Corporate Securities Info

Risky foreign ownership change

/ 05:18 AM January 10, 2014

If Speaker Feliciano Belmonte Jr. makes good on his earlier promise, the amendment of restrictive economic provisions of the Constitution will be high on the agenda of the House of Representatives when it reconvenes on Jan. 20.

Shortly after his election as Speaker last year, he filed a resolution seeking to amend the charter through the legislative process, i.e., the two chambers of Congress will, after three-fourths vote by their members voting separately, propose amendments. The proposals shall be submitted to the people for approval through a plebiscite called for that purpose.


The economic provisions sought to be revised relate to the liberalization of the rules on land ownership, operation of public utilities and development of our natural resources. At present, foreign ownership or participation in business entities engaged in those activities is limited to a maximum of 40 percent of their capital.

The proposed amendment consists of putting the phrase “except as otherwise provided by law” in the provisions concerned. With this qualification, the ownership or participation limits imposed by the Constitution can be modified by way of legislation, thus doing away with the tedious amendment and plebiscite processes.



There is no question the restrictive economic provisions of the Constitution should be amended. The factors and circumstances that induced the framers of the charter into maintaining Filipino control on key aspects of our economy have changed already.

Globalization, or the interconnection of the world’s economies with each other, compels us to accept the reality that we cannot, as a country, do it alone. Whether we like or not, we have to make the conditions conducive for the entry of foreign capital into our country.

Unless the billions of dollars that many Filipinos have transferred abroad for personal or investment purposes are brought back to the country, domestic capital is insufficient to fund the business activities needed to develop and strengthen our economy.

On its face, the proposed amendment appears to be a viable approach in easing the restrictive economic provisions of the Constitution. Adjustments in the allowable percentages of foreign investment in wholly or partially nationalized business can be proposed by any member of Congress and, assuming the lawmakers’ attention is not distracted by publicity-rich events, can be made effective within months.

And if the bill is certified as urgent by the President, the changes can be fast-tracked for implementation much earlier.



Looks good, doesn’t it? The procedure has the hallmarks of quick action that appeal to people who want things done yesterday.

That level of “efficiency,” however, has some drawbacks that, unless properly addressed, may negate, rather than promote, the benefits sought to be gained from the planned action.

In the hands of a fickle Congress, the ownership rules can change every three years (or worse, every year), depending on the mood or temperament of the lawmakers or whoever sits in Malacañang.

It is common knowledge that congressmen and senators dance to the tune of their business cronies or campaign supporters when bills that stand to affect the latter’s interests are filed in Congress. Business or vested interests do not hesitate to use their influence over their pet lawmakers to shoot down, for example, a proposed tax measure that may diminish their profits.

In the same token, there is no shame in cashing in on past favors (or promising some in the future) to push for the enactment of laws that would redound to the benefit of their business, at the expense of the competition.

The “I’ll scratch your back, you scratch mine” mantra is deeply ingrained in our political system.


With the “except as otherwise provided by law” clause in place, there is no assurance on the stability of the rules on foreign ownership or participation in the nationalized business areas. It’s possible that, say, in one year foreigners would be allowed to invest to as much as 85 percent of the capital of a local mining company and, two years later, upon strong lobby of some vested interests, Congress would reduce the percentage to 50 percent.

Or, in the case of land ownership, foreign ownership is expanded to 100 percent, and then a year later, at the urging of local real estate brokers, Congress pares down the ownership right to 30 percent. If there is anything that turns off or unnerves foreign investors in any country, it’s changing the rules of the game in the middle of the play.

They work on the assumption that the country’s business rules upon which they based their decision to put in their money will remain consistent and uniformly applied, unless valid reasons warrant their adjustment or modification. And if changes are justified, they should be prospective in effect, not retroactive.

The track record of Congress on the enactment of economic laws does not inspire confidence that it will use responsibly the power that goes with the “except as otherwise provided by law” clause in the restrictive economic provisions of the Constitution.

There is a bigger concern that Congress must address if it plans to amend the charter through the legislative mill: to disabuse the apprehension of many Filipinos that it will use this process to revise the political system to suit the selfish interests of its members.

With the pork barrel mess still fresh in the people’s mind, the trust rating of congressmen and senators is in the pits.

For comments, e-mail [email protected]

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TAGS: Business, Charter change, Congress, Constitution, foreign ownership, Philippines
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