Government open to entry of more foreign contractors

MANILA, Philippines — The Construction Industry Authority of the Philippines (CIAP), an attached agency of the Department of Trade and Industry, is open to lowering the threshold for Quadruple A license category to open the construction industry to more foreign contractors.

Under current rules of the Philippine Contractors Accreditation Board (PCAB), 100 percent foreign owned contractors are allowed to do business in the Philippines under the Quadruple A category if they bring in at least P1 billion as direct investment.

Smaller contractors without the required capitalization, meanwhile, may still do business in the country upon issuance of special licenses by PCAB.

Lowering the P1 billion threshold would enable more foreign companies that do not have the required capitalization to secure construction permits as regular contractors and engage in projects with full equity, CIAP said.

“We’re open, probably. Although we have the capacity at present, we do not shut our doors to foreign contractors,” Trade Undersecretary and CIAP head Ruth Castelo said.

“If there is huge clamor and the President says open it or liberalize it, we’re willing to do that provided we follow government regulations like, number one, consultation. We need to ask everyone in the industry. If there is a need to lower that, we need to do proper consultation first,” she added.

Last week, President Duterte ordered the National Economic and Development Authority Board, through Memorandum Order 16, to lift or ease restrictions on eight investment areas with limited foreign participation to improve the country’s competitiveness.

Included in these areas are the contracts for the construction and repair of locally-funded public works.

The Duterte administration plans to undertake a three-year rolling infrastructure program amounting to P3.6 trillion from 2018 to 2020 to usher in what is touted as the country’s golden age of infrastructure.

To support this, the construction industry is ensuring there will be no shortfalls when it comes to construction materials, workers, contractors and even construction professionals.

“They say we don’t have sufficient number of contractors to address the Build Build Build program but that is because they do not have the information from the DTI,” Castelo said.

“We have around 10,000 accredited contractors with a gross financial contracting capacity of P4 trillion. On capacity side, we have a lot of contractors that have the capacity. As a matter of fact, they even do projects abroad. So we don’t have any problem in capabilities but in case foreign contractors have a technology that is unique and which we don’t have, they are welcome to come here,” she added.

In its first policy note released in February this year, the Philippine Competition Commission (PCC) said the licensing rules implemented by PCAB contain a nationality distinction in its classification of licenses that has deleterious effects on competition in the construction sector.

“Nationality-based distinction hinders competition in the construction industry, creating an uneven playing field between local and foreign contractors. Foreign firms possess capacity to construct vital projects and share technical expertise with local firms,” the PCC said.