Duterte signs amended Public Service Act allowing full foreign ownership of telcos

ABS-CBN News

Posted at Mar 21 2022 08:14 PM | Updated as of Mar 23 2022 05:08 PM

President Rodrigo Duterte talks to the people after holding a meeting with key government officials at the Arcadia Active Lifestyle Center in Matina, Davao City on March 15, 2022. Joey Dalumpines, Presidential Photo
President Rodrigo Duterte talks to the people after holding a meeting with key government officials at the Arcadia Active Lifestyle Center in Matina, Davao City on March 15, 2022. Joey Dalumpines, Presidential Photo

MANILA (UPDATE) - President Rodrigo Duterte on Monday signed into law the amendments to the Public Service Act (PSA) which redefine what sectors are considered public utilities, and thus allow full foreign ownership of telecommunications firms. 

Proponents of the measure have said that it will boost foreign direct investments and fuel economic recovery following the disruptions of the COVID-19 pandemic. 

"I believe that through this law, the easing out of foreign equity restrictions will attract more global investors, modernize several sectors of public service and improve the delivery of essential services," Duterte said during the signing ceremony. 

"Indeed, the enactment of this amended law, as well as the amended Foreign Investments Act, shall help stimulate the economy, especially for local businesses," he added.

Republic Act 11659 amended the 85-year old PSA and identified the following as public utilities, which are subject to a 40 percent foreign equity cap. 

  • Distribution of electricity
  • Transmission of electricity
  • Petroleum and petroleum products pipeline transmission systems
  • Water pipeline distribution systems and wastewater pipeline systems, (including sewage pipelines)
  • Seaports
  • Public utility vehicles

Any industry not included in the list will remain as public services and will be liberalized, the measure said.

Prior to the amendment, foreigners were restricted from full ownership of companies considered to be public utilities, which include telecommunications firms. 

Analysts say this has stunted investment in telcos and resulted in a duopoly that is disadvantageous to consumers.

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Besides telcos, domestic shipping, railways and subways, airlines, expressways and tollways, and airports are also excluded from the definition of public utility and can thus be 100 percent owned by foreigners. 

"Foreign nationals should not be allowed to own more than 50 percent of the capital of the entities engaged in the operation or management of critical infrastructure unless the country of such foreign national accords reciprocity to Philippine nationals as may be provided by foreign law, treaty, or international agreement," the measure's reciprocity clause read. 

"Reciprocity may be satisfied by according rights of similar value in other economic sectors," it added.

Under the new law, a critical infrastructure is a public service that owns and operates assets that is considered "vital" in the country that once it is crippled or destroyed, its systems would have a "detrimental impact to national security." This includes telcos, it said. 

Duterte said the amendment would "lead the path to economic recovery amid the COVID-19 pandemic" while providing the public more choices, better services, and lower prices. 

The measure will generate more jobs and allow the exchange of skills and technology with the country's foreign partners, he added. 

Major local business groups, as well as foreign chambers, backed the measure.

— Art Fuentes, Job Manahan, and Wena Cos, ABS-CBN News

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