The Filipino First Policy May Actually be Encouraging Dummy Investors Instead (Even with the Anti-Dummy Law)
I wrote a post where I discussed whether or not Alice Guo (and I heard her real name is supposedly Guo Hua Ping) should be a reason to say "No to economic charter change." A certain idiot I've dubbed Porky Madugo even wrote this on his Facebook account:
Back on topic, I would like to emphasize that the Filipino First Policy may actually be encouraging dummy investors instead of discouraging them. Some people may use Alice to say, "See, I told you so, you (insert demeaning name)! If Alice can enter so easily, what about we allow 100% FDI and China buy us all!" That's the logic of that certain Porky Madugo, whose name and picture I blocked, despite my immense dislike for his stupidity. If Alice has been faking it by lying she's a Filipino citizen (and sadly, this incident has been used to justify hatred against Chinese Filipinos), then the real root cause is this. The Filipino First Policy makes it too difficult for foreigners to do business in the Philippines!
Filipino First Policy is actually a form of red tape
I don't have to have a PhD from Ateneo De Manila, University of the Philippines, etc., to understand how red tape actually encourages criminal activity.
Red tape is defined by Number Analytics as:
Red tape refers to the excessive and often unnecessary regulations, procedures, and paperwork that hinder the efficient functioning of administrative processes. It can manifest in various forms, including lengthy approval processes, complex application forms, and unclear or ambiguous regulations. The impact of red tape can be significant, resulting in delayed decision-making, increased costs, and decreased citizen satisfaction.
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| Translation: 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. |
In the case of foreign investment, isn't it a red tape in itself that foreigners must find a local partner who will own 60% of the business in the Philippine branch? To those who say that 60-40 isn't a problem (read here), why don't they rent a space where they will be allowed to keep 40% of their net profits, and lessor takes 60%? Wouldn't be more favorable if the lessor only received the monthly rent? Still, I'm amazed that people think 60-40 is about land ownership, instead of ownership of stocks. I'm amazed some people even think that there's 60-40 in other countries. I have to ask who told them? Was it Trust Me Bro? Was it CTTO Merkado? Was it the CBCP during a Sunday homily? Was it any lawmaker from the Makabayan bloc, like Atty. Neri Colmenares, Teodoro A. Casiño, Sarah Jane Elago, Raoul Manuel, etc.? Could they please name their sources? Whoever the source is, they may be under the Makabayan bloc spectrum, the CBCP spectrum, or simply another invented gossip!
This may be the reason why dummies happen. Sure, one can always talk about the Anti-Dummy Law. Some say, "Nothing is wrong with the 1987 Constitution. It's perfect the way it is! Let's unite!" That's what Butthurt Philippines once posted, then its webmaster, Lico Reloj, says that I just couldn't understand sarcasm. Sadly, that's the mentality of the anti-reforms. I'm going to share an excerpt from the Respicio & Co. website about the anti-dummy law:
Key Provisions and Purpose
The Anti-Dummy Law was enacted to uphold the constitutional mandate that certain economic activities and natural resources must be reserved for Filipino citizens or entities with a majority Filipino ownership. Specifically, it targets situations where foreign nationals might use Filipino citizens as fronts or dummies to own and control businesses or land that, by law, should be under Filipino control.
Definition of Beneficial Ownership
A significant concept in the Anti-Dummy Law is "beneficial ownership," which refers to the true owner of the property or business interest, regardless of who holds the legal title. This means that even if a Filipino citizen or corporation legally owns the majority shares, if a foreigner is found to have control or beneficial ownership, it constitutes a violation of the law.
Common Violations
Nominee Arrangements: One of the most common methods of violating the Anti-Dummy Law is through nominee arrangements, where Filipinos hold title to property or shares on behalf of foreigners. Even if the shares are legally held by Filipinos, if the foreigner exerts control, the arrangement is considered a dummy setup.
Management and Control: Another violation occurs when foreigners, despite owning a minority of the shares, have significant control over the company's management or operations. This control could be through contractual agreements, side letters, or other informal arrangements.
Simulated Transactions: Transactions that are simulated to appear as though Filipinos have control, when in reality the control is with foreigners, are also violations. This includes situations where the foreign national provides the capital, takes the profits, or otherwise controls the business decisions.
This is nothing more than a band-aid solution to try and defend the legacy of the late Carlos P. Garcia. Honestly, it's only fitting that the late dictator Ferdinand E. Marcos Sr. should be buried next to Garcia! Marcos' protectionist regime for 20 years drove the Philippines to a debt-driven economy. Emmanuel S. De Dios of the UP School of Economics even writes this:
That argument might hold some plausibility if the economic record was brilliant to begin with. But it was not. And here one needs to underscore the importance of assessing the entire period of authoritarian rule, from late 1972 to early 1986.
Take gross domestic product (GDP) for instance: the average GDP growth rate from 1972 to 1985 (Marcos’s last full year) was all of 3.4% per annum. Per-capita GDP grew annually at less than 1% average over the period — more precisely 0.82%. Hardly a roaring-tiger performance. At that rate it would have taken 85 years for per capita income just to double.
For comparison, the average GDP growth from 2003 to 2014 — even under a bumbling and quarrelsome democracy — has been 5.4% per annum — with a rising trend. On a per capita basis, GDP today is rising 3.5% annually, more than four times the growth rate under the dictatorship.
The reason for the dismal performance under martial law is well understood. The economy suffered its worst post-war recession under the Marcos regime because of the huge debt hole it had dug, from which it could not get out. In fact, all of the “good times” the admirers of the regime fondly remember were built on a flimsy sand-mountain of debt that began to erode from around 1982, collapsing completely in 1984-1985 when the country could no longer pay its obligations, precipitating a debt crisis, loss of livelihood, extreme poverty, and ushering in two lost decades of development.
The economy’s record under Marcos is identical to that of a person who lives it up on credit briefly, becomes bankrupt, and then descends into extreme hardship indefinitely. It would then be foolish to say that person managed his affairs marvelously, citing as evidence the opulent lifestyle he enjoyed before the bankruptcy. But that is exactly what admirers of the Marcos regime are wont to do.
It is instructive that neither Thailand, Indonesia, Malaysia, nor any major Asian country catastrophically experienced negative growth in the early 1980s. The Philippines was the exception, following instead the example of protectionist and over-borrowed Latin American countries. This suggests that there was nothing unavoidable about the crisis the Philippines suffered, and that it was the result instead of failed policies. In 1977 the Philippines’ total debt was all of $8.2 billion. Only five years later, in 1982, this had risen to $24.4 billion. Thailand’s debt in 1982 was still only half that amount. Thailand and other countries of the region thus avoided a debt crisis and ultimately went on to attract foreign direct investments in export-oriented industries in the now-familiar East Asian pattern. But no such thing happened under Ferdinand E. Marcos, notwithstanding the arguments and exhortations of people like Gerardo P. Sicat (who would cease to be active in the regime by 1980). By the early 1980s, the pattern would be set where foreign direct investments in neighboring countries regularly outstripped those in the Philippines. (The intermittent coups d’etat post-Marcos did us no favors either.)
All this should correct the common misconception that the country’s troubles stemmed entirely from conjunctural “political factors,” notably that it was caused by ex-Senator Benigno “Ninoy” S. Aquino, Jr.’s assassination. One might not even entirely blame the mere fact of authoritarianism itself — after all Thailand, Indonesia, and Malaysia at the time were also ruled by despots of some sort or other, yet suffered no crisis. Rather the Philippine debacle was linked to the misguided policies that were structurally linked and specific to Marcos-style authoritarianism. For all its technocratic rhetoric and rationale, the Marcos regime never took economic reform, liberalization, and export-oriented industrialization seriously; it remained a heavily protectionist and preferential regime (think the cronies and the failed major industrial projects). The availability of easy loans was well suited to the priorities of a regime that thought it could stoke growth without deep reform and slake the greed of Marcos and his cronies at the same time. In the end a corrupt regime fell victim to its own hubris.
Marcos' lack of economic reform helped bankrupt the Philippines! Certainly, this is a consequence of the Filipino First Policy. That's why I question why people would want Garcia declared a hero while Marcos as a villain? Garcia's nonsense policy empowered Marcos! I even want to claim people who keep quoting the late Alejandro Lichauco, to give proof that Garcia's Filipino First Policy became a model for the world to follow! If all they can cite is again their own countrymen, I must question if the Philippines and China are the only countries they know and recognize!
Sure, the Anti-Dummy Law can be passed, but it's a band-aid at best. The reason is that the Anti-Dummy Law is defending red tape. Whether we want to admit it or not, red tape actually encourages illegal activity, even when that illegal activity is still required to be prosecuted. For instance, the Ozone Disco Tragedy is one. I watched the Case Unclosed episode. One of the biggest problems is the difficulty of getting a business permit. What was done was that under-the-table transactions got involved in securing the Ozone Disco permit. Working with money under the table was the only way to get the permit. In turn, it has encouraged inspectors to keep giving Ozone Disco a permit even when the safety was already compromised.
Meanwhile, making it easier for FDIs to invest in the Philippines can actually discourage dummy laws
The heading may sound stupid, but it's true. If FDIs had an easier time securing permits to do business in the Philippines, it would probably lessen the dummy laws. Instead, we can have reasonable restrictions that wouldn't allow FDIs to do what they want. The real problem is that 60-40 arrangement is red tape. The Philippines may not be prohibiting FDIs but it's still very discouraging (read here). Who in their right mind, again, would want to invest but only keep 40% of their profits, which is barely half of the revenues? It's also a result of misunderstanding profits and sales! Your sales aren't your profits!
Instead, we need to take a look at how 100% FDI, again shares ownership of stocks, would actually discourage dummies. An MNC would want to invest in the Philippines. Any good investor would look into the dos and don'ts of the country. When it comes to MNCs doing business, they're actually required to follow the laws of the country. Sadly, some Filipinos still think foreign investors are foreign invaders, never mind invader isn't synonymous to investor (read here). If MNCs aren't required to find a local Filipino partner who will own 60% of the profits, it would make their investing in the Philippines easier. What they need to worry about is compliance with local business-related laws such as employment laws, environmental laws, structural laws, and taxation laws. These things I mentioned should be the worries of MNCs, not finding a local partner to split off a huge portion of the net profits after taxes.
I'd like to close this blog post with an example
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| 24h.com |