President Aquino’s misconception on land and corporate ownership

President Aquino's intransigence on proposed constitutional reform does not assure long-term economic progress in our country.

President Aquino’s intransigence on proposed constitutional reform does not assure long-term economic progress in our country.

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.

Letter of appeal to President Noynoy Aquino to scrap the 60/40 equity restrictions against foreign investments

If you really love the Philippines, you should admit that the 1987 constitution is flawed and needs to be amended for the betterment of the Filipino people.

August 4, 2012

Dear Mr. President,

I am really disappointed with your stand that we need no constitutional amendment to gather more foreign investments for our country and in fact, you even said that retaining the 60/40 equity restrictions will assure Filipino shares in any foreign investment projects which for me was wrong as forcing any foreign investors to find a Filipino partner who rich enough to front the 60% of a foreign investment project or transaction would never assure the financial security and flexibility on the part of foreign investors to utilize his/her investments as much as possible as he/she have to abide what the Filipino partner says.

Mr. President, to whom Filipinos you referred? the common people or your financiers who rich enough to swindle 60% of foreign investments.

Many countries around the world like Argentina, Brazil, Cambodia, Canada, Chile, China, Colombia, Czech Republic, France, Georgia, India, Indonesia, Ireland, Japan, Kazakhstan, Korea, Malaysia, Mauritius, Mexico, Peru, Poland, Russia, Singapore, Spain, United Kingdom, and the United States allows 100% foreign equity ownership of businesses at most of their economic sectors including mining, oil and gas, tourism, manufacturing, transportation, telecom, infrastructure, banking, and electricity sectors which are crucial to our future economic growth and these sector really needs 100% foreign investment participation as our own local companies doesn’t have enough capital, technology, and expertise.

Mr. President, there is no enough valid reason not to support the initiatives to amend the restrictive economic provisions of our 1987 constitution in Article XII, section 2, 11 and 12 in particular where the 60/40 equity restrictions are being stipulated if you really care the Filipino people not your financiers during the 2010 presidential campaign.

For the last 77 after that 60/40 equity restrictions being stipulated by our Founding Fathers like Manuel Quezon and Claro M. Recto in reaction to the Great Depression that time, our country became an economic laggard to the point that our country is one of the poorest in Asia as the rest of the world catches-up the standard of living of the United States and Europe through the usage of FDI and export oriented economic model in contrast of ours that we used the import-substitution economic model where we have to protect our own local industries from foreign competition regardless of the inefficiency of our own local industries and also breed a massive dependence on IMF/World Bank loan to finance the import-substitution economic model and therefore, breeds corruption among the government elites.

The restrictive economic provisions of our 1987 constitution is contributing to further and complex problem that our country plunging right now that is the severe unemployment and underemployment due to lack of competition in our job market as foreign investors are being driven out in our domestic economy and the local investors cannot provide the necessity of our growing labor force due to lack of capital and technology as foreign investors are reluctant to have a large-scale partnership with any local companies due to the notorious corruption in the Philippine business sector.

Those who were luckily educated were driven out of the country and forced to seek lucrative jobs abroad to earn money to support their remaining families here in our country at the expense of emotional troubles to their remaining children in a long-run which contributed to a further socio-economic problems among the Overseas Filipino Workers’ families where their remaining wife/husband in our country tend to dump their husband/wife who was working abroad or their remaining children tend to engage strange activities during their adolescence especially where some of them got married early of their ages or committed juvenile crimes due to the absence of one or two of their parents when they grew up.

If you, Mr. President wanted to have a real economic, political and social prosperity just just for today but also forever in our lives, let us support the initiate of Juan Ponce Enrile and Feliciano Belmonte of amending the restrictive economic provisions of our 1987 constitution.