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‘Keen’ European interest in shipping after foreign ownership cap removed

By Alyssa Nicole O. Tan, Reporter

THE SHIPPING and telecommunications industry are likely to receive increased European investment following the passage of a law that removes the 40% foreign equity cap in various industries, according to the European Chamber of Commerce (ECCP).

Republic Act 11647, which amends the 85-year-old Public Service Act, now allows 100% foreign ownership in airports and airlines, subways and railways, telecommunications, domestic shipping, and tollways and expressways after these industries were excluded from the definition of public utility. 

ECCP President Lars Wittig told BusinessWorld in a video call that “when it comes to shipping, we already know that the interest is keen, actually, I will say extreme.”

Despite the “abnormally high” freight rates in the Philippines, Mr. Wittig said some of the largest international shipping companies still had access to domestic freight.

Freight charges have already gone up by an average of 25% this year, reflecting the impact of higher oil prices.

In the year to date, fuel prices have risen by a net P13.95 per liter for gasoline, P27.50 for diesel, and P20.80 for kerosene.

The presence of foreign companies here is a token of their enthusiasm, Mr. Wittig said, “because they had to go through a lot of challenges in order to get the advantages that they already had before the Public Service Act was signed.”

This was possible because of their size, as well as decades of operations which allowed them to find ways to work around obstacles. However, Mr. Wittig said that it was still better to have an open market.

“We want everybody, without any limitation, to be able to do it, not just the biggest because they have the money to find a way,” he said.

“It has to be equal, fair, even playing field for everybody — foreign and local alike, not just a few foreign and all the locals,” he added.

Mr. Wittig said foreign interest in telecommunications was apparent from the 2018 bid to become the third player in the telecommunications industry.

Dito Telecommunity Corp., formerly known as Mindanao Islamic Telephone Company, Inc. (Mislatel), won after the two other contenders were disqualified. The consortium was granted a certificate of public convenience and necessity, as well as six radio frequency bands.

“There were multiple European telco providers that came here… but none of them won the tender, also because many of them didn’t even submit their proposal. Why? Because of the 40% ownership cap,” he said.

”Forty percent into something like telco is a massive investment, but it’s not enough ownership to control your own destiny. And therefore, that was won by the Chinese,” he added, referring to Dito’s Chinese investor, China Telecom.

Now that the Public Service Act has been passed, European telecommunications companies have indicated renewed interest, he said.

“They are very eager to return now and give it another try, and they will be dead serious about it. I guarantee you,” Mr. Wittig said..

“I also believe personally they will succeed in doing this,” he added.

The law “basically eliminates the Chinese providers,” Mr. Wittig said, referring to a provision that prohibits foreign state-owned enterprises from investing in any public service classified as a public utility or critical infrastructure.

“The Public Service Act, that which is really about national security, will allow the country to be equally safe in case of war,” he added.

The Philippines, however, will have to ensure acceptable implementing rules and regulations are in place to make the most out of the newly passed law, he said.

“We need to advance the current movements in the legal system by changing the implementation of rules and regulations on foreign ownership,” he said, noting that it is the country’s constitution that “prevents foreign companies from eroding resources for their gain in the Philippines.”