The Office of the Solicitor General has warned the Supreme Court of the adverse impact on the economy of its recent decision allowing foreign construction firms to secure a regular license to engage in any private or government project here.
Solicitor General Jose Calida sought the reversal of the high court’s March 10, 2020 decision, which upheld a lower court ruling declaring void a provision in the Implementing Rules and Regulations of Republic Act 4566, which classifies the licenses that may be issued by the Philippine Constructors Accreditation Board.
The chief state lawyer said the decision was untimely considering the effect of the COVID-19 pandemic on the unemployment rate.
Calida says the decision will open the door to more participants in the construction market, which accounts for 10 percent of the Philippines’ total employment.
He says foreign contractors usually bring their own nationals to work on their projects, hence denying Filipino workers of employment opportunities
He cited the projects being undertaken by Chinese contractors where they employ their own nationals.
“The entry of foreign contractors with their undue advantage will not only displace current professionals and workers in the industry, but will reduce the employment opportunities for returning Filipino Workers,” Calida said.
“Undeniably, MSMEs [micro, small and medium enterprises] comprising 97 percent of the registered contractors who are reeling from the debilitating effects of the pandemic will further be subjected to foreign competitors whose wider supply chain networks and support from their respective governments will put them at a disadvantage.”
Calida says issuing regular licenses to foreign contractors will result in the unbridled influx of foreign contractors.
The Philippines’ leading construction groups, including the Philippine Constructors Association Inc., Cebu Contractors Association Inc., and Davao Constructors Association Center Inc. have backed Calida’s motion for reconsideration.
In its March 10 decision, the high court declared as unconstitutional Section 3.1 of the Implementing Rules and Regulations of Republic Act 4566, the law creating the Philippine Licensing Board for Contractors.
That provision classifies the licenses that may be issued by the PCAB to contractors into regular and special licenses.
Under Section 3.1 of the contractors’ license law’s IRR, companies with at least 60 percent Filipino equity participation may be granted a regular license, which gives them continuing authority to engage in many contracting activities in one year. Foreign firms can only be granted a special license and they need to have a separate license for each contract activity.
However, the high court declared that such provision was “a deterrent to the foreign players in the construction industry.”
It also agreed with the opinion of the Philippine Competition Commission that nullifying the nationality requirement in the licensing scheme would level the playing field for local and foreign firms to undertake construction activities in the Philippines.
The OSG says the PCAB actually welcomes the entry of foreign contractors into the country, thus the IRR recognizes the issuance of special licenses to address the current demands for the Philippines to be globally competitive and balance the participation of foreign contractors.
In fact, the OSG says, Section 3.1 of the IRR was subsequently amended to allow the issuance of “regular license with annotation” to foreign firms with a capitalization of at least P1 billion.
The OSG insisted that foreign contractors should compete with the local industry under the “proper regulatory measures provided by the PCAB,” and that locally funded low-cost projects that require no technical expertise or new technology should be reserved for local MSMEs, which comprise 97 percent or 15,061 of all 15,533 licensed contractors in the country.
“Should the assailed provision in the IRR be nullified, the easier entry of foreign contractors will allow foreign contractors to compete with local MSME contractors in relatively smaller projects,” Calida said.