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.