MSMEs, Cabinet warn vs uncontrolled entry of foreign contractors

by Paolo Romero (The Philippine Star), 14 Dec 2020

MANILA, Philippines — Cabinet officials and micro, small and medium enterprises (MSMEs) in the construction sector have raised alarm over moves to allow the unregulated entry of foreign contractors in the country, which they said could spell the local firms’ demise.

Barely surviving the effects of the COVID-19 pandemic, MSME and industry organizations yesterday expressed their concern to the Senate committee on trade, commerce and entrepreneurship, which has been deliberating on bills calling for further opening up of the construction industry.

The Construction Industry Authority of the Philippines (CIAP), the main agency for the sector, said it would be “untimely” to add more players to the local construction market amid the COVID-19 pandemic, as proposed by Senate Bill 1008 and its related bills that seek to lift restrictions on the entry of foreign players to the domestic industry.

The CIAP is chaired by Trade Secretary Ramon Lopez, and has as board members Labor Secretary Silvestre Bello III, Public Works Secretary Mark Villar, Transportation Secretary Arthur Tugade, the chairpersons of the four implementing boards and a private sector representative.

“MSMEs, comprising 97 percent of registered contractors who are reeling from the debilitating effects of the pandemic, will further be subjected to foreign competitors whose wider supply chain networks and support from their respective governments will put them at a disadvantage,” CIAP in its 13-page position paper sent to the committee chaired by Sen. Aquilino Pimentel III.

The Society of Philippine Electrotechnical Constructors and Suppliers Inc. (SPECS) comprised of licensed electrical construction companies pointed out that “without the necessary safeguards and programs to develop and strengthen the local industry, it would have an adverse impact on our members, most of whom are MSMEs.”

The need for safeguards for the local industry is also echoed by the Association of Carriers and Equipment Lessors (ACEL) whose members are part of the construction equipment supply distribution chain.

There are over 15,000 licensed contractors in the country which provide around 4.2 million in employment, accounting for 10 percent of total employment in the country and making it the biggest direct job contributor to the country in the last ten years.

“The entry of foreign contractors with their undue advantage will not only displace current professionals and workers in the industry but will dampen employment opportunities for returning overseas Filipino workers,” CIAP pointed out.

For its part, the Organization of Socialized and Economic Housing Developers of the Philippines (OSHDP) whose members had been responsible for socialized housing for the less-privileged, noted that the proposed legislation would increase the cost of constructing houses, as 100 percent foreign constructors would likely bring in high-salaried foreign engineers and managers.

“As you might well know, OSHDP developers operate on a government-mandated price ceiling, and as a result, are very sensitive to increases in the cost structure,” the group told the panel.

According to a position paper presented by the Philippine Constructors Association (PCA), such legislation “would critically impact local players – particularly the MSME sector, which make up some 97 percent of local contractors.”

PCA represents the country’s construction sector with chapters nationwide and affiliate members from various support industries.

In a separate position paper, PCA Marivalley president Wilfredo Reyes said his members mostly MSMEs are extremely worried that the bills tend to allow the entry even of wholly owned foreign small constructors who would bring their workers, further exacerbating the current situation of a labor surplus in the industry due to depressed demand and massive repatriation of overseas Filipinos amid the global pandemic.

“It is apparent that there cannot be any true leveling of the playing field when there are no clear-cut compensating protection and safety nets for local MSMEs in the construction industry… when entering foreign firms enjoy considerable protection and support from their own governments,” Reyes said.

PCA Metropolitan Chapter and the Pangasinan Constructors Association also submitted position papers to the Senate committee, raising similar concerns.

PCA pointed out it is not averse to the entry of foreign construction companies which are already allowed to operate under existing laws and regulations.

“What we are concerned about would be the unregulated entry of foreign-owned construction companies without the necessary safeguards and programs for the local construction industry,” it said.

CIAP added that the liberalization of the construction industry has been accepted and addressed through the years by the formulation and implementation of corresponding laws, policies, and regulations such as the Special Licenses for Joint Ventures, Consortia and Foreign Contractors, and the Regular License with Annotation for Quadruple A companies, allowing wholly owned or foreign corporations to regularly engage in projects.