Transforming the Philippine Economy New Era of Foreign Investment with Revised Public Service Act

The recent amendments to the Public Service Act (PSA) in the Philippines mark a significant shift in the country’s approach to foreign investments and economic development. These changes are lauded as a monumental step towards liberalizing the nation’s economy, especially by foreign business groups and the Philippine Competition Commission (PCC).

Key Highlights of the PSA Amendments:

1. Definition of Public Utilities: The amendment provides a clear definition of what constitutes a ‘public utility.’ Only specific sectors are now categorized as public utilities and subject to a 40% foreign equity restriction. These include the distribution and transmission of electricity, petroleum and petroleum products pipeline transmission systems, water and wastewater pipeline systems, seaports, and public utility vehicles​​.
2. Lifting of Restrictions: For sectors not classified as public utilities, the amendment allows up to 100% foreign equity. This significant change is expected to spur global capital investments and bring new ideas to various public service sectors. Sectors like telecommunications, railways, subways, tollways, expressways, and airports, which are no longer classified as public utilities, stand to benefit greatly from this relaxation of restrictions​​​​.
3. Economic Recovery and Competition: These amendments are seen as crucial to economic recovery, particularly in the post-COVID-19 context. They are expected to boost competition in public service, leading to lower prices, better quality, and more choices for consumers. Additionally, they promise to promote job growth and accelerate technology transfer​​​​.
4. Regulatory Aspects: Despite the liberalization, certain regulatory requirements remain. For instance, the sale or transfer of shares resulting in foreign ownership of more than 40% in public service corporations still requires prior approval from relevant administrative agencies. These measures ensure a degree of oversight and compliance with national standards​​.

The amendments to the PSA are seen as a game-changer for the Philippine economy, potentially aligning it with other more open economies in Southeast Asia. The liberalization of foreign investment restrictions is expected to attract more foreign direct investments, create jobs, and improve the overall quality of public services. This shift represents a major advancement in the country’s economic policy, aiming to make the Philippines a more competitive and attractive destination for global investors.