COVID-19 response, reforms crucial in attracting FDIs

MANILA, Philippines — Policymakers should complement the health response to the pandemic with legislative reforms on the economy to sustain the first semester recovery in foreign direct investment (FDI), according to the Department of Finance.

DOF Undersecretary and chief economist Gil Beltran said yesterday the government should not only speed up the vaccination pace to achieve herd immunity, but also usher in investments reforms to attract FDIs during the pandemic.

“Moving forward, programs to make doing business easier and infrastructure investments will be key in attracting more investment into the country,” Beltran said.

According to the Bangko Sentral ng Pilipinas, FDIs  jumped by more than 40 percent to $4.29 billion in the first half from $3.05 billion a year ago. In June alone, the net inflow of foreign capital rose by over 60 percent to $833 million on new funds channeled into the country by multinationals.

The FDIs in the first semester were also six percent higher than the pre-pandemic volume of $4.05 billion during the same period in 2019. To preserve this momentum, Beltran said policies on foreign ownership should be revised as pushed for by the DOF.

Beltran also stressed the need to amend the Foreign Investment Act (FIA) of 1991, the 85-year old Public Service Act (PSA) and the Retail Trade Liberalization Act (RTLA) of 2000.

The Senate last week ratified the bicameral agreement to slash the capital requirement for foreign retailers to P25 million—around $500,000—from $2.5 million at present, under the RTLA.

On the other hand, senators have yet to pass their version of PSA amendments. In the proposal approved by the House last year, the PSA will limit the coverage of public utilities to distribution of electricity, transmission of electricity,  water pipeline distribution and sewerage pipeline.

As a result, industries that fall outside the definition like telecommunications can soon be owned and operated by foreigners, circumventing the constitutional ban on foreign ownership of public utilities. Opposition senators, however, hesitate to open up telco to external players on fears that national security may be compromised by their free rein.

Further, proposed changes in the FIA will take out the practice of professions from the negative list, permitting foreign professionals to work here with the hope that they share their knowledge with Filipinos.

Beltran said approving these economic reforms, along with speeding up the immunization pace, will bolster the country’s prospects of acquiring FDIs during the pandemic.