The Security and Exchange Commission’s proposal to impose new foreign ownership rules is reverberating all over local and foreign business circles, with analysts expressing serious concern about its implications especially in the stock market. The draft memorandum from the SEC reflects a recent Supreme Court ruling that redefined the parameters for the computation of the 60-40 rule on foreign ownership to include common shares and not just total outstanding capital stock (which includes preferred shares with no voting power).
Whatever gains the country has been enjoying recently could be reversed if this ownership issue is not resolved satisfactorily and soon. A businessman who did not wish to divulge his identity said a lot of potential foreign investors who had visited the country and had been back twice or thrice are now putting things on hold pending the resolution of this thorny subject, with many having second thoughts about the stability of the Philippines as an investment destination.
The SEC proposal couldn’t have come at a worse time, with the country now getting renewed interest from international businessmen coupled with the recent credit rating upgrades by Moody’s and Standard and & Poor’s. It also reinforces the negative perception about the Philippines being inconsistent and unreliable with regard to business rules and policies due to alleged arbitrary court decisions that could just pull the rug from under the feet of businessmen.
The ownership issue also highlights once more the need to review the Constitution, in particular the outdated and overly-protectionist economic provisions. It doesn’t take rocket science to know that it would be difficult to attract players when they are under the impression that we are a country that has this very annoying habit of changing rules in the middle of the game. If this kind of perception persists, no one should be surprised if pretty soon we might as well be singing a sad refrain that goes, “Gain, gain, go away…”
The uncertainty of mining
The Bureau of Internal Revenue may or may not be on the right track by imposing a seven percent tax on gold, with small-scale miners reporting lower productions, resulting in a sharp decline in gold sales to the Bangko Sentral since last year. Small-scale miners supply around 60 percent of the BSP’s gold requirements but it would seem that the imposition of the said taxes has resulted in rampant gold smuggling (mainly to China via Hong Kong).
The drop in gold sales also underscores the country’s inability to check the actual gold extraction from small-scale miners and “informal miners” (estimated to number about 200,000) aside from the fact that the DENR and concerned government agencies have no idea where the gold output goes. In contrast, big industry players number about 10 with their gold output strictly monitored by the government. A businessman who did not want to be identified commented that mining activities should really be confined in the hands of reputable and responsible corporations since one, they are the ones who pay the right amount of taxes and two, they have the resources to take care of the environment even as they engage in mining activities as provided for by the Mining Act of 1995 where mining companies are mandated to set aside a portion of their operational expenses to the SDMP or Social Development Management Program that would benefit the host community and its environs.
The mining issue is already a headache with big players unhappy over a number of provisions in the implementing rules and regulations (IRR) covering the new Mining Executive Order (EO 79), with allegations that they violate the Constitution. Among the disputed provisions involve the “no-go” areas or those that will be closed to mining operations, and the revised period covering mining contracts that reduced it from the current maximum of 50 years to just half. Everything seems to be in limbo, which is why foreign investors are also in a bind since they are uncertain what to expect.
‘Devil and the Deep Blue Sea’
The controversy sparked by the alleged dumping of toxic wastes by a US Navy civilian contractor (Malaysian Glenn Defense Marine Asia) has renewed calls for the abrogation of the Visiting Forces Agreement with the United States especially from Senator Miriam Defensor Santiago, who said the contractor’s actions violate established international laws concerning the protection and conservation of the environment.
This always seems to be the problem whenever US vessels or personnel come over, with anti-America groups agitating for the abrogation of the VFA due to allegations that it infringes on the country’s sovereignty. However, abrogating the treaty at this time is definitely not advisable considering our involvement in territorial disputes over Panatag Shoal and the Spratlys. China is increasingly getting belligerent, even establishing a new city (Sansha) covering the disputed Spratlys with plans to put up a garrison. Who knows what kind of toxic wastes are being dumped in the deep blue waters of Spratlys 200 miles within our exclusive economic zone?
So it boils down to a simple choice – will it be the devil or the deep blue sea?
High spirits for Canadian ambassador
Canadian Ambassador to the Philippines Christopher Thornley was extremely pleased at the successful visit of Canadian Prime Minister Stephen Harper and his wife Laureen over the weekend. The meeting between President Aquino and the Canadian PM went very well, with the luncheon hosted by President Noy very well attended. It was the first time in 15 years for Canada’s top leader to visit the Philippines, and it looks like Ambassador Thornley, who has come to love the Philippines, will have his wish granted to stay a little longer courtesy of the Prime Minister who was very pleased with all the arrangements.
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