New law defines public utilities covered by foreign equity limit

By Benjamin Pulta

March 23, 2022, 4:05 pm

<p>Justice Secretary Menardo Guevarra <em>(File photo)</em></p>

Justice Secretary Menardo Guevarra (File photo)

MANILA – The new law amending the Public Service Act (PSA) recently signed by President Rodrigo Duterte now clearly defines which businesses are considered as public utilities that will remain covered by the restrictions on foreign capital enshrined in the Constitution, the Department of Justice (DOJ) said on Wednesday.

“The new law now clearly defines what public utilities are: electricity transmission and distribution, petroleum pipeline transmission, water and sewerage pipeline distribution, seaports, and PUVs (public utility vehicles). Their foreign ownership will continue to be limited by the Constitution (maximum of 40 percent of capital). All other public service industries will be liberalized, allowing foreign capital to the extent of 100 percent," DOJ Secretary Menardo Guevarra said in a message to reporters.

Under the amended PSA, telecommunications, railways, expressways, airports, and shipping industries will be considered public services, allowing up to 100 percent foreign ownership in these sectors.

Senator Franklin Drilon, the law's main proponent in the Senate, said the new law amends the more than eight decades old Commonwealth Act No. 146 and will pave the way for economic recovery.

Drilon said the amendment provides a clearer definition of public utilities, as he pointed out how the interchangeable use of "public utility" and "public service" has effectively barred the entry of foreign capital into the Philippine market.

While foreign ownership to these public utilities will remain restricted to a maximum of 40 percent, all other "public services" will no longer have foreign ownership restrictions.

Drilon, however, clarified that Republic Act 11659 does not translate to the deregulation of public services, as he underscored that all public services, including public utilities, are still subject to existing regulatory rules.

"These laws will stimulate the economy, promote competition in business, enhance the ease of doing business, and generate more jobs," Drilon said. (PNA)