Skip to main content

Why I Believe 100% Shares Ownership of Public Utilities Will Help Benefit Filipino Businessmen

Accru Melbourne

Typhoon Odette certainly blew another serious blow in the Philippines, didn't it? I could remember the Typhoon Ruping when I was only in Kinder 2. Memories in kindergarten may fade over time but a few don't--such as how some people may mention that they failed kinder for sleeping in classes. The passage of the bill that allows 100% ownership of shares in public utilities has been condemned by certain Filipino organizations such as the League of Filipino Students, Kabataan Partylist, and Bayan Muna. The same old cry of "imperialism" is funny since these groups are using American made social media (such as Facebook and Twitter), they may be ordering meals from Grab which is from Singapore, they are using gadgets made from other countries (such as iPhones which were most likely assembled in China), and other stuff which were obviously not Filipino in origin.

A heavy lesson from Odette and other previous disasters

The reason why Odette restoration couldn't be done fast is due to the power of supply and demand. I can't demand VECO to work "fast enough" in the restoration of our electricity. VECO was doing the best it could. However, like every power company in the Visayas--demand outweighs supply. If electricity is in high demand but in low supply--prices will naturally go up. If there are too many customers then can you expect the company to perform at the best effectiveness and efficiency? It would be an insane demand for anybody to demand the electrical companies to provide lower cost and better services if they have to deal with too many customers at a time. The power companies will need to raise up their prices so they can hire more workers, buy better equipment, and provide better service. Yet, we have those know-nothings demanding this and that because they know nothing about running a business. 

The same could've been true for Typhoon Ruping during the late Corazon "Cory" Sumulong Cojuangco-Aquino's administration. Fidel Valdez Ramos has faced with the challenge of frequent brownouts--something that I'd dare say traumatized me during the 1990s. Too many brownouts! The only advantage was that they made me have less TV screen time. However, it would also distract the work of other people. I just knew nothing about economics from my late tens to my teen years. I even wonder why in the world was economics only taught in 4th-year high school back when it was the K+10 program? It feels quite as insane as learning mathematics without learning its practical applications. It's like calculus seems to make no sense until I realized it's used in operations management, computing profits, economic planning, and finding the break-even point. I only learned that in college. 

The price of protectionism or limiting foreign direct investments (FDI) to only a few shares showed its results. Yolanda, for one, showed the devastation in Tacloban. Fortunately, I wasn't in Tacloban last 2013 but the results of heavy disasters were there. There was foreign aid given but what about more foreign investments? In my opinion, I think the problem of the late Benigno Simeon "Noynoy" Cojuangco Aquino III's foreign investment reforms lacked public utilities. Noynoy prioritized the use of infrastructures, manufacturing gas, steam, airconditioning, finance and insurance, transportation, and scientific and technical activities. It would be of no avail if the liberalization of utilities weren't done. Manuel Araneta "Mar" Roxas II could've also tried to push for it last 2013. I believe the early Duterte Administration years should've been devoted to liberating the public utility sector too. For any good the second Aquino Administration and the Duterte Administration did--the liberalization of the public utilities should've been in high priority.

The opportunity behind liberalization of public utilities

I'm getting tired of hearing whiny people who give in all their excuses such as "imperialism" and "only foreign investors will get rich". I find it stupid that the Malaya Business Insight had a caricature by the late Neil Doloricon saying that only FDIs will get rich. Far from it as provided by the history of first world countries. We have the late Lee Kuan Yew from Singapore. Kishore Mahbubani of the Lee Kuan Yew School of Public Policy even dared to say Singapore used FDI to get better. Mahbubani constantly heard negative lies about FDI. Instead, he said, "No! We're not giving in to those lies!" Mahbubani stressed out that FDIs will provide jobs for Singaporeans. Deng Xiaoping did the same thing for the People's Republic of China (PRC) launching a real great leap forward. 

Here are a few things to think about how FDIs can be restricted or regulated within reason even if they have 100% shares without a Filipino partner:
  1. FDIs are still required to be registered at the Department of Trade and Industry (DTI), the Securities and Exchange Commission (SEC), and the Bureau of Internal Revenue (BIR) to name a few. They will still be required to pass through inspections such as the City Health, Department of Health (DOH), and other offices that regulate the private businesses. For example, an Arabian restaurant owner is still required to make sure that his restaurant isn't filthy like many of the local, unlicensed halal restaurants that tend to shut down eventually. 
  2. Land ownership isn't necessarily part of the deal. Personally, I think the Philippines has the right and duty to refuse to sell land to foreigners. It's like how shopping malls will never sell their spaces to their tenants. Lessors tend to prefer a leasing system since it gives them better money cycles than if they sold the spaces at a one-shot deal. I prefer not to sell the spaces for that reason too. 
  3. Filipino landlords are still in control of the foreign tenants. There are contracts to follow which is applicable to both Filipino and foreign tenants. Rules such as no subleasing without permission, no usage of the space for illegal or immoral activities (such as online gambling), property damage, and not paying rent for two (2) consecutive months will require immediate eviction. A foreigner who violates these rules is just as liable as a Filipino tenant.
  4. Any profits generated for the month will be monitored by the BIR. The chances are FDIs will be availing of local accounting services nearest to them. However, even foreign accounting services must comply with being registered with the BIR too. The accounting firm then reports the income of all businesses (whether foreigner or Filipino) to the BIR. Chances are the multinational corporations (MNCs) will really enter the Value Added Tax (VAT) zone. They will be paying a huge 12% VAT, they would still be subjected to the quarterly taxes, and the annual Income Tax Return. Failure to pay these taxes can result in penalties. If negotiation fails then any legal course of action can be done. FDIs are not exempt from paying taxes either. 
  5. So, even if a firm will have the intention to steal information--that would be a direct violation of the law. If a telecommunications company provides good Internet then good. However, if the foreign telecommunications company decides to start stealing confidential information then that's a good reason to sack that firm. The agreement with every FDI is that they are to subject themselves to Philippine laws even if they have 100% shares without a Filipino partner.
Are we clear now that the FDIs are still considered players? Well and good! Business analytical tools will always go with the basic SWOT analysis. If there are threats then there are opportunities. The PESTLE analysis shows what political and economic policies can influence business. Porter's Five Forces involves the bargaining power of the buyers. We need to think positively about the use of public utilities. The opportunity is there for growth of the Filipino business. Public utilities such as airlines, telecommunications, oil, natural gas, electricity, trucking, waste management, water, electricity, and the like are in demand as the Philippine business environment needs more of it! If there's more supply to fill the demand--expect lower prices of services at a better quality as a result of competition. Who doesn't want lower-priced but better quality services? 

Here are a few examples of how I think liberalization of public utilities will help benefit Filipino businessmen:
  1. The world today is a global and digital village. Internet was once viewed as a luxury back in high school. However, it has become a necessity. It became a problem between my parents' generation and mine when we needed better Internet. It can become a source of quarrel especially when college students need it to communicate with their professors and do their homework. Parents do have the right to be suspicious about it if their children will just use it for nonsense. However, the Internet is now a needed tool. Better Internet services will mean Filipino businessmen can now do Internet business better. A Shopee seller will no longer have to worry about too many interruptions. A call center will have better connections. The rise of Food Panda and Grab in the Philippines means better Internet is needed. Better Internet can only be achieved if demand is met by supply. If the local telecommunications want to remain relevant then they need to provide better services. It will also mean that local communications won't be exhausting themselves with too many customer complaints.
  2. Having a better price for water and electricity can help Filipino businesses do better. I remembered how Odette caused many businesses to come to a standstill. Some businessmen were forced to use generators which can be very annoying due to the smog. However, having plenty of power suppliers can mean power outages can be easier to deal with so there will be much lesser excuses not to meet deadlines. It will also mean schools will have teachers who will have better reasons to fail students to fail to meet deadlines.
  3. Disaster preparedness would be better done as well. The great bottleneck holding back the Filipino utility providers is with supply and demand. One reason why the clearing done after Odette was slow was due to that bottleneck of supply and demand. The local public utility providers just can't hurry it up. If VECO (or any power company) did that then they could end up damaging properties with fires. VECO's advice not to leave the power supply on during the work was to avoid accidents. People had to wait for the safety signals. However, the power suppliers were, again, faced with the bottleneck of overly heavy demand that slowed them. If there were more power suppliers and the like--the bottleneck can be greatly reduced. One area can be dominated by a local utility supplier. Meanwhile, far-to-reach areas can be where FDIs can choose to establish their services as long as they don't damage the environment and follow rules. With that, the bottlenecks can be lessened to a greater extent if the supply and demand gap is brought closer by FDIs providing public utility services.
  4. Do I need to mention the money that they will bring? So much for the claim that only FDIs will get rich. These public utility FDIs can be the newest customer for Filipino businessmen. FDIs will want to buy local food supplies so they will naturally end up eating at Mang Inasal or Jollibee instead of importing their food from their home country. The number of revenues they produce will end up in the Philippine banks since they will need direct sources of funding for their local operations. A portion of the income goes back to the mother company. However, a certain portion will end up in the banks, which in turn, will end up financing projects such as bank investments like the Retail Treasury Bond (RTB) and the Unit Investment Treasury Fund (UITF) which may benefit more local businessmen. Bank accounts are taxed to a certain percentage after interest. 
  5. If an FDI generates millions per month--12% will go to VAT payments. Quarterly taxes and the ITR will also have additional sources. All that taxable income that they have and the taxes they must pay will benefit local businesses too. The government needs all that money to pay debts and build public infrastructures. I don't see any reason why FDIs involved in utilities are exempted from the great necessity of taxation. Taxation is an absolute necessity because printing more money than necessary is highly inflationary. What is needed is not to print more money but more sources of money. 

References


"The legacy of Philippines President Benigno Aquino" by Laura Southgate (August 25, 2015)

"The Philippines Readies Public Services for 100 Percent Foreign Ownership" by James Guild (December 29, 2021)
https://thediplomat.com/2021/12/the-philippines-readies-public-services-for-100-percent-foreign-ownership/
Labels:

Popular posts from this blog

Open FDI Equals CHINA?!

This is an interesting drawing I found on Facebook. It's often used to portray people who look at the removal of the unnecessarily restrictive 60-40 shares ownership policy as, "The current president's gift to China." The same was done during former Philippine president Atty. Rodrigo R. Duterte. The same was also done with Philippine President Ferdinand R. Marcos Jr. It makes me think of stupid comments written by idiots on Facebook. It would be ironic if a lot of anti-FDI and anti-American rants were made not only on Facebook but also were typed using Apple gadgets of all things! They may be quick to use whatever irrational reasons. Some reasons can range from foreigners "unfairly" owning the means to produce equipment (read here ) and that they're simply forced to participate in the capitalist economy model to survive (read here ). However, I must ask if these guys were forced to use the luxury brands they're using (read here ). As the map shows, s
Read more

#SahodItaasPresyoIbaba Economics Will Ultimately Hurt the WORKING CLASS

Cartoonist Zach Some people claim to fight for the working class--while refusing to work themselves. Some people claim to fight for the working class--while supporting policies that will prove detrimental to the working class. One of these policies is #SahodItaasPresyoIbaba--meaning to raise salaries and lower prices. I wrote some time ago about why #SahodItaasPresyoIbaba doesn't work . However, I'lm still attacked by Ad Homimens and Nom Sequiturs. How's that even possible anyway? Economics isn't magic! If President Ferdinand "Bongbong" R. Marcos Jr.'s promise of PHP 20.00 kilo rice is absurd--so is the promise of #SahodItaasPresyoIbaba economics!  Image by Sabrina Jiang © Investopedia 2020 I don't need a PhD in economics to understand cost accounting. The income statement would include salaries as part of the cost. The cost of goods sold includes salaries. Marketing and promotions include salaries. General and administrative would include salaries. Pa
Read more

Is Anybody Willing to Prove Filipino First Policy Has a Place in the Rising Asian Century for a Million Pesos, Tax Free?

Yesterday was the birthday of former president Carlos P. Garcia, who died in 1971. Garcia is often associated with the Filipino First Policy. Back in the 1990s, I remember how Filipino First Policy was taught in values education classes --never mind the glaring contradictions. The contradictions are that imported equipment was used, or that we can literally never escape the use of imported equipment. I wrote an article discussing why Garcia's Filipino First Policy has no place in the rising Asian Century . I haven't done academic work right now, having been disgruntled by the Filipino education system. Sadly, not even graduate school taught me the basics of stock market investment (such as equity funds) or how Cash 2 Go works. That's why some people say, "It's just a degree!" I often said, "Well your doctor went to college, your lawyer went to college, etc." However, it looks like a college degree may not be for everyone, under K+12!  Some people are
Read more

Millions of Studies from the Trust Me Bro School of Economics Show #SahodItaasPresyoIbaba Business Model Works

Happy Labor Day anyone? It's this time of the year when labor groups like Kilusang Mayo Uno (literally the May One Movement) would protest. They would raise banners demanding #SahodItaasPresyoIbaba. For those who don't speak Tagalog, it means raising salaries and lowering the prices of goods. However, basic cost accounting will tell you that salaries are part of the cost of production . People ignore facts and choose their feelings a lot . I tell them that salaries are part of the cost of production (no need for a Ph. D for that, which I no longer aim to get) but they just sneer at it . They think the government has absolute control over the economy like magic . Members of Filipino labor groups may even say that wage hikes aren't inflationary even when evidence shows otherwise.  The  Economics Help   website presents why doing so can actually  worsen  inflation: Wage Push Inflation.  If labour is able to push for higher wages, despite lower growth, then we could get a combi
Read more

What's the Use of Complaining About Jollibee Acquiring Companies BUT Not Accepting Open FDI to Bring in COMPETITION to the Philippines?

Anti-Snowflake Squad Facebook Page I was checking across Facebook and noticed some idiots complaining about Jollibee acquiring companies. The same idiots turned out to be anti-FDI--the same group that converses with Porky Madugo and Mukhang Adik. As usual, I will not directly link the idiots (or even reveal them directly, they will reveal themselves) to avoid giving them clout. Here's a statement by Porky that may make anyone wonder if (1) he knows he's lying (which I think he is for some self-serving reason ), or (2) he doesn't know what he's talking about: The monopolization of business ruins the business. It degrades the quality of the business of a product.   If you think monopolization is good, that's stupidity. It kills the competition and it kills the business.   Well, as old saying goes: "capitalists are the only one will destroy themselves." Since when did capitalism mean killing competition? Isn't Porky supposedly a die-hard Communist? In the
Read more

La Salsa: The Delicious Filipino-Mexican Cantina at Lahug, Cebu City

La Salsa Facebook Page I've eaten at La Salsa Twice. I've tried eating at El Taquito (which is probably no longer operational in Cebu) and El Loco (which closed down years ago). I've eaten the Mexican American style of Red Lizard (read here ). La Salsa Filipino-Mexican Cantina offers a delicious blend of Mexican food for the Filipino customer. It's another experience for delicious Mexican-style cooking.  I've tried their beef fajita and enchilada. These are some of my favorite Mexican foods. For my first two dine-ins--I felt the cozy atmosphere of a home . I expected the enchiladas to be thinner but they are thicker. Perhaps, it's a different enchilada than the one I ate years ago. Both are delicious in their own way. I enjoyed the huger serving of enchilada.  Right now, it's still the soft opening. Some items won't be available at the moment. Based on my own personal review, I'd recommend this restaurant to anyone who enjoys fusion cooking. I love h
Read more

Forget About Open FDI, Let's Open #SahodItaasPresyoIbaba Stores Instead

A really disastrous decision! Before the Buwan ng Wika ends, I want to write about those who have been demanding "Sahod itaas! Presyo ibaba!" (Raise salaries, lower prices). Back in 2022, I wrote an article discussing why the demands for higher salaries, lower prices of goods, and handouts for all are a recipe for disaster . I could laugh at people who believed in the promise of PHP 20.00 per kilo of rice promise of Philippine President Ferdinand R. Marcos Jr. Before that, people had been demanding #SahodItaasPresyoIbaba during the reigns of the late former president Benigno Simeon C. Aquino III and former president Rodrigo R. Duterte.  Image by Sabrina Jiang © Investopedia 2020 I did explain why the model doesn't work. In the cost of production, you need to account for everything that happens including salaries . Raising salaries during inflation can actually worsen the situation . It's because sticky inflation happens with cost-push factors (ex. cost of gasoline, co
Read more

A Fun Song to Start Learning the New Pinyin Sequence

I was looking for a song in relation to the BoPoMoFo. In my case, I'm prone to calling Pinyin "BoPoMoFo" until today (read here ). It's because Pinyin basically serves the same purpose as Zhuyin--teaching one how to read Chinese. I'd like to say that I got too comfortable with this old sequence: I may hate memorizing Zhuyin but I like treating Pinyin in the same sequence. The new table which uses the 23 initials-24 finals method (read here ) can be confusing. Some old-timers may have an easier time transliterating the Zhuyin into Pinyin. However, I still find the new sequence confusing. I may no longer remember Zhuyin (and I kept failing at it and kept memorizing sentences without understanding) but I can remember Pinyin. Except my memorization of the Pinyin was in the BoPoMoFo sequence.  With more than a billion Chinese speakers worldwide--can we keep using the old books to teach Mandarin? That's why I wrote about why the old Chinese textbooks can't be us
Read more

"But the Philippines Isn't Taiwan!" is Just Another Lame Excuse to Justify Filipino First Policy

Atlas Institute for Internal Affairs   Happy Double 10 to Taiwan! Chinese Filipino schools would take part in what's often called the Double 10 celebrations. October is the 10th month and it's the 10th day. I remember talking about how Taiwan succeeded by accepting FDIs and how the Filipino First Policy caused us to fail . The typical response I would get on American-made social media (of all places), such as Facebook, would be, "How many times do I need to stress that the Philippines isn't Taiwan. We are the Philippines! We are unique!" If those fools did a study, they may realize that there's a link between the Taiwanese aborigines and the Filipino aborigines (read here ). The Philippines should've learned from Taiwan during COVID-19 One of the best models for fighting COVID-19 was Taiwan. Sure, I'm more in favor of shifting to a parliamentary system and Taiwan is still a presidential country (with parliamentary features).  Former Taiwanese president
Read more

The Pinaskohan Mentality is Keeping Poor Filipinos, POOR

Philippine Star Is it me or is the Christmas Season really that toxic in the Philippines? I wrote an article about the irony of early Christmas season with late Christmas shopping . I didn't think about writing this but is it me or do people like to ask for impunity during the Christmas season? Think about that toxic former friend or former romantic partner. You cut off that person because of the toxic behavior he or she shows. However, you meet at a public place during the -ber months. The person says, "Let's reconcile! It's Christmas!" I can be open to reconciliation with classmates with who I had a childish quarrel back in high school. So far, one of the people I had a childish grudge wasn't  a toxic person. The reason why I feel I can reconcile with that person is because he's productive . The same can't be said for people who have a toxic attitude.  What do several Filipinos look forward to during Christmas? Would it be just the spiritual signific
Read more