The Philippines 60-40 Equity Scheme Doesn't Prohibit FDIs But It's Still VERY DISCOURAGING for International Business

First and foremost, I'd like to tell people that I don't believe that the Marcos Years were the "golden years". I still agree with economist Cielo Magno that land ownership isn't a factor, since some countries without equity restrictions, don't allow foreigners to buy land. In contrast, inflation and the like were rampant during that time. However, we need to realize that any gains after EDSA 1986 weren't realized. As I was looking at Facebook, a page called Punch the Lies by Atty. Mike Navallo stated this:

FACT: The 1987 Constitution does not prohibit entry of global investors into PH. What it regulates is foreign investment in areas deemed critical such as public utilities; exploration, devt and use of natural resources; and certain investments as determined by Congress. (Art XII)

Public utilities (water, electricity, petroleum distribution, seaports, PUVs) are considered vital to socio-economic devt that's why they're subject to foreign ownership limits.

There's also a question on national security. Remember concerns over Chinese involvement in NGCP?

The Public Services Act was amended in 2022 excluding from the definition of "public utility" services such as telecomms and transportation, therefore allowing foreign ownership.

It would be easy to look down on me because I'm not a lawyer. However, in this digital age, I don't need to be a lawyer to understand the basics. I'd like to address the elephant in the room here. However, I'd like to address the common sense issue of public services. It's said by Punch the Lies that the reason why they're subject to foreign ownership limits is because they're vital to socio-economic development. However, what can we do if the costs of water, electricity, petroleum distribution, seaports, and PUVs are too expensive due to the simple rule of supply and demand?

Earlier, I wrote an article about the stupidity of having equity restrictions--in the name of security. Of course, I expect these people to keep quoting mostly Filipino economists and lawyers. Their favorite people are the likes of Atty. Hilario G. Davide Jr., Atty. Christian Monsod, and Professor Solita "Winnie" Collas-Monsod, to name a few. They also love to quote from the IBON Foundation. I find the idea of subjecting businesses to 60-40 in the name of security, to be utterly stupid. It's not like as if certain laws such as taxation laws, labor laws, data privacy act, etc. don't provide necessary restrictions.

The 60-40 arrangement is nothing more than overpriced rent (read here). Who in their right mind would want to rent a space if they have to give 60% ownership to the lessor? Let's say I prepare a shopping mall. However, I require all my tenants to give me 60% of their ownership, which in turn entitles me to 60% of their profits. Even worse, I'd be stingy to give them a good place. It's definitely not paying for the value. In turn, even when I don't prohibit tenants from entering, my conditions would still discourage them from entering.

If people are wondering why Communist Vietnam has been more viable for business--please check their policies on foreign investment. In fact, the Vietnam Briefing reveals that most industries (except a few) allow up to 100% foreign ownership of shares. Vietnam doesn't allow land ownership. Please stop confusing land ownership with share ownership! The Vietnam Embassy states that for certain sectors, the ownership limit granted to investors is 70%, not 40%. A 30% difference really makes a difference in why more go to Vietnam. Please, Vietnam isn't that protectionist paradise as some fools want to paint it out to be. It may still be under the Communist Party of Vietnam but Doi Moi changed its economic policy significantly (read here).

Image by Sabrina Jiang © Investopedia 2020

I'm afraid most people who support the 60-40 policy confuse profits with revenues (read here). If they're worried about FDIs and will run away with their profits, then listen. FDIs get rich based on their net income after taxes (read here). Please, a sample income statement will show you that net income is what's left after all expenses have been paid. For some, it's just some "capitalist conspiracy used as an excuse". However, basic economics is no "capitalist conspiracy". Common sense will tell you that supply and demand drive the market price. Common sense will tell you that businesses don't just earn, they must also spend. FDIs will still be required to pay all types of taxes required. These taxes can be the value tax, income tax, and withholding taxes. Just because they own 100% of their business, doesn't mean they don't pay taxes.

To explain it in simple terms--an FDI may get a monthly revenue of PHP 277,700.00. However, all the expenses paid such as salaries, utility bills, depreciation, interest due to debt, etc. will be deducted from the revenues. Eventually, the taxable amount is PHP 111,000.00. Now, let's say that the taxes would be subjected to 12% VAT. The remaining net income after tax (for the month) would be PHP 97,680.00. That means the corporate income for the month is only 35% of their revenues for the month. An increase in sales doesn't always translate to an increase in income. Would the company really want to part 60% of what's left after all expenses, with a Filipino oligarch?

#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

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

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

Whoever Made This Meme About Coffee Shops May Have Never Seen (or PURPOSELY IGNORNING) Income Statements and Financial Statements

The Facebook group "Stop Blaming Capitalism for Socialism's Failures" is now plagued with Anonymous Participant posts. It's probably because they could no longer defend themselves. Anyway, let's think of the fallacy of this thinking. I'd like to point out that people get rich from the net profit --not from the sales. People should stop confusing sales for profits! Business & Plans If we look at that sample income statement, we look at how the coffee shop operates. Let's use the USD currency over the PHP, even if I'm a Filipino . The reason is that the sample income statement is from an American website. If we look at the income statement--we have sales deducted from the Cost of Goods Sold (COGS), and every other expenses. SG&A means selling , general , and administrative expenses--which involves paying the coffee growers, the coffee refiners, the coffee packers, and the coffee brewers. The person who runs the coffee shop is involved in the chai

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

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

The Irony of Getting Mad at Agricultural Imports Then Complaining About Inflation of Agricultural Goods

I really must laugh at the stupidity of "thought leader" pages or the comments on Facebook. A good example is the one above where Rosendo So says that onion importation could've prevented the price surge of onions. However, just reading the comments (and there's so plenty I wouldn't bother replying to them all) keep demanding protectionism for local farmers. The illogical stupidity of the comments proves one thing--there's still a significant surge of economic illiteracy in the Philippines. What do you expect from people who demand stuff like higher wages while lowering the prices of goods? Simple cost accounting dictates that wages are part of the production process. If you start raising up prices then you can expect the prices of goods to increase as well. They even don't bother to analyze the supply chain along with operational costs as well. I don't need a doctorate in economics to get it. Okay, I'll confess that I had a graduate degree from th

Why I Feel Investing Money in UITFs Might Be a Good Idea While Studying DIY Stock Trading

It's said anybody can do stock trading. However, the idea can be very suicidal if one decide to rush into stocks without studying how to effectively do it. Some people can even recklessly borrow tons of money and end up harming themselves when the trade was at a loss . They might've borrowed the money from a loan shark for all we know. I'm trying to study the stock trade though there's a good option. AXA Chinese Tycoon is a managed fund. Now, there's also Unit Investment Trust Fund (UITF) which could be a good alternative while one is learning to do stocks. Stocks can be learned but remember-- no investment is ever a walk in the park. Stocks need some time to learn. I haven't started direct stock trading it. Meanwhile, I'm aware that funds like the AXA Chinese Tycoon or the UITFs are powered by stocks . The pandemic has prevented me from doing direct translations. Instead, I decided to use GCash and ATRAM (linked to GCash ) to start another trading portfoli

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

Raising Salaries During Inflation Can Worsen Inflation

Translation: Raise up salaries! Lower prices! Let's all be united and move for a sustainable salary! It's tomorrow! Let's see each other on #MayOne2023! It's May 1 today and it's referred to as Labor Day . One of the many organizations in the Philippines called Kilusang Mayo Uno (May 1 Movement) has been doing the same nonsense all the time. Do these people even have the slightest idea of wealth generation? I doubt it. They have been demanding the same thing all over again. I wonder if these people are aware that it's not sustainable (read here ). The same movement has been to have salary increases in the midst of inflation. At first, it sounds like a good idea. However, the economic aspect will totally reveal why it isn't feasible. 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 combination of rising inflation, but s

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