Senate Bill No. 1156 under Committee Report No. 20
AN ACT PROMOTING FOREIGN INVESTMENTS, AMENDING THEREBY REPUBLIC ACT NO. 7042 OTHERWISE KNOWN AS THE “FOREIGN INVESTMENTS ACT OF 1991,” AS AMENDED, AND FOR OTHER PURPOSES
November 11, 2019 at 3:00 p.m. Session Hall, Senate of the Philippines
Delivered by HON. WIN GATCHALIAN, Senator of the Republic:
Mr. President, my honorable peers in the Senate, good afternoon.
Republic Act No. 7042, otherwise known as the Foreign Investments Act, was enacted in 1991 to invigorate the Philippine economy by substantially liberalizing foreign investment laws and policies. Foreign direct investments, or FDIs, are important to a developing country like ours as they provide tangible economic benefits in the form of technical expertise, technological transfer, foreign exchange from exports, employment, and higher tax revenues, among others.
At the time the Foreign Investments Act was passed in 1991, the law did a fair job in accomplishing its mandate to increase foreign investor access into the country. According to the Joint Foreign Chambers in a 2010 policy document, FDI accumulation in the Philippines grew from US$4.711 billion between 1990 and 1994, to US$11.183 billion between 2005 and 2009, representing a 237% increase over a 20-year period.
Despite this progress, we have the second lowest FDI accumulation figures among the ASEAN 6 from 2015-2017, according to the World Bank. Our FDI accumulation for that period stood at US$23.98 billion. Meanwhile, Singapore’s FDI accumulation for the same period stood at US$208.48 billion; Indonesia had US$45.79 billion; Vietnam had US$35.5 billion; and Malaysia had US$32.84 billion. Only Thailand recorded a lower FDI accumulation, at US$19.78 billion.
The Organization for Economic Cooperation and Development or OECD’s FDI Regulatory Restrictiveness Index for 2018 also lists the Philippines as one of the most restrictive countries in the world when it comes to FDI rules. Of the 68 economies covered by the index, the Philippines ranked among the most restrictive in terms of FDI rules in the business services, telecommunications, media, electricity, and transport industries, with a restrictiveness score way above the OECD average. We fared a little better in the financial services industry, although we still scored above the OECD average. All in all, the OECD found the Philippines to have the most restrictive FDI rules among the 68 economies included in the study, with an overall restrictiveness score almost six times higher than the OECD average.
It has been 28 years since the enactment of the Foreign Investments Act, yet our current foreign investment laws and policies are still relatively restrictive, standing in the way of economic attractiveness and employment opportunities. We remain a relatively unattractive investment destination, because our investment laws are less open and generally more inhibitory compared to those of our neighbors in the ASEAN. Given the current global and regional economic climate, there is a need to take a look at the Foreign Investments Act in its current form and face the fact that it may not be living up to its potential as a vital piece of legislation.
I am co-sponsoring today a measure that proposes to amend several provisions of the Foreign Investments Act, which will help us take advantage of global and regional economic dynamics. If passed into law, this bill will help make the Philippines more attractive as an investment destination, which, in turn, could open up more employment opportunities for the Filipino people.
The updated policy declaration puts a premium on the major role played by technological advancements as well as global and regional economic realities on the Philippine economy. The proposal also provides for a review mechanism over foreign investment transactions that threaten to impair national security, ensuring that the State does not take for granted national security issues in the name of gaining more FDIs. I also see that the Committee Report carries certain provisions which reflect the intent of my proposal under Senate Bill No. 919 on the establishment of a web portal that will serve as a central database and make it easier for investors to learn about the country’s pertinent laws, rules and regulations, and policies, including restrictions, on foreign investments. This will provide potential foreign investors access to what legal and practical issues they might need to face – sending a clear message that transparency and ease of doing business are as important to the State as it is to businesses and investors.
Taken together, these amendments will result in a foreign investment regime that is more fine-tuned to the changing economic climate and its accompanying demands. Our receptiveness to these changes may very well determine whether we can live up to our true economic potential or remain in the doldrums compared to our next-door neighbors.
While I reserve my prerogative to interpellate on some of the provisions of the Committee Report, I support this measure’s immediate passage. It is high time for our country to start enjoying the economic benefits that our neighbors have reaped from foreign investments for the longest time.
Thank you, Mr. President.