The STUPIDITY of Insisting that Equity Restrictions in the 1987 Constitution of the Philippines Exist for "National Security"

As the call for economic charter change goes on, I feel the need to educate some people with common sense. I'm reading comments on Facebook that 60-40 (or any similar ownership restrictions) is for the "security of the Philippines" or that certain sectors can't be allowed 100% ownership on the part of the MNC. Once again, do I need to remind people for the nth time that 100% FDI ownership is all about share ownership? Sadly, many Filipinos misunderstand what 100% FDI means (read here). What 100% FDI ownership means is that MNCs don't need to look for a Filipino partner, only to be burdened with having to give up 60% (or more) of the net profits after taxes and they only keep 40% (or less). That's why I called such an arrangement as overpriced rent (read here).

Some of these people I ran into on Facebook (of all places) are too beholden to Atty. Hilario G. Davide Jr. It was last 2018 when Davide Jr. also said that the Philippines may become a "colony of businessmen". One of Davide Jr.'s words was this:

Davide said the 60-40 foreign equity ratio should stay also because the Philippine population is growing annually and they should have food security.

"What will you feed the people afterwards if all our assets here, natural assets, would be [granted] to foreign investors?...Congress should stick to it [60-40] and fully implement the same," he said.

The Constitution restricts ownership of certain areas of investments to firms with at least 60-percent Filipino capital.

The restriction also covers exploration, development, and utilization of natural resources through co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations.

However, as they keep mentioning Davide Jr., I fire shots at them with Singapore's very own Kishore Mahbubani, founder of the Lee Kuan Yew School of Public Policy (LKYSPP) in the National Unversity of Singapore (NUS). I could imagine what if Mahbubani and his friends decided to vacation in Cebu City and ran into Davide Jr. Mahbubani might say, "Hilario is that you?" Davide Jr. may say, "Long time no see. I'm glad you remembered me. We met at the United Nations." Mahbubani may say, "Too bad you never joined the World Economic Forum. Unfortunately, I must disagree with your statements. So you say it's for security reasons? I'm sorry but I have to disagree."

Let's compare FDIs to tenants who invest in the space and the Philippines to any form of commercial space (hence why I'm still opposed to letting foreigners buy spaces). If we're going to make the comparison, let's say that I opened a shopping mall in a downtown area. However, before one can rent in my shopping mall, they must sign a waiver that says that the lessor must let me own 60% of their business for that branch, located in my shopping mall. Certainly, no sensible businessperson would agree to such a stupid deal. I'm pretty sure none of the shopping mall groups such as Ayala, Robinson's, and SM ever put such a ridiculous clause in their contracts!

I bet a lot of the families who run the malls will laugh at me. Just think if I wouldn't allow a tenant to rent a space unless the person agreed to give me 60% ownership of that space. Tenants want to keep 100% of their profits. Unfortunately, most people operate with the idea that profits are what you own for the day. Never mind that simple mathematics says that the profit is computed by the selling price less the cost price.

Image by Sabrina Jiang © Investopedia 2020

In accounting, we have to focus on this cost accounting statement. I'd like to tell people to notice that we have revenue less COGS equals gross income. Gross income is then deducted from all expenses which results in Earnings Before Tax. After that, Earnings Before Tax is deducted from taxes. All that's left is the net income, which the investor wants to keep at 100%. Expenses would include the monthly rental aside from utility expenses. If one wants sot reduce the prices of goods, it should be because some (or all) areas of related costs have been reduced. If utilities are cheaper, increasing the salaries of employees while having a certain reduction of the overall price of the goods or services is possible. However, simply increasing salaries without considering all other factors will be inflationary.

Basically, as a lessor, I collect the rentals every month. If the tenant can't pay the rent in two consecutive months, it's a ground for lawful eviction. The rent is part of the list of expenses. If I say that I'm going to require 60-40 for "security purposes", it's a very flimsy excuse. It's not as if I can't add certain restrictions to the clause such as no subleasing without permission, no immoral activities, no damage to property, no consecutive two months of non-payment, no one is allowed to live in the commercial space, etc. These restrictions are reasonable compared to when I require the tenant to give 60% of their net income after taxes. Getting a profit isn't an easy thing. The businesses should be allowed to keep 100% of what's left of the net income after taxes.

It may sound nice to say that it's all about "security". However, any shrewd businessperson who will read my contract will not buy the garbage I just spewed at the person. They would see that my requiring them to give 60% of their net income is nothing more than my own selfish agenda. Requiring MNCs to split 60-40 (or even higher than 60%) of the net income is all about the Filipino partner trying to get rich fast. That's why the late Carlos P. Garcia's "Filipino First Policy" caused the Philippines to fail. True, the Philippines may not be a totalitarian or Communist state. However, more businesses have chosen Communist Vietnam instead as a place to invest.

The idea that only Filipinos should hold the majority of the economic activity is obsolete. It's not that we disregard the locals. If Filipino businesses can do good then they will survive the influx of FDIs. If they see the FDIs as opportunities for better connections then they will grow. Jollibee is an example of how the Philippines can survive against foreign businesses (read here). Garcia's third-world mentality only kept the Philippines stuck. It's a shame Filipinos tend to quote the great Lee Kuan Yew on the Marcoses but refuse to accept his helpful advice on other things. Some would even say, "It's just LKY's opinion!" or "It's just Mahathir Mohamad's opinion!" All the while, they treat the constitutionalists of the Philippines as "overly beholden".

The big question is what has being "overly beholden" to people like Davide Jr. done for the Philippines? Vietnam and China both learned from Singapore how to improve their economies, even if they remain as Communist countries. Why has the Philippines been so stuck with the Marcos narrative (even still blaming it for problems not caused by it) instead of fixing the effects of the Marcos Years? The idea that 60-40 exists for "security reasons" is nothing more than a flimsy excuse that may have some hidden agenda.

Get Stuck with EDSA, End Up Like Nokia

Yes, we should never forget what history teaches us. A classmate of mine, back in high school, wrote a simple and blunt essay called "History: A Teacher". I doubt he still has a soft copy, given it was already more than 20 years ago. I'd like to quote Duterte critic Andrew James Masigan wrote this in Philippine Star --something that should remain relevant: I would never undervalue the 1987 Constitution. It dismantled the legal framework of a repressive regime and established the democratic institutions we enjoy today. For this, I am grateful. The 1987 Constitution was crafted with the best of intentions. It sought to put the Filipino first in all aspects of governance and to level the playing field amongst sectors and peoples. But it is far from perfect. It failed to consider the importance of foreign capital and technologies and the stiff competition we would have to face to obtain them. In short, its economic provisions were short-sighted . So despite the Constitut...

#SahodItaasPresyoIbaba Economics' Bad Accounting

I would like to apologize in advance to my readers. The picture I'm presenting is in Tagalog, and not all my readers speak Tagalog. I would translate the picture's text into English for convenience. It says: "Ano ang bumubuo sa mga presyo?" means "What comprises the price?" "Gastos ng materyales" means materials expense "Gastos sa kasangkapan" means depreciation expense ""Gastos sa pasahod" means salary expense "Kapitalista" means capitalist Renta is well, rent "Kayang pababain ang presyo" means "Prices can be lowered". It says that capitalists (industrialists, landlords, bankers) and elitist governments are part in the gross profit. Get rid of excise taxes (either permanently or temporarily) for the prices of goods and services. In the times of crisis, in the burden of sacrifices, we need to be watchful for capacity. Whatever savings for times of difficulty by the workers and countrymen, the...

Past Chinese School Education in the Philippines was Based on "Sǐ Jì Yìng Bèi"

Chinoys of my age (and older) may remember these textbooks. I called them as the "symbol of trauma". It was memorizing something without understanding it . One would just memorize (without understanding it) because it was typical. Not being able to memorize what was assigned? Get a bad grade? One can expect physical punishment like hitting the hand with a ruler or chili in the mouth. Chinese language teachers are stereotypically strict . The language textbooks (above) are what were used during the 1990s to the early 2000s. As I wrote it, the Sinjiang textbooks aren't effective in teaching Mandarin , in a world where Mandarin has over a billion speakers! There's a Chinese proverb that says, "死記硬背 sǐ jì yìng bèi" or "Memorize to the point of death". That's exactly what those textbooks are. Memorize to the point of death! Okay, it may sound exaggerated. However, that's how Chinese language teachers in the Philippines were made to teach the ...

Migrante International's Really Bad Economic Literacy

March 17 (which is tomorrow) seems to be an unofficial holiday for some people, right? I'm sickened that the late Flor Contemplacion has been treated like she's some national heroine (and thankfully, tomorrow isn't a holiday) even after Singapore had proven her guilt. A movie was made by Joel Lamangan called The Flor Contemplacion Story . The call for Migrante (Migrant) International has been to remember Flor even after several years. What's not too surprising was to learn that Flor's sons were all arrested for drug-related charges. Even her eldest son died while in prison. You have Migrante International wanting to end the labor export policy. However, a post by Migrante really shows how this group fails basic economics. I will not post the whole press statement but one part that made my eyes roll. >> Further opening the country’s economy to foreign ownership and control will worsen the exploitation of our people and the environment without creating a susta...

"Filipino First Policy" Has NO PLACE in the Rising Asian 21st Century

I guess nobody saw the Asian 21st Century coming, right? China was once a poor nation but look at it now. Vietnam was once a poor nation but look at it now. Singapore was once a poor nation but look at it now. The late great Lee Kuan Yew wrote his book From Third World to First . I'm afraid some people have been using it to go against the presidency of Ferdinand R. Marcos Jr. while ignoring what else Lee Kuan Yew had to say. Lee Kuan Yew described the Filipino press to be rambunctious on pages 304-305 which I agree. I'm afraid that the Filipino press may have had a hand in getting rid of any economic or political reforms that could help the Philippines. Yet, one policy has been holding back the Philippines for decades and yes, it's the Filipino First Policy . Reviewing the Filipino First Policy and why it has no place in the rising Asian 21st century I remembered how the values education subject taught Carlos P. Garcia's stupid Filipino First Policy as a Filipino value...

Has Passing Down Hatred for Singapore (Because of Flor Contemplacion) Economically Helped the Philippines?

PEH.ph It was on March 17, 1995, when Flor Contemplacion was executed in Singapore. I've noticed that I've been addressing her as the late many times, even if the late is a statement that may be ony appropriate if the person has been recently deceased within 10 years. It's about to become 30 years since Flor was hanged in Singapore. However, generational hatred would've been passed down from 1995 up to 2025. Some people are still tagging #JusticeFor Flor. These traits may be passed down from the Batang 1990s to their children in this generation. It may also be passed down from parent to child, even if the child was born in the 2000s to 2010s. Somebody born in 2000s and beyond might even say, "Papa and mama told me about Flor Contemplacion! That's why I hate Singapore!" Talk about a child born in 2004 who's probably angry with Singapore, because his parents kept telling him about how Flor was supposedly "unjustly treated" over there. Some tim...

My First Taste of Sichuan at Yang Hero IT Park

I was doing some random historical study. One of the many things I recalled from Asian history class was the Chinese Communist Party in Sichuan. It's an interesting piece of historical detail that Mao Zedong (and other Chinese communists) were avid lovers of spicy food . Yang Hero had its first branch in Gaisano Tabunok. It opened a branch in IT Park last May 25, 2023 . The menus had Chinese translations. The establishment has made me realize the importance of learning Mandarin . True, I could order their food without speaking Mandarin. However, I still feel that the increasing number of Chinese businesses left and right would mean, "You may need to learn some Mandarin now to connect with more people in the world." For a bit of background, here's what I gathered from Sun Star Cebu: Evanmarie Mendoza, social media specialist at Yang Hero, said: “The Chinese barbecue is also a must-try for foodies as it differs from the regular ones that we typically have here in the P...

Tealive's Aren Caramel (Kaong Sugar Caramel) Series

I usually tend to associate sugar with cane sugar. In this case, Tealive (read my review here ) uses a sugar known as gula aren. I did some research and found out that Gula Aren is made from the sap of the sugar palm tree. The fruit is also known as kaong in the Filipino language. Granted, the Filipino language also derives from the Malaysian and Indonesian languages--it may be derived from the Indonesian word kolang kaling . The Philippines may also be producing its own gula aren or palm sugar. Sugar palm or kaong is pretty much grown as a staple in Filipino cooking too. Here's a video from an Indonesian woman. Watching this, it's safe to assume that kaong farmers in the Philippines follow more or less the same routine. Maybe, some people may call it latik though latik is made from coconut milk and not coconut sap. Though, some Filipinos may still call palm sugar as latik. The video above also shows an Indonesian binignit with some kaong. I was shocked to learn kaong is also u...

Getting Stingy at the Cost of Fire Safety?

March is fire prevention month, right? If there are people who are too extravagant then I'd like to talk again about stingy people (read the article here ). I've tried growing up with the stingy vs. extravagant extremes. Some people become stingy even with the necessities. It's one thing to deny a child a children's party since it's a want . It's another thing to deny a child stuff they need all in the name of saving money . Even worse, some people may be more than stingy enough to ignore fire safety. A stingy person just wants to save. It's almost like the story of the Miser and His Gold or The Rich Miser . I really find these stories entertaining at the same time, irritating. The first story has the miser who hid his gold under the ground. Some people today are too distrustful of banks and investments. The second story has a rich man who even dresses in rags, denies his son's shoes, had his wife cook some cake only for him, and was so greedy he had it ...

Started to Invest in the ATRAM Global Equity Opportunity Feeder Fund

It's time to begin a new road into investing. I went from a moderate risk taker to a moderately aggressive risk taker. Of course, I need to be careful with how much money I invest or I don't invest the money that I need. I believe that one could start by investing 15% to 20% of one's income. Basically, it's money that's not needed now. Fortune Recommends gives this ideal sweet spot: Many of the experts we spoke with suggested, as a general rule, to invest a set percentage of your after-tax income. Although that percentage can vary depending on your income, savings, and debts. “ Ideally, you’ll invest somewhere around 15%–25% of your post-tax income, ” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that’s fine. The important part is that you actually start.” Some budgeting strategies account for this, such as the 50/30/20 budgeting strategy, which breaks your monthly budget into three ca...

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