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Foreign investment into renewables in the Philippines restrained by constitutional limitations

Geysir drilling rig of Iceland Drilling on Biliran Island, Philippines (source: Biliran Island Blog)
Alexander Richter 26 Aug 2020

Efforts are under way in the Philippines to loosen limitations to foreign direct investments into renewable energy, including geothermal energy development in the country.

An article from the Philippines indicates concrete discussions on the limitations on foreign direct investment into renewable energy projects in the Philippines. According to Sherwin T. Gatchalian, Chairman of the Philippines Senate Committee on Energy points to constitutional limitations set forth in the exploitation, exploration and utilization of indigenous resources, so the Manila Bulletin.

“It’s actually a barrier to entry of capital, especially in the initial stage. In a deal setting, we have foreign capital coming in especially because foreign capital is usually cheaper than our local capital that can invest in these types of projects. So, typically, if they (foreign investors) have cheap capital, they want to control and own that corporation – so it does become a barrier to entry for investors here in country,” the lawmaker explained.

So according to Gatchhalian, the government will have to find possibilties to ease those hurdles to investments into the country’s renewable energys sector, which includes geothermal.

Up to today, natural resources – such as geothermal – will have to be utilized and explored only by corporations from the Philippines, and nationals of the country. There are limits in terms of how much foreign ownership in renewable energy projects is allowed.

The Department of Energy of the country has tasked the National Renewable Energy Board (NREB) to study other mechanisms and processes on how foreign participation can be maximized in RE projects. The Constitutional limitations are being looked at by the Philippines-College of Law. The goal is to easen rules that helps attracting foreign direct investment into the sector.

“There are already areas which can allow for greater foreign participation like for geothermal – like if it’s a large scale geothermal exploration or a large-scale project, it allows for FTAA mechanism or financial, technical agreement approach to be tapped for that exploration,” the NREB chief emphasized.

Source: Manila Bulletin