Construction sector calls for level playing field

Construction industry experts have cautioned against the unregulated entry of foreign contractors in the country as this will create undue disadvantage to a sector where 97 percent are micro, small and medium enterprises (MSMEs) and which employs around 4.2 million Filipinos.

The unregulated entry of foreign contractors was the main topic at the first panel of the Philippine Construction Arbitration Conference 2020 organized by the Philippine Institute of Construction Arbitrators and Mediators (PICAM).

 “This is the worst idea in the worst possible time,” said Divina Law Senior Partner Atty. Enrique dela Cruz Jr. who specialized in government contracts, particularly those involving public-private partnerships and build-operate-transfer projects.

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The industry, which claimed to be the biggest job generator of 4.2 million in the last ten years, was also among the worst hit by the pandemic-induced lockdowns with both public and private development projects brought to a complete standstill during the first two months of the community quarantine restrictions.

 Dela Cruz noted that the unrestricted market access of foreign contractors in the country will create undue competition against SMEs which comprised bulk of licensed contractors.

Commissioner Emilio Lolito Tumbocon of the Construction Industry Arbitration Commission (CIAC) noted that foreign contractors have actually been doing business in the country since the 1970s through joint venture arrangements.

“Strictly speaking, foreign contractors are here as we speak,” noted Comm. Tumbocon, adding that nearly 2,500 licenses on the average are issued to foreign contractors every year since 2015.

 However, he said these foreign contractors should have some “skin in the game” to really level the playing field as construction projects carry a 15-year warranty but it wouldn’t be easy for proponents to go after foreign contractors once they have finished the project even when something has gone wrong in the project.

Atty. Roberto Dio of the Philippine Dispute Resolution Center also pointed out that if these foreign contractors don’t have assets here in the country it would be hard to enforce judgment on them even in an arbitration case.

Dr. Ernesto de Castro, President and CEO of ESCA Inc., said this is the reason that an investment requirement for foreign contractors is needed to make sure that these foreigners have assets here.

Atty. Dio confirmed that there is no existing reciprocity agreement with the home base of these foreigners that would guarantee the same treatment for Filipino contractors who will do business in their countries. In fact, Atty. Dela Cruz noted that “no other country in the world allows foreign contractors’ unregulated market access.”

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 Comm. Tumbocon stressed that the Philippines should look at neighboring countries like Singapore, Malaysia, Indonesia and Thailand who all have a robust domestic construction industry as they encouraged joint venture agreements between local players and foreign companies, rather than allow the unrestricted entry of foreign contractors.

“They adopted best practices and seem to show that they were successful. Let’s not reinvent the wheel as we are in a catch-up mode. Their local construction industry has regulations to level the playing field. Let’s look at best practices and try to adopt them,” he concluded.

The discussion on the unbridled entry of foreign contractors arose following the decision of the Supreme Court to declare as unconstitutional a regulation by the Philippine Contractors Accreditation Board (PCAB) that governs the licensing of foreign contractors. The Office of Solicitor General has filed a motion for reconsideration of the high court’s order.

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Article and Photo originally posted by Manila Bulletin last November 30, 2020 6:30am and written by Bernie Cahiles-Magkilat.

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