The recent Supreme Court ruling on the extent of foreign ownership in Philippine Long Distance Telephone Co. has further increased uncertainty among foreign investors wanting to infuse capital into the country.
According to Henry Schumacher, European Chamber of Commerce of the Philippines vice president for external affairs, the problem was not yet so big that foreign investors were already thinking of packing their bags and leaving the country.
However, he explained that the local investment environment had become even more uncertain for foreign investors, considering the uncertainties that they were already facing, including those related to sanctity of contracts and inconsistent policies of the national and local governments.
“[The high court ruling] has not shaken things to that extent yet. It’s the control test versus the grandfather rule, in this case. This just adds another question mark [for foreign investors here]. The government, the Cabinet, and the [Supreme Court] will have to come up with a clear ruling on this. This has created a lot of uncertainty. We need to clarify that,” Schumacher told reporters in an interview Wednesday.
The high tribunal last month ordered the Securities and Exchange Commission to scrutinize PLDT’s ownership structure to see if the country’s biggest telecommunications firm was violating the constitutional cap on foreign ownership in public utilities.
The Constitution limits foreign ownership in public utilities, except those specifically exempted by law such as power and oil refining, to 40 percent.
In its full-court decision, the Supreme Court effectively changed the definition of “capital” as used by PLDT and other local companies with foreign stakeholders in defining their ownership structure.
According to the ruling, “capital” should only refer to voting shares or common shares and not the total outstanding capital stock. This meant the exclusion of preferred or nonvoting shares.
PLDT chairman and chief executive Manuel Pangilinan earlier admitted that if this were the definition of “capital” to be used, then 64 percent of PLDT was owned by foreigners. However, including preferred shares in the computation, only 13 percent of the company was owned by foreigners.