foreign investors can only exercise limited participation—every two years.

Senate Bill 2227 seeks to establish a Web portal that will serve as a central database containing information about the country’s foreign investment laws, rules and regulations, and policies, including restrictions. The portal will be maintained by the BOI in coordination with other relevant agencies.

At the same time, Gatchalian lamented the low FDI accumulation figures recorded by the country in recent years, which saw the Philippines continue to trail many of its Asean peers as a result of its relatively restrictive foreign investment laws and policies.

Citing World Bank data, he noted that the Philippines’s FDI accumulation for the 2015-2017 period stood at $23.98 billion, way below Singapore’s $208.48 billion. Indonesia ranked second in the region with $45.79 billion, followed by Vietnam with $35.5 billion, and Malaysia with $32.84 billion. Only Thailand, which brought up the rear at $19.78 billion, recorded a lower FDI accumulation than the Philippines.

The senator added the Organization for Economic Cooperation and Development’s 2018 FDI Regulatory Restrictiveness Index listed the Philippines as one of the most restrictive countries when it comes to FDI rules.

Moreover, Gatchalian sought to allay fears that the liberalized investment environment could be used by foreign investors to deprive Filipinos of the opportunity to work within the country. “I filed a bill last week amending the Official Development Assistance (ODA) Act, which seeks to protect the interests of Filipino workers by prioritizing them for employment in development projects financed through ODA funds.”

In a statement, Gatchalian also cited data from the International Monetary Fund’s 2018 World Economic Outlook showing the country having the highest unemployment rate among the six large Asean markets last year, at 5.3 percent.