Adoption of Foreign Equity Requirement under Executive Order No. 65 s. 2018
GPPB Resolution No. 06-2019, adopted on March 8, 2019, amends the 2016 Revised Implementing Rules and Regulations (IRR) of Republic Act No. 9184, concerning government procurement. The resolution adjusts the eligibility criteria for partnerships, corporations, and joint ventures, reducing the required Filipino ownership from 75% to 60%, in line with Executive Order No. 65, which allows for 40% foreign equity participation in locally-funded public works contracts. This amendment aims to ease restrictions on foreign investment and promote greater participation in infrastructure projects. The resolution takes effect immediately and is intended to ensure consistency with existing laws while facilitating foreign investment opportunities.
March 8, 2019
GPPB RESOLUTION NO. 06-2019
ADOPTION OF FOREIGN EQUITY REQUIREMENT UNDER EXECUTIVE ORDER NO. 65, S. 2018 AND AMENDMENT OF THE RELEVANT PROVISIONS OF THE 2016 REVISED IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 9184
WHEREAS Republic Act (RA) No. 9184 otherwise known as the "Government Procurement Reform Act" took effect on 26 January 2003, while its 2016 Revised Implementing Rules and Regulations (IRR) took effect on 28 October 2016;
WHEREAS, Section 63 of RA No. 9184 and its 2016 revised IRR authorized the Government Procurement Policy Board (GPPB) to formulate and amend public procurement policies, rules and regulations, and amend, whenever necessary, its IRR;
WHEREAS, Sections 23.4.2.1 (b), (c) and (e) provide for a threshold of at least seventy-five percent (75%) on domestic interest, outstanding capital stock or ownership as eligibility criteria for partnerships, corporations or joint ventures in the procurement of infrastructure projects;
WHEREAS, Commonwealth Act (CA) No. 541, dated 26 May 1940, requires government agencies to give preference in awarding of contracts for construction or repair of public works to domestic entities and that the term domestic entity shall refer to any corporate body or commercial company duly organized and registered under the laws of the Philippines seventy-five per centum of the capital of which is owned by citizens of the Philippines or of the United States, or by citizens of both countries;
WHEREAS, Letters of Instruction No. 630, dated 22 November 1977, provides that "unless specifically authorized by the President of the Philippines in exceptional cases, bidding award or negotiations of primarily civil works contracts shall be limited to Filipino individuals and to corporations, partnership, or associations seventy-five percent (75%) of the capital of which is owned by citizens of the Philippines";
WHEREAS, the Office of the President (OP) issued Executive Order (EO) No. 65 on 29 October 2018 promulgating the Eleventh (11th) Foreign Investment Negative List (FINL) which provides for limitation on investment by foreign entities in specific business and/or industry;
WHEREAS, EO No. 65, s. 2018, provides that contractors with forty percent (40%) foreign equity may get contracts for construction and repair of locally-funded public works subject to regulatory frameworks;
WHEREAS, on 18 January 2019, representatives from GPPB-Technical Support Office (TSO) met with representatives from the Office of the Deputy Executive Secretary for General Administration (ODESGA) of the OP to discuss the shift in requirements and the conflict between the provisions of the EO and the IRR;
WHEREAS, ODESGA representatives conveyed that the intention is to ease restrictions on foreign participation in certain investment areas or activities by increasing the threshold of how much foreign entities may own from twenty-five percent (25%) to forty percent (40%) and that such was the intention of the President in issuing EO No. 65, s. 2018;
WHEREAS, during the 1st Joint Meeting of the GPPB and the Inter-Agency Technical Working Group (IATWG) held last 07 February 2019, the GPPB-TSO presented the issue to the Board and recommended that the matter be referred to the IATWG for further study and to address the conflicting provisions between EO No. 65, s. 2018 and 2016 revised IRR of RA No. 9184, and while the matter is under review, to retain the eligibility criteria provided in Section 23.4.2.1 (b), (c) and (e) of the 2016 revised IRR of RA No. 9184;
WHEREAS, consistent with the intention to ease restrictions on foreign participation in certain investment areas or activities, the Board resolved to adopt the provisions of EO No. 65 and amend the relevant provisions of the 2016 revised IRR of RA No. 9184;
WHEREAS, based on the instructions of the Board, the GPPB-TSO drafted the proposed amendments to the relevant provisions of the 2016 revised IRR of RA No. 9184 and the Philippine Bidding Documents (PBD) for the Procurement of Infrastructure Projects to adopt the policy provided in EO No. 65, s. 2018, and presented the same for consideration of the IATWG in its 2nd Regular Meeting last 28 February 2019; CAIHTE
WHEREAS, after due consideration, the IATWG resolved to recommend to the Board the proposed amendments to the 2016 revised IRR of RA No. 9184 and the PBDs for the Procurement of Infrastructure Projects, including the corresponding provisions in the Generic Procurement Manuals (GPMs);
WHEREAS, during the 2nd Regular Meeting of the GPPB last 08 March 2019, the GPPB-TSO presented the proposed amendments to Sections 23.4.2.1 (b), (c) and (e) of the 2016 revised IRR of RA No. 9184, and proposed amendments to Instructions to Bidders (ITB) Clause 5 of the PBDs for the Procurement of Infrastructure Projects as recommended by the IATWG;
WHEREAS, after careful review and due deliberations, the GPPB approved the recommendation of the IATWG to amend Sections 23.4.2.1 (b), (c) and (e) of the 2016 IRR of RA No. 9184 and ITB Clause 5 of the PBDs for the Procurement of Infrastructure Projects, including the corresponding provisions of the GPMs, subject to the relevant provisions of CA 541;
NOW, THEREFORE, for and in view of all the foregoing, WE, the Members of the GOVERNMENT PROCUREMENT POLICY BOARD, by virtue of the powers vested on US by law and other executive issuances, hereby RESOLVE to confirm, adopt, and approve, as WE hereby confirm, adopt, and approve the amendments to Sections 23.4.2.1 of the 2016 IRR of RA No. 9184 and amendment to ITB Clause 5 of the PBDs for the Procurement of Infrastructure Projects, including the corresponding provisions in the GPMs, subject to the relevant provisions of CA 541, a copy of which is attached as Annex "A", and made an integral part hereof.
This resolution shall take effect immediately.
APPROVED this 8th day of March 2019 in Manila City, Philippines.
(SGD.) ______________________________Department of Budget and Management
(SGD.) ____________________________________National Economic and Development Authority
(SGD.) _________________Department of Education
_____________________Department of Energy
(SGD.) ________________Department of Finance
_______________________Department of Health
___________________________________________________Department of Information and Communication Technology
_________________________________________Department of Interior and Local Government
(SGD.) ________________________Department of National Defense
(SGD.) ________________________________Department of Public Works and Highways
__________________________________Department of Science and Technology
(SGD.) _________________________Department of Trade and Industry
(SGD.) _____________________Department of Transportation
(SGD.) _____________________Private Sector Representative
ANNEX A
2016 Revised Implementing Rules and Regulations of Republic Act No. 9184
|
Original |
Amendment |
|
Section 23.4.2.1 (b) |
|
Partnerships duly organized under the laws of the Philippines and which at least seventy-five percent (75%) of the interest belongs to citizens of the Philippines; |
Partnerships duly organized under the laws of the Philippines and which at least sixty percent (60%) of the interest belongs to citizens of the Philippines; |
|
Section 23.4.2.1 (c) |
|
Corporations duly organized under the laws of the Philippines, and of which at least seventy-five percent (75%) of the outstanding capital stock belongs to citizens of the Philippines. |
Corporations duly organized under the laws of the Philippines, and of which at least sixty percent (60%) of the outstanding capital stock belongs to citizens of the Philippines. |
|
Section 23.4.2.1 (e) |
|
Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract: Provided, however, That in accordance with Letter of Instructions No. 630 (LOI 630), Filipino ownership or interest of the joint venture concerned shall be at least seventy-five percent (75%): Provided, further, That joint ventures in which Filipino ownership or interest is less than seventy-five percent (75%) may be eligible where the structures to be build require application of techniques and/or technologies which are not adequately possessed by a person/entity meeting the seventy-five percent (75%) Filipino ownership requirement: Provided, finally, That in the latter case, Filipino ownership or interest shall not be less than twenty-five percent (25%). For this purpose, Filipino ownership or interest shall be based on the contributions of each of the members of the joint venture as specified in the JVA. |
Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract: Provided, however, That in accordance with Executive Order No. 65 (EO 65), s. 2018,1 Filipino ownership or interest of the joint venture concerned shall be at least sixty percent (60%):Provided, further, That joint ventures in which Filipino ownership or interest is less than sixtypercent (60%) may be eligible where the structures to be build require application of techniques and/or technologies which are not adequately possessed by a person/entity meeting the sixty percent (60%) Filipino ownership requirement: Provided, finally, That in the latter case, Filipino ownership or interest shall not be less than twenty-five percent (25%). For this purpose, Filipino ownership or interest shall be based on the contributions of each of the members of the joint venture as specified in the JVA. |
5th Edition of the Philippine Bidding Documents for the Procurement of Infrastructure Projects
|
Original |
Amendment |
|
ITB Clause 5.1(b) |
|
Partnerships duly organized under the laws of the Philippines and which at least seventy-five percent (75%) of the interest belongs to citizens of the Philippines; |
Partnerships duly organized under the laws of the Philippines and which at least sixty percent (60%) of the interest belongs to citizens of the Philippines; |
|
ITB Clause 5.1 (c) |
|
Corporations duly organized under the laws of the Philippines, and of which at least seventy-five percent (75%) of the outstanding capital stock belongs to citizens of the Philippines. |
Corporations duly organized under the laws of the Philippines, and of which at least sixty percent (60%) of the outstanding capital stock belongs to citizens of the Philippines. |
|
ITB Clause 5.1 (e) |
|
Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract: Provided, however, That in accordance with Letter of Instructions No. 630 (LOI 630), Filipino ownership or interest of the joint venture concerned shall be at least seventy-five percent (75%): Provided, further, That joint ventures in which Filipino ownership or interest is less than seventy-five percent (75%) may be eligible where the structures to be build require application of techniques and/or technologies which are not adequately possessed by a person/entity meeting the seventy-five percent (75%) Filipino ownership requirement: Provided,finally, That in the latter case, Filipino ownership or interest shall not be less than twenty-five percent (25%). For this purpose, Filipino ownership or interest shall be based on the contributions of each of the members of the joint venture as specified in the JVA. |
Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract: Provided, however, That in accordance with Executive Order No. 65 (EO 65), s. 2018, 2 Filipino ownership or interest of the joint venture concerned shall be at least sixty percent (60%): Provided, further, That joint ventures in which Filipino ownership or interest is less than sixty percent (60%) may be eligible where the structures to be build require application of techniques and/or technologies which are not adequately possessed by a person/entity meeting the sixty percent (60%) Filipino ownership requirement: Provided, finally, That in the latter case, Filipino ownership or interest shall not be less than twenty-five percent (25%). For this purpose, Filipino ownership or interest shall be based on the contributions of each of the members of the joint venture as specified in the JVA. |
Generic Procurement Manual Volume 3 — Manual of Procedures for the Procurement of Infrastructure Projects
|
Original |
Amendment |
|
Section 3 — Instructions on the Procedural Steps for the Procurement of Infrastructure Project |
|
Part One — Competitive Bidding |
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Step 4 — Receive, Open and Examine the Technical and Financial Envelopes |
|
Who may be eligible to participate in a public bidding for infrastructure projects?
The following persons/entities shall be allowed to participate in the bidding: (2016 IRR Section 23.4.2.1)
a. x x x b. Partnerships duly organized under the laws of the Philippines and which at least seventy-five percent (75%) of the interest belongs to citizens of the Philippines; c. Corporations duly organized under the laws of the Philippines, and of which at least seventy-five percent (75%) of the outstanding capital stock belongs to citizens of the Philippines. d. x x x e. Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract: Provided, however, That in accordance with Letter of Instructions No. 630 (LOI 630), Filipino ownership or interest of the joint venture concerned shall be at least seventy-five percent (75%): Provided, further, That joint ventures in which Filipino ownership or interest is less than seventy-five percent (75%) may be eligible where the structures to be build require application of techniques and/or technologies which are not adequately possessed by a person/entity meeting the seventy-five percent (75%) Filipino ownership requirement: Provided, finally, That in the latter case, Filipino ownership or interest shall not be less than twenty-five percent (25%). For this purpose, Filipino ownership or interest shall be based on the contributions of each of the members of the joint venture as specified in the JVA. |
Who may be eligible to participate in a public bidding for infrastructure projects?
The following persons/entities shall be allowed to participate in the bidding: (2016 IRR Section 23.4.2.1)
a. x x x b. Partnerships duly organized under the laws of the Philippines and which at least sixtypercent (60%) of the interest belongs to citizens of the Philippines; c. Corporations duly organized under the laws of the Philippines, and of which at least sixtypercent (60%) of the outstanding capital stock belongs to citizens of the Philippines; d. x x x e. Persons/entities forming themselves into a joint venture, i.e., a group of two (2) or more persons/entities that intend to be jointly and severally responsible or liable for a particular contract: Provided, however, That in accordance with Executive OrderNo. 65 (EO 65), s. 2018, 3 Filipino ownership or interest of the joint venture concerned shall be at least sixty percent (60%): Provided, further, That joint ventures in which Filipino ownership or interest is less than sixty percent (60%) may be eligible where the structures to be build require application of techniques and/or technologies which are not adequately possessed by a person/entity meeting the sixty percent (60%) Filipino ownership requirement: Provided, finally, That in the latter case, Filipino ownership or interest shall not be less than twenty-five percent (25%). For this purpose, Filipino ownership or interest shall be based on the contributions of each of the members of the joint venture as specified in the JVA. |
Footnotes
1. Promulgating the Eleventh Foreign Investment Negative List issued on 29 October 2018.
2. Promulgating the Eleventh Foreign Investment Negative List issued on 29 October 2018.
3. Promulgating the Eleventh Foreign Investment Negative List issued on 29 October 2018.
Published in the Philippine Daily Inquirer on May 17, 2019.