What foreign investment restrictions?


    First of Three Parts

    In the past few months, moves to change the constitution by foreign chambers of commerce to lift purported restrictions on foreign investments’ entry into the country have intensified.

    Both Senate President Franklin Drilon and House Speaker Feliciano Belmonte are saying there is enough time under the 16th Congress and during President Benigno S. Aquino’s term to amend the Charter’s economic provisions to make the country more open to foreign investments.

    While the issue hardly belongs to his territory, Foreign Affairs Secretary Alberto del Rosario has claimed that the country direly needs to lift its restrictions on foreign capital if it is to participate in new global economic arrangements. As I will argue, though, in subsequent installments of these three-part series, Belmonte and del Rosario’s motives may not be as purely patriotic as they seem to be — their keen interest in charter change may point to the real motive behind all this cha-cha agitation.

    What restrictions on foreign capital are they talking about — I mean in practice and not in theory?

    Unless you live in the boondocks or in some isolated island in this archipelago, you cannot spend a day without buying – having to buy, actually – a product or a service sold by corporations either majority owned by foreign firms, even exceeding the constitutionally-mandated 40 percent limit for utility companies, or in which these have very significant shares.

    Household brands in the Philippines: Foreign firms have majority or significant shares in them.

    Household brands in the Philippines: Foreign firms have majority or significant shares in them.

    When you get up at dawn, and you turn on the lights, you’re buying electricity from Manila Electric Co., controlled by the Indonesian conglomerate which is tightly owned by Anthoni Salim, son of the late Liem Sioe Liong, who had been Indonesian dictator Suharto’s biggest crony. (See my column, Feb. 13, “Indonesian Magnate Controls Meralco.” To date, the Salim group or Meralco has not corrected any single information nor assertion in that article.)

    Your breakfast and then your bath are likely to contain products made or distributed by a big multinational. The biggest consumer-products multinationals in the world, the Swiss Nestle and the American Procter and Gamble, have dominated the industry since before the war.

    When you take a drink of water, and you live east of the metropolis, you must have bought the water from Manila Water, in which the old-elite Ayalas own just 31 percent, while about 34 percent is shared by the Japanese Mitsubishi Corp., Singaporean firms, and the International Finance Corp. of the World Bank. If you live west of Manila, you’ll be buying water from Maynilad Water, which is 53 percent owned by Salim’s holding firm in the country, Metro Pacific Investments.

    For your calls and your internet connection, you’re using Smart or Globe, both of which are controlled and run by foreign firms. The Salim group, through Philippine Long Distance Telephone Co. (PLDT), and Japan’s biggest communications company, Nippon Telegraph and Telephone together own 47 percent of Smart. (See my column, “PLDT now an Indonesian-Japanese joint venture,” March 11). You think the Ayalas are the biggest stockholders of Globe? Nope: it is 47 percent owned by Singapore Telecom. Ayala Corp. has 30 percent, and other foreigners hold 17 percent through the stock market.

    If you like to read the newspapers at breakfast, Salim, through PLDT’s Beneficial Trust Fund, has 20 percent of the Philippine Daily Inquirer, and 70 percent in each of Philippine Star and BusinessWorld. Salim is also firming up plans to buy 70 percent of the Manila Standard TODAY from the Romualdezes by early next year.

    On your way to the office you stop for gas; if you’re not buying from Petron, you’ll likely be buying from foreign firms’ subsidiaries Pilipinas Shell and Chevron (Caltex), which has been in the country for a century and together have 40 percent of the market.

    7-Eleven is Taiwanese
    If you stop to buy bottled water at the now ubiquitous 7- Eleven convenience store, guess who controls our 21st century version of sari-sari stores?

    No, it’s not the family of the late Vicente Paterno nor Erap’s trade and industry secretary Jose Pardo nor Mar Roxas’ Araneta clan – although each of these, you might say, are ten-percenters, i.e., they each own 10 percent of shares in the firm.

    Philippine Seven Corp. is 57 percent owned by Taiwanese President Chain Stores, one of the biggest conglomerates in Asia with 80 subsidiaries and affiliates all over the region. The Texas-based 7-Eleven has nothing to do with the Philippine 7-Elevens, except to collect royalty for the use of the name and logo. (For details see my column June 2, 2013, “Taiwanese firm booming in the Philippines”). As in my columns on Salim, the firm has not corrected any information or assertion in that column.

    If you live outside the metropolis, and you don’t want to suffer the terrible traffic of regular roads, you’d have to pay firms to use the toll roads run by companies in which Indonesian firms have majority control.

    The South Skyway was built by a company owned by former Indonesian strongman Suharto’s eldest daughter, Siti Hardijanti Rukmana, known as Tutut. Her firms are still in Citra Metro Manila Tollways Corporation, which receives the tolls from there. Salim owns 67 percent through Metro Pacific Investments, of Metro Pacific Tollways Corporation, the largest tollways firm in the country that gets the tolls from the North Luzon Expressway, the Subic-Clark-Tarlac Expressway and the Manila-Cavite Toll Expressway.

    And, knock on wood, in case you’re hurt in a terrible car accident in those expressways, you may be brought to the country’s top hospitals majority-owned or run by Salim’s holding company Metro Pacific Investments: Makati Medical Center, Asian Hospital, Cardinal Santos Medical Center, De Los Santos Medical Center, and three others outside Metro Manila.

    But if you’ve driven safely home and have relaxed to watch TV, you’d likely be using the services of SkyCable, 40 percent owned by the Singapore firm STT Communications Pte. Ltd., or of Cignal TV, controlled by the Salim group through MediaScape, which is funded by PLDT’s Beneficial Trust Fund.

    What restrictions are they talking about, when Starbucks has 226 stores here, more than those in any European country and most countries in Asia, which are ostensibly more open to foreign investment?

    I’d be very interested to know how they’re doing it, but the Tantoco (Rustans’) Group of Companies, one of whose subsidiaries is the Starbucks Philippine partner, and the Henry Sy conglomerate, have been so successful in being the venue for the massive entry of foreign retail stores (such as the Japanese Uniqlo) into the country in recent years.

    Most of these foreign firms operating in the Philippines have simply taken advantage of our liberal economic policies. However, the big question, though, is how Salim and the Ayalas have managed to skirt the constitutional provision limiting foreign ownership in utility industries, which include electricity distribution and telecommunications.

    The answer is contained in a notion economists have invented to explain market failures: Regulatory Capture.

    And you’ll find it shocking how a nondescript government entity – the Securities and Exchange Commission, the regulatory firm “captured” – has on its own, in effect, lifted the 40 percent limit on foreign companies’ ownership of utility firms, clearly specified by the Constitution and upheld by the Supreme Court.

    That on Wednesday.

    FB: Rigoberto Tiglao


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    1. Shame on you! Mr.Tiglao you are obviously Pro-oligarchy. And because of your likes this country will never achieve the real freedom and democracy.

    2. Larry Ebersole on

      In any economy, anyone who can produce more than what it can consume will grow; such will be the need of the Philippines, to produce something it can export, what should that be and when could it be ? We can only be user or provider; as user, we will not grow: as provider, we will surely grow. Can we be provider on our on initiative … your answer will be as good as mine.

    3. victor m. hernandez on

      We need foreign investors to develop the many sectors of our economy in order to provide employment and income for the very many who do not have jobs. The local business elites do not have enough money to do the job. What foreign investors wish is a straightforward way of investing and having control over the companies that they invest and organized without going through the complications and roundaout way of getting control of a company. Surely, the mode of investing ala PLDT Beneficial Trust Fund, which is also controlled by Salim, as you assert, is just too daunting and complicated to many foreign investors.
      The country is bereft of knowledgeable and competent professionals who are patriotic enough to channel the huge OFW remittance into a Beneficial Trust Fund that can be invested in strategic industries and investments that will create enough employment in many areas of the country. Very many of our brilliant and competent professionals are shackled with golden chains by big business, foreign and local.

    4. In this age of globalisation of business, being IN a country has little to do with ownership or control. The UK is host to massive foreign ownership. Jaguar/Landrover owned by Indians. Mini owned by Germans. Rail manufacturing owned by the French. Electricity, Water, and waste disposal owned by the French. General Motors and Ford cars owned by the Americans etc etc. Does it matter? No as these companies are successful and create jobs. Yes when they are so powerful the regulator can no longer control them. This is now the case for the Utilities privatised under the appalling Thatcher government. Effective regulation, not ownership is the issue today in all countries.

    5. Liberal policies will bring prices down in the PH. Filipino people would feel the gain in their pockets. Except for those big companies, foreign investors feel reluctant to invest their money here, having to find a local partner to venture a business in most areas. Why Indonesia is getting 10 times more investment than the Philippines? What is the problem with having foreign companies here? Is it better to send Filipinos oversees to work in foreign land? Filipinos wanna be welcome everywhere, but it seems to me that foreigners are not welcome when they want to set up a business here. Oligarchs are really happy with this policies, of course. They were actually made for them.

    6. Vicente Penetrante on

      Thank you for showing us that we are already open to foreign investments. “Those in power” may have been given gifts. The motive of the cha-cha is to give legitimacy to going on wrong-doings.

    7. Bert O. Romero on

      Aren’t the constitutional provisions restricting foreign ownership of the country’s resources merely “sentimental” issues to showcase our nationalism? Shouldn’t these emotional “restrictions” give way to practical considerations like permitting aliens to own our lands and other natural resources enabling every Filipino family to have three square meals a day, empowering every child of school age to go to school and finish a course he wants, finding employment upon graduation, and allowing the family to have modest shelter, decent clothing, and adequate medical care? So what if we Filipinos end up not owning anything in our own country? I am certain our leaders – Drilon, Belmonte and del Rosario – are not bereft of a sense of patriotism and have the nation’s interest at heart when they zealously call for constitutional amendments. Drilon and Belmonte may look non-Filipino and del Rosario may be “foreign” to the Filipino language but I doubt if they are UN-Filipino. The three are opulent, as opposed to corpulent, many times over and material incentives will have no attraction to them. At this time of their age and career, in all likelihood their motivation is sacrosanct. Ne Plus Ultra? No more beyond? No. Plus ultra. More beyond. What is that? A legacy of more benign historical narrative of their motivation and action today which will make their grandchildren and great grandchildren proud of them.

    8. Ever since the yellow regime came into power in 1986, this has been the constant dialogue between the leaders and the mother country.
      ” Inay, you have to part your legs, the foreigners are here again.” ” Are they going to pay this time at least, son? ” “No, Inay, they said its you owes them this favor.” This plan to amend the constitution is just a logical extension of the real yellow ribbon agenda. Since they ascended to power, they have imposed on the helpless people 1. Privatization, which puts private interests above the public good. Witness the world’s highest electricity rates, for example and the PPP projects. 2. Deregulation, to remove obstacles to the greedy oligarchs obscene profit-making. 3. Import Liberalization, which destroyed the country’s industrial base and therefore one of the biggest sources of government revenues and transferred this tax burden on the shoulders the people in form of vat and sin taxes. Now they are going to tax soft drinks, and you know its not the rich who consume the bulk of these. Don’t be surprised if they tax the air that you breathe too, they are just waiting for the right PPP project for this next scam. Do I have to mention that we only get a 10% share of the Malampaya natural gas? There is not enough space anywhere to list down how our Inang Bayan is being forced to part her legs. The only silver lining here is that the longer this exploitation continues, the bigger will be the coming upheaval. I hope we live long enough to see the coming of this wonderful day.

    9. There’s no need to ammend the constitution, foreign investment
      are already lording over local investment, that’s fine as long
      as it is advantageous to the country.

    10. Bert O. Romero on

      But, Mr. Tiglao, what about the agricultural lands and coconut plantations and real estates, the condominium and townhouse and residential complexes, the retail trade (look at those sprawling malls!) the air and sea and rail and land transports, the mines and the lumber and forest concessions, the majority of print and broadcast and audio and video and social media outlets, the bus and taxi and jeepney and trycycle and padyak transports, the banks and courier services and the foreign currency exchanges and the five-six and the paluwagans, the restaurants and the bars/grills and catering services and the side street ihawans and the ubiquitous pedestrian ambulant peddling services WHICH ARE ALL STILL OWNED BY FILIPINOS ?
      Isn’t it about time we also open them all to foreigners? How can we outpace our neighboring ASEAN countries if we don’t make ourselves more liberal to foreign investment? How can we transform the Philippines from “a rising economic star” into “a risen economic star” if we adopt a similarly restrictive Chinese and Vietnamese approach to foreign investment contrary to what is being propagated in the Philippine media that China and Vietnam have liberal investment policy even allowing foreigners to own land? Why should we believe the study by Gunnar Myrdal, author of the 60’s Asian Drama that for every dollar invested in a developing country two dollars are repatriated or that the bulk of the foreign investment is sourced locally? Na ginigisa tayo sa sariling mantika?
      Of course as foreign secretary del Rosario is expected to take a leading role in enticing foreign investment to PH if only to give justice to the word “foreign” in his designation. What is he an old hand in Washington for (reportedly he grew up, studied and worked in USA) if he cannot be the leading voice for the Washington consensus of globalization, privatization and liberalization of foreign investment in the Philippines? Isn’t he doing an exemplary job at it?

    11. maybe in the next installments mining industry will be mentioned? Philex on the side of MVP, but wait, look at the cement industry which has a mining component, it is now owned by a French, a Swiss and a Mexican companies.

    12. PinoyAkoPinoyTayo on

      I’d rather see firms open up to foreigners rather than it being controlled by a few. The oligarchs were successful in using the value of being ‘nationalistic’ to stifle the competition.

      How many filipinos do you think can enter the telecoms, utilities, or media? Only a few. No foreigner would enter our market unless they find a way around the controls which is what Bobi has explained. If I own a multimillion dollar business, why would I let someone control the enterprise? What’s the outcome? Limited competition and limited choices for filipinos. Let the foreign media enter our market and we’ll see what happens to the Lopezes, we’ve given them the protection they don’t deserve in the name of nationalism.

    13. The presence of the Salim Group in the Philippines goes beyond what was described above.

      The Salim Group is also the beneficial owner of the local company producing the “Gardenia” bread that Filipinos loved to eat everyday.

      That would mean that the Salim Group enters the stomach of the Filipinos first thing in the morning.

    14. These are the issues that those pretentious “nationalistic” or “patriotic” groups should be pursuing instead of motherhood issues that are only good for media mileage. Here are concrete and specific issues that say, Mr. Satur, Ms. Loren or Ms. Gina can write about and speak in the fora where they usually just exercise their vocal cords. What they can do is file the proper cases with the Supreme Court to dismantle foreign ownership and destroy the foreign domination of our economy. This is an area where they can get the expertise of Manong Johnny against these foreign predatory business entities.

    15. Romeo A. Ybanez on

      No problem with this as long as we collect correct taxes and spend it for the good of all the citizens and residents of the Philippines.

    16. The bastardization of the Philippine Constitution is still ongoing !!! From the VFA to Meralco, from Malacanang and Congress to the Securities and Exchange Commission, it seems everybody only pays lip service to the fundamental law of the land. But when it comes to negotiations with the NDF and the MNLF/MILF the government is very adamant that the Constitution be upheld. The government of the Philippines has a very selective policy when it comes to the implementation of the constitution. When it involves foreign companies and investments the government treats the constitution as a piece of paper that can be discarded. When it comes to Filipinos fighting for their grievances the government puts its foot down and slam the constitution in their faces. The Philippine government is a government of the foreign investors, by the unconscionable elite and for the US imperialists. It is a government of sycophants.

    17. opinion reader on

      Aral-aral din pag may time.. kakahiya tayo. Gusto pa i-amend ang constitution, eh iba naman pala sa actual…

    18. How said, indeed, that the Philippines is now under foreign control, again. We read about the heroism of Jose Rizal, Andres Bonifacio, Apolinario Mabini, Antonio Luna and all the rest who helped in the struggle to free the Philippines from from foreign dominaton. We end up exactly where started more than 500 years ago, maybe even in a worse situation. Why, what happened?

      Well, this is what happens when you elect incompetent presidents and senators like Cory Aquino, Fidel Ramos, Joseph Estrada, Gloria Macapagal Arroyo, Ninoy Aquino, Webb, Jaworski, Estrada, Soto, Lapid, Ejercito, Revilla, Enrile, etc, etc. Never mind that these people are all corrupt, but it is their incompetence that made the situation possible. They fell asleep at the wheel, so to speak, and the bus they
      are riding in was hijacked by a group with a different destination or intention.

      Again, we ask why and how did this happen? Ask the Filipino people. They know and they shoulder the responsibility and the blame.

    19. Now that you have captured our undivided attention , we can hardly wait to read the rest of your story. Good job as usual. Mr. Tiglao.

    20. Leodegardo Pruna on

      Surprise, surprise? A big NO. Even the big and long time enterprises know that in this country one can do a lot of things through the “PALUSOT” and of course “MONEY” is behind all these. God bless the Philippines.

    21. MR. TIGLAO, please file the appropriate CASES, criminal or otherwise, against the aforementioned corporations and their officers. We will be with you all the way.

    22. Wrong, wrong, wrong! First off, if the constitutional limits are being breached, either (a) there should be a crackdown to ensure that the limits are being observed; or (b) the limits should be removed to ensure there is no conflict with the law. It is of interest, moreover, that in an economy that has been described as a “consumer economy”, there is no presence by Walmart, the world’s largest retailer, whose success has been based on volume sales and price reductions for consumers. And why did Ford close its assembly operations in the Philippines and relocate them elsewhere? The fact is, although control of a corporation may be exercised through a substantial minority investment, that may not meet the needs of a multinational with valuable proprietary technology. Like any country, the Philippines is in a competitive market environment; if other economies appear to be better places to do business, corporations will choose to locate their investment there – and the Philippines will be the loser.

      • The Philippines will be a loser without foreign investments? In the first place foreign investors take out more capital than they bring in. No, the Filipinos will not lose without foreign investments. The Filipinos will survive and become even better without it.

      • Yeah right subijano like how? Make substandard products with their dysfunctional pinoy pride thanks to their “pwede na iyan” mentality? So much for world class.