“We note that universal banks are already authorized to offer services that may be performed by investment houses such as underwriting, investment management and similar services… We believe it is thus appropriate that the investment house sector itself be further liberalized consistent with the objectives of Senate Bill 2517,” the JFC said in its joint statement of support, which was sent to the Senate Committee on Economic Affairs during Tuesday’s hearing.An administration priority measure, Senate Bill No. 2517 seeks to permit foreign nationals to hold 100% of these types of companies by amending Republic Act (RA) No. 7042, otherwise known as the Foreign Investments Act of 1991.“Allowing foreign entities to own up to 100% of a domestic investment house will support underwriting and capital raising activities of local companies, especially in foreign markets,” the JFC added.
This change in the permitted capital structure for investment houses, according to the JFC, would benefit the Philippines in terms of additional direct foreign investment and employment, linkages with global and regional markets, and transfer of knowledge and technology.
RA 7042 formulated the Foreign Investment Negative List (FNL), which identifies the activities or areas where ownership by foreign entities is limited by the Philippine Constitution or other specific laws.
The proposed measure however restricts full ownership to foreign nationals from countries that offer reciprocal freedoms to Filipino nationals.
The Securities and Exchange Commission (SEC),as well as the Insurance Commission, have also expressed their support for the proposed law authored by Senator Joseph Viktor G. Ejercito.
“The SEC supports the senate bill which seeks to remove and amend the investment restrictions and special laws governing adjustment companies, lending companies, and financing companies more specifically on the last two because there are the companies under the jurisdiction of the SEC,” SEC Director Justina F. Callangan said during the same Senate hearing.
Ms. Callangan said that the measure will attract foreign investors and multinational companies, thereby generating employment opportunities while exposing local professionals to international best practices.
For her part, lawyer Joan Castro of the Insurance Commission said the agency also supports the bill, specifically on the provision on the removal of the 40% ownership of foreign companies — but held off on submitting an official statement pending clearance from its parent agency, the Department of Finance.
“Such liberalization will enable the country to comply with the ASEAN [Association of Southeast Asian Nations] economic community commitments and increase the competitiveness of the country’s adjustment industry,” Ms. Castro told lawmakers during the hearing.
Meanwhile, representatives of the Bangko Sentral ng Pilipinas (BSP) said they are still reviewing the provisions of the proposed law to ensure they do not clash with existing regulations.
The Board of Investments of the Department of Trade and Industry has also expressed support for the goal of the legislative measure but also sought more time to examine the proposed law.
Mr. Ejercito said that the measure is targeted for passage during the current session of Congress, along with the other priority bills in the Senate’s legislative agenda aimed to improve the flow of foreign direct investment (FDI).
“I think this is in line with the other measures which seek to improve foreign direct investment. Our ratings are good but we are still lagging in foreign direct investment compared with our neighbors. These measures are aimed at improving that,” Mr Ejercito said in a chance interview with BusinessWorld.
According to BSP data, net FDI inflows to the Philippines totaled $4.875 billion as of the third quarter of 2014, compared to Singapore’s $58.202 billion, Indonesia’s $19.219 billion, Thailand’s $14.064 billion, and Malaysia’s $8.130 billion.