THE business sector welcomed the recent Palace certification of three economic bills as urgent, but aired reservations over a provision lowering the capitalization requirement for foreign retailers.
Industry leaders interviewed by the BusinessMirror said the pending bills have been long awaited because their enactment spells more job opportunities and economic growth.
President Duterte certified as urgent last week the following bills: amendments to Public Service Act (Senate Bill 2094), amendments to Foreign Investments Act (Senate Bill 1156), and amendments to Retail Trade Liberalization Act (Senate Bill 1840).
“We welcome the urgency the administration is bringing to these three reforms, which the business sector has been advocating for a long time,” Makati Business Club Executive Director Coco Alcuaz said.
Alcuaz said the bills can help the country attract job-creating investments, which is much more needed at a time when the economy is still reeling from the impact of the lockdown measures amid the Covid-19 pandemic.
Management Association of the Philippines (MAP) National Issues Committee Chairman Rizalina Mantaring said the bills will be a boon for the Philippines as these will plug the gap in foreign investments, given that the country is lagging behind its neighbors.
The priority bills are also seen to bode well for the consumers as more industry players will be able to set up shop in the country. “They will foster more competition which usually results in lower prices and better service,” Mantaring explained.
The MAP official added that “over the longer term, we may also benefit from technology transfer as companies bring in more modern facilities and processes.”
The pending bill seeking to amend the 84-year-old Public Service Act aims to improve the quality of public services and goods by allowing more players. The proposed amendments provide the inclusion of public markets in the coverage of “public service”; and the definition of “public utility” in the following sectors: distribution of electricity, transmission of electricity and water pipeline distribution and sewerage pipeline systems.
Meanwhile, the bill amending the Foreign Investment Act seeks to cut the minimum employment requirement to 15 from 50 direct local hires for small and medium local firms established by foreign firms with at least $100,000 in paid-in capital.
PCCI: Small biz will be hurt
As for the amendments to retail trade, Philippine Chamber of Commerce and Industry (PCCI) Chairman Alegria Limjoco expressed some concern.
The Senate version of the bill seeking to revise the Retail Trade Liberalization Act aims to further loosen up foreign restrictions by removing investment categories. This, as it aims to lower the minimum paid-up capital requirement for foreign retailers to $300,000 from $2.5 million.
Lowering the capital requirements for foreign firms will hurt the local micro and small businesses, Limjoco said, pointing to competition.
“I want to Filipino micro and small retailers to thrive and grow,” said Limjoco, who is also the vice chairman of the Philippine Franchise Association and Philippine Retailers Association.
Still, Limjoco said the other two bills will be beneficial for the Philippine economy, agreeing these will create employment opportunities and promote the welfare of the consumers.
The German-Philippine Chamber of Commerce and Industry Inc. (GPCCI) said these bills will complement the recently signed Corporate Recovery and Tax Incentives for Enterprises (CREATE).
“GPCCI is very delighted that these bills have been tagged as urgent. Reforms in these fields for more liberalization will support the recovery of the economy after Covid-19 and attract foreign investment,” GPCCI Executive Director Martin Henkelmann said.
CREATE was signed last month before lapsing into law.
It reduced the corporate income tax to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below and have total assets of P100 million and below effective July 1, 2020. All other local firms and resident foreign companies are imposed with 25-percent income tax.
Currently, the Fiscal Incentives Review Board is finalizing the implementing rules and regulations of CREATE. It is also coming up with a new list of investment sectors that can avail themselves of the incentives under said measure.
House members: 3 bills a boon
More jobs, improved quality of human resource, and sustainable economic growth are just some of the positive economic outcomes to expect should the New Public Service Act, Foreign Investments Act, and Retail Trade Liberalization Act be enacted into law this year, lawmakers said at the weekend.
House Committee on Ways and Means Chairman Joey Sarte Salceda, AAMBIS-OWA Rep. Sharon Garin and Deputy Speaker Bernadette Herrera said economic liberalization will boost the government’s Covid-19 response programs and bring new economic opportunities for Filipino.
Salceda, principal author of all three bills, said the Palace certification signals to the economic community that the Philippine is serious about attracting foreign investments.
“Currently, we are the most closed economy in the whole of Asean. It is no coincidence that we are struggling to gain foreign direct investments,” Salceda said.
“In parallel with the Resolution of Both Houses No. 2, which would amend the economic restrictions in the Constitution, these bills will help us recover from the Covid-19 economic crisis,” Salceda added.
In 2019, the lawmaker said the latest Organisation for Economic Co-operation and Development FDI restrictiveness index shows the Philippines is among the world’s most restrictive countries to FDI.
“The same index shows that we are the most closed economy in Asean. To be the worst in Asean, an international success story in lifting millions of people out of poverty, is shameful,” Salceda added.
“The Philippines has locked itself out of significant foreign investments, and therefore job creation. We have spent hundreds of billions of pesos in foregone revenue for tax incentives, when we have not tried a simpler, cheaper solution: opening industries in need of capital to foreign investment through legislative action,” Salceda added.
Also, Salceda said the loosening of FDI restrictions will work best with the new incentives law—the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
“CREATE will definitely work better if it can accommodate even industries currently restricted by our FDI laws,” Salceda said.
“Once the BOI finalizes the Strategic Investment Priorities Plan, or the list of incentivized industries under CREATE, having our doors open to investment will be the best way to invite foreign capital and technology,” Salceda said.
Garin acknowledged that allowing the transfer of technologies and know-how from advanced countries will catalyze economic development and the productivity of the local workforce.
With 1.5 million workers displaced during the two-week enhanced community quarantine (ECQ), boosting government coffers to address the severe economic impact becomes imperative, she said.
The National Economic and Development Authority (Neda) has identified the three bills as crucial for recovery.
The United Nations Conference on Trade and Development (Unctad) revealed that global foreign direct investment (FDI) flows are expected to contract between 30 and 40 percent this year. While the global projection for FDI remains grim, the Bangko Sentral ng Pilipinas (BSP) maintained that the country is off to a promising start by securing $961 million in net inflows of FDI in January 2021, a 41.5-percent increase compared to last year’s FDI inflow.
Swift ratification
Meanwhile, Herrera said she will work with the House leadership to get SB 2094 (Public Service Act), SB 1156 (Foreign Investments Act) and SB 1840 (Retail Trade Liberalization Act) swiftly ratified when session resumes on May 17.
“As soon as the House receives the Senate-approved urgent measures, we will review it and ask the Committee on Rules to put it in the agenda for ratification. The review will be a simple process of due diligence by going through those three bills line by line,” she said.
“Enactment of the amended Public Service Act plus the amendments to the Foreign Investments Act and the Retail Trade Liberalization Act would have the combined effect of releasing much of our economy—from the MSMEs to the large conglomerates—from many growth-inhibiting chains,” she said.
“These three new major pieces of legislation, together with the recently-signed FIST [Financial Institutions’ Strategic Transfer] Act and the CREATE Act, would give our economy additional ways to recover and compete better in the new normal local and international economy,” she added.