Foreign businessmen say Philippines' Foreign Investment Negative List 'too negative'
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MANILA - The organization of Philippine-based foreign businessmen on Tuesday called on the government to trim the list of industries restricted to Filipino nationals.
In a statement, the Joint Foreign Chambers of the Philippines said the government should be “more proactive” so it can come up with a shortened 10th version of the Foreign Investment Negative List (FINL) two years from now.
“Despite continuous advocacy over almost a decade, responsible public sector leaders have yet to assign priority to shortening the list, with the exception of the economic provisions of the Constitution. Amending these constitutional restrictions has been advocated by Congressional leaders, and a study was reportedly prepared at the request of President Aquino but not publicly released. However, little attention has been paid to removing other restrictions from the list,” the group said.
President Benigno Aquino III last month signed Executive Order 98 or the 9th Foreign Investment Negative List, which adds four restrictions that were legislated during the 14th Congress.
The amendments encompass foreign ownership and foreign practice limitations in laws covering the lending and real estate sectors as well as healthcare professions in the areas of psychology and respiratory therapy.
A recent United Nations Conference on Trade and Development report showed the Philippines enjoys among the lowest foreign direct investment (FDI) inflows among Asean members during the last two years - something the Joint Foreign Chambers blamed on a “too negative” list of activities open to foreign investors.
“While many factors explain this situation and there is good reason to expect the amounts to rise in 2013 and thereafter, a Negative List that is too negative is one of the factors effecting FDI that can be further liberalized. Throughout 2012 we have been encouraged by consistent reports of manufacturing firms of several nationalities relocating from China, Japan, and Thailand because of rising costs, floods, and political risks. Vietnam, Indonesia, and the Philippines—the so-called VIP economies—are being considered by these firms for new and expansion manufacturing investments. The Philippine government can build on the growing optimism about improved opportunities to invest in the Philippines by making a serious effort to make the Negative List less negative,” the Joint Foreign Chambers said.
The group said the past two decades saw only the retail and gambling sectors opened up to foreign investors.
“The Philippine economy in 2012 remains more closed to foreign investment than its neighboring Asean economies,” the group said, citing the World Bank’s Investing Across Borders 2010 report that showed the Philippines having “some of the strictest foreign equity rules.”
If Constitutional amendments cannot be made, revisiting some of the laws limiting foreign participation in the domestic economy may help, the Joint Foreign Chambers said.
“While constitutional restrictions on foreign capital and foreign professionals are hard to change, restrictions in legislation and/or in interpretations of what should or should not be in the FINL should be easier to liberalize. Restrictions are scattered through various laws, some quite old, and most have rarely been reviewed to determine whether they remain in the national interest, especially whether they stand in the way of creating jobs,” the group said.
A review on how the Foreign Investment Negative List is being drawn is “overdue,” it said.
“A reform policy in government to determine whether existing restrictions continue to be in the national interest is lacking. Year after year, government departments passively apply the same legal restrictions and add new ones when Congress creates them. A review is overdue. This could be done by an inter-agency team instructed to review various restrictions on foreign equity investment in the participation in the Philippine economy of foreign equity, taking into consideration whether restrictions impede investment, job creation, and competitiveness. A report with specific proposed amendments could be ready by the time the 16th Congress is convened,” the Join Foreign Chambers said.
It also asked the government to remove from the negative list the “practice of all professions” prohibition, adding that this is “not germane in a document that concerns ‘investment.’”
“There are 46 individual laws that provide for the regulation of as many professions, while the Supreme Court establishes rule for practicing law. All but the laws on professions allow for reciprocity. The Professional Regulatory Commission decides whether reciprocity exists when a foreign national applies to practice in the Philippines. The current FINL does not explain this. Furthermore, with some exceptions, there is a distinction between ownership of a company that employs professionals (certified by the PRC) and employees who execute professional services. The FINL needs clarification, as it is incorrectly worded in its present form,” the group said.
It said a long-winding FINL would be a deterrent as the Philippines moves to fulfill its Asean commitments as well as participate in other multilateral trade deals.
“As Asean moves towards the Asean Economic Community there will be more advocacy under the 2007 AEC Blueprint to lower barriers to cross-border investment in priority sectors. Similar challenges may arise if the Philippines negotiates for advanced free trade agreements with the European Union and with the 11 countries currently participating in the future Trans-Pacific Partnership. The investment chapter of the Korea-US FTA requires unrestricted foreign equity investment between parties, and the same chapter in the TPP is expected to be similar. Parties are given time to transition their laws to meet commitments under the new trade agreements,” the Joint Foreign Chambers said.
It groups the American Chamber of Commerce of the Philippines, Australian-New Zealand Chamber of Commerce of the Philippines, Canadian Chamber of Commerce, European Chamber of Commerce of the Philippines, Japanese Chamber of Commerce and Industry of the Philippines, Korean Chamber of Commerce of the Philippines, and Philippine Association of Multinational Regional Headquarters.