Philippines: Foreign ownership cap limits PPP progress in PH: ADB

  • The prevailing 40% limit on foreign ownership is preventing the Philippines from pursuing more public-private partnership (PPP) in infrastructure development, the Asian Development Bank (ADB) said in a new report.
  • In its recently released PPP Monitor, the multilateral development bank said this may restrict competition and ultimately inhibit infrastructure development.
  • “The current limit of 40% of foreign ownership in the PPP project company in infrastructure projects restricts competition and, in some ways, can inhibit Philippine infrastructure development,” the report said.
  • In terms of market maturity, majority of the PPP projects that have reached financial closing in the Philippines are in energy sector (65%), the report said. The transportation sector also has a sizeable share (23%) but the other sectors vital to the growth of basic economic sectors have smaller shares: Information and Communication Technology (ICT) (6%), water (5%), social infrastructure (2%), it said.
  • The ADB said the handling of municipal solid waste has not been receiving large investments from the private sector because of various constraints such as the short tenure of local government executives and the lack of capacity of local government units (LGUs) to undertake PPP transactions.
  • The government is in the process of easing foreign ownership limitations in various industries with the goal of spurring competition and creating more jobs.
  • The 11th Foreign Investment Negative List, for instance, is now under review by Malacañang and is expected to be signed before end-2017. The list is expected to ease restrictions on foreign participation in at least eight areas that include construction, practice of professions, retail and trade, utilities and education.
  • President Duterte also signed on 21 Nov 17 a memorandum order directing government agencies to fast-track the determination of other business sectors that can be opened up to foreign participation both through administrative means or through the amendment of pertinent laws.
  • Socioeconomic Planning Secretary Ernesto Pernia earlier said Malacañang favors raising to 70% the foreign ownership cap in public utilities like telecommunications and water.
  • Raising the foreign ownership limit for public utilities, however, would require the amendment of the Public Service Act which prohibits majority ownership by foreign entities in public utilities.

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