DTI’s Lopez backs foreign ownership limits for small construction firms


TRADE Secretary Ramon M. Lopez is seeking to retain restrictions on foreign ownership for smaller businesses in the construction sector.

A recent Supreme Court ruling reduced restrictions on foreign entities in the construction industry, voiding the nationality requirements in contractor licensing rules set by the Philippine Contractors Accreditation Board (PCAB).

The case was based on the board’s denial of Manila Water Co.’s application to accredit its foreign contractors.

Mr. Lopez, who chairs the board of the Construction Industry Authority of the Philippines, said the ruling would encourage more foreign investment.

However, he said contracting businesses with capital of less than P100 million should be reserved for Filipino ownership.

For micro, small and medium-sized enterprises, “we can still hopefully give a certain level (reserved) for Filipinos,” he said at a Senate budget hearing Monday.

“But the large (businesses) obviously will be open to more competition and allow more foreign players… the other concern… is also guaranteeing the work and having traceability and we can run after the contractor (if there are problems),” he added.

Persons licensed with the PCAB would be able to practice construction contracting in the Philippines, regardless of citizenship or nationality, under House Bill (HB) No. 7337.

HB 7337 seeks to amend Republic Act (RA) 4556 or the Contractors’ License Law.

The Implementing Rules and Regulations of RA 4556 limits construction industry business ownership to Filipinos, approving licenses to contractors that are either Filipino sole proprietorships or 60% Filipino-owned.

House Committee on Trade and Industry Chair and Valenzuela representative Weslie T. Gatchalian in his sponsorship speech for HB 7337 said that the implementing rules do not promote competition, creating barriers for foreign contractors.

But Minority Leader Bienvenido M. Abante, Jr. said that the unregulated entry of foreign contractors would hurt small and medium-sized Filipino contractors, and could lead to a decline in job opportunities for Filipinos.

The Philippine Competition Commission (PCC) in a statement on Sept. 15 supported the Supreme Court ruling.

“With the regulatory barrier struck down, competition among contractors should fall squarely on merit and not based on undue advantage based on nationality alone,” the commission said.

The decision could encourage the entry of more contractors that price their products competitively and offer more options to consumers, PCC added.

Mr. Lopez said that the private sector is working on an appeal for reconsideration of the Supreme Court ruling. — Jenina P. Ibanez

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