Gov’t to open more industries to foreigners

Plans to shorten foreign investment negative list

12:48 am | Monday, October 3rd, 2011

CAYETANO PADERANGA: Government reducing the number of items in the Foreign Investment Negative List. PDI PHOTO/LYN RILLON

The government has committed to allow foreigners to invest in more industries and practice more professions locally by reducing the number of items in the Foreign Investment Negative List.

At the mid-year economic briefing last Friday, Economic Planning Secretary Cayetano Paderanga said this was one of the things that the government would be working on to make the local investment environment more attractive to foreign investors.

“Our aim is to make the Foreign Investment Negative List as short as possible. Those that will remain on the list are those that are covered by constitutional restrictions,” Paderanga said.

National Competitiveness Council co-chairman Guillermo Luz agreed with Paderanga’s statement, saying a shorter negative list would help jack up the country’s competitiveness.

However, he warned against tweaking the Constitution to allow greater foreign participation in industries and employment, saying this was not the right time to do so.

“We’ll just try to make the list as practicable as possible,” he said.

American Chamber of Commerce of the Philippines senior adviser John Forbes further challenged the government officials on the panel, saying the negative list has not had changes in the past 20 years.

Finance Secretary Cesar Purisima countered this by saying that there had been some changes over the past years, including in mining, which allowed 100-percent foreign ownership, and retail trade, which allowed full foreign ownership at a minimum paid-up capital of $2.5 million.

“Upwards of 90 percent of economic activities are open to foreigners. You keep looking at the ‘empty’ portion rather than the ‘full’ portion. The government does have to still work on this, but the list shouldn’t stop foreigners from investing,” Purisima said.

Under the negative list, industries that did not allow any foreign ownership included mass media (except recording), retail trade enterprises with a paid-up capital of less than $2.5 million, cooperatives, private security agencies, small-scale mining, cockpits, firecrackers and pyrotechnics, and marine resource utilization in archipelagic waters, territorial seas, and exclusive economic zones.

The list also limited foreign ownership to 20 percent in private radio communications networks; 25 percent in private recruitment for both local and overseas employment, construction of defense-related structures, and repair of locally funded public works, except infrastructure or development projects covered by Republic Act No. 7718 and foreign-funded and foreign-assisted projects that undergo international competitive bidding; and 30 percent in advertising.

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Tags: foreign investments , negative list , Philippines

asdafaa qwesda

These politicians are overselling opening up the country to foreign investors. By doing so they are playing right in the hands of leftists like that jerk Walden Bello because it is guaranteed to disappoint. FDI is certainly a good thing but it is no panacea.

As others have already pointed out the biggest deterrent to foreign investments is the lack of rule of law, weak protection of property rights, a corrupt judiciary (where you have to bribe to get justice), and an overly prescriptive constitution that interferes in every aspect of business. China, Vietnam, Taiwan, Korea, Singapore did not become successful by simply allowing investors in. They also allowed investors and businessmen wide latitude in how they ran their businesses. They allowed the market to dictate wages and work conditions. For as long they didn’t force (enslave) people to work the gov’t didn’t interfere. If PALEA did what they did in Singapore, they’d be lucky not to be thrown in jail. In China, Vietnam or 1960s Korea, they would’ve probably “disappeared”. Little or no time and money wasted on lawyers and courts which can be a tactic for blackmailing a foreign partner. And more money can be reinvested back into the economy.

Sigh, the only reason I can think of why these politicians want to do this is because they want to milk foreign investors of their money. Local businessmen appear to be no longer enough.
asdafaa qwesda

These politicians are overselling opening up the country to foreign investors. By doing so they are playing right in the hands of leftists like that jerk Walden Bello because it is guaranteed to disappoint. FDI is certainly a good thing but it is no panacea.

As others have already pointed out the biggest deterrent to foreign investments is the lack of rule of law, weak protection of property rights, a corrupt judiciary (where you have to bribe to get justice), and an overly prescriptive constitution that interferes in every aspect of business. China, Vietnam, Taiwan, Korea, Singapore did not become successful by simply allowing investors in. They also allowed investors and businessmen wide latitude in how they ran their businesses. They allowed the market to dictate wages and work conditions. For as long they didn’t force (enslave) people to work the gov’t didn’t interfere. If PALEA did what they did in Singapore, they’d be lucky not to be thrown in jail. In China, Vietnam or 1960s Korea, they would’ve probably “disappeared”. Little or no time and money wasted on lawyers and courts which can be a tactic for blackmailing a foreign partner. And more money can be reinvested back into the economy.

Sigh, the only reason I can think of why these politicians want to do this is because they want to milk foreign investors of their money. Local businessmen appear to be no longer enough.
Anonymous

Opening up industries to foreign investors is a correct step towards development but this should be done hand in hand with other aspects relative to attracting foreign investment such as addressing power costs (number 2 issue, seems hopeless), capital account liberalization, improving infrastructure (number 1 issue, PPP is the right step towards this but…MOVE GOVERNMENT), improving labor-management relations, etc.I’m not sure about Sec. Paderanga’s press release though – -before you can amend the negative list you have to amend laws, which is really difficult here in the Philippines with the quality of Congressmen we elect.
http://pulse.yahoo.com/_U7T7BP5KQKFBP7PMJ66OLQ35JA Reggie

The fact that there is a huge gap between poor and rich people here in PH, you can’t help but wonder, why is that? How did that happened?

Well, local businesses refuses to increase salaries to cope up with inflation but they raise the prices of their goods because of rising costs. Hey, aren’t salary expenses part of your costs? Moreover, these local businesses are reaping all the benefits because they pass the downsides to consumers by raising the prices and refusal to increase the salaries.

http://pulse.yahoo.com/_ZUJ5PWPGPIHIHNGC66C5WHKNZA Roberto

If you look at the rise of the Peso from 56 to 39 per dollar, you miss the decrease of dollar imported goods in Pesos. Big business needs much less Pesos for to buy dollar nominated goods but still increases Peso prices.
That is why local business can increase profits by 30, 50 and more percent. Contrary, most business in the western societies are already happy with just few percent net profit and still prosper and pay much higher salaries. Here, where we buy in supermarkets, most employees earn 120 to 150 Peso a day because they work with short contracts that are not covered by the minimum wage. Hardly any foreign owned business would be allowed to this when operating in PH.

asdafaa qwesda

Roberto,
“Contrary, most business in the western societies are already happy with just few percent net profit and still prosper and pay much higher salaries.”

You forget the time element of money. Inventory (and therefore cash) turnover can be much faster in rich countries. Here you buy a good to sell and it can sit in the warehouse for months. Months where your money is sleeping and you have to keep paying your overhead to maintain your operations and warehouse. In a rich country you sell your goods quickly at a low price then you can buy more goods and sell those again. Because of the high turnover you can multiply that small net profit many times into a big one. Do that here and the turnover isn’t fast enough. It is a common symptom of developing economies and not unique to the Philippines.

“Hardly any foreign owned business would be allowed to this when operating in PH.”

Given the reason I gave above. I doubt that. Local businessmen aren’t morons and they face pretty stiff competition already.

Anonymous

We are victims not of foreign investors but our own Pinoy oligarchs and they will do everything to make sure status quo is maintain even to the expense of pnoys who suffer from lack of jobs.
http://www.facebook.com/people/Leodegardo-Pruna/100000668583781 Leodegardo Pruna

Will the foreigners come the way government has been handling the PAL issue? While the Constitution mandates freedom to organization, it is at the same time mandated to protect the welfare of its people. Government must lay down a policy of industrial peace otherwise foreign business would shy away from doing business in the country. God bless the Philippines.
Tony B

I like this line: “retail trade enterprises with a paid-up capital of less than $2.5 million,”. In other words, if foreigners want to open a Sari Sari store they are quite welcome but if you want to compete with SM or Robinsons then you are not welcome (to create thousands of jobs).

Anonymous

This is to protect Henry SY’s SM against for example Wallmart. While SM exploit sales lady’s buy hiring them for almost 6 months, lay-off and rehire them after 5 months. Are we less patriotic if we allow Wallmart, an American compnay to enter Phils business, who can give more benefits and will probably not follow the exploitation of SM?

Rj Nieto

Walmart treats its workers just like how SM Malls treat theirs,if not worse.

Please read wikipedia (at the least).

http://pulse.yahoo.com/_K2RI3LJVGNNED3XPMG7HVMIIO4 Herbert

Saying that some Philippine industries are not open to foreigners is big lie. Just take a look around, so much Chinese, Taiwanese and Koreans are doing businesses on the said list, such as Chinese operating fishponds in Taal lake prior to fish kill, and the good old Divisoria.

Gov’t to open more industries to foreigners

Plans to shorten foreign investment negative list

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