JFC: Foreign ownership rule change may impact FDI

The Joint Foreign Chambers (JFC) said “drastic changes” in the way companies with foreign ownership can do business in the country is a “serious setback” for the Philippines in the race for foreign direct investments.

“Requiring foreign equity percentages to apply not just to the total outstanding capital of a corporation but to each class of shares of such capital is a step backward. This may have a negative impact on the investment climate in the Philippines, which is already struggling to keep pace with neighboring countries that are relaxing their FDI restrictions to encourage the entry of more foreign investments,” the group said in a position paper sent to the Securities and Exchange Commission (SEC).

Citing a recent report of the United Nations Conference on Trade and Development (UNCTAD), JFC said the Philippines had been lagging behind its peers in the Association of Southeast Asian Nations (Asean) in terms of foreign direct investments.

As of the first half of 2012, UNCTAD reported that FDI inflows to the Philippines reached only $900 million, lower than Singapore’s $27.4 billion and Indonesia’s $8.2 billion.

“The Philippines has a long way to go in an increasingly competitive world economy, and such drastic changes in the fundamental principles of doing business is a serious setback that undermines investor confidence in the stability of the Philippine legal and business environment,” JFC said.

The JFC said that confusions on how to define the nationality of corporations and applying the 60-percent rule of Filipino ownership in each class of shares for public utilities could impact investment.

The group said that under the Constitution, the restrictive criteria for complying with equity requirements would then apply to areas such as the ownership and management of mass media and the utilization of marine resources (both fully nationalized); the 40-percent foreign capital cap imposed on the operation of public utilities, land ownership, exploration, development and utilization of natural resources, and ownership, establishment and administration of educational institutions; and the 30-percent foreign capital cap imposed on advertising.