THERE is no equal sharing of ownership between Filipinos and foreigners in a Philippine stock corporation. A provision in the Constitution limits the latter to a maximum of 40 percent participation in nationalized and partly nationalized companies.
As the Supreme Court ruled in the Gamboa case surrounding the ownership structure of Philippine Long Distance Telephone Co., renamed PLDT Inc., the 60:40 ownership ratio in favor of Filipinos should apply to each class of shares in a company’s outstanding capital stock. This means at least 60 percent of common shares and 60 percent of preferred shares with or without voting rights must belong to Filipinos.
As a result of the SC ruling, the role of the Securities and Exchange Commission is crucial in determining compliance with an ownership equation. Whether regulatory authorities adhere to the High Court’s suggestion is an issue that may be subject to speculation or even criticism. Better ask SEC Chairperson Teresita Herbosa.
The SC’s definition of a maximum 40-percent foreign ownership applies also to investments that a President brings home from his or her official trip abroad.
Regardless of how much of China’s pledge of $24 billion is in the form of loans or of investment as committed to the Philippines during President Duterte’s recent visit to that country, one wonders when the money will start flowing in. As in the past, every presidential visit to other countries brought home investment pledges in billions of dollars. Had all these promises been turned into actual investments, the Philippines would have been very rich by now—and must have successfully reduced unemployment—that it would no longer need to beg for any foreign alms.
The present national leadership should have learned its lessons from the experience of previous regimes that
whatever had been committed may come in five, or even six years, or may not come at all.
For instance, former President Benigno C. Aquino 3rd and his entourage of businessmen during their 12-day tour of the US and Europe reported having brought home foreign investments totaling $2.35 billion, which they said would create 33,850 jobs.
Since then, nothing has been heard about whether the investments materialized or generated the prospective jobs. Such committed investments of $2.35 billion would have been worth P110.45 billion, at P47 to a US dollar.
Going by the statistics available on the website of the Securities and Exchange Commission, P110.45 billion in foreign money would dwarf the SEC’s company registration reports. Paid-up capital of 24,527 new companies, according to the same SEC posting, reached only P32.149 billion in 2015.
By looking at the numbers, any observer may conclude that the Aquino administration’s boast of $2.35 billion in new potential investments in 2014 was impossible to happen. Foreigners promised only to invest but had to “look and see” first before parting with their money.
The equation would also show the impossibility of foreigners investing $2.35 billion. How about the Filipinos’ 60 percent participation in the ownership? If $2.35 billion, or 40 percent, would be foreign, then $3.525 billion, or 60 percent, would have to be put in as the counterpart infusion by Filipino capitalists in a company with a total outstanding capital of $5.875 billion.
Who among the very rich Filipinos could possibly afford to invest $3.525 billion in a 60-40-percent stock corporation? That would be a lot of investible funds, which at $47 to a US dollar, would amount to P165.675 billion!
How about the $24 billion investment that Mr. Duterte said his trip to China had yielded in the form of Chinese pledges to the Philippines? Again, at P47 to a dollar, that would top a trillion, at P1.128 trillion.
Filipino businessmen who accompanied Mr Duterte to China could have invited the Chinese to invest here. However, they should have been informed that in certain nationalized and partially nationalized industries, their
ownership must not exceed 40 percent of outstanding capital.
If in China the government owns most companies or is a substantial stockholder in others according to Wikipedia, in the Philippines the government is not supposed to engage in business and compete with the private sector. Philippine National Bank used to be state-owned but has been privatized and sold to businessman Lucio Tan. The government, though, still owns two banks such as Development Bank of the Philippines and the Land Bank of the Philippines.
Among the listed companies, the government still controls Philippine National Construction Corp., which has been granted another 50-years as a stock corporation by the SEC.
PNCC used to belong to businessman Rodolfo Cuenca but he lost it to the government for unpaid debts. It was registered with the SEC on Nov. 22, 1966.