• ‘Best business in the Philippines is no business’

    Emeterio Sd. Perez

    Emeterio Sd. Perez

    It is rarely that I deviate from the usual stuff that I write about in Due Diligencer. As in a previous piece, I had taken a detour and responded to a suggestion made by Teddy Sevilla that I explain the impact of preferred shares issued by San Miguel Corp. on SMC’s capital stock.

    I did as suggested, only to receive a long comment from a reader of The Manila Times who goes by the name of Amnata Pundit, to whom I will respond briefly after taking up another reader’s reaction.

    “As a foreigner, I think the best business in the Philippines is no business.” This was BobJp’s reaction to a piece I wrote on “Complicated computations of corporate ownership.”

    BobJp has a point when he hinted that with the foreign ownership restrictions that the government imposes on businesses, it would be better for foreigners “not to do business here especially if the company is founded on the foreigners’ money.”

    I do not know what BobJp actually meant when he wrote that “foreigners can easily lose money.” Perhaps he had had a bad experience with some unscrupulous Filipinos who may have duped or cheated him of his money. But even if his reaction may not have been based on personal experience, he is correct in saying that the best way to avoid investment risks in this country is not to invest at all.

    Foreigners’ concern
    BobJp’s comment should not be taken for granted by government regulatory agencies that deal with investors, be they Filipinos or foreigners. It really is difficult to invest here, particularly for foreigners who may not be well-oriented on domestic regulatory practices.

    How long, for instance, does it take a foreign company to register a local subsidiary? To know the answer, try hanging out with the liaison people of law officers at the Securities and Exchange Commission. From them, you will learn the intricacies of company registration before you are able to start operating. The question is how long would it take a businessman to obtain legal personality by seeking the signature of one of SEC’s top officials?

    Okay. You may be advised to use the SEC’s “Express Lane” forms to speed up the process of registering your business as a stock corporation. You will be told that you do not need to do the usual “FU,” which stand for follow-up. Simply wait and you will get in 24 hours your accreditation via the issuance of a SEC certificate of registration.

    Express Lane forms
    Well and good for business. But how much does a set of express lane form costs today? Many years ago, a set of Articles of Incorporation and a set of Articles of By-laws cost P150 each. With the cost of printing as a result of inflation, the price must have gone up to P500 per set or maybe even higher.

    I am writing this because a group of foreign investors are planning to invest here. (I am not identifying their nationality yet.) I would not know what to say about the intricacies of opening a business here, particularly in dealing with the SEC, the Department of Trade and Industry, and the Bureau of Internal Revenue.

    But first, they would come to feel and observe for themselves the investment climate in the country. They should, otherwise it would be too late to be sorry after opening shop only to fold a few months later.

    Preferred shares
    Let me take up the other reader’s defense of the issuance of preferred shares by San Miguel Corp.

    I wrote that piece about SMC’s preferred shares in response to a request from one Teddy Sevilla after reading “Quo vadis, San Miguel,” which appeared in this space on July 21, 2015. In reporting SMC’s preferred shares in two articles, I went through the company’s various postings which guided me in my analysis of SMC’s capital-raising exercise. As I have been writing about companies, particularly those whose shares are either partially or fully listed on the Philippine Stock Exchange, I made sure I had documents to back up my reports.

    In the case of San Miguel, it is never my intention to embarrass anyone among the company’s stockholders and executives. Yes, I concluded in the article that preferred shares should be treated as liabilities and not ownership just as many, many years ago, I questioned the continued treatment of preferred shares as part of a company’s equity during a seminar organized by SGV and Co.

    Don’t I care how a drastic change, which would never happen anyway, would affect the accounting entries in a company’s financial filings? My answer to my own poser is this: CPAs or certified public accountants would know better. After all, their practice is governed by what is called Philippine financial reporting standards that set the rules they are required to strictly follow.



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    1. Philippines is a failed state. this all I can say. too much red tape and corruption from janitor to the top. too many dishonest people. that’s why this country will remain poor compared to its neighbors. soon Vietnam, Myanmar and Cambodia will overtake the country and we will be sending maids over there. lol.

    2. Dominador D. Canastra on

      Very true–but very bad for our country.
      Meanwhile, the established businesses–and the foreign chambers of commerce hypocrtitically praise the Aquino government to high heavens! Why? It is because they know that the World Powers have decided to make the Philipines their common colony–never mind the ruile of law– and the Constitution.
      That is why no foreignobservers have joined The Manila Times, Columnists Tatad and Tiglao, Gus Lagman, Celis, Averia, Santiago, Dulay, Perez, and the others, in telling the truth about the Smartmatic-Tim PCOS machines.

    3. Teddy Sevilla on

      There is something fundamentally unfair with the way we do business. We tell foreigners, “We want your money and your expertise, but do not meddle with the business. We, Filipinos, will make the strategic decisions because you, foreigners, will just exploit us if we let you run the business your way.” It makes one wonder why any outsider would want to do business in the Philippines at all. Maybe that is what BobJp meant; I sympathize with him. But, as Mr. Perez pointed out, there are ways to legally skirt the 60-40 rule.

      I am in favor of amending the constitution by inserting the phrase “or as may be provided by law” in the relevant section as previously editorialized in Manila Times.

    4. I agree that preferred shares are liabilities not equity. As a value investor, I include to deduct it to assets to get the book value. In my research SMC is heavily in debt and price per share is in downward trend.

    5. The Philippines is in a dangerous situation in that the rule of law in this country is being ignored and controlled by the President reminiscent of the movie 1984. I’m sure there are laws that discouraging plunder and graft but they don’t apply anymore to the majority of elected and non elected government officals.

      Blatant disregard of crimes, shielding and coverups by the Dept of Justice and Ombudsman office.
      Violations of the laws committed by the government officials of the Pork barrel funds, DAP funds, Yolanda funds, SAF 44 true accountability, MRT missing maintenance, Prisons where inmates have automatic weapons and grenades gives the impression of a lawless country.

      What business would want to invest their money in the Philippines ? Will their investment be covered by the rule of law ?
      Not likely in the Philippines.

    6. Felimon A. Soria on

      Foreign investments like tourism is one of the most important aspect of an economy. If foreign companies are discourage because of so many hang ups I think it is bad for the country. China and other countries became very progressive because of what I mentioned.