Jan 31, 2011

Shouldn't the Philippines repeal the "60/40 Law" (and change its Constitution) to encourage investments?

Dear Filipino,

The Philippines cornered the least amount of foreign direct investments among seven selected economies in Southeast Asia in 2009, according to the International Monetary Fund (IMF) in its first global survey on FDIs. On a global scale, the Philippines ranked 60th out of 72 countries included in the Coordinated Direct Investment Survey.

Question: Considering that investments are needed to bolster economic growth -- e.g., $10B for infrastructure alone -- how should the Philippines become more investor friendly? How about repealing the 60/40 Law? This is one scuttlebutt that is impeding investors from coming in!

Mike T.

Dear Mike,

What prompted a guy like you with a “harvard.edu” email handle to ask a lowly blogger like me? Aren’t you guys supposed to hail from the “Know-it-all Capital of the Universe”?

Just a little good-natured ribbing there, of course. ;-)

Anyway, thanks for your question, but the “60/40 Law” you’re asking about is actually part of a HUGE issue that I really want to talk about with more breadth here. [For readers looking for more depth on a particular legal sub-issue, I recommend approaching knowledgeable legal professionals practicing in the Philippines.]

First, some Philippine constitutional background.

Under the heading “National Economy and Patrimony,” Section 1 of Article XII of the Philippine Constitution provides:
The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. Private enterprises, including corporations, cooperatives, and similar collective organizations, shall be encouraged to broaden the base of their ownership.
I added the italicization in the indented paragraphs above because I found those blurbs very admirable and impressive-sounding. And if the drafters of the Constitution really meant what they wrote, let’s give them some credit. Unfortunately however, when it comes to formulating laws in accordance with lofty stated policies, negative unintended consequences always pose a risk; in the Philippines, this problem becomes even more compounded by problems stemming from implementation.

So let’s talk about the main implementing law behind the constitutionally sanctioned policy of protecting local industry from “unfair foreign competition”: The Foreign Investments Act (FIA) of 1991 (as amended).

The FIA requires “the formulation of a regular Foreign Investment Negative List [FINL] covering investment areas/activities which may be opened to foreign investors and/or reserved to Filipino nationals.”

If you’re a “former Filipino” and now a citizen of another country and you haven’t yet gotten your dual citizenship or reclaimed your Filipino citizenship, you may want to pay particular attention to this “FINL.” This “negative list” is really a list of occupations, trades and investments where foreign participation is either limited or off-limits altogether. So if you are harboring any dream of someday going back to the Philippines to practice your trade, set up a sari-sari store or other small business, or invest, this list is very important to you.

Subject to all sorts of exceptions and asterisks which I won’t discuss here, the latest “negative list” under Executive Order No. 858 signed in 2010 includes the following:

I.  No Foreign Equity Allowed: Mass media (except recording); practice of all professions (engineering, medicine and allied professions, accountancy, architecture, criminology, chemistry, customs brokerage, environmental planning, forestry, geology, interior design, landscape architecture, law, librarianship marine deck/engine officers, master plumbing, sugar technology, social work, teaching, agriculture, fisheries, and guidance counseling); retail trade enterprises with paid-up capital of less than US$2.5M; cooperatives; private security agencies; small-scale mining; utilization of marine resources; ownership, operation and management of cockpits; manufacture, repair, stockpiling and/or distribution of nuclear weapons; manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personnel mines; and manufacture of firecrackers and other pyrotechnic devices.

II.  Up to 20% Foreign Equity Allowed: Private radio communications.

III.  Up to 25% Foreign Equity Allowed: Private recruitment, whether for local or overseas employment; contracts for the construction and repair of locally-funded public works; contracts for the construction of defense-related structures.

IV.  Up to 30% Foreign Equity Allowed: Advertising.

Now, here’s where the term “60/40 Law” got coined:

V.  Up to 40% Foreign Equity Allowed: Exploration, development and utilization of natural resources; ownership of private lands; operation and management of public utilities; ownership, establishment and administration of educational institutions; culture, production, milling, processing, trading excepting retailing, of rice and corn and the by-products thereof; contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, agency or municipal corporation; project proponent and facility operator of a BOT project requiring a public utilities franchise; operation of deep sea commercial fishing vessels; adjustment companies; ownership of condominium units; manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) or Department of National Defense (DND) clearance; manufacture and distribution of dangerous drugs; sauna and steam bathhouses, massage clinics and other like activities; all forms of gambling; domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000; domestic market enterprises which involve advanced technology or employ at least fifty (50) direct employees with paid-in-equity capital of less than the equivalent of US$100,000.

VI. Up to Sixty Percent (60%) Foreign Equity Allowed: Financing companies and investment houses regulated by the SEC.

Quite understandably, the restrictions are based on the premise that it is in the country’s best interests for these areas of concern to remain under the control of Filipino citizens and/or Filipino corporations.

And I for one think the premise makes some sense. A lot of countries, even the most advanced ones, also have some very restrictive laws about who can own what in order to protect their national interests. That’s why you have members of the US Congress intervening and threatening legislative action whenever a Chinese company is rumored to acquire a key American company. That’s why Scandinavian countries have very strong key local industries largely protected from foreign competitors.

When I was living in London in the middle of the last decade, a common refrain from locals, whether homeowner or renter, was the cost of housing. Why? Because wealthy foreigners from Arab states, among others, were gobbling up properties left and right, thereby driving up prices to levels completely out of reach for the locals.

We don't want that to happen in the Philippines, of course. But the problem with the Philippine situation, as you can see, is that the “negative list” is pretty broad-based and leaves little room for foreign professionals and investors to actively participate in the Philippine economy -- the kind of participation which may be necessary to globalize the country’s industries and spur economic growth.

This inevitably brings up the question of whether the law is indeed serving the country and its citizens as intended.

In one study about competitiveness of countries in attracting foreign investments, the Philippines did not only rank at the bottom – 6th out of the ASEAN-6 – in having a favorable regulatory regime, its score is not even close to its nearest competitor, Indonesia:

(Source: InvestPhilippines)
So while I am not in favor of completely doing away with the whole list, what I’m in favor of is a systematic, intensive but expeditious review of the list to see which areas have restrictions that need to be maintained and which areas can and should be fully liberalized, and thereafter a quick governmental action to effect the necessary changes. Although politically messy, this “action” will need to come in the form of Charter Change – there appears to be no getting around to it – if we must revamp the current law.

And revamp it we really must.

Why? Now, I know this is serious stuff but in honor of a favorite comedian, David Letterman, whose show, Late Night with David Letterman, officially debuted on February 1, 1982, let me present to you my...

Top 10 Reasons to Revamp the Philippines’ Foreign Investments Act:

[10] Lack of control over their investment understandably discourages foreign investors.

The restrictions mentioned above are the biggest barriers to foreign investments in the Philippine economy. It’s a fairly simple calculus really: When foreign investors are faced with a choice to put their money in two countries where risks are almost identical but where one country requires majority control to be in the hands of the locals, investors would naturally choose the other country which allows them to determine what happens exactly with their funds.

[9] The amount of available local capital is insufficient to meet the national demand for it.

It is no secret that many of the infrastructure-related projects needed by the country require billions of dollars in funding and that the available free capital among the local investors is simply not sufficient to meet the demand. In fact, it is impossible to meet the demand if the country will just rely on local capital, period.

How can it be possible? As of end-2010, the total stock market capitalization of the entire Philippine Stock Exchange (which means all the companies listed in the country’s stock market) is only PHP 8.87 trillion. This figure translates to just about US $200B, a sum not even 65% of the present market capitalization of one US company, Apple, Inc.  Put another way, the owners of Apple can swap the company with all the companies listed in the Philippine stock market and still have about $100B left.

[8] There is a shortage of actual companies/individuals who can partner with foreigners willing to invest.

Not only is the actual amount of local capital insufficient, but the list of actual Philippine companies and/or individuals who may have the wherewithal to partner with willing foreign investors is also short. Who among the locals can pony up the required 60% in big capital-intensive projects to allow them to serve as joint venture partners of foreign investors willing to enter the Philippine market? Thus, because of the current law, the legal ability of a foreign investor to fund a project is limited by the amount raised by his local partner.

To illustrate, let’s say a restricted project costs $100. Even if a foreign investor can put up the maximum allowed by law – i.e., $40 -- the law still requires his Filipino partner to come up with the other $60. If the Filipino can only raise $30, the maximum the investor can bring in is $20, not $70, leading to the collapse of the joint venture, or the project altogether. Where the project survives, the shortcuts taken to comply with the funding requirements naturally affect the quality of the finished project.

[7] The current law allows the local oligarchs to have their choicest pickings because of limited competition.

In her book 2003 book "World on Fire" (excerpted in a Prospect Magazine essay entitled "Vengeful Majorities"), Prof. Amy Chua wrote: “When foreign investors do business in the Philippines, they deal almost exclusively with Chinese” because “[a]part from a handful of corrupt politicians and a few aristocratic Spanish mestizo families, all of the Philippines’ billionaires are of Chinese descent.”

It’s true: If you’re a Chinese Filipino oligarch in the Philippines, the deals are literally walking to your doorsteps and lining up for your review. But the main reason for that is this 60/40 Law, whose provenance, interestingly enough, can be traced back to American Commonwealth times. Because the Chinese Filipino oligarchs who dominate the Philippine economy are the ones with the funds who can put up the required “Filipino” capital investment, naturally, foreign investors who want to come in are forced to approach them first for partnership possibilities, or the foreigners can’t come in at all.

This dynamic allows these oligarchs to have first crack at studying investment options as to where they can put their money. And with the limited competition, they are almost assured of hefty returns, thereby further concentrating wealth among the handful of them. In fact, in some situations where there is virtually no competition, it is easy to imagine how foreign investors and their local oligarch partners can even practically hold the Philippine government hostage and make it agree to concessions and guarantees that virtually eliminate risk for the investors.

[6] Inflexibility of equity-sharing encourages corruption and other law-breaking (e.g., use of “dummies,” etc.).

In an environment already rife with political corruption, the restrictions placed on foreign investors and their Filipino partners which limit allowable equity structures further stoke law-breaking, bribery and corruption.

A common tactic to get around the restrictions on equity participation is the use of “dummy” Filipino partners. Here, the local partners (often, the oligarchs mentioned above) “own” 60% of the entire venture on paper but the project is, in actuality, mostly (if not fully) funded, operated and managed by the foreigners despite their being just “minority” partners. This type of situation leaves projects vulnerable to extortion from regulators who learn about these arrangements, abuse by one partner over the other just to maintain the front of a legally compliant partnership, or worse, the collapse of the project altogether and ugly lawsuits thereafter.

There is an “Anti-Dummy Law” to counter the use of dummies, but because of inconsistent and/or lack of adequate supervision and enforcement, it appears to an outside observer to be often largely ignored.

[5] Cumbersome compliance issues lead to legal maneurings which may not be compliant with the spirit of the law and just add friction to what can otherwise be a smooth transaction.

The law has led to all sorts of legal squabbles including the most basic: What does “Filipino” mean? In areas reserved to Filipino citizens or domestic corporations whose capital is at least 60% owned by Filipinos, the “Filipino” classification is critical, as shown by the PIATCo-Fraport AG airport controversy where one of the main issues is whether there were violations of the Anti-Dummy Law.

The Philippine Department of Justice has adopted the “control test” in establishing the nationality of corporate stockholders covered by the law: If at least 60% of the corporate capital is owned by Philippine citizens, all the corporate shares, including those owned by foreigners, are considered Filipino. But if the percentage of Filipino ownership goes below 60%, only the number of shares that corresponds to that percentage is treated as Filipino. In other words, if one can show that at least 60% of the capital is owned by Filipinos, no further inquiries are made on the nationality of the owners of the remaining 40%. This means that when this ownership-restricted corporation invests in another ownership-restricted corporation, the investing corporation is treated as a “Filipino” investor.

Now, compare this test from the “grandfather rule,” which is still followed in some instances. Under this rule, the nationality of the individual stockholders or the owner of the stocks of the corporate shareholder affects the status of the restricted corporation in which the investment was made.

How to make sense of the two rules? According to SEC Commissioner Raul J. Palabrica, the current rule seems to be this: The "control test" is the main standard to determine the nationality of corporations but the "grandfather rule" will be applied if there are questions about compliance with Filipino ownership requirements.

One creative strategy to circumvent the ownership restrictions is the use of “global depository receipts” or GDRs in which investee companies would sell to foreign investors interest-bearing “depository receipts” using the stocks of the restricted investee companies as collateral.

Technically, the nationality rule is not violated because the stocks remain in the company’s name but the investors are assured of hefty returns on their investment without breaching the nationality rule. But it should be obvious that GDRs are, for all intents and purposes, “foreign investments” which should be covered under the nationality rule if the government is indeed serious about cracking down on these types of legal maneuvers which may be compliant with the letter of the law but not its spirit. Additionally, GDRs only increase the friction in business transactions for the companies trying to raise funds, adding unnecessary cost in terms of time and money to what would otherwise be simple transactions.

[4] Revamp of the law can increase the competitiveness of local industries and create jobs.

Foreigners are not only reluctant to invest their money if they do not have control, they are also concerned about intellectual theft if they are to divulge their corporate secrets to Filipino partners in a partnership where they are in the minority. This often entails their dialing back of their investment of intellectual capital in the form of industrial/product design, technology and market knowhow.

Allowing these profit-seeking foreigners to own their local subsidiaries outright 100% can translate to increased competitiveness for the local industries affected because the oligarchs who presently rule their industries will be forced to up their game. With increased competition, the affected industries will modernize, grow and, in the process, create jobs for locals.

[3] Revamp of the law can increase the country’s exports.

The current law is really anti-trade, and here’s why.

One way for the country to grow its export-oriented manufacturing industries is to enter into bilateral trade agreements (BTAs) with the right countries, especially with those whom the Philippines already enjoys robust trading. But the current law poses a hindrance to signing of BTAs because the Philippines’ counterparties will definitely demand preferential terms and more openness on the part of the country to allow investors from their countries to come in unencumbered by restrictive investment laws.

[2] The current law discourages even “former” Filipinos from investing or returning to the Philippines to set up their businesses or practice their professions.

While there is now a dual citizenship law which allows Filipinos who became naturalized citizens of other countries to reclaim their lost Filipino citizenship, many of them choose not to do so for various reasons. But because they are considered foreigners under the law, they are therefore prevented from setting up small businesses (e.g., retail trade enterprises less then $2.5M in capital; see the list above) under their own name and/or practice their professions in the Philippines. This is unfortunate considering these “former” Filipino professionals have much to share with the land of their birth, having learned immensely from their exposure in globalized and highly competitive industries all over the world.

[1] To retain the current law is to maintain the status quo.

‘Nuff said.

Got a question for The Filipino?  Email him now at askthepinoy@gmail.com.


Anonymous said...

Dear Mike T.,
Pinoy's answer is so long, and I haven't read it but since you are in the States I thought the answer would be obvious.

Why should any nation follow the example of the US and have everyone else own the real estate? Of course the argument is that they can't take it out of the country - but what if they buy it all up and not do anything with it since they would rather stay wherever they are right now. Where is the development there?

Why should we give up real assets for paper which devalues? or is not tied to anything else, but more paper, or a bunch of zeroes on a computer?
That law could stand some ammendments, but personally I think that it's repeal is not the answer for the Philippines.

What we are in need of is GOOD IDEAS. True original thought is capital, the rest is just money.
Then we need to get off the beach or the golf course and put some real muscle and sweat into turning our ideas into something that works.
If we do that, the money will come.

Brouha Ha

Anonymous said...

Dear Pinoy,

I hate to say this to you, but your blogs that I enjoy most are those that answer naive, humorous and nonsensical questions.

Please bring back the fun.


Lady in Waiting

Mike T. said...

@Brouha Ha:

Ideas are good but in the real world, CAPITAL is needed to put ideas to action. How will you hire and employ workers without CAPITAL?

That is one of the most important issues in the Philippines today.

A million people have to leave the country to find employment.

And in order to generate employment, an economy needs Capital.

Where will that Capital come from if the local oligarchs are not able to provide the necessary Capital?

That is why attracting foreign investors becomes necessary and crucial.

Question: Is it really "Nationalism" to have policies designed to protect and foster an economy where 12 million people have to work abroad for foreign bosses because the fact of the matter is this 12 million can not find employment locally because of this "Nationalistic" investment policies?

Shouldnnt "Nationalism" be defined as a policy that fosters employment in our own country and not condoning a situation that forces the Filipinos to become vagabonds abroad - even tolerating the idea of working as illegal aliens abroad just to find menial employment?

Whose "Nationalism" is it where the Philippines harbors and nurtures 2 classes of Filipinos - one class that reaps the rewards of patronage, cronyism and a feudal despotic system where wealth is forever the monopoly of this class, and another class that is the unintended victim of the ruling elite that does not have the privilege, power, prestige and access to this Encomienda system (except by marriage and perhaps by using the government machinery to essentially extort or be the beneficary of bribes and extortion) a practise perpetuated and favored by the elite and its oligrachy of cronies and politicians and bureaucrats?

In other words, if it is the kind of pseudo "Nationalism" that keeps 90% of the people poor and ignorant - let's burn that "Nationalism" to the dustbin of history.

Anonymous said...

I say change the constitution to let it fall in the hands of those running the country (the Executive). I think they would know better when to repeal it or when not to. Perhaps they can even use it as bargaining chip with some countries who have vested interests coming in on some industries.

-Dapo Gi

Ricky S. (via email) said...

We've discussed this issue quite a few times at AFBP and is so obvious to those involved in international business. In the 90s, I tried to get many of my American clients to invest in the RP, which involved actual due diligence trips to the country.

But after legal review of the investment climate and the very poor reputation of the Judiciary in terms of integrity and potential safeguards against arbitrary rulings against foreign capital, every single one passed and invested in China, Thailand, Taiwan, and even Malaysia! They simply felt it wasn't worth the trouble when other countries were so welcoming. So here we are, at the bottom of FDI lists.

And when we talked to even sophisticated Congresspersons, they gave me the impression that they fully subscribed to the so-called "Filipino First" investment policy, and saw nothing intrinsically wrong with the thinking that gives rise to the 60/40 Law. Bottom line, it's the people in power protecting their privileged investment positions at all costs, and the hell with the country. As in the US, it will probably take "traitors to their own class" to break this logjam or simply a revolution of the disempowered.

We'll need the equivalent of people like Teddy Roosevelt, Andrew Carnegie, Franklin D Roosevelt, JFK, Warren Buffett, et al, who espoused laws and principles for the good of the country and its unemployed, even when those enlightened policies, on the surface, appeared to militate against their own interests. These people are driven to do what is right and often to do what is in their long term interest!!!

For the wisest Capitalists know in the long run, their economic interests are furthered when business invest (either domestic or foreign) generates strong economic growth putting more money in the hands of the masses and the middle classes who comprise approximately 70% of the GDP. Ergo, more investment, ceteris paribus, means more employment, which means more Aggregate Demand, which then means MORE PROFITS, THE CAPITALIST END GAME!

But we need traitors to their class, which will not easily give up their control of THE BEST CONGRESS MONEY CAN BUY! And who has the most money to buy them with? A rhetorical question.

Anonymous said...

Dear Mike T.,

There is CAPITAL in the Philippines, but its not all in the stock market. Many companies don't list because our stock market is small and can be manipulated by someone or institutions that have blocks of change. Take the BW scandal etc.

If you add our funky justice system to the equation , you have a great disincentive for foreigners or risk-adverse locals to come in.

Add our very uncontrolled press and its unfiltered disclosures, and you have a very zany atmosphere for investment.

Add our poor institutional regulation - the best agencies that 'money can buy', and you have unliscenced securities dealers and scams, kotong cops and fixers, customs crocodiles, etc that absolutely scare away the uninitiated westerner.

I think that these are the reasons that big companies don't come in, and not because we have a 60/40 law.

We also don't have an anti-usury law, so shitty banks that charge 9% per annum on credit cards, in developed nations, charge 3.35% per MONTH, or up to 7% per month if you've got a balance and are a few days late on the monthly payment.

Private lending investors charge 5 to 6% per month with security or co-signer. Banks used to charge 42% per annum in the late 80's, it went down to about 24% in the 90's and must be fully secured and with personal surety.
They charge these rates, not because there is a lack of capital - but because they are greedy, and there is no law to stop them.

I don't think that it's 'Nationalistic' policies that have driven 12 million Filipinos abroad - it is in fact our lack of Nationalistic policies that have done it.

When the 60/40 laws were put in place, the big investors were oil companies, logging companies and mining companies. In other words, they had come for our natural resources, not necessarily to provide employment. I believe that investment safeguards should continue to exist in this type of area.

The other big players were after our retail markets because of 90+ million consumers. Even if we have A,B,C,D,E segments, bottomline, our purchases add up. This category is open for foreign ownership, as long as they bring in big investments. I think Pinoy said $2.5M and up (which is only about one sari sari store in the US).
Anyway, Koreans, Chinese, Singaporeans etc, all come in daily into these sectors - and I really don't think anyone is stopping them,even if they aren't putting in the necessary investment. So that 60/40 law isn't stopping them either.

Companies with legitimate interests and technology can set up within our PEZA zones, or if they are exporting, they can set up almost anywhere and avail of the incentives of the BOI.

I think what the Filipinos need is not a change in the laws (if it takes too long), but a change in the mindsets. We don't have much of a shared national identity, apart from that of being a colonized victim.
We did throw our Nationalism into the dustbin, that's exactly where it has been ( except for a few glorious moments of awakening.)

We need to rediscover the greatness of our race and to reach out and begin to fulfill our true destiny.
We are not the only nation that suffered diaspora, it just so happened that it was our generation that got the brunt of it. We cannot change that history, but we can still write the future as we wish it to be.

We have to assume that we have strengths, we have to grit our teeth and make the effort to move forward. The government cannot do this for us - this effort must come from each Filipino, wherever in the world s/he is, and yet we must move as one body, if we really want positive change.

We do this for ourselves, our families, our communities, our Nation.

Yes, we can change the law, but I think first, we must change our minds. Believe that the Filipino can be great!

Brouha Ha

Ricky S. (via email) said...

The Philippine plutocrats are aided first and foremost by the ignorance of the people, even by the well educated, supposedly sophisticated, well meaning, and well known national politicians considered "good guys". Many of the latter do believe sincerely in the "Filipino First policy" that provides investment killing, job destroying, poverty insuring policies that only serve to keep prices high in the domestic economy through blatant "rent seeking" laws of the economically privileged few, which results in self perpetuating dominance!

We need a couple dominant social and economic social class to take the long view who are willing to take a socially responsible, less greedy economic model that will free up pent up humungous resources of the country, currently hijacked by a rapacious few. And in the end, just like many in the US a century ago and plutocrats in our neighboring successful Tiger economies have found out, 90% of $1 Billion is really much less than 10% of $500 Billion!

Anonymous said...

Im an american with familly in the Philipines. I would never spend one red cent in investment there. Unlike here in the states, I can't own anything and given the corruption that is so obvious why would I start a business there. Foreiners that want to buy a house and live in the Philipines also would like to start businesses there. We have the skills and the money to do so. We want to live there and be part of the Philipino culture. This would help the economy and put people to work. I can say that until this changes you wont get the investment needed. So as it stands your #1 source of income are the poor little girls that marry old fat american men and send home $ to familly and thats the truth....how awfull

Brouha Ha said...

Finally, the Department of Trade and Industry is realizing what some of the true deterrents to investments are in the Philippines:
1) lack of predictability, or long term policies - we change the rules too often
2) lack of coherence - different government agencies have overlapping rules which go in different directions
ex. BOI grants tax incentive, but BIR men will come to assess because they claim that they are not 'informed' of the BOI incentives
3) irrational rules made by bureaucrats who have no business experience (except for electioneering or commissioneering)
4) poor info dissemination and implementation of national polices vis a vis regional or local polices for investment
ex. Local government code was passed in 1991 for implementation in 1992. This covers revenue allotments for the local government units that are hosting investments like mines, geothermal plants, oil wells. Even if these companies are headquartered in Makati, a portion of their taxes and fees must accrue to the area where their resource base is located.
This is to devolve policy making to the local government units and provide for its financial support
These are already in our laws, but not many have read them or care to implement correctly


Jay A. Verisen said...

"Who among the locals can pony up the required 60% in big capital-intensive projects to allow them to serve as joint venture partners of foreign investors willing to enter the Philippine market?"

But we can finance them locally. Why do we have to let foreign investors usurp and exploit the local terrain, resources and labor when we should be providing average Filipinos to do just that.

Ody dela Merced said...

Then Senator Biazon and erstwhile Chairman of National Defense and Security said that foreign investors have been known to buy large tracts of land in other countries and might do the same if we allow them 100% ownership. It can be used to influence politics and be a national threat.

My answer: Why don't we start with industrial land that foreigners can use to build their factories employing locals to construct and run it. They should also be free to own residential land for own use.

Ody dela Merced What I do for a living

Anonymous said...

I see both side of the arguments here, but I would have to take against the 60/40 rule side. Having been from the states, and been in Philippines many times, I personally would not invest one single cent in to the Philippines. The corruption is high and 60/40 rule does not protect foreigner investments, because when it comes to voting power in a company foreigners will always get out voted. Protectionism is only good for certain industries, not all. Ricky S is right, these politicans say protectionism is for the good of the people in the Philippines, but it is a crock of lies, they are only trying to protect their own interests. Filipinos that actually believe those crock of lies that come out of the mouth of the Philippine politicans should have their head examined. Most Americans do not trust our politicans these days, we know most of them are liars and full of shit but we can vote them out. AS for Philippines the power only rest in the few corrupt elite families, and they are always the ones on the ballot. They are also the ones that have interests in Philippines that they want to protect, so I do not see this 60/40 going away. Also, I want to make an argument on the foreigner only looking to exploit Philippine natural resources. If foreign companies do not go in to mine for oil, silver, gold, natural gas, wood...etc. would Philippine companies know how to do it, do they have the technology to do it? From what I see, none of them can do it. One person says it doesn't create jobs, why wouldn't it, logging companies need workers, sames goes to oil, same goes for precious metals...etc. Plus if these companies set up shop in the Philippines, Philippine government will have more tax revenue to collect plus they get share of the profit from the natural resources, but as for how much it actually goes in to public projects that's a different story because of how bad the corruption is in the government there. Out of the $100 tax revenue probably less than $3 gets used for public projects, $97 goes in to corrupt politican's pockets. Politicans want to remain control there because that's how they suck common people dry over there, that's why when there is an election somebody always get shot. Maybe people who got shot are the ones that actually want to make the country better, but they would have to attack protectionism first, which would end up attacking other politican's interests. The funny thing is Filipino people keeps on voting for these Politicans who fucks up Philippines and make their life worse off. If protectionism is so good why is Philippine economy dead last in SE Asia for the last 3 decades or more. Also why do so many Filipinos have to go overseas to find a job, aren't there enough jobs in Philippines? I think these are the questions you guys need to ask every single one of your Senators and Representatives, if they don't know the answer then vote them out of office because those are the corrupt ones that are trying to protect their own interest and want to continue receiving tons of corrupt money.

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