60-40 ownership rule hit anew

Categories: Business Updates

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Date: 18 Jun 2014

Written by Lenie Lectura


British companies are seriously looking at pouring more money into the Philippines, provided the government will relax the restrictions on foreign ownership of companies in certain industries, the United Kingdom (UK) mission to Manila said.

UK Trade Envoy to the Philippines George Freeman and British Ambassador to Manila Asif Anwar Ahmad told Energy Secretary Carlos Jericho L. Petilla that British companies are particularly concerned with the ownership rule, which prevents foreign companies from owning more than 40 percent of firms in the country in sectors on the Foreign Investment Negative List as prescribed by the Constitution and other specific laws.

Ahmad and Freeman made a courtesy call on Petilla on Tuesday.

They said a number of British companies would want to invest or continue investing in the Philippines because of its huge potential, particularly in energy-related projects.

Leaders of international and local business chambers are also calling for the easing of rules on foreign ownership.

“We see a very big growing market here. The growing Philippine economy presents a big market for UK energy firms,” Freeman said.

But before making an investment decision, Freeman pointed out that shareholders do take into consideration the stability of the market and regulatory regime, including the foreign-ownership limitation.

He said these are vital considerations needed to attract UK firms into the country.

“You need certainty of ownership and be able to convince financiers that the project is secured for the long term. To promote that, we need to revisit the 60-40 rule,” Freeman added.

Freeman and members of the UK trade delegation paid a courtesy call on different government agencies, including the DOE. The delegates intend to forge commercial partnerships and explore opportunities to provide relevant valued-adding energy solutions.

Its mission is to meet with potential partners and clients in the oil and gas, renewable-energy and energy-efficiency sectors, as well as hold discussions with the government on possible collaboration for projects with local government units.

Energy security and climate change are also of mutual interest, with world energy demand expected to increase by 34 percent by 2035. In the country, energy demand is growing at about 5 percent per annum.

Freeman and Ahmad said the UK has world leading expertise and extensive capabilities across the energy secto—from renewable energy to the oil and gas sector. The UK, they added, is committed to produce 15 percent of its energy from renewable sources by 2020.

During their visit, Petilla said the UK officials’ concern is something that needs to be looked into by the proper agencies because renewable-energy (RE) projects are more capital intensive compared to conventional power plants.

“They are really just looking at RE projects, which can be owned 100 percent by foreign firms, something that  our legislators can look into. Solar and wind energy projects are all capital intensive than coal or gas-fired plants and we need foreign investors for these projects. So, to get that, we have to revisit the 60-40 law,” Petilla said. Chairman of the House Committee on Energy and Oriental Mindoro Rep. Reynaldo Umali, who was also present at the DOE office, said there is a proposed bill that may address the UK officials’ concern.

“Congress filed a resolution, which intends to change precisely the [60-40 rule] by adding just five words and these are ‘as maybe provided by law,’ and this will open a lot of possibilities to address the concerns of foreign investors,” Umali said.

The constitution restricts the ownership of public utilities to firms with at least 60-percent Filipino capital. The ownership restriction also covers exploration, development, and utilization of natural resources through co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations.


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