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Real Talk: No MNCs In Their Right Mind, Would Ever AGREE to That Ridiculous 60-40 Proposal

Here's another art I found on Facebook. Some time ago, I wrote about how the 60-40 policy may not prohibit, while still discouraging FDIs from entering. It's plain common sense, really, that nobody would want to rent a space if they had to part with 60% of their net profits to the lessor (read here). 

It annoys me to think that certain Netizens on Facebook are still blaming government corruption over the 60-40 policy. That can get annoying. I can link the 60-40 policy to government corruption. After all, corrupt officials want to perpetuate their stay in power through an ignorant and impoverished population. However, blaming corruption alone is really downright stupid. Some say investors are going to Communist Vietnam because the Communist Party of Vietnam-Vietnam People's Army is serious about cracking corruption. However, the reality is that, ironically, Communist Vietnam has more reasonable economic restrictions compared to the Philippines (read here). Only a few sectors in Vietnam are subject to ownership restrictions. Not to mention, these restrictions aren't even hard-coded in their Communist-based constitution!

This is one of the most idiotic comments I've seen on Facebook. As part of respecting people's privacy (even if the real name is most likely a fake account), I blocked out the name and picture. However, I might put out certain names in public if they happen to be so open in their crazy behavior. I would like to translate this statement into English, for the sake of readers:

It's also like that in doing business in other countries. They also have their 60/40 arrangement where they couldn't do business, without a local partner. It's only proper that 60% for the local and 40% for the foreigner.

I must overemphasize like the late Miriam Defensor-Santiago would. I can remember her timeless expression when she grilled former police officer, Alan LM Purisima. MDS said, "Really?" It was because Purisima tried to weasel his way out by saying stuff like, "It was merely advice, not an order," and "When I delegated the responsibility, I didn't delegate the accountability." Responsibility and accountability have different meanings, while they're both connected, Responsibility is management of tasks. Accountability is owning to one's actions. When the responsibility is passed, so is the accountability. I felt like one of my all-time idols, MDS, in saying, "Really?!" to the statement. I want to elongate, but it can take a lot of time! Whoever this person is, the source must either be:

  • Framers of the 1987 Constitution of the Philippines, such Atty. Christian Monsod and Atty. Hilario G. Davide Jr.
  • The Catholic Bishops Conference of the Philippines
  • Makabayan Bloc (thankfully, they lost) 

If we're to define profits, a simple definition from the Cambridge Dictionary is:

money that is earned in trade or business after paying the costs of producing and selling goods and services

People who defend the 60-40 arrangement are most likely confusing profits and revenues (read here). It's a common conversation in the market where people confuse their sales (revenues) with profits. One can have high revenues yet low profits. For example, you may be able to sell to the whole baranggay rice worth PHP 20.00 per kilo. However, if the price of the rice was PHP 2,580.00 per 50 kilos. That means each kilo of rice would be PHP 51.60. That doesn't account for the cost of wrapping goods. Not to mention, one still needs to compute the markup percentage. As said, when you eat in a restaurant, you pay for both the food and the ambience. Coffee shops charge higher prices because they have higher operating costs and better quality coffee. In short, one needs to understand what profit means. Profit is what's left of the revenues less expenses. We have the gross profit and the net profit after taxes.

Business & Plans

Now, let's take a look at this sample income statement. Now, take a look at the sales and deductions of expenses. We deduct from the Cost of Goods Sold. However, we must also pay Selling, General & Administrative expenses. This would mean payment of rental (in most cases), workers, suppliers, service providers, and utilities! That's why #SahodItaasPresyoIbaba, or "increase salaries, decrease prices," economics is nothing more than wishful fantasy. After paying all of the expenses, the net income after taxes is pretty much what's left after sales. In short, sales don't equal profits! 

Who in their right mind would want to invest in the Philippines if they have to part with the Net Income After Taxes, by a huge margin? Not to mention, some companies may have a much longer Return On Investment than others. Why should the MNC pay 60% to the local? All in the name of security or all in the name of greed? Just think that such practices would be like why a lot of people are now boycotting Adobe's super-expensive scheme. Why would I pay PHP 3,000+ per month just to draw art? That's why I bought Affinity Photo 2, which is a one-time purchase, that's until a much better version comes out! It's similar to why MNCs invest in a country if they couldn't take home their Net Income After Taxes, which is barely half or even a tenth of the sales! 

However, such people continue to blame corruption, (insert political dynasty), human rights stability, etc., for low investments. What they don't see is that some countries with high rates of FDI still have a corruption issue. Vietnam's current General Secretary, To Lam, shamelessly ate gold-crusted steak by Salt Bae, after laying flowers at Karl Marx's grave. Did that stop investments from flowing into Vietnam? Vietnam is a Communist country, meaning that people are still under a totalitarian state! If we're to blame corruption, which is defined by abuse of authority for personal gain, why not blame corrupt politicians who support the Filipino First Policy? 
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