As the amended Public Services Act (PSA) inches closer to enactment, the Philippine Competition Commission (PCC) assured that safeguards are in place to prevent abuse of market dominance and other anti-competitive practices.
PCC Commissioner Johannes R. Bernabe said at a media briefing on Thursday that the Philippine Competition Act (PCA) provides the much-needed safeguards to the measure that seeks to allow full foreign ownership in certain sectors, including transportation and telecommunication.
Meanwhile, the Joint Foreign Chambers (JFC) said it looks forward to the enactment into law of the amended PSA following the ratification of its bicameral conference committee version by Congress and Senate.
The PSA amendments separately ratified on Wednesday by both chambers seek to liberalize the economy by permitting 100-percent foreign ownership in sectors not listed as public utilities.
As a result, economic managers and lawmakers projected that foreign investments will increase by around P299 billion over the next five years.
The measure identified public utilities as follows: (1) distribution and transmission of electricity; (2) petroleum and petroleum products pipeline transmission systems; (3) water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems; (4) seaports; and (5) public utility vehicles.
“Of course, if there are acquisitions, which would then increase market concentration, then obviously, this would be subject to review,” Bernabe said.
It is the mandate of the antitrust agency to conduct reviews of mergers and acquisitions, which aim to assess if such transactions will result in substantially lessening the competition.
The PCC official also cited the provisions on abuse of market dominance, which refers to entities using their position to control the market.
Those found guilty of said anti-competitive practice could face a fine of up to P110 million.
“This, of course, entails the situation where in the future, if the foreign investor manages to acquire a dominant position in the market, there are certain constraints posted by our law in the way that conduct has to be undertaken so this does not constitute abuse of one’s market power,” he explained.
Rules vs dominance
PCC Chairman Arsenio Balisacan said they aim to release this year the rules and guidelines covering abuse of dominance.
“We would really want to complete all these pending cases as well as guidelines…before we end our term in January,” Balisacan said.
Meanwhile, Bernabe said that PCC being one of the agencies being consulted in classifying public utilities is also a safeguard. The National Economic and Development Authority (Neda) is the other.
“If there are certain sectors which suffer from a lack of competition in the first place, then we will be against having them included in the list of public utilities where foreign equity will be limited,” Bernabe said.
PCC Commissioner Emerson B. Aquende said the PCC is tasked with ensuring that the PSA amendments will bode well for the consumers.
“I think the challenge…for the PCC [is] to ensure that the expected benefits of liberalization will trickle down to the intended beneficiaries at the end of the day—and that is, of course, the consumers,” Aquende said.
In addition, he said that the reform should benefit not only the “upper echelon of the society” and business sector but the micro, small and medium enterprises as well.
“The ratification of the Public Service Act Amendments by Congress is a game changer for the Philippine economy. This landmark legislation opens up many public services markets to foreign investments,” Balisacan added.
Foreign biz groups
IN a statement on Thursday, the foreign business organizations under the JFC welcomed the recent move by the legislators as this allows PSA amendments to draw nearer its passage.
“The JFC expressed optimism that this game-changing law will be signed into law in the current Congress since the bill was certified as urgent for priority enactment by President Rodrigo Duterte,” they said. It can now be transmitted to Duterte for signing into law.
JFC said that the measure will “match policies” for foreign investments implemented by the country’s neighbors, including Singapore, Thailand, Vietnam and Indonesia.
THe PSA amendments are also parallel with the Asean Comprehensive Investment Agreement which took effect in 2012, it added.
“And it will allow the Philippines to better participate as a member of advanced plurilateral trade and investment agreements such as the Comprehensive and Progressive Transpacific Partnership and the Regional Comprehensive Economic Partnership,” JFC said.
The foreign chambers have been lobbying for the bill amending PSA, saying such will improve the quality of public services in the country. The restrictions in foreign ownership, they noted, have resulted in investments shifting to other countries instead.
“Before the pandemic in Southeast Asia, when over $100 billion of FDI a year flowed into the region, too little reached the Philippines, and neighboring competing economies moved ahead of the Philippines,” they noted.
The members of JFC, upon enactment of the measure, said they will update the companies from Australia, Canada, Europe, Japan, Korea, New Zealand, United States, among others, about the reform in a bid to boost investments further.
“Many firms from our countries have successfully invested in the Philippines and are fully aware of the great opportunities and advantages that the Philippines offers in a wide range of business activities,” JFC said.
“With enactment of the PSA amendments important new investment opportunities in telecommunications, most forms of transportation, and other public services will now be open, creating significantly larger foreign capital inflows in future years,” it added.
While PSA amendments will lead to more investments, House Ways and Means Chairman Joey Sarte Salceda said that it will also improve competition in the country, which is seen to benefit the consumers.
“The main economic benefit of the PSA amendments is that it provides local (and oligopolistic) players in key sectors with a credible threat of external competition. Credible threat of competition is seen as a pro-competitive measure that reduces monopoly or oligopoly power (to set prices or provide services at low quality) and encourages local players to improve efficiency,” he explained.
With PSA amendments in place, Salceda estimates a GDP growth rate that is 0.47 percentage point higher than the baseline.
“That’s just for key sectors, such as telecoms, domestic shipping, and railways. That does not yet include the small sectors, such as ice plants, marine repair, and irrigation,” he said.
As the country opens its industries to more competition, Salceda said the PCC must be ready to address potential anti-competitive practices from foreign entrants.
The Neda, he said, should craft a “very clear” implementing rules and regulations (IRR) for the review of investments by the President.
“The parameters have to be very clear, so that we do not create a cloud of uncertainty over the investment environment. Otherwise, a Presidential review on unclear grounds could create a chilling effect on investments,” he explained.