Is P-Noy's Proposed Infrastructure Fund the Way to Go?

The government urges creation of an infrastructure fund to help fund Public-Private Partnerships. Sec Purisima says ““We’re solid in our belief that we need to invite investors to our country. Investors need a fair return as payment for their capital and the risk they’re taking. We need to make sure that we simplify the processes.” One step in this direction, according to Purisima, was the initiative of the Department of Trade and Industry to streamline the approvals process for foreign investments and to cut red tape.

Doing the same thing and expecting the same results. Will a protectionist consitution generate the efficiencies of a free market? FREE YOUR MIND.

As pointed out by the Inquirer article – “The idea of a Philippine infrastructure fund is not a new one, with previous administrations having tried to drum up support for private-sector funded projects through the state-owned National Development Corp.

Is this the right direction to go?

The latest incarnation of this idea proposed by the Arroyo administration as recently as last year was the allocation of P50 billion for the NDC, which would be used as seed money for big-ticket infrastructure projects. Under this scheme, the cash would be raised by selling bonds to the public. Purisima acknowledged that the funding requirement for President Aquino’s infrastructure program would be nothing short of massive.

What is wrong with this picture?

A couple of things.

#1 – The need to invite investors. Sec Purisima says “We’re solid in our belief that we need to invite investors to our country”. If we are indeed solid in this belief, given that the Philippines has reputation as being among the most restrictive in Foreign Investments, prudence dictates that we address the issues which give us such reputation – “overly restrictive and obsolete laws are an impediment to foreign direct investment and their poor implementation creates additional costs to investment”.

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.- 1987 Philippine Constitution, Article 12

So how do you exactly invite investors when the Philippine constitution is very restrictive? You go out on a selling mission – only to turn back investors because of equity limitations? It does not make sense.

Which reminds me of the recent SONA – invite foreign dignitaries, Noy speaks in Tagalog and expect consuls and ambassadors to bring their own language translators because Aquino does not want to speak English. Remind me of the times when the Aquino supporters were mocking Erap for speaking Tagalog.

#2 – Fair Return on Capital. It is true that Investors need a fair return as payment for their capital and the risk they’re taking. Investors also want a modicum of control to ensure that their investments don’t end up in a government pork barrel somewhere, or the fat paycheck of an inconsequential and incompetent government bureaucrat. Or that their local partner with 60% has colluded with the Philippine government to rip off the foreign partners. Then there’s also the longer view – what are the prospects for getting good returns given a non-performing Philippine economy. There are many variables to consider.

#3 – Process Improvement. Process improvement is but one component. One step in this direction, according to Purisima, was the initiative of the Department of Trade and Industry to streamline the approvals process for foreign investments and to cut red tape.
The bigger component to attracting foreign investment is still one that involves equity and property ownership. Why will an investor put major money if he does not have major control? You can have a streamlined process but when the constitution RESTRICTS FDI – there’s not much to process, really.

Is there a better way?

The SONA’s reference to inefficiencies in water, rice, electricity, calamity funds and transportation with reference to the Metro Rail Transit are inefficient is not because of foreign competition or due to foreign investors but due to the lack of it.

Our utilities are inefficient because we took the protectionism route, embedded it in our constitution, thereby missing out on the efficiencies that come with competition.  It ensured that our industries never got to grow up – perpetual cottage industries that failed to launch. Much like a person who is chronologically old but with the emotional and mental age of a six year old.

This shows a complete failure of the Aquino administration to see the evils of protectionism – and its presence in the 1987 Philippine Constitution.

But what do you expect? President Noynoy Aquino is a tool of the Filipino monopoloy businesses/oligarchs (MERALCO, MWSS, MAYNILAD, PLDT, FIRSTGEN, FPHC, FPIC, ABS-CBN, SMART, GLOBE, PAL) is just too real. In the recent electric rate increase, Aquino was reduced to being an apologist for the inefficiencies of an ownership structure that protects vested FILIPINO monopoly business interests.

Kung anong puno, siyang bunga.

A toast to the Philippine Idiocracy

Barely 3 days after the May 10 elections, The Economist wrote:

He has served in both houses of Congress, but has a lacklustre record there.

Mr Aquino will face problems familiar to his predecessors: how to spur an economy that lags behind most of South-East Asia; widespread, entrenched poverty; a high birth-rate; reform of an over-prescriptive constitution; communist and Muslim separatist insurgencies; and home-grown terrorism linked to al-Qaeda.

He will need the co-operation of a new congress, also elected on May 10th. It was not immediately clear how well Mr Aquino’s Liberal Party and its allies had fared. But parties often count for little—for the most part congressmen align themselves with the main source of political patronage, ie, the president. This kind of political opportunism and the tradition that new presidents return the favours done by power brokers during their election campaigns mean Mr Aquino will need all his mother’s fortitude to resist the blandishments of those around him.

Another misgiving about the incoming president is that, like Mrs Arroyo (the daughter of an ex-president), he comes from one of the handful of families that have dominated Philippine politics and the economy for generations. His mother is remembered for restoring democracy But she failed to entrench stability or prosperity. During her presidency the economy boomed but then sagged, and she had to fend off several military-coup attempts. And she allowed the dominant families to regain the political and economic clout usurped by Marcos and his cronies.

So here we are again – using the same protectionist optimization tactics when the root of the problem is the protectionism embedded in the Philippine constitution itself. This is the same protectionist constitution that ensures the Philippines gets the crumbs in FDI.

Same old solutions,  Same old results

We have been protectionist since Day One of the 1987 Philippine Constitution. Don’t expect free market efficiencies from an inefficient protectionist environment. You can blog to death what a jerk I am, but will that really bring down the cost of utilities, will that really lead to more economic freedom?

You asked to be put on a cliff, you asked to be cheered because you are on the cliff, you asked to be supported as you go throw your bare self down the cliff.

I could have told you not to jump from the cliff – but then I would be an obstruction to your happiness.

So, when your body goes splat as it hits the ground – I will be cheering too.

You all asked for it, you got it – SIX LONG YEARS OF AQUINO – minimal infrastructure, high utility rates, lack of economic choices,

The Pope, Jesus Christ, Mary,  Joseph, Saint Jude and the entire pantheon of Catholic Saints ain’t gonna save your ass.

My country, I grieve for what you have done unto yourself.



  1. Ryan Bosco · ·

    When I heard Aquino mention something about having an “antitrust” law, I said, “Holy sheeeet, America passed that law about a hundred years ago!

    The framers of the 1987 Philippine Constitution are the most idiotic group ever to craft laws in the 20th century (considering the resources of knowledge and information available to them).

    I can’t wait for 2012 or an asteroid to hit earth. Anything that will wipe the Philippine slate clean to start over fresh. Our problem is a terminal cancer. No chemotherapy or the like will cure our culture of corruption.

  2. Same old solution, rely only on local businesses, oligarch-owned ones mostly… still the same “Filipino-only” crap… so we’re Filipino-only in poverty and backwardness…

  3. NFA rice · ·

    Bahala nang mahal ang tubig at elektrisidad, bahala nang walang ilaw at tubig, at gutom basta lang kapwa Pilipino ang makinabang sa pera ng Pilipino.

    I wonder whether guys that say that actually have water, electricity bills to pay and other people to feed and educate. Hindi sila naaawa sa karamihan. Maybe they are still living in their parents house or waiting for padala from abroad?

    Mga gunggong talaga! Letse!

  4. ArticleRequest · ·

    Nationalistic sentiments strongly influence the protectionist constitution. Its caused by really misplaced Pinoy pride. Pinoy businesses only. Kung may foreign groups dito dapat may Pinoys din dun. My @$$.

    When a Pinoy interviews a foreign actor one of the first questions is “Are you part Filipino?”, its annoying. Pinoy lang ang mga ganun. Filipinos get orgasms if the actor or singer says yes. Jeez. When Jollibee was featured on Glee for a few secs, Pinoys went crazy and thought we were being recognized at last by international media. Really now?

    Apply the the basta pinoy = hype mentality to Pinoy business and you get really stupid results.

    Its misplaced national pride and overfixation on anything considered “Uniquely Pinoy”. If I say I hate “Ocho – Ocho” song I am automatically not a Pinoy for some stupid reason. The song sucks and its played on a noontime show where women wear little clothing and dance like Jell-O. I hate watching ABSCBN/GMA teledramas because their plots are weak and predictable. The characters, effects an acting are fake and I would rather watch nonPinoy made movies because 99% of Pinoy movies are poor quality. Ayaw ko yung sineng Pinoy, teledramang Pinoy, di dahil sa colonial mentality. Kung palpak yung quality palpak talaga. I cant do anything about it can I?

    Perverted nationalistic sentiments are a product of the flawed culture the Philippines is in. Getting rid of protectionism is impossible in the Philippines unless you (re)educate people’s mindsets and get them over the Jollibee on Glee = OMG perspective.

  5. NFA rice · ·

    Memo to Nationalist sh*theads:

    If water and electricity are cheaper, the common Filipino can spend the extra money on other important things like better food or education. Meaning, the money is more spread out in the economy rather than concentrated in the oligarch electric, water, and telecom companies.

  6. Hyden Toro · ·

    Foreign investors are smart businesspeople. They can hire well educated researchers, before they invest in any country. They will never invest in any country that has serious problems in: insurgencies; Al Queda Militantancy; widespread graft and corruption, etc…If they come: they will be just taking advantage of the low cost of wages in our country. If other countries will offer them lower wages. They will surely: fold up, leave and move to that country. These investors do not think like our: imbecile President, moronic politicians and idiotic government officials…To presume otherwise, would be stupid, for all of us…

  7. @hyden. also the constitutional restriction on foreign equity is a source of competitive disadvantage. If the foreign company wanted to invest more but its local counterpart cannot raise the counterpart 60% – then the foreign company’s hands are tied. instead of expanding the service to more people it has to make do with the its existing subscriber base – and other customers are left unserved or underserved (tubeeegggg…. koryenteeeeeee)

    the next source of competitive disadvantage is ownership of real estate where the business will be set up. it is not much of an issue for labor-intensive export-oriented businesses because they wind up leasing facilities in ecozones and moving to where the labor cost is lower and with the same productivity.

    however for investors who are not into, exports and want to invest in hospitals, schools, nurseries, recreational facilities their options are limited. thus, if the local Filipino business does not want to partner with the foreign investor – the foreign investor can’t get in – and provide the resources and investments that satisfy unmet needs.

    it is going to get worse as the population increases – the Filipino monopolists will sit on expansion preferring to optimize their current revenue base – ergo, increase in rates. limited expansion will lead to pilferage as communities that are not being served will tap into private residences. this increases inefficiency even further and we wind up with higher electric rates.

    we need the option of allowing foreign investments that can fill the gaps – and that can increase the efficiency of the electric power industry.

    thus far, what quino is doing is akin to treating cancer with aspirin. it’s not really a good approach.

  8. ulong pare · ·

    … daaang

    @Hyden T: ulong’s global consultants, inc at your service…

    … firstly: a dossier of the country’s head of state… his/her wants/needs, habits (good/bad/indifferent), etc.hastera, etc…

    … secondly: head of state/prez personal profile… educational level gauges the IQ and level of comprehension… dito pa lang bagsak na si his excellency gung gong… :mrgreen:

    … thirdly: the amount of bribe his excellency is worth… in his case, konti lang … chop change… 😳

    … priceless? or wothless? ano say mo?

  9. ulong pare · ·

    … daaang

    … tsekwas y conos y padre damasos control flipland’s livehood…

    … flipland’s admin/traposakals/political clan are in their payroll…

    … the tans, tengs, tings, tongs, tungs… the lopezez, aranetas, ayalas, zobels… live large in their homeland >>> taiwan, hong kong, mainland tsina, espana, ‘merka…

    … padre damasos remit the gung gongs abuloy/tithe to herr ratzinger (papa sa roma) to support his red prada shoes addiction… i.e. ofws remit ‘sang tambaks na milyones to devout katolickdicks gung gongs… they, in turn, give abuloys/tithe to padre damaso who remit the ofw remittance to herr ratzinger…

    … hay naku, ang gulo ninyo…

    … kaya flips gutom… mga santo/santa ang mga gung gongs… :mrgreen:

  10. There was one serious problem about this things — bad habit seldom dies quickly.

    There are actually external investors in the provinces already mostly married to Filipinos. The only problem is from time to time they post a thread in their home country’s forum how to get out their own mess.

    For one, I read somewhere an investor in Boracay was harassed by authorities lorded over by close kin to the sitting official.

    Sadlym Noynoy has vast array of armies of local supporters who has bad habits of kicking out investors if they managed to cross their way.

  11. read this:

    Heh you got the wrong perspective. people don’t get what true patriotism means. Patriotism is love of country irrespective of other countries. You love your country and that’s it. You don’t hold it over other countries. You just love it and it does not mean the government. The nationalism portrayed by you people and AP bloggers refer to the European “nationalism” which was dangerous as it was “racist” and almost “fascist”.

    Protectionism isn’t fueled by nationalism. It is fueled by greed for money (the oligarchs) and fear of the superiority of foreign. Filipinos tend to see anything foreign automatically superior over anything Filipino. Filipinos boast when they got something from abroad. “Oh hey it’s made in the US, Japan!” “Let’s go to Starbucks! It’s international!” This is why i don’t get how you people tend to feel the “over nationalistic” of the Filipinos as i haven’t seen them.

    Filipino businessmen know they can’t compete with foreign so instead of opening up by being challenged and do something better, they go the cowardly route, protectionism.


    simple as that. they use the “nationalism” excuses to hide their greedy purposes and cowardly/lazy actions.

    like i said before, Filipinos have no passions and have no great ambitions. Just look at Dubai. …speechless…

    I agree with you though. The mediocrity in our films and shows is so immense. I never watch them. It is like that because of poor education of the massive poor people. But know this: Unlike the poor Burmese and other poor countries, we are free to explore and discover. We have “freedom”. You can buy informative and inspirational books from foreign writers. You can watch films that are actually great. We have no restrictions in the internet. And many more. Almost everything helpful in our spiritual and mental lives are available to us so long as you have little money and you really go search.

    As the Bible said, “Knock and the door will open for you”

    Be grateful we don’t have the internet restriction policy of China, the 3rd most corrupt government in the world, Burmese government, and many worse things.

  12. Miriam Quiamco · ·

    China is the third most corrupt government, maybe we should export our Aragorn over there to fight corruption, after all, all he has to do is appear and say sweet things, corruption will disappear and the Chinese people will listen. But hey, why is China growing economically with double digits every year again, considering it is the one of the topmost corrupt?

  13. ako ang simula... · ·

    as someone said,

    Run like hell by flips.


  14. “…If the foreign company wanted to invest more but its local counterpart cannot raise the counterpart 60% – then the foreign company’s hands are tied. instead of expanding the service to more people it has to make do with the its existing subscriber base …”

    Hindi lang yan. It is also a rich source of corruption. Guess who will line up to offer themselves to dummy for the investor especially kung very lucrative ang prospects. Akala mo ha 60% is owned by local investors, yun pala it was also financed by the foreign investor in the name of dummies double-dummying for influential people in and out of government. Then later to get poor investor toe their line, they would threaten to expose the dummy arrangement from time to time. Genius eh! Then because the guy is probably a Japanese, they charge the trickery as compensation for the war crimes committed by their fellow Japs or for Americans for their ripping off our war veterans. Hehehe, see how it all fits up?

    It would be good if the 60% could be filled up by, say, a cooperative of farmers, balut vendors association, kapatiran ng tricycle drivers, PTAs etc. Wouldn’t that be wonderful?

  15. I believe everyone in government already knows this, that our constitution is outdated and an actual obstruction to progress. The blueprint for progress for 3rd world countries has been available for decades now, with the rise of Korea and Singapore, and in more recent years our other Asian neighbors. Our problem is not that the government doesn’t have the capacity to follow suit, but that it is purposely keeping our country that way it is to keep itself rich and in power. I’ve believed for the longest time that people in power (government and the big businesses) have it to their advantage (at least in the short term) that the Philippines remain poor and uneducated.

    AP has already established that the only thing our beloved constitution is protecting are the oligarchs. That is precisely why the government is upholding it. For the country to progress, the government really has the lion’s share of responsibility. Kaya lang, there are 2 problems: masyadong GARAPAL (God forbid our senators and congressmen won’t be able to afford their next yacht or sports car, travel the world, or support their numerous mistresses if they actually use our money for progress), at walang BAYAG (afraid to offend their oligarch supporters, afraid to offend their catholic electorate, and basically afraid to offend anyone for that matter, lest they start to actually IMPLEMENT the laws they have passed).

    As individuals, one can still prosper in the Philippines. It IS possible and there still ARE poor people who have managed to become successful financially without going the OFW route. However, as a country, the Philippines will remain a crap nation as long as GARAPAL at DUWAG ang gobyerno natin.

    I don’t know what the solution is. I campaigned for Gordon, knowing he has at least the balls to TRY to steer the country in the right direction. I contribute to local charities that fund scholars, in the hope that there will be more educated voters in the future. I share AP articles in my social network, hoping that my network becomes aware and slowly get off their yellow high. Are there better solutions with faster results?

  16. please read carefully. i referred to the Burmese government as the world’s third most corrupt country in the whole world.

  17. One possible solution is the emergence of technologies. The quicker people communicate, the higher the chance they will make a move.

    We can’t just assume the people will be forever satisfied with their own perception of their leaders and not doing something about it.

    The only problem with technologies like for example mobile phones and internet is that Joma’s people love to plant bomb to sites owned by companies unwilling to give him moolas i.e. revolutionary tax.

  18. “So how do you exactly invite investors when the Philippine constitution is very restrictive? You go out on a selling mission – only to turn back investors because of equity limitations? It does not make sense.”

    actually, thats why there is a fund, so the equity restrictions are no longer an issue.

  19. What are you smoking, and can you spare me about a dimebag of it? No investor with any sense of self-preservation is going to look at the “fund” as anything even reasonably approaching something that makes up for the lack of equity, which has value several orders of magnitude greater than simple cashflow.

  20. Even if it’s wrong to believe:

    It’s also wrong to believe:

    However, I agree with what you say about protectionism. They will use the cover that it’s a “patriotic” or “nationalistic” device when in fact it’s not. It’s more patriotic to remove the protectionism and allow foreign players in to beef up our economy. And allowing foreign companies in does not mean you acknowledge that foreigners are superior… you’re just allowing them to help us.

  21. This is a reason why AP exists. Technology to spread the message. 😈

  22. “approaching something that makes up for the lack of equity, which has value several orders of magnitude greater than simple cashflow.”

    equity in infrastructure? why? whats the argument?

  23. On one hand, you can rely on the state to support your undertakings, but will it have the resources to maintain that support? On the other hand, you can invite outside investors to support your undertakings, but how can that be possible with the protectionist provisions that are embedded in the Constitution? GabbyD, will you see the point in Cha-Cha as a tool for attracting foreign investment?

  24. Hyden Toro · ·

    I don’t think the Constitutional revision will help attract foreign investors. Foreign Investors invest money to:

    (1) Avail of the low cost of labor in any country. The lower the cost of labor; the more their profits.

    (2) To avoid paying huge taxes, in their own countries. They are looking for countries that will not tax them too high. Giving them huge tax breaks.

    (3) To have fast liquidity of their assets, once they plan to move. That is; they can convert easily their
    assets into cold cash; once they decide to leave or move.

    (4) To easily take out their money profits, out of the country. And put that money into a safe tax havens like some Carribean countries.

    Businesses are run for the sake of profits. They don’t run on the basis of humanitarian or charitable purposes. It’s greed, okay, but that’s the work of foreign investors. You have to face it…

  25. Hyden Toro · ·

    Hey Daang:

    The imbecile, Noynoy Aquino was absent from his class. When his college Proffesor taught this matter. Maybe he was there busy promoting EDSA…

  26. ulong pare · ·

    … daaang

    @Hyden T: i recognized his excellency gung gong during my koledjs years at feati u… he was a “suki” at the comics/mags stand underneath paterno bldg (feati annex)… his fave was TIK TIK…

    … ay sus ginoo, i hated it when it’s my turn to rent the dang TIK TIK… pages kinda sticky already… 😳

    … now that his excellency gung gongs is our prez, i do hope that he utilized his analyTIKTIK mind to the fullest…

  27. @hyden that assumes you are allowed to invest as you deem fit – without equity restrictions.

  28. For example:

    Infrastructure – Say… Solar Farm – 20 hectares of solar panels that generate electricity –

    let’s just say for discussions sake the investment amount required is $1 million.

    Domestic capital can only raise $300K –
    even if the investor can spend $1 million
    – the constitution says he can’t go beyond 40% equity

    computing for the 40% equity as required, given that local has $300K:


    Thus, instead of getting the full benefit of the $1 million – the amount put into the project is only:

    Local capital of 60% + Foreign capital of 40% = $300K + $200K = $500K or $0.5M

    Now with fiscal incentives – say all local taxes, permit fees and other fees are waived for five years: – Depending on the tax rate – if say the assessed amount is 8% of the investment amount that’s – a savings of $40K per year x 5 years = $200K.

    Theoretically, this amount will be plowed back by the investor – and an expansion can get 3 more years – on the expanded amount. So computing again: $200K x .08 = $16K per year x 3 years = $48K

    After 8 years the full investment amount of $1 million can’t still come to fruition. Meanwhile, investors need to recover their investment – and you get higher rates.

    To resolve the problem – the local group raises $300K more – either through borrowings (which plunge us deeper into debt) or bond/stock issues (we are not exactly Class AAA material) – and to attract buyers we pay higher interest – that money is taken from future taxes that are automatically appropriated to pay off the debt gradually – or depending on the terms of the bond issue. So on and so forth. That’s what you get to read in the Philippines business pages daily.

    Compare the previous scenario to allowing the investor to invest $1 million by the 1st year. Tapos. You can even tax the investment instead of giving incentives – revenue instead of loss.

    And no need for fiscal incentives which frankly when misapplied can deprive the government of revenue that could have gone to public services.


    I might be wrong, please do correct my math.

  29. @bong

    for high-tech industries/renewable energy, its possible for 100% ownership:

    “100% foreign ownership is possible, minimum paid-up capital is US$ 200,000.00. but there are exemptions which can allow a paid -up capital of US$ 100,000.00.”

    this is FAR LESS than the 1M USD of ur example

  30. @gabbyd: BINGO – how about capital which is below $100,000? How about a retired navy man who has only $50,000? it is still discriminatory – free the market. he can generate electricity for the barangay – at $250 per unit – that’s 200 households – are you saying he should not be allowed to invest then because he has $50,000 only? if the 200 households have no electricity – why keep the $200,000 restriction? It does not make sense.

    Second is such 100% ownership available for fossil fuel power generation investors, tollway developers, water utilities, telecommunication, shipping lines, trucking – please look it up – thanks. start with the Foreign Investments Negative List – and let us know what the percentages are. Thanks again.

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