|Rose Marie M King-Dominguez||Melyjane G Bertillo-Ancheta|
Government and policy-makers can do a lot to keep economic indicators in the black, by re-focusing on improving the transparency and stability of rules, and getting regulators to modernise their perspectives.
For many years, the Philippines has been trying to instill pro-foreign investment policies. Just this year, Republic Act 10641 was passed to allow foreign banks to acquire up to 100% of the voting stock of an existing domestic bank, an increase from the maximum foreign equity ownership of 60% set 20 years ago. The country has no choice but to seek the benefits of opening its economic doors. With the Asean (Association of Southeast Asian Nations) integration deadline drawing near, the Philippines must continue implementing measures under its commitments to the Asean Economic Community and for the country to benefit fully from economic integration.
But even as the Government tries to implement a more open and global imperative, some laws, or their interpretation and implementation, appear to be heading in the other direction. In a fairly recent Supreme Court case, the tribunal's discussions appear to question an ownership structure based on the control test that is provided for in the implementing rules of the Foreign Investments Act, favoured in a series of administrative opinions, and which many enterprises engaged in partially nationalised activities have relied on. This Supreme Court decision has decidedly confused these issues, and is a cause for concern for existing and prospective foreign investors.
While there are discussions on amending the Philippine Constitution to modernise restrictions on foreign equity ownership, they are getting embroiled in political issues, such as the question of a second term for the President. However, there is clearly a need to revisit at least some of these restrictions, such as that on mass media. With internet borderless transactions, and almost limitless access to foreign content becoming more pervasive, the rationale for the decades-old 100% Filipino ownership requirement for mass media has disappeared. But recent SEC opinions on the use of websites appear to say that only 100% Filipino-owned companies can own and operate websites since these disseminate information to the public (see, for instance, SEC-OGC opinion 14-06), a reading that the agency could not have meant. It is up to regulators to ensure that laws remain resilient, practical and useful, as the country enters a new year.
Rose Marie M King-Dominguez and Melyjane G Bertillo-Ancheta
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.