LEADERS and sectoral groups have been calling for a change in the 1987 Constitution. Initially, the call was to amend the economic provisions and ease foreign ownership in key industries prohibited by the Constitution. Today, with the new administration, it is no longer amendments but a full-blown constitutional revision that is being suggested with two opposing tracks being pushed: a parliamentary-federal system (unicameral-federal), viz., federal-presidential. We are no longer debating about why change the system but how do we change the system.
The why has apparently been settled but the how is the burning issue. How do we set the federation in an archipelago so divided by culture, dialects and beliefs? But as we debate on the setup, much is also being raised on how the various corporations in the country will be affected. The core issue to that is taxation, most especially the situs of tax. Just like the push for autonomy in the Local Government Code in the 90s, Book II of the same was the crux of decentralization and deconcentration. Book II is on Local Taxation and Fiscal Matters.
The other push is for opening the economy further to foreigners. Taking the cue from leading Asean economies like Singapore, Malaysia and Indonesia, the Philippines should be able to attract foreign capital. Economic growth in the country has been characterized as one of consumer-led growth, with two key drivers: OFW remittances and BPOs.
Issues have been raised in the Philippines about getting more foreign direct investments instead of purely hot money. The true measure of the strength of FDI economic policies for a given country is for the FDI inflows to exceed the outflows, “especially in the case of a poor country with great need for capital investments, such as the Philippines. The amount of FDI inflows, when very large, can tolerate a high rate of FDI outflows. Investment flows are measures from year to year. Stocks are accumulations of investment flows. Therefore, a country that keeps having substantial net FDI inflows will eventually have a high stock of capital and increase its investment capacity. It is capital in place that enables a country to have high productive capacity. Inflows of capital often are also accompanied by technological innovations in production. A rising stock of capital could imply an increasing technological capacity for the country.”
Under the present constitutional system, foreign investors are minority shareholders. They cannot go beyond the 60-40 ownership mandate by the law of the land. Yet here are foreign investors believing in the potentials of the Philippines and still face risks in putting their money into our system.
As there are many interested foreign investors, there are also many horrendous stories of Filipino businessmen duping foreign investors. Some Filipino businessmen would go the way of the stock market, issuing IPOs, enticing foreign investors to come in, using the money for operation that drives the company to bankruptcy, making repeated capital calls until the shares of the foreigners are diluted to almost holding on to empty bags. What makes it bad is that government regulators, Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE), are unable to protect the interests of these foreign investors. Worse, the rights of minority shareholders are set aside. On a case-by-case basis, if you are up against the director-son of the founder of a management school in the region as well as one of the oldest accounting firms in the country, foreign investors have no recourse to seek redress but to go the way of the courts. The next challenge a foreign investor would have to face is the “syndicated-like” behavior of law firms and that is why a seat in the SEC and PSE are important because some officers would just sit on the case until the foreign investors give up because of sheer exhaustion after years of just trying to get a financial statement and other documents on the company they invested their money in.
Despite the near bankruptcy of the company, one would think that the share price in the PSE would have nosedived, but alas, the law of gravity seems not to apply with the stock. It remains buoyant with the changing of capital and the shaving of operations to bring the same capital to company B, which then plows back the money as new investments. This company even had to show losses in gargantuan proportions like the sinking of a fishing vessel in Indonesia where nary a report was made. Despite all these nefarious activities, they herald in media about being awarded by the Ministry of Fishing, in Indonesia, as one of the best companies in the tuna industry when, in fact, the company is in the list of illegal poachers in Indonesia. Now, how can shareholders allow this? Simple: one gets a former PSE president advocating minority shareholder rights to be its lawyer during its annual stockholders’ meeting.
If drugs destroy the fibers of a nation, corporations like these destroy our country, institutions and our collective reputation as a nation. Department of Agriculture Secretary Manny Piñol should look into the tuna industry (because there is none to begin with) and the players that destroy it. Duterte should unsheathe the sword and thrust it to corporations to lift the veil and see the sordid mess we are in because of some Filipino businessmen who pretend to be captains of industry but are perpetrators of white-collar crimes. Look at all the mess they did in Mindanao. No wonder, the land of promise is a wasteland in some areas.
Some businessmen in high hat ridicule corruption in the public sector. And yet a network of very wealthy and powerful businessmen, who compromise the health and security of the general populace for corporate gain, are called philanthropists and geniuses. Don’t you think they are on a par with drug lords—or even worse?