To put foreign contractors on equal footing with their local counterparts, drive down costs in the construction industry, and bring in new technology, Senator Win Gatchalian wants to amend the 54-year-old Contractors’ License Law.
Gatchalian has recently filed Senate Bill No. 1008, which the lawmaker said seeks to amend Republic Act (RA) No. 4566 to promote competition and investments in the construction contracting services industry. The bill, according to the lawmaker, will help foster true competition in government public works projects by liberalizing the entry of foreign contractors into the industry.
“The construction industry plays a vital role to national economic development as a provider of production inputs and as a consumer of services and products from other sectors,” Gatchalian said. “However, the nationality requirement in the granting of licenses has created a substantial barrier to entry of new contractors, thereby hindering the growth of the construction industry.”
“Essentially, these government restrictions on foreign participation in the construction industry create distortions that reduce competitive pressure, reward poor performance, and distort incentives to innovate,” he added.
Should SBN 1008 become law, the nationality requirements in granting licenses to new contractors will be removed.
Furthermore, the bill inserts a new Section 17 to RA 4566, which states that persons, regardless of nationality or citizenship, properly licensed and registered with the board may be allowed to practice construction contracting in the country.
The bill also adds a reciprocity clause wherein foreign contractors may only be allowed to practice construction contracting if Filipino contractors are also allowed to operate in their respective countries.
“The Philippine government has to balance the need to supervise and regulate the construction industry for public safety with the need to ensure a level-playing field that would generate growth due to considerable scope for learning-by-doing, knowledge generation, expansion of product variety, and an upgrade on product quality in the construction industry,” Gatchalian pointed out.
“This proposed bill seeks to provide a level playing field and extend equal opportunities to eligible and qualified domestic and foreign contractors by removing barriers to entry of new players, including government restrictions that hinder potential economic growth,” he added.
Gatchalian stressed that the Philippine Competition Commission shares his view of giving foreign investors equal footing in the construction contracting services industry.
In an amicus curiae filed with the Supreme Court, the PCC expressed its discontent over a provision in the implementing rules and regulations of the current Contractor’s License Law which allows the Philippine Contractors Accreditation Board to license local contractors on a yearly basis, while requiring foreign contractors to obtain a new license per project. For the Commission, this constitutes unfair competition as it creates a barrier to the entry of new players, and thus should be nullified.