‘Foreign SWFs may own shares in public utilities’


Foreign Sovereign Wealth Funds (SWFs) can collectively invest a maximum of 30 percent in Philippine companies engaged in the operation of public utilities and critical infrastructure such as telecommunications, according to the newly released Implementing Rules and Regulations (IRR) of the Public Service Act (PSA).

On Monday, the National Economic and Development Authority (NEDA) released the amendments of the IRR of the PSA in a bid to provide safeguard provisions to protect the country against national security concerns that may arise through any proposed merger or acquisition, or any investment in a public service.

Section 44 states that foreign governments or foreign state-owned enterprises; entities controlled by foreign government or foreign state-owned enterprises; and an entity acting on behalf of a foreign government or state enterprise are prohibited from making any investment or owning capital in a public service or critical infrastructure.

“Sovereign wealth funds [SWF] and independent pension funds of each state may collectively own up to thirty percent [30 percent] of the capital of such a public utility entity or public service entity classified as critical infrastructure,” Section 44d of the IRR stated.

“The cumulative investment of such funds in the public service classified as a public utility or critical infrastructure, regardless of source of fund, shall not exceed thirty percent [30 percent] capital investment,” it added.

Further, Section 45 of the IRR provides that no foreign national can own more than 50 percent of the capital of entities engaged in the operation and management of public services in the Philippines.

However, if an investment leads to a foreign national owning more than 50 percent of the capital stock of the public service, the country of the foreign national “accords reciprocity to Philippine nationals as provided under the Act and these Rules.”

“The PSA amendments form a critical part of our endeavor to attract foreign investments to the country to boost market competitiveness, foster innovation, and create high-quality jobs,” NEDA Secretary Arsenio M. Balisacan said.

Upon its effectivity on April 4, 2023, the amendments to the PSA will enable the liberalization of key public services by allowing full foreign ownership of businesses in select industries such as airports, railways, expressways, and telecommunications.

Prior to the approval of the amendments, foreign ownership in the aforementioned industries was limited to 40 percent.

Meanwhile, public service utilities such as electricity transmission and distribution, water and wastewater pipeline distribution system including sewerage, petroleum and petroleum products pipeline transmission systems, seaports, and public utility vehicles remain subject to the 60-40 percent foreign equity limitation.

“The implementation of policies on competition and regulatory efficiency necessitates comprehensive and transparent consultations with key stakeholders and legislators to ensure that these remain faithful to public interest,” Balisacan said.

Further, relevant administrative agencies may issue guidelines and circulars for the effective implementation of Republic Act (RA) 11659 and its IRR, provided that these remain consistent with Commonwealth Act No. 146 as amended, as well as with RA 11659 and its IRR.


The IRR joins the list of policies and measures to attract foreign capital in the Philippines. These measures include the amendments to the Foreign Investments Act, the Retail Trade Liberalization Act, and the passage of the Corporate Recovery and Tax Incentives for Enterprises Act.

The government also ratified the Regional Comprehensive Economic Partnership as well as implemented amendments to the IRR of the Build-Operate-Transfer Law and approved the NEDA Joint Venture Guidelines.

“We are confident that the Philippines will be able to attract much-needed capital and technology, sustain its high-growth trajectory, and generate high-quality jobs enabling rapid poverty reduction in the next six years,” Balisacan said.

RA 11659 or the amendments to the PSA was signed into law by former President Rodrigo Duterte in March 2022.

The amendments also provide the following safeguard provisions:

■ The power of the President to suspend or prohibit any investments in a public service in the interest of national security upon the review, evaluation, and recommendation of the relevant government agency;

■ The provision on restrictions on investments by foreign state-owned enterprises (SOE) prevents a foreign SOE from owning capital stock in a public utility or critical infrastructure;

■ The provision on information security ensures entities engaged in the telecommunications business meet relevant ISO standards;

■  The reciprocity clause prevents foreign nationals from owning more than 50 percent of capital in critical infrastructure unless the country of such foreign nationals accords reciprocity to Philippine nationals; and

■ The performance audit provision mandates the conduct of an independent evaluation to monitor a firm’s cost and quality of services to the public.