The Philippine is a very predictable place to do business for monopolists. Have your 40% equity ready – and there will be a Filipino monopoly business ready to match you with 60%. Filipinos who can only match 50%, 40%, 30%, 20%, 10%, 5% – you are out of luck. The lucky foreign investors who find the Filipinos who can match the foreign 40% with the local 60% have guaranteed revenue – a captive market that is shielded from global competition.
No wonder that for a country that is perceived as an economic basket case, Asia’s laggard – has at least three Filipinos in the Global Forbes Fortune 500 – Lopez, Ayala, and Tan. And they happen to be Filipino monopolists as well. Mind you – the assets of these three people are far greater than the annual budget of the Philippine government.
Philippines among most restrictive to foreign investments
As pointed out by the World Bank study Investing Across Borders the Philippines imposes of the strictest regulations regarding foreign ownership of businesses in the country. The Philippines ranks second only to Ethiopia, which does not allow foreign equity ownership in any business.
Under the Philippine Constitution Secs 10 and 11 of Article 12, only up to 40 percent equity in a domestic corporation is open to foreign ownership.
Wasn’t it only last month when these headlines hit the news stands?
In contrast, Brazil, France and Ghana allow foreign ownership in all of their domestic firms up to a hundred percent.”
And if that’s not enough – FDI was down prior to the May elections.
FDI down in May 2010 – Anticipating the protectionist inefficiency, expansion of Filipino monopoly businesses, better deals from competing countries?
By Michelle Remo
Philippine Daily Inquirer
First Posted 15:50:00 08/10/2010
Filed Under: Economy and Business and Finance, Politics, Investments
MANILA, Philippines – The country registered a net outflow of foreign direct investments in May as the elections pushed investors to the sidelines while waiting for the political situation to stabilize.
According to the Bangko Sentral ng Pilipinas, net outflow of FDIs reached $35 million in May. This was a swing from the net inflow of $446 million in the same month in 2009.
The bleak investment picture in May dragged the FDIs for the first five months of the year. FDI in January to May stood at a net inflow of $446 million, down 68 percent from $1.39 billion in the same period a year ago.
Central bank officials said the outflow of investments in May and the decline in the net inflow in the first five months were due to uncertainties both in the domestic and international fronts.
Locally, they said, the elections prompted foreign investors to wait until the new administration stepped in and to look for signs the turnover of governance would be smooth. Offshore, the debt crisis in the Eurozone dampened risk appetite of investors.
Analysts said the crisis in the West somehow cast doubts on the sustainability of the recovery of the global economy from the 2009 recession. Asian developing countries, like the Philippines, are partly dependent on the global economic recovery, which would spell rebound of their export sectors, to boost their own growth rates.
“Investors stayed on the sidelines as they remained wary of potential spillovers of the Eurozone’s sovereign credit problems, notwithstanding the relatively peaceful conduct of the May 2010 local and national elections,” BSP Governor Amando Tetangco Jr. said in a statement.
Data from the central bank showed $630 million worth of gross inflows of FDIs in January to May, while gross outflows amounted to $184 million.
The BSP said bulk of the gross inflows of FDIs in the first five months came from the United States, Switzerland, Japan, Netherands, Singapore, and Hong Kong.
Investments from corporate entities from these countries benefited mostly the manufacturing, real estate, financial intermediation, utilities, mining, and transportation sectors.
The BSP expects the net outflow of investments in May to be reversed in the succeeding months given fresh optimism of the business sector, which private-sector analysts said became evident since Benigno Aquino III took over as the country’s new chief executive.
The government’s new economic team has vowed to improve the country’s business climate, particularly by trimming procedures in setting up a business and curbing corruption in line agencies.
The team is also promoting partnerships between the government and the private sector wherein the private sector will invest in public infrastructure projects.
Finance Secretary Cesar Purisima, who heads the economic team, said the government would put up an infrastructure fund, which would become a pool of investments from the private sector in priority infrastructure projects.
Privatization of Public Monopolies Equals Private Monopolies
The public-private infrastructure fund is old hat and plain old smokes and mirrors when put up against the backdrop of protectionism and liberalization. Privatizing a public monopoly does not necessarily make it less inefficient. Liberalizing the ownership of a public monopoly however changes the game because local owners who are inefficient can be ousted by local small shareholders by partnering with foreign investors who can provide more win/win arrangements than the local monopoly businesses. Decoupling and liberalizing ownership will therefore introduce competition and create efficiencies that will benefit Filipino consumers.
Investment Policy Affects The Kinds of Investors We Attract
In this recent keynote address – P. Aquino reiterated his latest toy – the $10B to buy the PAGCOR monopoly on casinos and gambling.
Aquino: RP to be good place to do business
By Cathy C. Yamsuan
Philippine Daily Inquirer
First Posted 04:51:00 08/10/2010
Filed Under: Investments, Foreign affairs & international relations, ASEAN
MANILA, Philippines—Talk about good timing.
President Benigno Aquino III vowed to make the Philippines “a predictable and consistent place for investment” a day after a top local tycoon made a pitch to buy the Philippine Amusement and Gaming Corp. (Pagcor) for $10 billion on behalf of a group of Malaysian businessmen.
In his keynote address at the 43rd founding anniversary of the Association of Southeast Asian Nations (ASEAN) Monday, Mr. Aquino said he envisioned the Philippines becoming a country “that would be known for honoring contracts and giving due protection to foreign investors.”
The President came to the Department of Foreign Affairs and met with Foreign Secretary Alberto Romulo and the diplomatic representatives of the ASEAN countries.
Mr. Aquino vowed to transform the Philippines, saying that “an exemplar, as well as exponent, of the rule of law—including international law—is a country attractive to investments. A Philippines that harmonizes its national interest with its international responsibilities is a nation that can earn, and maintain, its dignity and self-respect whether on a bilateral or multilateral level.
“We can achieve this by making sure our country is a predictable and consistent place for investment. The security and well-being of Filipinos throughout the world will be best protected if our country enjoys international amity. That amity will be fostered by our ability to honor contracts and give due protection to investors,” he said.
Mr. Aquino said his administration also planned to “be more conscious of our commitment to fostering improved ties with our ASEAN neighbors. We will be a good neighbor, a productive partner and a consensus-builder as we work toward our common goals.”
Romulo handed the President a framed copy of the ASEAN Charter in Filipino. Mr. Aquino said copies of the charter would be made available to all pubic libraries nationwide.
The Philippines – Predictably/Consistently Protectionist, Pro-Oligarch, Anti-FDI/Anti-Liberalization/Anti-Consumer
It was funny how Aquino talks about protecting foreign investors when the constitution restricts investors. Who is there to protect in the first place when investors barely want to give it a look? Get the investors in FIRST – by liberalizing the economy and removing the protectionist provisions in the charter.
Without liberalization, Aquino is just ensuring that Filipino monopoly businesses snag a 60 (Fil)/40 (foreign) joint venture with a foreigner – never mind the Filipino small businesses that are willing to do a 40 (fil)/60 (deal) and compete against the local monopoly.
With this kind of investment policy we attract Malaysian monopolists to go into (60/40) joint veture with Filipino monopolists. Which means Philippine Casinos will remain uncompetitive, will pay wretched wages and benefits – there’s no competition, what do you expect?
Tiger economy? Yeah right – if you buy that you are a bigger fool than I expected.