Albay Rep. Joey Sarte Salceda said the enactment of the Public Service Act amendments (PSA) will help create local jobs as well as reduce dependency on overseas Filipino workers.
Salceda, chair of the House ways and means committee and first principal author and principal sponsor of Bill 78, or the Public Service Act amendments made the statement as he confirmed the measure was transmitted to President Duterte’s office Monday and is expected to be signed by the President in the coming days.
Calling the reform “the most important economic reform since the CREATE Law,” Salceda says the reform “comes in handy as we are looking for growth that will not be debt-driven but investment-driven.”
“The PSA amendments will be very crucial for economic recovery. Our freed-up fiscal space will be limited due to COVID-19 debts. So, in place of government spending, we need another source of capital for our public investment needs. Foreign direct investments will help fill that gap,” Salceda said.
Salceda adds that the measure will be particularly important to “closing the country’s investment gap,” as the bill, once enacted, “will encourage investment in sectors that are essential to public welfare.”
The measure effectively opens up to 100 percent foreign equity all economic sectors in the country except the transmission and distribution of electricity, water pipeline, and sewerage, seaports, petroleum pipeline, and public utility vehicles.
Salceda said the measure is the closest that the country has been to overcoming the “growth overhang caused by the 1987 Constitution’s foreign equity restrictions.”
“Prior to these amendments, we were the only country on the planet to limit foreign equity in certain industries on the basis of implication. We just assumed that all public services are public utilities. The Constitution only explicitly limits foreign capital in the latter, not the broader category.”
“It’s a massive reform because it opens us to foreign capital. We need a lot of foreign capital. We have plenty of domestic talent, but they leave for abroad because the capital required to hire them is invested abroad.”
“It’s no surprise that we lag our neighbors behind in terms of foreign direct investment. We are the most restrictive economy in ASEAN, bar none. The PSA amendments change things massively.”
Salceda also said that he expects the proposal to yield “massive” impacts to job creation and investments.
“We expect an increase in FDIs by around P299 billion over the next five years from the final version the sectors that will be opened up as a result of the PSA amendments. We also expect gross value added (GVA) growth in these areas to cause a GDP growth rate that is 0.47 percentage points higher than the baseline,” Salceda said.
“On a practical level, the impacts could also be huge for the Filipino family. Why do other countries pay more for our labor, attracting OFWs? They have capital that we do not have for our own national
development. Abroad, our workers build public services with foreign capital on foreign soil. Why don’t we just bring the foreign capital here and let our workers build our own country with foreign investments instead?”
“I thus expect very strong jobs growth in telecoms, heavy transport, and other key public services as a result of foreign capital infusions due to the PSA amendments,” Salceda added.
“That will help encourage some of our OFWs to devote their skills and expertise in the country instead, because there will be more jobs that require their skills, without the added burden of having to leave their families,” Salceda said.
“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.”
“Empirically, certain sectors appear to be responsive to the threat of new sectors by trying to generate customer loyalty among existing clients through lower prices,” Salceda explained.
Salceda also described the bill as “a boon to consumers.”
“Apart from the fact that more competition means lower prices generally, we also imposed a provision that if public utilities and public services exceed the rates set by the regulators, they have to
refund the excess collections from the public, and also pay fines,” Salceda said.
“Now we have something squarely and explicitly in the law that will allow us to punish public services that charge excessive rates,” Salceda added.
“Consumers stand to benefit from the PSA amendments immediately. Of course, in the long run, we are also bound to create more jobs and maybe even be able to send many OFWs home, as we expect new FDI due to the reform to come from capital-starved public services.