Three days ago, in reaction to reviving initiatives to amend the protectionist economic provisions of the 1987 constitution, President Benigno Aquino III affirmed his intransigence against reforming the 1987 constitution especially on protectionist economic provisions, citing that China has become an economic giant despite of no private ownership of land. The president said that there are many things that need to be tackled before constitutional reform like inefficient bureaucracy, peace and order, infrastructure according to the recommendations of big business sectors in our country like PCCI, and MBC.
President Aquino was cherry-picking here. In China, private ownership is prohibited as the lands are owned by the state and anyone (Chinese citizen or not) who wants to use land for business and residential purposes have to ask the Chinese government of 99-year land lease. He forgot to say that China allows 100% foreign corporate ownership in anywhere in China, unlike here that foreigners cannot own more than 40% of share in a business anywhere in our country.
The Wholly Foreign Owned Enterprise (WFOE or WOFE) is a Limited liability company wholly owned by the foreign investor(s). In China, WFOEs were originally conceived for encouraged manufacturing activities that were either export orientated or introduced advanced technology. However, after China’s entried into the WTO, these conditions were gradually abolished and the WFOE is increasingly being used for service providers such as a variety of consulting and management services, software development and trading as well. With that, any enterprise in China which is 100% owned by a foreign company or companies can be called as WFOE.
The reasons on why amending the protectionist economic provisions of the 1987 constitution are necessary because foreign investment ownership restrictions have been embedded in our Basic Law like only 40% foreign equity ownership on extracting natural resources (Article XII, Section 2); only Filipinos can own land privately (Article XII, Section 3); only 40% foreign equity ownership on domestic-based enterprise (Article XII, Section 10); only 40% foreign equity ownership on public utilities (Article XII, Section 11); only Filipinos can work on professional jobs (Article XII, Section 12); only 40% foreign equity ownership on education (Article XIV, Section 4); only 30% foreign equity ownership on advertising and foreign investment is prohibited on media (Article XVI, Section 11), cannot be relaxed or repealed by legislation alone and to do so would be “inimical” to national interests (Article XII, Section 22).
However, in the globalized economic realities of today, these ownership restrictions on foreign investment do not assure economic progress that is inclusive but exclusive because forced equity sharing would force foreign investors to find a local partner who is rich enough to tap 60% of an investment project. Also, these provisions that I have mentioned are hypocritical in our part as Filipinos can own land or own 100% of businesses abroad like the United States, Singapore, Japan, Hong Kong, South Korea, Poland, Chile, Brazil, and many others while these nationals cannot own land or businesses they invested 100% here in our country.
The 60/40 equity sharing is a forced bribery in favor of local conglomerates like the Sys, Ayalas, Cojuangcos, Tans, and many others as they are the only few can afford to tap 60% of a particular large-scale investment project that involves foreign companies. The 60/40 equity sharing is giving these local conglomerates an unfair advantage compared to foreign companies who in fact with superior capital, technology, expertise, and management style and the Filipino consumers and workers who are ripping for quality services.
The government should stop pandering local business and nationalist interests and allow everyone regardless of nationality to do their businesses everywhere in our country. Crafting legislation to allow 100% foreign corporate ownership especially with the important economic sectors like mining, oil and gas extraction, manufacturing, agriculture, forestry, public utilities, education, and media within the current provision of the 1987 constitution are unconstitutional. Therefore, the long-term remedy is to repeal the 60/40 from the 1987 constitution.
Allowing full ownership regardless of citizenship is one of the big steps to become developed country someday.