By James A. Loyola, May 3, 2022; Manila Bulletin
The Securities and Exchange Commission (SEC) now has the power to speed up the resolution of numerous pending cases pertaining to companies with foreign ownership after the amendment of three laws.
These amended laws are the Foreign Investments Act (FIA), the Public Service Act (PSA), and the Retail Trade Liberalization Act (RTLA).
“Instituting these game-changing reforms is a step in the right direction. Now more than ever, it is imperative to further liberalize the Philippine economy and open its doors to foreign investments to spur economic growth amid the lingering impact of the COVID-19 pandemic,” said former SEC Commission Secretary Gerard Lukban.
The SEC addresses these concerns through a special unit under the Corporate and Partnership Registration Division, which was formed in 2021.
Lukban said the favorable resolution of pending cases complements the amended laws and will further bolster the Philippines’ image as a new “haven for foreign investments.” Data from the Bangko Sentral ng Pilipinas (BSP) show that the Philippines recorded its highest foreign direct investment of $10.3 billion in 2021.
The full-year figure surpassed the central bank’s initial projection of P7 billion and the 2017 record of $10.3 billion. This was also 54 percent higher than the $6.8 billion recorded in 2020.
With the amendments to the law, Lukban expects FDIs to surge, helping the Philippines recover from the negative effects of the pandemic.
“Foreign investors were previously cautious of the implications of their foray into the Philippines because of the old and antiquated laws, which made it hard for us to attract larger investments in the country. Resolving pending cases swiftly will allow us to show investors that the Philippines is now a haven for foreign investments,” Lukban said.
President Rodrigo Duterte signed into law three measures that streamline and ease restrictions for foreign retailers that seek to open and operate a shop in the Philippines while making the country more competitive than its ASEAN neighbors.
Republic Act No. 11647, which amended the Foreign Investments Act of 1991, was signed into law last March 2, 2022 while RA No. 11595, which amended the Retail Trade Liberalization Act of 2000, was made into law three months prior to December 10, 2021.
Most recently, Duterte signed Republic Act (RA) No. 11659, which lists the amendments to the 85-year-old Public Service Act.
The amended FIA states that, except as otherwise provided under RA No. 8762, micro and small domestic market enterprises with paid-in equity capital of $200,000 are still reserved for Philippine nationals.
Foreign nationals are allowed a minimum paid-up capital of $100,000 under certain conditions: if they utilize advanced technology as determined by the Department of Science and Technology; are endorsed as startup or startup enablers by the lead host agencies in accordance as per RA No.11337; and the majority of direct employees are Filipinos, the number of which shall in no case be less than 15.
The amended PSA allows 100 percent foreign equity across economic sectors, except for entities engaged in the transmission and distribution of electricity, water pipeline and sewerage, seaports, petroleum pipeline, and public utility vehicles.
On the other hand, the revised RTLA lowers the required minimum paid-up capital of foreign retailers to P25 million and the minimum investment requirement of P10 million per store.
With the removal of the categorization of enterprises, foreign retailers are mandated to maintain the minimum paid-up capital. The Department of Trade and Industry (DTI), the SEC, and the National Economic and Development Authority (NEDA) are tasked to review foreign entities’ compliance every three years.
They are likewise required to submit a certification from the BSP of the inward remittance of the capital investment or other proof certifying their capital investment is deposited and maintained in a bank in the Philippines.
“Allowing more players to jump-start their business in our country, as evidenced by the record-high improvement in investor sentiment, can help drive our economic recovery. The implementation of loose restrictions on foreign entrants will lead to the creation of more jobs and unlock more opportunities, ultimately leading to higher income and spending power of households,” Lukban said.