DOST exec calls for revision of rule on foreign ownership

CEBU, Philippines - A key official from the Department of Science and Technology urged Congress to change a provision in the  Constitution that limits foreign ownership of companies in the Philippines to 40 percent.

Monchito Ibrahim, deputy executive director of DOST-Information and Communications Technology Office, said  such amendment in the 1987 Constitution will specifically benefit the  telecommunications industry.

"We need to actually change that (provision)," Ibrahim told a forum yesterday on investing in technology and telecommunications in Cebu City organized by Cebu Business Club.

"Our direction is to convince Congress to change that," he said.

Ibrahim said that scrapping the restriction on foreign ownership especially in utility companies will create a more "open" environment for investors.

The DOST official emphasized the telecommunications sector needs more players because it is a very capital-intensive industry.

For instance, Ibrahim cited the planned entry of Australian telecoms giant Telstra Corp. Ltd. into the Philippine industry through a wireless joint venture with San Miguel Corp.

He said that Telstra-SMC's entry will benefit the industry by creating tougher competition which will hopefully result to improved services offered by telecoms companies.

He noted the cost of Internet services would possibly go down as a result of the competition.

Presently, the Philippines telecoms industry is dominated by Philippine Long Distance Telephone Co. and Globe Telecom.

Global credit rater Fitch Ratings had said it expects the potential entry of Telstra and SMC "to have limited impact on the domestic competition in the next two years."

"Large cash burn is likely for the new entrant in the initial period, as it will face significant capital outlay to build its network in the absence of mandatory infrastructure sharing. However, we believe the impact on industry profitability may be greater over the longer term," Fitch had said in a previous statement.

Fitch said the entry of a third player will intensify industry competition over the longer term.  (FREEMAN)