Legislative Amendments See Boost on Foreign Investments

According to Colliers, two legislative amendments will help boost foreign investments in the country.

Amendments to two existing laws – the Retail Trade Liberalization Act of
2000 and Public Service Act of 1935 – will further liberalize the Philippine economy and attract foreign investments, according to leading diversified professional services and investment management firm Colliers (NASDAQ and TSX: CIGI).

Republic Act (RA) No. 11595, which amended the Retail Trade Liberalization Act, was signed into law by President Rodrigo Duterte in December 2021, while Senate Bill (SB) No. 2094, which will amend the Public Service Act of 1935, is currently awaiting the president’s approval after it passed its third and final reading.

These two amendatory pieces of legislation are part of the three investor-friendly measures endorsed by the president and whose passage has been advocated by Department of Finance secretary Carlos Dominguez III and the chief executive’s economic team.

According to Jen Torres, Associate Director of Office Services – Tenant Representation, the easing of restrictions and requirements introduced to the Retail Trade Liberalization Act and the

Public Services Act will attract more foreign investors, which will generate new business opportunities and economic drivers across the country. \

“The potential economic growth generated by the liberalization of investment policies will also help the country recover from the Covid-19 pandemic by attracting more foreign capital.”

Under RA 11595, the minimum capital requirement for foreign retailers has been reduced from $2.5 million (approximately PHP125 million) to PHP25 million. The amendment also reduced the investment-per-retail-store requirement to at least PHP10 million per store.

Furthermore, RA 11595 repealed the requirements under Section 7 of the original law, which provided that all retail trade enterprises under Categories B and C in which foreign ownership exceeds 80 percent of equity should offer a minimum of 30 percent to the public through any stock exchange in the Philippines within 8 years from the start of operations.

The new law also encourages foreign retailers to have a stock inventory of products made in the Philippines.

On the other hand, SB 2094 seeks to ease the restrictions on foreign investments in public services. One of its salient amendments is the distinction made between “public services” and “public utility.”

Under SB 2094, public utility refers to a “public service that operates, manages, or controls for public use” any of the following:

• Distribution or transmission of electricity
•  Petroleum and petroleum products pipeline distribution systems
• Water pipelines distribution systems and wastewater pipeline systems
• Airports, seaports, public utility vehicles, and tollways or expressways

Those not classified as public utility shall be considered as public service, which under SB 2094 will not be bound by the restriction on foreign ownership. Public services include telecommunications, air carriers, domestic shipping, railways, and subways.

According to Torres, the potential influx of foreign businesses will potentially spur the office sector.

“These business entities will need to set up a local operating center or headquarters, which may lead to increased office demand in Metro Manila and other locations across the Philippines.”

Choosing Metro Manila as the first base of operations in the Philippines is a tried-and-tested formula for success, which will bode well for such new entrants. “We urge new entrants to explore office options in some of the country’s established business districts, such as Fort Bonifacio and the Makati CBD, both of which are home to top local corporations and multinational firms.”

“New entrants may also consider leasing opportunities in emerging localities, including Quezon City and the Bay Area, both of which offer a high inventory of new office supply, attractive rental rates, and
proximity to talent.”

With the flow of investments accelerating economic development in various areas across the country, Colliers believes that the economic opportunities created by the aforementioned legislative amendments will have a positive cascading effect on Philippine real estate and the livelihoods of many Filipinos.