Comparing Philippine FDI law with Brazil

Foreign direct investment law by selected countries surveyed by the World Bank in 2010 (table 1).

Foreign direct investment law by selected countries surveyed by the World Bank in 2010 (table 1).

oreign direct investment law by selected countries surveyed by the World Bank in 2010 (table 2 with the Philippines highlighted in red box).

Foreign direct investment law by selected countries surveyed by the World Bank in 2010 (table 2 with the Philippines highlighted with red box). (Click the complete report in PDF)

It’s been 10 days after the 16th Congress of the Philippines started its 3-year term and as usual like the previous congresses, legislators have to pass their bills the moment a congress term starts and with the newly-opened Congress, House of Representative Speaker Feliciano “Sonny” Belmonte filed the first House resolution of the Congress calling to amend the restrictive protectionist but anachronistic economic provisions in the 1987 constitution especially the forced 60/40 forced equity sharing in favor of Filipino individuals or corporations in extracting natural resources, setting-up domestic corporations, public utilities, media, and advertising.

I am a bit disappointed with the content of the resolution wherein the 60/40 forced equity sharing will not really be scrapped, instead, Speaker Belmonte covered the 60/40 forced equity sharing with “UNLESS OTHERWISE PROVIDED BY LAW”, which means the current provision may be kept in constitutional paper but there would be more flexibility for the Congress to enact 100% foreign investment participation in mining, oil and gas extraction, manufacturing, agriculture, public utilities, media, advertising, land, and many more without too much explicit constitutional contradictions compared today. But, I think this is better with this gradual manner than none in order to silence anti foreign investment liberalization while not hampering the efforts to amend those provisions in the 1987 constitution, that is really needed for our country in order to have more inclusive and meaningful job generation and improving our dilapidated infrastructure in order for our country to move forward in this globalized economic order of today.

(Here’s the resolution of Speaker Belmonte to amend the 1987 constitution).

Foreign investors want to invest 100% then control what they invest because in the first place, the capital, technology, and ideas are theirs and also to anchor themselves from different notorious business practices all across the world including the Philippines like using dummies just to circumvent foreign investment restrictions and later on, the money will be swindled by these dummies and foreign investors cannot take the money back to them because law prohibits them from investing in particular economic sectors, thus the government will not going to protect them.

Yet, some legislators like Neri Colmenares of Bayan Muna are opposing Belmonte’s move to amend the protectionist economic provisions of the 1987 constitution for the reason that other countries have the same foreign equity ownership restrictions as ours. He even cited Brazil as one of the examples that have “strict” foreign direct investment laws than us where as far as I remember when he spoke during the public hearing about this issue, he said that Brazil only allows 25% foreign investment participation in businesses which is wrong as Brazil allows 100% foreign investment participation at MOST including mining, oil and gas extraction, manufacturing, agriculture, and public utilities, look the table below from World Bank’s Investing Across Borders 2010. (Click the complete detail)

Foreign investors can invest 100% in Brazil than in the Philippines.

Foreign investors can invest 100% in Brazil than in the Philippines.

See, Neri Colmenares has been lying to many people several times regarding this issue in whether to amend the protectionist economic provisions or not just to support his party-list agenda that he represent just to have their political survival assured in the face of increasingly globalized economic integrated, which makes their economic platform of “national industrialization” anachronistic as to set-up capital and labor intensive businesses like mining, oil and gas extraction, manufacturing, and public utilities need economic of scale to be operational that existing local conglomerates cannot fulfill nor the government as what these outdated left-leaning people have been advocating for many years.

The very point of Sonny Belmonte and many FDI liberalization advocates is this:

There should no constitutional constricts on foreign investments especially foreign investment participation. Our foreign direct investment laws should attune with the economic necessities in relative to global economic order. Putting any restrictions on foreign direct investments in the constitution especially in the 1987 constitution for the Philippine’s case, deprive any flexibility by the executive and the legislative branches of the government to adjust our FDI laws attune with a particular time without too much political noises from vested interests. Lesser or no constitutional debates in crafting FDI laws in the future mean that any investors especially foreign, will not going to have an anxiety on whether to continue invest in our economy or not.


Doing business in the Philippines, most ‘difficult’ in the world – World Bank

Two worlds divided by the atrocious processing to do businesses in the Philippines.

The Philippines in terms of ranking on doing business remains difficult and atrocious compared with the hundreds of countries around the world according to the latest report of the World Bank’s “Doing Business 2013“.

The country ranked 138th out of 185 countries according to the latest survey done by the International Finance Corporation and the World Bank in regards of processing permits in order to have a business being a legally recognized by the government. The country remains bombarded by the red tape in regards of processing permits to do business.

It takes 161 days of starting a business, among the worst in the world, compared to only a day in New Zealand, 2 days in Australia, 3 days in Canada, and 4 days in Singapore.

It takes 16 procedures in order for a business be legally approved by the government, making it the third worst in the world after Equatorial Guinea which takes 18 procedures and Venezuela which takes 17 procedures.

It takes also 36 days for entrepreneurs in order their businesses be registered, way longer than the world’s leaders of New Zealand which takes only a day for businesses be registered, Georgia which takes 2 days for businesses be registered, and Singapore which takes 3 days for businesses be registered.

It cost 18.4% of the country’s GDP per capita in order for businesses be legally registered that includes legal fees for registration, compared to nothing in Slovenia, 0.2 in Denmark, 0.6 in Singapore, and 1.0 in the United Kingdom.

It also cost 4.8% of the country’s GDP per capita in order for businesses especially foreign to deposit money to pay the paid-up capital requirement as required by our law, compared to none in many countries like our regional peer, Singapore.

I am not surprised with the current rankings of our country in regards of doing business. Many Filipinos have been frustrated on the procedures imposed by the government on the perspective entrepreneurs who wants to generate jobs for millions of unemployed citizens regardless of whom they came from. Our government seems to be procrastinating in their efforts to improve our business climate in our country so that local and foreign entrepreneurs would encouraged to set-up their businesses that would have generated more jobs and more prosperity for the people but instead, these prospective entrepreneurs have been bombarded with the atrocious requirements in order to have their businesses be registered while the government protects the selected elite oligarchs from the floods of competition that would have provide the millions of poor and unemployed Filipinos an opportunity to uplift from poverty and ignorance.

The government officials should stop pandering the needs of the elite oligarchs and let real competition in our economy to work in order to satisfy the needs of the majority Filipino, who installed them through elections, of employment, education, health care, and many others. The government officials especially the elected ones should stop punishing and blocking prospective foreign entrepreneurs, whether large or small from setting-up businesses here that would have created millions of job opportunities like the constitutional prohibition of 100% foreign equity ownership of businesses outside PEZA-accredated zones and let these foreign entrepreneurs to invest 100% from their own capital and ideas and control what they invest to protect rent-seeking dummies.