Foreign chambers remain upbeat on PPP projects

MANILA, Philippines – The Joint Foreign Chambers (JFC) said yesterday the Philippines can still attract foreign investments in the Public Private Partnership (PPP) projects despite the constitutional limitation in foreign ownership because there are legitimate options around this impediment.

Citing jurisprudence from a previous decision of the Supreme Court, the JFC said that foreigners can enjoy full ownership in power generation projects and the supply of utility.

“In spite of the constitutional restriction on foreign equity participation in public utility enterprises, it need not be seen as a barrier to the success of public-private partnership projects since there are legitimate options for moving this aspect of PPP policy forward,” John Forbes of the American Chamber of Commerce of the Philippines said. “By providing prospective foreign investors with viable options, we can revive investor interest in the country and fully realize the economic growth potential that the PPP policy holds,” he added.

However, Forbes said the 60-40 rule on foreign ownership is a 75-year old law. “It hasn’t been updated. It is clearly time to have a national debate on this issue. The world has changed a lot since 1935,” he explained.

For instance, Forbes explained that the airport can be operated 100 percent by a foreign firm provided that the aircraft is operated locally.

Forbes said that power generation and the supply of electricity to the contestable market are not considered public utility operations by virtue of the Electric Power Industry Reform Act of 2001. A shipyard, which was once included as a public utility under the Public Service Act, is no longer considered a public utility as a result of a series of statutory repeals, he said.

He also said that refining of imported crude oil, as opposed to refining petroleum that is indigenous to the Philippines, is not within the activities considered as “public utility” within the contemplation of Republic Act No. 387 (the Petroleum Act of 1949).

“ Since these industries are not within the domain of public utilities, it follows that the nationality restriction does not apply, thereby paving the way for up to 100 percent foreign ownership in these areas,” he said.

Likewise, while the Constitution absolutely requires a franchise or other form of authorization for the operation of a public utility, it does not impose such a requirement over mere ownership of the facilities needed for its operation.

“Since there is a clear distinction between the operation of a public utility and ownership over its facilities and equipment, then there should be no barrier to foreign ownership of such facilities and equipment for as long as operations are undertaken by an entity that meets the nationality requirement,” Forbes said. –Ma. Elisa P. Osorio (The Philippine Star)