Promoting Free Societies

Better Competition, Better Services, Better Lives

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As the teacher at Sandelain Elementary School booted up the classroom laptop, her students were bubbling with excitement.

“Can we use it for the laptop?” one of them eagerly asked.

“Yes! You can use it for the laptop. Try it!” she replied.

Moments later, the teacher’s face lit up in a smile. She clasped her hand over her mouth in amazement as the computer connected to their new Starlink satellite internet. Soon her students were huddled even closer around the laptop as she streamed a video.

If you’re reading this, quickly Googling a question or pulling up YouTube is probably routine. But for the teacher at Sandelain Elementary School, her students, and hundreds of thousands of other people in rural and remote parts of the Philippines, fast and easy access to the internet was—until recently—practically unheard of.

This new connectivity is the result of years-long policy reform efforts by the Foundation for Economic Freedom (FEF), an Atlas Network partner.

Restrictive and protectionist policies dating back to the 1930s limited Filipinos’ access to key services, such as reliable electricity and broadband internet. For people across the country, weak internet connections and monopoly-controlled public services were everyday battles.

FEF Board Member Dr. Joseph Angeles is a lawyer, an academic, and a policy expert. But first and foremost, he’s a Filipino who has been working towards liberty-minded reforms in the Philippines almost his entire life. Dr. Angeles politely describes life under the protectionist policies as less than ideal. “There would be various areas where phone and internet coverage was not quite there,” he said. “And the speed-to-cost ratio was not very favorable compared to our neighbors.”

Or in other words, Filipinos were being forced to pay more for worse service.

Philippine history, cultural fears, and nearly a century of entrenched protectionist laws have created these policy problems, but FEF refused to accept this status quo any longer.

Beginning in 2016, FEF’s team launched a campaign to open the country’s telecommunications, transportation, and renewable energy industries to foreign investment, and thus competition. What would follow would be multi-year, multifaceted campaigns battling entrenched powers and protectionist fears.

FEF won Atlas Network’s Templeton Freedom Award in 2019 for their work ushering in new property rights laws that changed the lives of Filipino farmers and landowners. Now, their campaign to reform the country’s public service laws have earned them another nomination for the 2023 Templeton Freedom Award.

FEF’s team used their policy, legal and communication expertise to advocate for liberty-minded policy changes in the Philippines. Their work would result in sensible, local Philippine solutions finally being passed.

Policy Fears and Monopolies

The history of the Philippines—unfortunately like the history of many Asian countries—is a long story of oppression, colonization, and foreign economic control.

The Philippines gained its independence from the United States in the 1930s. Largely because of their history up until that point, many of the newly independent country’s laws were highly restrictive to foreign investment, reflected even in its Constitution.

This aversion to foreign investment was formalized in Article XII, Section 11 of the Philippine Constitution which stated that all the country’s natural resources are owned by the state and also subject to the 40% cap on foreign investment. This Constitutional restriction was adopted into law through the Public Service Act (PSA) enacted in 1936. The PSA—in an effort to prevent continued foreign control of the country—limited any foreign investment in the operation of a public utility to 40%.

In 2020, according to the Organization for Economic Cooperation and Development (OECD), the Philippines had the third most-restrictive foreign direct investment regulations out of the 84 countries it measured.

Aside from the challenges that emerged from restricting foreign capital and business, some of the biggest problems with these policies stemmed from crucial omissions.

The 1936 PSA didn’t actually define what a “public utility” was, so the operation of all of the country’s public services including transportation, telecommunications, and electricity were controlled by a small handful of locally owned but monopolistic, ineffective, and cronyistic companies. Renewable energy production was also governed by the same extreme restrictions, inadvertently preventing any substantial renewable energy investment in the country.

“If you were being sold a car and you weren't allowed to drive it, I'm pretty sure you wouldn't be so enticed to buy that car,” Dr. Angeles said of the country’s anti-foreign investment law, which prevents investors from having a controlling stake in operating firms providing these services. “Lifting those kinds of restraints has been identified by multiple economists to be one of the necessary conditions for further investment in those capital-intensive fields.”

FEF knew that the longer these policies stayed in place, the farther the Philippines would fall behind in connectivity, economic growth, and quality of life. However, since multiple attempts to change or amend these policies had failed in the past, FEF knew they would need innovative solutions to change the status quo.

The Long Battle for Change

To reform the foreign investment restrictions of the PSA, FEF began looking at what companies and industries were being defined as public utilities. By analyzing global policies, they developed actual definitions for industries that should be defined as public utilities and industries that were merely public services and should be open to outside investment and competition.

Armed with their global legal research, FEF partnered with the University of the Philippines Law Center to draft a bill defining a public utility. The FEF coalition then teamed up with legal scholars, economists, constitutionalists, and legislative experts to ensure the bill would provide the reforms needed, and also vet the bill to ensure it would pass legal scrutiny.

As the Philippine Congress deliberated the public utility reform bill, FEF’s coalition met with legislators to answer any questions they had and provide multi-sectoral support throughout the reform process.

FEF also launched a far-reaching multimedia communications campaign to educate the public on how reforming the public service law would improve many aspects of life in the Philippines, particularly in the areas of transportation and telecommunications.

Because of FEF’s work, six years after their campaign began, the legislation was signed into law in March 2022. The Implementing Rules and Regulations for the law was released a year later in March 2023.

However, without electricity, there was no way that new technologies like satellite-based internet could be accessed by Filipinos across the archipelago, so the next battle was for greater access to clean energy.

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Dr. Joseph Angeles speaks at Atlas Network's Asia Liberty Forum 2023

Bringing Power to the Country

To address the country’s effective ban on foreign investment in renewable energy production, Dr. Angeles first began studying the flaws of the policy. He published an all-encompassing study in the Philippine Law Journal which traced the origins of this policy and showed how renewable energy investment restrictions didn’t make legal or common sense. More importantly, it was hurting Filipinos who lacked access to the power grid.

The idea behind the original regulation was “to ensure that these scarce natural resources were still going to be around for future generations of Filipinos,” but as Dr. Angeles explains, “renewable energy was not, of course, one of those scarce resources. So a case can be made that the Philippines was shooting itself in the foot with that provision. As lawyers, our question was how do you move forward? We knew amending the Constitution was a non-starter. So how do we resolve this so the benefits can trickle down to all consumers?”

After publishing his study, Dr. Angeles and the FEF team got to work championing reforms where they knew they could get results: inside the Department of Energy (DOE).

Over the course of a year, FEF worked with multiple government officials in the DOE, from two different administrations, to shepherd the necessary reforms through the administrative process.

Finally, in November 2022, DOE amended the Implementing Rules and Regulations of the law to remove the country’s restrictions on kinetic renewable energy to say that the “exploration, development, and utilization of solar, wind, hydro, and ocean energy shall not be subject to the 40% foreign equity limitation.” This amendment was buoyed by the support of the Department of Justice which cited the paper of Dr. Angeles, as one of their basis for this stance.

Finally, Filipinos across the archipelago would have access to renewable energy—and in many cases-–the basic electrification they’d been denied for decades.

“Forbes recently called the Philippines one of the hottest markets for renewable energy today. That’s all from amending the Renewable Energy Act. So I think the proof is in the pudding. We’re starting to see these positive impacts happen,” Dr. Angeles said.

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Foundation for Economic Freedom and the University of the Philippines Law Center briefing Congressman Arthur Yap

The Ripple Effects of Reform

When describing the reforms for increasing investments in public services and renewable energy, the Asia Business Law Journal said, “it’s been billed as a game changer for the Philippines. The nation—long shackled by red tape, corruption and one of the region’s tightest pro-domestic ownership regimes—is enacting laws that open its gates to crucial foreign investment. With it will come expertise and growth in key sectors such as telecoms, infrastructure, and energy.”

Filipinos across the country now have unprecedented opportunities to harness renewable energy technology like solar, wind, kinetic, and hydroelectric.

And with electricity, comes access to technology.

Almost immediately after the law went into effect, Elon Musk’s Starlink began offering satellite internet services across the Philippines. Now, many places—like Sandelain Elementary School—that have never had reliable internet before have newfound high-speed access to the world.

Lasting Change

FEF’s nomination for a second Templeton Freedom Award in four years is a feat few Atlas Network partners have achieved.

“Being nominated signals the recognition of peers like Atlas Network,” said Dr. Angeles. “But it also acts as a signal to others who may be inspired to take up a cause that these victories do matter. And hopefully victories like this can act as a springboard for other things to come.”

When summing up his thoughts about the impact of FEF’s reform victories, Dr. Angeles told the story of a judge in a remote area of the Philippines who was forced to deal with flawed internet service for years. He didn’t hesitate to spend out of his own wallet to make sure his team had the tools to do their jobs more efficiently and effectively than ever, once Starlink became available.

“It’s gratifying to see people in those far-flung areas have access to the internet. I saw a judge from one of these areas say on social media, ‘I bought this Starlink with my own money and now my whole staff has internet’.”

Facilitating real solutions to real problems fuels FEF’s drive to tackle issues that were once viewed to be insurmountable to give Filipinos the economic freedom to get what they deserve; better competition, better services, better lives.