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?

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 ""Gaston 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...

Remembering the Late Jesse Robredo's Quote on Systems That Force People to be Good

It's been some time since Jesse M. Robredo died too soon. Hopefully, his wife Atty. Maria Leonor Gerona-Robredo is true to her word, in her willingness to amend the 1987 Constitution of the Philippines, for the sake of foreign investments. It's a shame I never wrote about the late great man. The CoRRECT Movement on Facebook gave this important note on Robredo's life. Robredo said, "It's not enough for an official to be good. There has to be a system that forces them to be good." Whether or not Robredo was for charter change or a few constitutional amendments, I can't tell. For some racists, let me remind them that Robredo's real surname is Lim and his paternal grandfather is the late Lim Pay Co. In terms of Robredo's credentials (and I tend to sometimes brag about the credentials of those I quote), here's what the City Government of Naga website says: He is an Edward Mason Fellow and a graduate of Masters in Public Administration at the John...

Filipino First Education Created the Fixed Mindset Over Growth Mindset Mentality

Tomorrow is Bonifacio Day. It's effortless to say that Filipino First Policy works. I wouldn't be surprised if Andres Bonifacio gets used as a poster boy. However, Bonifacio worked for British and German investors . I'd like to talk about how decades of Filipino First Policy compromised our education system. Some idiot on Facebook said which I'll paraphrase to avoid getting personal. The idiot said, "If you let foreigners invest here, can Filipinos afford it?" The same idiot also scorns the law of supply and demand (read my post discussing why that's plain silly here ). People who believe in #SahodItaasPresyoIbaba must first prove it works by opening such stores nationwide, to show that the Philippines doesn't need FDI to succeed (read here ). Of course, I can expect them to say "It's the government's responsibility to raise salaries without raising the prices of goods." That's just plain bad accounting and finance too! Andrew Ja...

Refuse to Do Business with a Person Who Looks Down on Menial Work

If there's any reason why some people are angry with the rich--it's because of rich people who look down on the poor. Some people are born rich without knowing the struggles of the one who originally acquired the wealth. Some rich parents make the fatal mistake of making their children feel entitled. Meanwhile, some rich parents make their children do the right thing by not waiting until things get too far. Some rich parents end up making their children attend middle-class schools, do summer jobs, work as employees in their own businesses, and teach them the value of wealth, especially by narrating the struggles before they got wealthy. In looking for a business partner, I feel it's very important to look at the attitude of these people. How do they treat people who do menial work? I could imagine looking forward to a business contract. However, it turns out that the potential business partner is a spoiled brat . Maybe, it's already a red alarm if I'm invited to an ...

Dayang Daya: The Case of Five-Six Lending Services Roaming to Collect Christmas/New Year Debts by January

I remember during the late 1990s when the song "Dayang Dayang" (Princess of the First Degree) was played on the radio. The origins are often debated whether or not it was from Muslim Mindanao or from the other neighboring countries. The Philippines has had settlers also from Malaysia and Indonesia. A parody cover by the late Yoyoy Villame was called Dayang Daya or Cheating Cheating. It was probably making fun of the Indian five-six lending business. Indians tend to be called Bombay because of the location known as Mumbai. I even made the mistake of referring to Indians as "Bombays" more than once. The song "Dayang Daya" does talk about the five-six lending services. It does target a lot of gullible people. I even became nearly distrustful of Indians in college for quite some time. I wrote how a Merry Christmas may lead to an Unhappy New Year due to debt burden (read here ). I tend to say to myself, "Somebody hasn't paid their debt!" every ti...

Will Opening the Philippines to 100% FDI Lead to Foreign Monopoly?

Monopoly - Hasbro I was looking at the CoRRECT Movement Moderated Public Forum on Facebook. I found more illogical arguments by a certain troll in the forum named Juan Dalisay Jr.--the writer of the Superphysics One website. However, this isn't the first argument I ran into as I've seen arguments from Kabataan Partylist and the League of Filipino Students on Facebook. They have claimed that foreign direct investments (FDIs) will lead to exploitation, only they will get rich, that they will rape resources, and an even funnier claim is that they will lead to monopolies . Some people, even fools, should be allowed to defend themselves at CoRRECT Moderated Public Forum than just live in their echo chamber of Facebook pages. However, Kishore Mahbubani and the late Lee Kuan Yew had long disproven that . The testimony is in the book From Third World to First by Lee himself. Mahbubani said foreign investors create jobs, bring capital, and teach new skills. I wonder if protectionist adv...

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