Ownership cap restricts entry of foreign telcos

CEBU, Philippines - Restrictive foreign ownership remains a key challenge for the entry of possible foreign players particularly in the telecommunications sector.

Antonio Padre, assistant regional director at Department of Information and Communications Technology in Visayas, said the 40 percent foreign ownership is one hurdle that prospective foreign telco players could face if they plan to enter the Philippine market.

"That ownership issue [has to be addressed]," he said.

Aside from the ownership cap, the official also cited the extensive capital needed to put up a telecommunications infrastructure in the Philippines which is an archipelago.

He expressed support to have more players in the telco industry to make services better for consumers.

He said the National Telecommunications Commission has enough frequencies for a third telco player to join the current duopoly of Globe Telecom and PLDT Inc.

In its FDI (foreign direct investment) Regulatory Restrictiveness Index report, which covers 65 economies, the Organization for Economic Cooperation and Development (OECD) noted that “the Philippines’ FDI regime is one of the most restrictive compared to OECD and non-OECD countries."

OECD said most of such restrictions stem from the Constitution’s 40 percent limit on foreign ownership in strategic industries and economic sectors like telecommunications, transport and electricity public utilities; agriculture, fisheries and forestry; construction; advertising; private radio networks and real estate.

OECD also noted that foreign investors have to meet $200,000 minimum capital requirement “which is among the highest worldwide” and “can constitute a serious obstacle for small foreign investors."

“Restrictions on FDI in the Philippines are high by both regional and global standards,” the report read.

OECD also cited the need to make the Philippines more FDI-friendly.

“Regional competitors for foreign investment are not standing still but are continuing with their reforms,” it said.

“All of this cautions against too great a sense of complacency in the Philippines.”

OECD also noted “the persistent under-investment in the Philippines is not limited to attracting FDIs since domestic investment is still low in spite of a booming economy.”

The report said “the challenge is not only to attract foreign investors but also to persuade domestic firms to invest and, above all, to ensure that the investment that arises helps contribute to inclusive and sustainable development”.

“Reforms in the Philippines all move in the right direction, but the reform agenda is not complete," OECD said. (FREEMAN)