By Jenina P. Ibañez, January 31, 2020; Business World
The Philippine Competition Commission (PCC) is renewing its recommendation to amend the law that limits foreign equity in public services.
“During this time it is probably time to revisit the definition of public service to allow other players to come in. That’s what we are doing,” PCC Commissioner Annabelle C. Asuncion said in a press conference on Thursday.
The PCC in 2017 first backed amendments to the Public Service Act, including removing the foreign equity cap on the telecommunications and transportation industries.
The industries, which are considered public utilities, limit foreign ownership of the public utility company to 40%. The remaining 60% must be owned by Filipino citizens.
The law that defines the country’s public service utilities was first passed in 1936.
Ms. Asuncion told reporters after the press conference that the 60-40 requirement limits players that can enter a market.
“From the competition perspective, limited. Limited ‘yung possible players who will come in. Sinasabi nga namin in a globalized economy mas gusto mo talaga na maraming players (We said that in a globalized economy it is preferred to have numerous players),” she said.
The PCC’s position notes that public utilities should include only four sectors: electricity (and its transmission), gas or petroleum distribution, water distribution, and sewerage pipeline systems.
Sectors outside of this, PCC believes, should not necessarily be covered by the 60-40 rule.
“The point is, kailangan i-revisit ‘yung (there needs to be a revisit of the) definition ng public service. For example, telco — is it still a public service that requires 60-40, or is it a service that you can open up to foreign entities?”
The four suggested public utility sectors, she said, would create a natural monopoly.
Citing sewerage systems as an example, Ms. Asuncion said that competition would be inefficient for the sector.
“For it to be efficient for a player, for a business to enter into, kailangan niya (it would need to) mag-invest so much in terms of capitalization that for them to be able to recover their investment, they would have to have a wider scope dun sa pwede nilang pag-operate-an (in where they can operate),” she said.
“Natural monopoly ‘yan. Competition will not be efficient because if there are two players providing that kind of service within a small geographic area for example, they would probably die. Malulugi sila (They will lose money).”
PCC in an e-mail noted that the current bill to amend the act filed in the 18th Congress has taken note of their recommendations since 2017, “with some adopting our recommendations and adding that the PCC should be included in the technical team along with NEDA to determine whether other industries would be classified as public utilities.”
The House of Representatives in September began tackling House Bill 78, which if passed into law would give both the PCC and the National Economic and Development Authority power to recommend the public utility classifications of industries.
The criteria for the recommendation includes that the service is necessary to the public, a natural monopoly, regularly distributes the commodity service to the public, is necessary for the life and occupation of residents, and that the commodity or service is obligated to provide adequate service to the public on demand.
The bill is currently pending plenary approval in the House of Representatives and is pending at the committee level at the Senate.
Commissioner Johannes Benjamin R. Bernabe said that the companies still need to be regulated even if equity limitations are relaxed.
Ms. Asuncion added those companies in industries no longer considered public utilities would still be regulated by the relevant sector regulator.