If You're Cowering from Competition from Foreign Investors, You Have NO RIGHT to Do Business

I remembered discussing about who ought to be the next president. I mentioned about the need for the removal of economic protectionism for better services. The next statement that I got was that, "Why would you let them invest here? Only they (foreign investors) will get rich!" It's a common lie and misunderstanding about foreign investment. Some might even be thinking that foreign investments equals foreign debt or foreign invasion. However, such isn't the case when you know about the subject of International Marketing. It was very last 2004 but there's one statement that can't be denied--the world is becoming a global village. Studying international marketing that year talked about the need to do international trading. Trading with other countries has always been part of economics.

Fear FDI, fear competition

I think the big fear of some anti-FDI sentiments is rooted upon one thing--fear of competition. It was said that Carlos P. Garcia made the"Filipino First" policy to protect the Philippines. However, such a policy may have caused failure. Discouraging foreign investments is discouraging competition. Late,r the Marcos Years can be attributed to inflation. Inflation is caused by the principle of supply and demand. High demand and low supply equals higher prices. Prices are raised when supply is low to protect the buyers and the sellers. Sellers would need some extra money to purchase extra supply or to recover from the losses. It made me think of why prices increase during a disaster like the recent Odette disaster--sellers themselves have accumulated losses along the way.

The Foreign Investment Act of 1991 or the Republic Act 7042 talks about the 60-40 rule which is to be a "safeguard" for local businesses.

a) the term “Philippine National” shall mean a citizen of the Philippines or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines or a corporation organized abroad and registered as doing business in the Philippine under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation shall be considered a Philippine national; (as amended by R.A. 8179).

The rule in itself is just utterly ridiculous. Later, there were amendments made to allow certain sectors to invest as specified in the Negative List. Amendments were done over time with Fidel V. Ramos, Joseph Marcelo Ejercito, Gloria Macapagal-Arroyo, the late Benigno Simeon "Noynoy" C. Aquino, and incumbent Philippine President Rodrigo R. Duterte. Certain amendments were done which allowed Noynoy to give the Philippines an economic kickstart. However, certain sectors are still in the negative list. This, however, still limits the competition. Noynoy did some economic reforms but it would've been a wiser move if he practically got rid of the negative list. That would've probably allowed the Philippines to be at even better footing against Singapore and Malaysia.

Those who are saying that protectionism is to help "businesses" grow are really mistaken. Instead, it's all about fearing competition. I'm always amazed at how it's very easy to brag about Filipinos who are winning abroad. However, some of these same people are fearful of competition from foreign investments. They say that Filipinos must rely on their own capacity and not rely on foreigners. However, cutting through it, it's all about being scared of competition. What's the use of being into business if you're too scared of competition? Do they think that those Filipinos that big win abroad ran away from competition or just won easily? Please, Lydia De Vega was no overnight "fastest woman in the world" neither was Cecil Licad an overnight concert pianist!

One could take a look at how Mao Zedong and Deng Xiaoping. Deng, though a communist, saw what Mao didn't. Mao tried to create the Great Leap Forward by isolationism and protectionism. The results were disastrous--it was a great leap forward to oblivion. Instead, Deng decided to practically do a lot of new policies such as welcoming foreign investment. Deng went to the United States of America (USA) and told them that his state was open for business. The economic reform of Deng did wonders such as when he invited foreign direct investors. Even the late Lee Kuan Yew dared to call Deng a great man. Deng proved Maoism was a failure. Dengism became a new thing when capitalism was infused into a new program called Socialism with Chinese Characteristics. Vietnam also followed with the Doi Moi program making it more progressive than the democratic Philippines. In short, Deng knew that competition was what China needed to get a kickstart. Either you work or no pay was Deng's way.

The idea that the likes of Neri Colmenares and Teodoro Casino are saying is nothing but cowardice. Some cowards just use them as sources probably having nowhere else to to turn to. In reality, one must think of being too scared of competition. It's only normal to have fear but this is not healthy fear anymore when you are requesting for protection from competition.

A real entrepreneur doesn't run away from competition

There are various tools used in business case studies to get your alternative courses of action and the solution to it. There's the SWOT Analysis which talks about Strengths, Weaknesses, Opportunities, and Threats. Porter's Five Forces are all about(1) competition in the industry, (2) potential new entrants into the industry, (3) supplier power, (4) power of customers, and (5) threat of substitute products. There's also the PESTLE analysis which stands for Political, Economic, Social, Technological, Legal, and Environmental. We need to take a look at the fact that entering into business means entering into competition. If you want to prove yourself great--you need to show that you can survive in the midst of competition. You prove yourself great by winning fair and square--not by cheating nor by asking for protection from competition. That's what I decided to remember when I was remembering all the case studies I did as a student at the University of San Carlos (USC).

The analytical tools don't talk about hiding or destroying the competition. Instead, it's all about how to win or the strategy that may be formulated. There's the plan to win but what about the strategy? Neither plan nor strategy will be useful if there's no competition. A plan is an arrangement or pattern for a definite purpose A strategy is a blueprint, layout, or design to accomplish a specific goal with flexibility. In short, a strategy is all about changing when necessary to go with the plan. It's like the plan is to hit a big profit. However, the strategy talks about how to win a big profit such as taking advantage of economies of scale, checking out the emerging market, and how to make the best products worth the money of the customer. These can also be used by local businesses in the face of foreign investment.

In SWOT analysis, there's always the opportunity. A whiny local businessman only sees foreign investors as threats. However, a real local businessman will see the opportunities with foreign investors. A foreign investor is a rival. However, the rival of your customer or supplier can mean another customer (extra sales) or a new extra supplier to grow one's network. A local businessman may start selling basic goods (such as basic goods) to the foreign investor, which in turn, means extra money. A local businessman may also decide to get more utilities from both local and foreign such as extra transportation services, faster Internet, and many more. It's all about building up a network through the competitor of one's customers and one's service providers. True, they are a threat but every threat may open a new opportunity.

This kind of mentality will tell you why free trade countries work better than protectionism. Do you think Sony will become a worldwide brand if Japan remained in the Tokugawa Era's protectionist policy? |You may be enjoying your Sony appliances such as the Playstation 5 or a Sony TV set. Samsung became a global brand because South Korea is a very friendly to foreign investors. Samsung was able to prove itself against the foreign electronic companies to the point that it beat Apple in terms of sales. Eventually, Xiaomi from China ended up becoming a new global player in the smartphone market by defeating Samsung and Apple. What about North Korea's Koryolink? I doubt it that people will be getting a Koryolink soon nor will it become a global brand because of their protectionist environment. Meanwhile, China's free market system did wonders to the country even when it still claims to be a Communist country.

If one must think about proving the Filipino great--we must welcome competition by foreign investors by all means. The recent Typhoon Odette tragedy has some slower restoration work. The reason is because there's too much demand and too little supply. Internet speed is slow in the Philippines because two-three telecommunication companies can't supply it to the whole Philippines. Add the competition and we get a fresh supply. Higher supply to meet the higher demand means we can get lower cost services for better quality. It's because too much workload can wear anyone or anything out. If a local business falls down--it should only be because they refuse to evolve. It's like how local Muslim restaurants fall down while those ran by Arabs manage to stand out for years. Just think about how survival is based on competency whether one is a local or a foreign entrepreneur.

In turn, the competition translates into revenues. A local business grows with the competitors in the form of suppliers, service providers, and additional customers. A real estate lessor will gain additional tenants whether they are foreigner or local. Extra income means more taxable income for the government. All who do business in the Philippines are still required to pay income taxes whether they be foreign investors or local investors. If there are more people employed then there will be more spending meaning there will be more taxable income. So again, doesn't that defeat the idea that only foreign investors will get rich if you let them invest here in the Philippines?