Govt may relax 60-40 rule to attract foreign investors

The government is mulling over a legislative amendment that will allow foreign companies to fully own investments in major restricted industries, though for a limited period, Trade Undersecretary Cristino Panlilio said Thursday. Panlilio was referring to proposed measures to relax the Constitution's "60-40" rule that limits foreign ownership of companies in the Philippines to 40 percent. “That’s what we are reviewing [to see] how we can have a legislative amendment through the [Legislative-Executive Development Advisory Council] or an executive order," Panlilio said, noting the possibility of allowing full foreign ownership for operating infrastructure projects since it will not be permanent. Foreign capital limits under the 1987 Constitution are among the reservations investors have about the public-private partnership (PPP) projects the Aquino administration has been offering, according to the Department of Trade and Industry (DTI). The DTI official said it might be possible to allow full foreign ownership for firms that will operate infrastructure projects because these will not be permanent. The DTI official said this is in the context of measures government is supposedly working on “to make our country even more foreign investor-friendly." In its Philippine Development Plan for 2011 to 2016, the Aquino administration seeks to achieve a 22-percent investment ratio by 2016 by attracting more foreign investors to the Philippines. Foreigners limited to 40 percent The Constitution restricts the ownership of public utilities to firms with at least 60 percent Filipino capital. The exploration, development, and utilization of natural resources through co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations also foreign ownership to 40 percent. The charter adds that these “agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law." However, Article XII, Section 10 of the 1987 Constitution provides that “Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. Investor-friendly In its Philippine Development Plan for 2011 to 2016, the Aquino administration seeks to achieve a 22-percent investment ratio by 2016 by attracting more foreign investors to the Philippines. In lieu of allowing higher foreign capital in strategic industries, the government has been offering packages of incentives through the Investment Priorities Plan (IPP) approved by the Board of Investments, an agency under the DTI. The IPP for 2011, which takes effect next week, has 13 preferred sectors which include energy, infrastructure, PPP projects, and shipbuilding. The IPP specifies the industries that qualify for tax perks which includes an income tax holiday and duty-free importation of capital equipment, among others. The General Policies and Specific Guidelines for the IPP will be published next July 27 and will be in place by the same date. The BOI said the tax holidays are not just for big-ticket projects under the 2011 IPP but will also include incentives for the micro, small and medium enterprises. However, in the latest batch of BOI-approved projects, foreign investors pledged to invest only P11 billion compared to the record P193 billion Filipino investors have committed. The Netherlands topped the list of country investors with P4.5 billion, followed by Japan (P1.2 billion) and the United States (P734 million). — BC/PE/ELR/VS, GMA News