Protection of investments
Sad, but true, the Philippines lags behind its neighbors in attracting foreign investments that stay for the long haul and create meaningful jobs for Filipinos.
The kinds of investments we seem to attract are mostly short term, or those made while awaiting favorable developments in more lucrative capital markets. As soon as these markets are able to offer higher interest rates or yields, the “portfolio investors” quickly unload their investments and run.
In an effort to change the country’s investment climate, several local and foreign business organizations met recently with congressional leaders to discuss the matter.
The businessmen are seeking, among others, the creation of an Office of Investor Protection that will help safeguard long-term investments and assist investors in dealing with the bureaucracy across government agencies.
In their statement, they said it was essential that the incentives offered for investments be actually delivered and not remain as promises. They decried the “technicalities” that often delay or block the release of refunds and other incentives to the private sector.
They cited instances of investors winning at the Court of Tax Appeals against the Bureau of Internal Revenue and later finding themselves losing after the Supreme Court ruled otherwise based on technicalities.
Nationalistic feelings aside, there’s no denying that foreign investments play a significant role in the growth and development of a country’s economy.
The world’s biggest economies are where they are now partly because of foreign investments in their country during their salad days.
The economy of the United States in the 1880s soared after Dutch and Swiss business magnates built and operated a nationwide railroad system.
A prostrate Japanese economy after World War II was helped on its feet by American investments that provided the seed capital for the reconstruction of its industries.
China would probably still be a backward agricultural country today had the late Premier Deng Xiaoping not opened its doors to foreign investments that tapped its huge population to produce the goods and products that now flood the world.
As early as 1967, our government was aware of the importance of promoting investments in the country. Thus, Congress enacted Republic Act 5186, which laid down the policies and measures to accomplish this objective.
The Board of Investments, an attached agency of the Department of Trade and Industry, was created to oversee this action.
Impressive sounding its name may be, the BOI is primarily an information, advisory and promotions body. Its most notable work is the annual Investment Priorities Plan that lists the investment areas in the country eligible for government incentives.
Being able to avail of or enjoy those incentives is not automatic; the investor has to work things out with the government agencies concerned.
The most that the BOI can do in this regard is act as intermediary for the investor with, for example, the Securities and Exchange Commission to act on the application for registration as a corporation, or the Bureau of Internal Revenue to release the tax refund, or the Department of Environment and Natural Resources to issue the appropriate environmental clearance.
In theory, government offices are supposed to coordinate efficiently with each other in the performance of their duties and responsibilities, especially those that are interlinked or complementary.
Well, our bureaucracy is made of a different stuff. Government offices zealously guard their turfs. The mantra in inter-government office transactions is, we do things our way and when we want to.
In other words, just because the BOI says an investor is entitled to certain benefits does not mean these will be given in the manner or form they were presented to him.
The office that will make possible the enjoyment of those perks has the final say on the matter. And considering the litigious nature of our society, chances are the courts would have the last word instead.
The business groups, particularly those representing foreign investors, cannot be faulted for seeking the creation of an office that will see to it that the government agencies concerned deliver the come-ons offered them for putting their money here.
Some offices have developed the uncanny habit of changing the terms and conditions of investments earlier made on the pretext that their underlying circumstances have changed substantially, or the staff that passed upon them overlooked certain significant items.
Then there is the problem of the “sanctity of contracts” being brazenly violated by government offices at the behest of publicity seeking congressmen and senators.
A case in point is the water concession agreement entered into in 1997 by the Metropolitan Waterworks and Sewerage System with Manila Water Co. and Maynilad Water Services Inc.
After 16 years, the MWSS suddenly discovered that the tax-free privileges it gave to the two water concessionaires were unauthorized and should therefore be disregarded. The case is now pending arbitration.
The most galling concern is the lack of stability or consistency in the decisions of our courts in commercial or business issues. Changing decisions based on technicalities is depressing enough, flip flopping on established jurisprudence is horrible.
Are we still surprised why our country is at the bottom of the investors’ priority list?
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