3/11/2021 Philippines pushes to ease Asia's toughest foreign investment rules - Nikkei Asia

https://asia.nikkei.com/Economy/Philippines-pushes-to-ease-Asia-s-toughest-foreign-investment-rules 1/3

ECONOMY

Philippines pushes to ease Asia's toughest foreigninvestment rulesDuterte-backed overhaul faces opposition from entrenched conglomerates

Filipinos work at the assembly line of Taiwan-based Kinpo Electronics' factory in Malvar, Philippines. © Reuters

JUN ENDO, Nikkei staff writerMarch 11, 2021 11:13 JST

MANILA -- The Philippines is closer to loosening its strict rules on foreign directinvestment, long seen as hindering global companies looking to crack a largeSoutheast Asian market dominated by local conglomerates.

The Philippine Senate is poised to take up legislation amending three laws -- theForeign Investments Act, the Retail Trade Liberalization Act and the PublicServices Act -- that were approved by the country's House of Representatives lastyear.

3/11/2021 Philippines pushes to ease Asia's toughest foreign investment rules - Nikkei Asia

https://asia.nikkei.com/Economy/Philippines-pushes-to-ease-Asia-s-toughest-foreign-investment-rules 2/3

These changes would start to unwind what a 2019 Organization for EconomicCooperation and Development index shows to be Asia's most restrictive FDI rules.

"We remain committed to supporting liberalization to enhance our country'scompetitiveness," Ramon M. Lopez, secretary of trade and industry, said in aspeech on competition in late February. This means amending the ForeignInvestments Act and other laws, he said.

With little over a year left in office, President Rodrigo Duterte, who has clashedwith big conglomerates during his term, appears to be making a final push forgreater openness to foreign investment. But he wields more influence in the Houseof Representatives than in the Senate, where the legislation's fate remains unclear.

House Speaker Lord Allan Velasco, an ally of Duterte, also has proposed amendingthe country's constitutional restrictions on foreign investment, adding a clause forexemptions under special laws to provide more flexibility to ease rules. Velascoexpects to win approval by the end of May.

The Philippines protects domestic industry, in part by capping foreign ownership at40% in many fields under its constitution and related laws. Full foreign ownershipis permitted in retail, but heavy restrictions are imposed on paid-in capital andinvestment per store, discouraging entries. Local conglomerates, many family-owned, have grown to span industries including real estate, retail, andtelecommunications.

On Wednesday, the Philippine central bank reported that net foreign directinvestment in the country dropped 24.6% to $6.5 billion in 2020, marking the thirdconsecutive year of decline.

3/11/2021 Philippines pushes to ease Asia's toughest foreign investment rules - Nikkei Asia

https://asia.nikkei.com/Economy/Philippines-pushes-to-ease-Asia-s-toughest-foreign-investment-rules 3/3

Foreign businesses usually enter the Philippine market through joint ventures withlocal partners or franchise chains. But some express frustration over their lack ofmanagement control and the protection that local rivals enjoy. Japanese restaurantoperator Yoshinoya Holdings recently switched to a joint venture with localfast-food leader Jollibee Foods after a franchise network under a different partnerdid not grow as expected.

Previous administrations sought reforms to encourage foreign direct investment,but momentum faded after fierce opposition from industry. Achieving where pastgovernments failed would go down as an achievement for Duterte.

"The government has never been more serious about this issue than it is now," saidNobuo Fujii, a director of the Japanese Chamber of Commerce and Industry of thePhilippines.