Da Coconut Repablik

A Chronicle of the Da Pinoys and Da Coconut Repablik of Da Pilipins

A Great Milestone For Reform: Foreign Stock Ownership Limits Dismantled

This day is somewhat a milestone in the history of this young country. On May 21st, 2013, the Securities and Exchange Commission have finally removed the restrictions regarding foreign stocks ownership in several sectors of our businesses. You must read the article from the business section of the Philippine Star. Here it is:

MANILA, Philippines – The Securities and Exchange Commission (SEC) has finalized the foreign ownership cap rules for Philippine companies.

In a memorandum issued yesterday, the SEC en banc said it will no longer implement the hotly-contested 40-percent foreign ownership cap for each class of shares.

“The required percentage of Filipino ownership shall be applied to both the total number of outstanding shares of stock entitled to vote in the election of directors, and the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors,” SEC said.

“All covered corporations, shall at all times, observe the constitutional or statutory ownership requirement,” SEC added.

Erring firms will be given one year to comply with the foreign ownership limit.

In March, SEC sought public comments for the second and final draft that outlines the rules on the ownership of local firms.

Under the SEC’s first draft released in November, all covered corporations like utility firms are required to meet the constitutional requirements of 40 percent foreign ownership limit for each class of shares at all times.

This followed the Supreme Court’s ruling last October stating that “the 60-40 ownership requirement in favor of Filipino citizens must apply separately to each class of shares, whether common, preferred non-voting, preferred voting or any other class of shares.”

But in an entry of judgment the SEC received on Jan. 8, the Supreme Court directed the SEC to apply the definition that the term capital “refers only to shares of stock entitled to vote in the election of directors, and thus in the present case only to common shares., and not the total outstanding capital stock (common and non-voting preferred shares).”

The Philippine Stock Exchange earlier said the implementation of the foreign ownership cap on each class of shares will dampen the attractiveness of the Philippines to foreign capital and hold back the development of capital markets.

The foreign ownership issue stemmed from the June 2011 decision of the Supreme Court, which granted part of the petition of lawyer Wilson P. Gamboa, who in 2007 sought to void the sale of the state’s 46 percent stake in Philippine Telecommunications Investment Corp. — representing a 6.4-percent interest in PLDT — to Hong Kong-based First Pacific Co. Ltd.

With the limits on foreign stocks ownership gone, it is time for further liberalisation of our economy in order for our local companies to compete abroad. We already know that economic protectionism was already outdated since the end of the Cold War, when several nations had dismantled most of their trade barriers in hopes of attracting investors and creating millions of jobs without much depending on their foreign workers abroad.

Most members of the Makati Business Club, which once divided on the issue of Constitutional Reform are now in favour of opening up the country to the foreigners.  The only problem right now is the administration itself. President Aquino is an indecisive leader. He speak of reforms several times but he also oppose the key initiative for reform, that is to amend the Constitution. Fortunately, more and more people are now supporting it including the prominent economist Gerardo Sicat.

With the foreign ownership equity abolished, I am hoping that the ‘good’ economic performance of the country are not illusions anymore. Ignore those nationalist fear mongers of both sides of the spectrum, we urgently need it because 2 years from now, the ASEAN Free Trade Zone will be implemented.  The Philippines is in a strategic position for commerce, coupled with our large English speaking workforce, foreign investors will pour in, create job opportunities, compete with the long time oligarchs and lessen the number and our dependence on OFW’s who are the only ones keeping the economy afloat as of now. In short, the Philippines is on life support.

Thomas Jefferson even said that a Constitution must be rewritten every 15-20 years in order to cope up with the present reality of the world. We already know that economic protectionism had failed us, although it have some credit during the Industrial Age. It is the time to reform our country beginning with this step. This is in fact a large step at last for the modernisation of our country to catch up with the rest of the world.

““Jefferson thought the dead should not rule the living, thus constitutions should expire frequently, but the fact is that the U.S. Constitution quickly became enshrined by the public and is the oldest constitution in the world,” said Zachary Elkins, a professor of political science at Illinois.”

I am glad that the 16th Congress will push this issue before time runs out. Until next time folks. By the way, in regards to Noynoy’s indecisiveness, I shall post this song. It is my pleasure to post this 80’s song.  It brings back nostalgia even I am not an 80’s kid. Adios!

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