The property sector is expecting a bonanza from the three pieces of business-related legislation recently signed into law as well as an executive order signed by President Duterte, all expected to open the floodgates to more foreign investments in the Philippines.
With the flow of investments accelerating the economic development of various areas across the country, leading professional services and investment management firm Colliers believes that the economic opportunities created by these amendments will have a positive cascading effect on Philippine real estate and the livelihoods of many Filipinos.
Republic Act 11595, which amends the Retail Trade Liberalization Act of 2000, reduced the minimum capital requirement for foreign retailers from $2.5 million (P125 million) to P25 million. The amendment also reduced the investment per retail store requirement to at least P10 million.
It also repealed the requirements under Section 7 of the original law, which provided that all retail trade enterprises under Categories B and C, in which foreign ownership exceeds 80 percent of equity, should offer a minimum of 30 percent to the public through any stock exchange in the Philippines within eight years from the start of operations. The new law likewise encourages foreign retailers to have a stock inventory of products made in the Philippines.
Colliers assistant manager of office services – tenant representation Vincent Bisuña noted that with these easing of restrictions, more foreign investors can be expected to engage in retail trade in the Philippines, which comes at an appropriate time as mall traffic and consumer spending gradually return to pre-pandemic levels.
In its latest report on the retail real estate sector, Colliers revealed that new retail space supply completed in 2021 reached 137,000 square meters, which is forecast to more than double annually until 2025.
RA 11647, meanwhile, which amends the Foreign Investments Act of 1991, allows for foreign ownership of micro, small and medium enterprises (MSME) with a minimum paid-in capital of $100,000, which is half of the original required amount stipulated in the original law.
In addition, the new law also mandates the creation of an inter-agency committee to promote and facilitate these foreign investments, adds safeguards at the disposal of the President to allay national security concerns, and institutionalizes the upskilling of Filipino workers employed by foreign businesses.
Bisuña said this law makes investing in the Philippines more attractive by lowering the required capital, will help break apart huge local players, and will help push the economy toward recovery.
Also signed into law was RA 11659, which amends the Public Service Act and eases restrictions on foreign investments in public services. One of its salient amendments is the distinction made between public services and public utility.
As amended, public utility is now defined as a “public service that operates, manages or controls for public use” of any of the following: distribution or transmission of electricity; petroleum and petroleum products pipeline distribution systems; water pipelines distribution systems and wastewater pipeline systems; as well as airports, seaports, public utility vehicles and tollways or expressways.
On the other hand, those not classified as public utility shall be considered as public service and will not be bound by the restriction on foreign ownership. This includes telecommunications, air carriers, domestic shipping, railways, and subways.
Colliers added that further boosting the promising effect of these three newly enacted laws is Executive Order 166 signed by President Duterte last March 23, which is a 10-point policy agenda aimed at accelerating the economy’s recovery from the COVID-19 pandemic.
The EO promotes a more resilient healthcare system, an accelerated vaccination program, the reopening of the economy and face-to-face classes, streamlined and less restrictive travel requirements, and the use of more relevant reporting metrics of the COVID-19 situation on the ground. All of these serve to sustain the country’s economic recovery and development trajectory through a whole-of-government approach to eliminate the pandemic’s long-term effects, Colliers said in its latest report.
The property consultant firm emphasized that these amendments introduced to the Retail Trade Liberalization Act, the Foreign Investments Act, and the Public Services Act will ease restrictions and requirements for investments, which in turn will attract more foreign investors who will generate new business opportunities and economic drivers across the country.
The 10-point economic recovery policy agenda of EO 166, on the other hand, will help accelerate the country’s recovery by sustaining current economic gains, minimizing the COVID-19 pandemic’s long-term adverse effects, and restoring development trajectory.
Bisuña pointed out that real estate will be one of the sectors that will benefit directly from these policy updates, adding that foreign entrants, should they decide to invest in the Philippines, will need to set up a local operating center or headquarters, which in turn will lead to increased office demand in Metro Manila and other provincial locations.
More foreign investments means more jobs for Filipinos. Increased activity in the property sector has a huge multiplier effect, considering the many industries and businesses that depend on it or linked to it.
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The article was originally published in PhilStar Global and written by Mary Ann LL. Reyes.
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