Those restrictive economic provisions…
- Boo Chanco (The Philippine Star) - May 24, 2013 - 12:00am

P-Noy got it wrong on why those restrictive economic provisions ought to be revisited. He is also wrong to cite China as proof that ownership restrictions don’t deter foreign investors. The attractiveness of China to investors, with its vast market and good infrastructure, can’t be compared to the Philippines.

For investors considering us, it is all about assurance of a level playing field. Inability to own land may not be a deal breaker but fears of a less than level playing field can squelch a deal.

In China, all land is owned by the state… no exemptions so that’s fine… everyone is in the same boat. It’s different here even if we have enough clever lawyers able to devise structures that go around the restriction. It is still a hassle investors with other options don’t have to put up with.

While some investors can accept leasing arrangements, others want the right to own real property. It becomes part of their asset base they can use to borrow against when they raise operating capital.

Others just don’t understand the restriction because their home countries like the United States don’t have it. Foreigners are free to lose their money, like a Japanese conglomerate did, buying ownership of the Rockefeller Center or the Pebble Beach Golf course.

What bothers some potential investors about our current debate is the strong and effective opposition to reforming the restrictions coming from our ruling oligarchs, the rich Chinoys in the Forbes top billionaires list, the indigenous elite and the landed Spanish mestizos. These are also the guys who vigorously opposed efforts to reform the retail trade law, not the sari-sari store owners.

What these all suggest is a playing field that is not level. There is also the 60/40 rule which requires foreign investors to pay a native dummy to hold shares beyond 40 percent. That also rankles. It demonstrates the rent seeking power of the local ruling elite that increases an investor’s costs of doing business and creates all sorts of control problems down the road.

Take telecommunications and power, considered strategic industries by the Constitution. The capital requirements are so large and most of it to be provided by the foreign partner. It just is plainly unfair to limit foreign ownership to 40 percent and require them to pay a local dummy to hold anything beyond that.

In some cases as in advertising, it is downright ridiculous to think it is in the strategic national interest to require a company creating materials to sell Sunsilk shampoo to be in Filipino hands. This is particularly true in today’s borderless world of the Internet where even China finds it challenging to control uncensored content filtering into the country.

In other words, the restrictive provisions of our Constitution are just embarrassingly out of date in today’s competitive era of globalization and the World Wide Web. Our neighbors have started to see the light and that’s why they have grown at a rate we can only dream of. Even Malaysia has recently talked about relaxing their bumiputra policy.

No wonder the Philippine Chamber of Commerce and Industry (PCCI) called on newly elected legislators to remove foreign ownership restrictions to attract more investments, short of allowing land ownership. But why stop there?

The PCCI specifically asked for lifting the restrictive economic provisions of the Constitution such as the removal of the 40-percent equity limit on foreigners; expanding the role of foreign investors in the exploration, development and utilization of natural resources; and extending land-lease agreements by another 25 years.

PCCI official Miguel Varela said: “Our domestic policies should promote economic growth by thinking regional and international rather than an insular market; our neighbors have liberalized investment policies that have made them truly attractive to foreign direct investors.

“If we want to stay highly competitive and attract more FDI [foreign direct investments], we need to change our mindset and gear our investment incentives toward international markets.”

If PCCI is no longer afraid of foreign competitors, why should government be? In fact, there is this feeling among some Pinoy entrepreneurs that “only the very wealthy mostly Chinese Filipinos and Spanish mistizos profit from these economic restrictions. Remove it and more foreigners will bring in more industries creating new jobs which will benefit millions.”

It is however true, as P-Noy pointed out, that there are other crucial factors that affect the attitude of foreign investors. P-Noy cited our problems with corruption and red tape in our bureaucracy, peace and order situation, and the lack of infrastructure as top concerns of potential investors in making a decision to do business in the country.

P-Noy is to be congratulated for issuing an administrative order creating a cabinet level task force to address those issues that plague our investment climate. Why only now? Better late than never!

One more thing… neither the order nor the press release stated a deadline for this task force beyond a requirement to report every 60 days. They are still trying to run this government by press release to simulate action. And as we have seen with DOTC, that simply doesn’t work.

Perhaps the reason P-Noy wants to put any charter change proposal in the back burner is the fear that any public discussion will open a Pandora’s box of political issues like the form of government and term limits. P-Noy must realize that even if it does, because we have a President like him who has no hidden agenda, now is the best time to tackle these ticklish political issues.

But P-Noy need not worry. Speaker Sonny Belmonte has devised a simple plan that would make it easy to tackle only the economic issues.

As explained to me by former SC Justice Adolf Azcuna, the pertinent economic provisions of the Constitution can be amended by passing a joint resolution that simply inserts the phrase “UNLESS OTHERWISE PROVIDED BY LAW” in the appropriate places… articles XII, XIV and XVI.

If this is done quickly, we could schedule ratification to coincide with the barangay elections at no extra cost for a separate plebiscite. Sayang naman if we miss this opportunity.

P-Noy has asked his economic managers to give him a recommendation. But I am afraid his economic managers are not likely to give him a recommendation he doesn’t like and they know exactly how he feels.

If his economic managers can have the balls to tell him otherwise, we may yet be able to make ourselves more competitive with Myanmar for investments moving out of China. I realize P-Noy can be stubborn but he can also be persuaded if enough compelling evidence is presented.

So that’s the challenge… help the economic managers frame the arguments for liberalization. Overcome the objections of our rent seeking economic elite who want to keep the status quo and preserve their unfair advantage.

 In the end, lifting those restrictions is really about job creation. P-Noy needs to create more jobs than the current state of our economy can deliver. Reforming those restrictive economic provisions will provide a psychological boost to the investment climate that will attract long term investors and not just those who play in our stock market.

Plain and simple, we cannot depend just on OFWs and call centers. We need manufacturing jobs to absorb excess farm labor that are not educated and trained enough for overseas employment or call center duties… and there are a lot of them. Time is of the essence because we have strong competition within our region for the same investment dollars.

I surely hope P-Noy gets it… for our economy’s sake.


I have not written anything on the PCOS because I wanted to give Comelec a chance to prove everything is in order. But almost two weeks after the election and PPCRV reports that 18,499 precincts have not transmit results.

I cannot buy the explanation of Comelec Chief Sixto Brillantes that the delay is caused by transmission problems. Even if they sent the printout of the tabulated returns by carrier pigeons, PPCRV should have these by now.

There is a growing suspicion that the usual suspects have found a way of cheating by withholding transmission of results. I am told that in many cases, PPCRV is being denied their copy of the results even if they are by law entitled to a copy.

And Comelec has not given us any credible explanation on what is going on beyond the possibility of a sabotage of the CF cards. If this is a precursor of what will happen in 2016, heaven help us! 

Rich seniors!

Marilyn Mana-ay Robles sent this one on behalf of fellow seniors:

We finally made it! W’re rich!

Silver in the hair; Gold in the teeth; Crystals in the kidneys; Sugar in the blood; Iron in the arteries; and an inexhaustible supply of natural gas.

Boo Chanco’s e-mail address is Follow him on Twitter @boochanco                                             


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