SEC-PLDT ‘capital’ definition worse than Parity Amendment


Third of a series on the foreign investment issue

The Philippine Long Distance Telephone Co.’s (PLDT) definition of corporate control that included owners of preferred shares—later on suspiciously and scandalously adopted by the Securities and Exchange Commission—would have, as the Supreme Court itself put it, “far reaching implications to the entire nation, and to future generations of Filipinos.”

The PLDT and SEC’s definition of “capital” would be as detrimental to Filipinos’ control of the Philippine economy as the so-called Parity Rights our former colonizers held for decades, the Supreme Court claimed in its resolution dated October 9, 2012. Senior justice Antonio Carpio wrote the resolution, which was concurred with by nine of the 12 justices voting, including Chief Justice Ma. Lourdes Sereno.

The resolution threw out PLDT’s petition to reverse its earlier decision in 2011 that the telephone company is foreign-controlled with 64 percent of its common stocks held by foreigners, and therefore violating the Constitution.

As I explained in my column on Wednesday, PLDT and other companies like Globe had justified foreign control of their firms by arguing that in the computation of “capital” and corporate control, even non-voting preferred shares, which essentially are debts and whose owners have absolutely no say in the firm, should be included.

PLDT and Meralco: End of Americans’ Parity Rights in 1974 allowed Filipinos to control these utility firms. Supreme Court asks: Why do we allow them now to be controlled by Indonesians?

PLDT and Meralco: End of Americans’ Parity Rights in 1974 allowed Filipinos to control these utility firms. Supreme Court asks: Why do we allow them now to be controlled by Indonesians?

The so-called “Parity Amendment’ had been the most blatant means for US economic exploitation of its former colony even after its independence, since it allowed US companies to have equal rights with Filipinos in the utilization and exploitation of natural resources.

The Court itself described what this was:

“Filipinos have only to remind themselves of how this country was exploited under the Parity Amendment, which gave Americans the same rights as Filipinos in the exploitation of natural resources, and in the ownership and control of public utilities, in the Philippines. To do this, the 1935 Constitution, which contained the same 60 percent Filipino ownership and control requirement as the present 1987 Constitution, had to be amended to give Americans parity rights with Filipinos. There was bitter opposition to the Parity Amendment and many Filipinos eagerly awaited its expiration.”

US companies’ “parity rights” —actually a euphemism—was such a blatant violation of our sovereignty that it was the casus belli that stoked the nationalist movement starting in the 1960s. Since our elite saw nothing wrong with it, the Communist Party appropriated the issue to argue the need for armed revolution against the “US puppet” administration.

Stunning claim
The Court emphasized what is really a stunning claim:

(PLDT and its allies’) interpretation of “capital” (to include preferred shares) would bring us back to the same evils spawned by the Parity Amendment, effectively giving foreigners parity rights with Filipinos, but this time even without any amendment to the present Constitution. “ (Emphasis in the original)

The Court pointed out that what PLDT has done is even worse than parity rights:

“Worse, their interpretation opens up our national economy to effective control not only by Americans but also by all foreigners, be they Indonesians, Malaysians or Chinese, even in the absence of reciprocal treaty arrangements. At least the Parity Amendment…gave the capital-starved Filipinos theoretical parity – the same rights as Americans to exploit natural resources, and to own and control public utilities, in the United States of America. Here, their interpretation would effectively mean a unilateral opening up of our national economy to all foreigners, without any reciprocal arrangements.

The court warned: “That would mean that Indonesians, Malaysians and Chinese nationals could effectively control our mining companies and public utilities while Filipinos, even if they have the capital, could not control similar corporations in these countries.” (Emphasis mine)

The Court in its resolution concluded: “The 1935, 1973 and 1987 Constitutions have the same 60 percent Filipino ownership and control requirement for public utilities like PLDT. Any deviation from this requirement necessitates an amendment to the Constitution as exemplified by the Parity Amendment. This Court has no power to amend the Constitution for its power and duty is only to faithfully apply and interpret the Constitution.”

Maybe the Salim conglomerate took those words quite seriously— the part saying that an amendment to the Constitution is necessary. Maybe that’s why the lobbying for amending the economic provisions of the constitution has intensified.

It continues to be a Damocles sword above the Salim group controlling PLDT. The company itself has been forced in its disclosures to admit that one of its major corporate risks involves the allegation that its foreign ownership “exceeds the 60% to 40% Filipino-alien equity requirement as provided under the Philippine Constitution.”

In its decision, the Supreme Court emphasized: “In fact, a resolution of this issue will determine whether Filipinos are masters, or second-class citizens, in their own country. What is at stake here is whether Filipinos or foreigners will have effective control of the Philippine national economy. “

The Court did resolve it, with its final ruling throwing out PLDT’s justification for foreigners’ control of it made in October 2012 —more than two years ago.

Are we so debased as a Republic only pretending to be under the rule of law that even a Supreme Court decision “with far-reaching implications” has been ignored by the SEC, with PLDT and Globe sticking to its convenient definition of “capital” that has been its flimsy excuse for being controlled by Indonesians and Singaporeans?

I hope that they haven’t “reached” even the last bastion for the rule of law in our nation. the Supreme Court.

And nobody, not the President, not the Congress, not even the “nationalist bloc” there, not most of us care?

To be continued on Wednesday: Why the Court’s reference to parity rights is stinging indictment of Meralco and PLDT.
FB: Rigoberto Tiglao


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  1. Bert O. Romero on

    Ambassador Tiglao, you have done the nation a great service with this series of articles, which have been backed by rigorous and scholarly research. There has been no outrage because this constitutionally anomalous situation of an Indonesian business entity being able to control resource-based Filipino firms beyond the constitutionally mandated prohibition is NOT PUBLICLY KNOWN. The Filipino nation therefore owes you a debt of gratitude for this exposé .
    Let’s have more of these especially naming those personalities which have had a hand in effecting this anomaly.

  2. Great Mr. Tiglao! At kung pwede nman po ay paki busisi nyo itong bagay na pa tungkol sa ASEAN markets na ma integrate next year 2015. Na ang ASEAN na mga bansa ay free sila sa taripa. Sa aking tingin Ito ay peligroso sa ating mga producers particular ang agricultural sector na walang kakayahang maki pag kumpitinsya sa ating mga kapit bahay na bansa sa dahilan ang production cost natin ay mataas. Ang mga imported na produkto ng mga ating kapit bahay na bansa ay madala at maipasok sa ating bansa ng libre. Samakatuwid wala ng smuggle na bigas at bunga nito mas mababa ang presyo ng bigas na mang gagaling sa Vietnam o Thailand at iba pang dayuhang bansa dahil Ito ay duty free. Eh kaawa po ang ating mga malilit na magsasaka. Kaya ko po tinatawagan ko ang inyong pansin, Mr. Tiglao. Maraming salamat po at sanay bigyan nyo Ito ng pansin. Kasiyahan nawa tayo ng Dios

  3. Incredible how stupid on

    The objective is to have good jobs and great country that will take care of its people.
    So who cares if most companies are own by Europeans, Americans, Asians, Chinese…

    If there is no competition for owning the market, who cares? Only the Tan, Go, Lopez, Aboilitz, etc etc… local rich people.

    Now if those local boys have to compete with the World in the country, they will need to be a lot better, and have prices down. Corruption will be hard to continue the way it is… Local Kings will need to perform…no more monopoly!

    • If only the local banks would just be more enterpreneurial in their lending policies and stop being pawnshops masquerading as bankers, Filipinos can easily raise the capital to compete with these foreigners. In fact, we do not even need “foreign investments” in the country to pursue assembly of jet fighters or submarines or even funding all the housing backlog. There is enough liquidity in the local banks to do all of of these. But then, we allowed a machine to select a stupid asshole to run this country and this is the price we get.

  4. victor m. hernandez on

    This is a ‘patintero’ game. Players will always make a go when it is opportune to make ‘lusot’ or to outsmart the blocker. The issue is complicated because it involve administrative obligation to enforce the law on ownership of utilities; and the need for investment in utilities. The situation certainly needs creative and feasible solution and mechanism to keep investments flowing in restricted projects, e.g. utilities, media, and whatever. Investors however would always like to be in control. Very interesting, and very challenging. Patriots, start cracking your brains, and let your creative juices flow to usher in a feasible solution.

    • The only solution is to get a patriotic and maybe, once a national democratic activist to be elected in a clean and honest election as the President. Not only should the guy have technical background, an engineering degree perhaps but he must have the knowledge and access to all the assets and funds that are available in various banks all over the world for our taking to be used to pursue all the objectives for the country and people.

  5. Carl Cid Inting on

    Do we want to uphold protectionist policies and hinder Philippine economic development and keep the economy for the benefit of bourgeois-compradors and oligarchs?

    • Agree. We must open our economy to more investors as this will be more beneficial to the government (higher tax collection) and the ordinary people (job generation). Inclusive growth will be achieve if jobless Filipinos will be able to get jobs.

    • Agree. We must open our economy to more investors as this will be more beneficial to the government (higher tax collection) and the ordinary people (job generation). Inclusive growth will be achieved if jobless Filipinos will be able to get jobs.

  6. This is an issue worthy to be investigated by the Senate Blue Ribbon Commitee, not those that had been investigating in aid of legislation daw. Don’t tell the people that this can’t be done – that will only show that you have hidden questionable relations with them. This must be investigated because a law was turned around in favor of some.

    • If that is the case, Mr. Manny who represents the Salim group can be held for treason. So as all the other guys as well as the lawyer groups and government personnel who have abetted and conspired to craft the legalese that allowed the rape of our sovereignty.