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The government warned the Supreme Court of the adverse impact on the country’s economy of its recent decision that allows foreign construction companies to obtain a regular license to participate in any private or government project in the country.
Thus, Attorney General José Cálida requested the revocation of the decision of the Court of March 10, made public on August 26, ratifying a resolution of a court of first instance declaring null a provision in the execution regulations (TIR) Of Republic Law 4566, which classifies the licenses that can be issued by the Philippine Builders Accreditation Board (PCAB).
GSO argued that the decision is untimely, considering how the Covid-19 pandemic has worsened the unemployment rate.
Calida said the decision would open the door for more players to enter the local construction market, which represents 10 percent of the country’s total employment.
He noted that foreign contractors often bring their own nationals to work on their projects, thus denying Filipino workers employment opportunities.
Calida cited projects being carried out by Chinese contractors, where they employed their own citizens.
Undue advantage
“The entry of foreign contractors with their undue advantage will not only displace current professionals and workers in the industry, but will reduce employment opportunities for Filipino workers returning abroad,” Calida emphasized.
“Without a doubt, MSMEs [micro, small and medium enterprises] comprising the 97 percent of registered contractors who are recovering from the debilitating effects of the pandemic, they will also be subject to foreign competitors whose broader supply chain networks and the support of their respective governments will put them at a disadvantage, ”he added. .
Likewise, GSO said that allowing the issuance of regular licenses to foreign contractors would mean an unbridled influx of foreign contractors to the detriment of local MSMEs.
GSO’s position was supported by the country’s leading construction groups, including Philippine Constructors Association Inc. (PCA), Cebu Contractors Association Inc., and Davao Constructors Association Center Inc. They joined their members and partner organizations in presenting three motions. separate reconsideration. -in intervention in the case of PCAB against Manila Water Co. Inc.
In its March 10 decision, the Court declared unconstitutional Section 3.1 of the Implementing Rules and Regulations (IRR) of Republic Law 4566, the law creating the Philippine Contractor Licensing Board.
This provision classifies the licenses that the PCAB can issue to contractors into regular and special licenses.
Under Section 3.1 of the TIR of the Contractor Licensing Act, companies with at least 60 percent Philippine equity participation can obtain a regular license, which gives them the continuing authority to engage in many contracting activities for a period of time. one year period. Foreign companies can only be granted a special license, and they must have a separate license for each contractual activity.
However, the CS stated that such provision was “a deterrent to foreign players in the construction industry”.
He also agreed with the opinion of the Philippine Competition Commission (PCC) that the repeal of the nationality requirement in the licensing scheme would level the playing field for local and foreign companies to undertake construction activities in the Philippines.
GSO said that the PCAB really welcomes the entry of foreign contractors into the country; therefore, the TIR recognizes the issuance of a special license to address current demands for the Philippines to be globally competitive and balance the participation of foreign contractors.
In fact, GSO said that Section 3.1 of the IRR was later amended to allow the issuance of “regular license with annotation” to foreign companies with a capitalization of at least P1 billion.
Still, OSG insisted that foreign contractors must compete with local industry under “adequate regulatory measures provided by the PCAB” and that locally funded low-cost projects that do not require technical expertise or new technology should be reserved for MSMEs. local, which comprise 97 percent or 15,061 of the 15,533 licensed contractors in the country.
“If the provision attacked in the TIR is annulled, the easier entry of foreign contractors will allow foreign contractors to compete with local MSME contractors on relatively smaller projects,” warned OSG.
No barrier
He disputed the argument that the regulation deters foreign players from entering the country.
Citing PCAB records, GSO said that a significant number of foreign companies were allowed to participate in national government and private construction projects.
From July 2015 to December 2019, PCAB issued a total of 12,932 special licenses and 221 of them were issued to wholly owned foreign companies. Of the total, 12,448 and 263 special licenses were issued for joint ventures (75% foreign and 25% Filipino) and consortia (40% foreign and 60% Filipino), respectively.
For the same period, foreign construction companies participated directly and won local projects worth a total of P1.1 billion.
The data also showed that contractors who received special licenses were able to participate in local projects with a total value of almost P2.98 trillion, representing 25.86 percent of total GDP by spending.
“Clearly, actual foreign participation contradicts the conclusion that Section 3.1 of the IRR of RA 4566 is effectively restrictive rather than purely regulatory. Such a conclusion is simply based on incomplete or outdated information presented by the PCC to demonstrate that the attacked regulation tends to deter the entry of foreign players into the construction industry, ”emphasized the GSO.
Stakeholders from the local construction industry also asked the Court to allow them to intervene in the case, as they are likely to be adversely affected by the ruling.
Among them are CM Pancho Construction Inc., EEI Corp., DATEM Inc., DM Consunji Inc., Will Decena and Associates Inc., DDT Konstract Inc., IPM Construction and Development Corp., First Balfour Inc., New Kanlaon Construction , and TRM Construction and Development Corp., all members of the PCA.
Likewise, Cebu Contractors Association Inc., together with engineers Francis Gerard Canedo and Avelino Masong, presented a petition for intervention in which they asked the Court to revoke its ruling on the case.
PCA Pampanga, Association of Builders of Negros Oriental Inc., Association of Lessors of Transporters and Lessors of Equipment-Davao Chapter, Contractors of the City of Zamboanga Inc. and Davao Construction Association Center Inc.
