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Definitions

If you haven’t got a job and want one, that’s what you need changed. If you’re fed up with sitting in traffic and want speedier road construction, that’s what you want changed. If you’re starving and can’t buy bare necessities, that’s what you want changed.

There’s a thing called the Foreign Investment Negative List, which every foreigner interested in investing in the Philippines knows about, and wonders why. It’s a list of things foreigners can’t do, things that might have made sense 30 years ago, but make no sense now. Things which, if changed, could greatly expand business activity, and hence job creation, in the country.

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Ideally the Constitution needs to be changed to remove these restrictions. It’s something then Speaker Feliciano Belmonte tried to do but President Benigno Aquino III wouldn’t support (for no good reason I could discern). Changing the Constitution will take time, and will happen, but what we’d like is change now. President Duterte and his economic team have suggested a clever interim solution: Change/clarify definitions; redefine those limiting activities to be more liberal, yet not violate the Constitution.

Change them to better reflect what is good for the country. A more active foreign role and a more open economy are good, as country after country has discovered.

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Take education, of which the Constitution limits foreign ownership to 40 percent. But if the Securities and Exchange Commission or some other agency defined education as basic education, primary and secondary schooling only, you’d be able to go to Harvard here at a fraction of the cost. And stay home with mom and dad.

Foreign ownership of mass media is banned 100 percent. Fine when all you could do was read newspapers, but not now when you’ve got satellite TV and internet, where there are no boundaries. So change the definition. The original intent of the Constitution to restrict is no longer enforceable, anyway.

Marketing and advertising through the internet are restricted to 30-percent foreign. That’s a judgmental decision of the SEC and can be changed by it. As in the media, it’s totally unenforceable in the internet age.

Then there’s the one we all care about today: operation of public utilities. We have a vast need after 30 years of neglect, so it’s very much “the more the merrier.” There’s more to be done than can be handled locally. The operation of a public utility is limited to 40 percent for foreigners. That one is easy: Just restrict the definition of a public utility to the ownership of the asset. Allow the management, operation and maintenance of it to be majority-foreign-controlled. Or adopt the proposed House bill that refers to public utility as “a person that operates, manages and controls for public use any of the following: 1) distribution of electricity; 2) transmission of electricity; and 3) water pipeline distribution system or sewerage pipeline system.” The bill limits the definition to those activities “unless otherwise provided by law,” and will shorten the list of what is considered a public utility.

If you want to set up a business and aren’t sure if it’s a public utility, you can ask the SEC and in many cases, it could relax the definition.

A more controversial one, though I’ve never understood why, is land ownership. Foreigners owning a few hectares of land would be no threat. What can be done for now is to allow much longer lease, say 99 years.

Mining has been more or less resolved through what are termed financial or technical service agreements. Full ownership of the mine’s assets is allowed, but profits must be shared 50-50 with the government, and there’s a 2-percent excise tax on actual market value of output under mineral production sharing agreements with local companies, plus other local taxes. Mining has other, more serious problems that hopefully Environment Secretary Roy Cimatu will correct.

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In some cases you might want to have reciprocity, but only allow it if a Filipino can do it in that country. But what about reverse reciprocity? Filipinos can own land in many countries, foreigners can’t own land here. That’s not fair. Mind you, I don’t think reciprocity should apply at all. If we want foreign involvement in something, just allow it.

Redefinition could help expand the economy faster, and open up opportunities for Filipinos. It makes sense. Let’s just do it.

E-mail: [email protected] Read my previous columns: www.wallacebusinessforum.com.

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TAGS: 1987 Constitution, business restrictions, Foreign Investment Negative List, foreign investments, Like It Is, Peter Wallace
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