March 1, 2024

 

Thirty-year divestment rule a hurdle for foreign investments in Philippines' corn sector

 

A presidential decree opened the door to foreign investments in the Philippines' rice and corn sectors, but this restricts such investments to only 30 years, according to Mari Charina Ubarra, a technical consultant at the Foundation for Economic Freedom (FEF).

 

The issue was brought up during a recent roundtable discussion at the country's House of Representatives concerning measures seeking to increase investments in both sectors.

 

Ubarra said that this provision on divestment is a "unique requirement" found only in the Philippines.

 

Christopher Ilagan, chairman of the agribusiness committee of the American Chamber of Commerce in the Philippines, said the limitation is not immediately noticeable to foreign investment.

 

"This is a thorn on the side of foreign investors… This 30-year divestment rule may not be an issue in the first few years but as you get closer to the [end] period, you rethink your investment," Ilagan said.

 

Ilagan also noted that the power of the National Food Authority (NFA) to oversee the divestment provision has been removed by the Rice Tariffication Law, which adds to the confusion regarding where foreign investors will have their divestment plans approved.

 

Ubarra said that if the full opening of the rice and corn sectors will not be allowed, an alternative proposal to attract investments and modernise the sector is to extend the divestment period to 50 years.

 

Ubarra added that the agriculture sector will require at least ₱1.3 trillion (US$23.2 billion) for irrigation, post-harvest facilities and other infrastructure to catch up with its Asian neighbors — a substantial amount that could be mitigated by attracting foreign investments.

 

Agriculture Assistant Secretary U-Nichols Manalo, director of the National Rice Program, said the Department of Agriculture welcomes efforts to attract investments in agriculture to address years of "under-investment in the sector".

 

BOI director Raquel Echague said that extending the divestment period to 50 years from 30 years for the rice and corn sectors should help draw more attention to the Philippines, especially in the feed milling industry which will allow the country "to catch up with our ASEAN neighbors."

 

Currently, foreign investments in the rice and corn sectors stand at ₱21 billion (US$375 million) and employ more than 4,000 workers.

- Politiko