100% FDI Share Ownership Isn't Colonial Mentality, It's About Helping Develop the Philippine Business Environment

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Listen to him and those who think alike, not the social media gossipers!

I guess this is always going to be another post where I'm refuting some gossip about foreign direct investments (FDIs). The social media gossipers want to make it look like all the advocates for reforms are giving in to colonial mentality. Colonial mentality is often a term used to define a person who prefers everything foreign even if what's foreign isn't of good quality. Though, I'm afraid the term colonial mentality has been misused and abused by people who want to remain in the protectionist status quo. We have had Carlos P. Garcia's "Filipino First Policy". Later, we had Ferdinand E. Marcos Sr.'s protectionist regime. After EDSA, we still remained somewhat protectionist even after some economic amendments. The late Benigno Simeon C. Aquino III and former Philippine President Rodrigo R. Duterte had signed certain laws to ease certain sectors. Andrew J. Masigan, a Duterte critic, had called the Public Services Act of 2022 better late than never. The signing of the law caused certain "thought leaders" like the Bayan Muna, IBON Foundation, Kabataan Partylist, League of Filipino Students, and other like-minded groups to cry foul about it. Ironically, they're crying foul on imported media such as Facebook or on blogging platforms such as Blogger or WordPress (which Teodoro Casino ironically uses). 

Whether we want to admit it or not, social media gossipers make terrible economists (read here). A lot of statements they make are really nonsense. Reading all their Facebook comments in regards to Philippine Senator Robin Padilla (read here) is full of Ad Hominems and gossip. The statement that history isn't gossip is for real. History is based on facts. Yet, the gossip spreads such as it's Duterte's "gift to China", that only foreign investors will benefit from investing in the Philippines (another myth debunked, read here), and that it's abandoning the national industry. Yet, history has proven that it's not about abandoning the national industry. Accepting FDIs has not been about abandoning the local industry. Instead, it's all about improving the national industry. Mao Zedong tried to accomplish the Great Leap Forward by self-industrialization and it failed. Mao's trying to industrialize China by doing everything themselves just failed. The late Lee Kuan Yew (author of From Third World to First) even mentioned in a speech, "Let's stop trying to do everything ourselves." Instead, it was all about how Lee Kuan Yew, Deng, and the late Do Muoi of Vietnam, have used FDIs to develop their countries. 

Opponents of economic liberalization could always say Hilario Davide Jr. is a good public servant. Though. I'm still amazed that Davide Jr. could dare say that amending FDI ownership laws will turn the Philippines into a colony of investors. Yet, another former United Nations (UN) diplomat named Kishore Mahbubani ended up saying otherwise. Both Davide Jr. and Mahbubani have been involved with public policy in Singapore. That's why I feel the comparison of Davide Jr. and the late John L. Gokongwei Jr. is a categorical mistake. True, the late Gokongwei Jr. supports constitutional reform. However, the comparison with Mahbubani is closer since both were involved with public policy aside from their being former UN diplomats and grandfathers (read here). Mahbubani himself wasn't just a public policy expert--he's the public policy expert of a country that went from third-world to first.

It can be an excuse that the Philippines isn't Singapore. True, but it doesn't mean the Philippines can't learn from it. Reading through From Third World to First will tell you other nations were impressed by Lee Kuan Yew's achievements. China is much bigger than Singapore. India is much bigger than Singapore. Vietnam is much bigger than Singapore. Yet, these countries began to see the benefits of economic liberalization. I'm amazed that some people have been using Lee Kuan Yew's statement on the Marcoses against incumbent Philippine President Ferdinand R. Marcos Jr. Yet, Singapore Prime Minister Lee Hsien Loong congratulated Marcos Jr. for winning the 2022 elections. Lee Hsien Loong had mourned the passing of Aquino III as well. Some say Singapore only accepted FDIs because it's not rich in natural resources. However, one can think that North Korea and Venezuela are rich in natural resources. However, these countries are poor due to economic protectionism even worse than the Philippines. Yet, some people still blame the USA for Venezuela's plight. Some people may want to blame South Korea for North Korea's plight. Meanwhile, South Korea interestingly has fewer mineral resources yet it's doing better than North Korea. Did South Korea steal the wealth of North Korea? That would be a very ridiculous accusation.

Instead, the issue of allowing 100% shares ownership is this--allowing FDIs to invest 100% without having to look for a Filipino partner. I admit that I'm not open to foreigners owning land. My logic behind that is a mall never sells its spaces and the Philippines' acceptance of FDIs must be likened to that of a mall. The limitations of 60-40 ownership are pretty much-overpriced rental (read here). Who in the right mind would want to depart from 60% of their net profits after taxes with their lessor? It will never make sense one bit for any sound businessman to do that. Allowing 100% share ownership for FDI means letting an investor invest in the Philippines like tenants to a mall. FDIs are still required to be registered with the government. A lot of stuff such as registration with respective offices like the Bureau of International Revenue (BIR), Department of Foreign Affairs, and the Department of Trade and Industry (DTI) are absolutely there. The BIR taxes the FDIs depending on how much income they make. The FDIs end up hiring locals first and buying local products (and availing local services) as well (read here). In the end, FDIs must base their profits on revenues less all expenses which include taxes. What's left is theirs but they benefited the local businesses (as new customers) and the local economy. More businesses registered equals greater tax collection, right?

Observing the rather limited FDI in the Philippines should be common sense. A good example is how two foreign delivery services, Grab and FoodPanda, have assisted Filipino businesses (read here). The statement that Filipino businesses will only be at risk is an overstatement. Instead, FDIs serves as threats (only for businesses that refuse to upgrade) and opportunities. That's why we have the SWOT analysis standing for Strengths, Weaknesses, Opportunities, and Threats. Would it even matter if Filipino businesses use imported material and equipment (read here)? It wouldn't as long as it serves its purpose to serve the business. Filipino businesses could benefit also from FDIs as service providers and customers. It would be their chance to grow better by learning new stuff. As Deng said it, "It doesn't matter if the cat is black or white. What matters is that it catches mice." In short, it's not ignoring the Philippines' business environment but developing it through healthy competition and opportunities. 

References

Books

"From Third World to First--The Singapore Story: 1965-2000) by Lee Kuan Yew
Harpers Collins Publishers

Videos

"The Singapore economic model - VPRO documentary - 2009"  by VRPO Documentary (September 8, 2018)

Websites

"Ex-chief justice warns PH will be a 'colony' if foreign capital limits are lifted" by Trisha Billones (January 29, 2018) 

"LEE KUAN YEW TALKS ABOUT THE FAILURE OF MAOISM AND DENG XIAOPING’S SHIFT TOWARDS CAPITALISM"
http://correctphilippines.org/lky_mao_deng/

"Long overdue laws finally passed" by Andrew J. Masigan (April 06, 2022)

"North Korea’s Resource Headache" by Andray Abrahamian & Geoffrey See (May 1, 2012)
https://thediplomat.com/2012/05/north-koreas-resource-headache/

"Singapore leaders congratulate the Philippines' President-elect Ferdinand Marcos Jr" by Vanessa Paige Chelvan (May 18, 2022)

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

"What Are The Major Natural Resources Of North Korea?" by Sophy Owuor (January 24 2019)

"What Are The Major Natural Resources Of South Korea?" by Benjamin Elisha Sawe (January 23 2019)

"What Are The Major Natural Resources Of Venezuela?" by Ferdinand Bada (July 25, 2019)

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