Aquino’s Foreign Trip Attracted Investments: So What?

BS Aquino went to London recently. News sources say this foreign trip cost P87 million but was worth it because Aquino attracted investments worth $2.5B.

Here’s the spin from Aquino’s Biased Stupifying-Completely Bullshit Network – ABS-CBN

The multi-billion-dollar investments were pledges of businessmen from both UK and US, he said.

Half of the total investment pledges came from Rolls-Royce, Asea Gaz Asia Ltd. and commodities trading giant Glencore, owner of the Philippine Associated Smelting and Refining Corp. (PASAR), all of which are based in the UK.

Glencore plans to expand its smelting capacity by investing $600 million while Gaz Asia eyes partnership with Aboitiz Equity as well as investment of $150 million to develop plants that will convert organic waste materials into liquid bio methane.

For its part, Rolls Royce has signed a P280-million service contract with the Gokongwei-owned Cebu Pacific for the purchase and service of new airplane engines.

The other half of the $2.5-billion investment pledges came from US-based businesses.

Among them are: GN Power Limited, which plans to put up two 300-megawatt coal plants in Bataan worth $1 billion; Underwriters Laboratories Inc. which will invest in a global technology research center in Manila.

Citigroup and USAid, meanwhile, have proposed a mobile financial inclusion program aimed at bringing the benefits of mobile banking to the rural areas.

“These numbers mean more jobs and more food on the table for Filipinos. At the same time, our friendship with the US and UK bore fruit in terms of economic gains,” he said.

What’s missing here?

Aquino had to go to UK to help convince UK investors to partner or go into joint venture with Aboitiz, Gokongwei and the merry men and goodfellas who line up the rosters of the Makati Bastard Business Club.

Note further that this is the only way these UK businesses can do business in the Philippines because the constitution restricts them to only 40% equity – AND requires a joint venture partner who MUST be a Filipino national. As stipulated in Article 12 – National Patrimony of the 1987 Philippine Constitution:

Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos.

The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities.

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines.

Note further that the Philippines is the only country in Asia that explicitly contains economic restrictions in its constitution.

Thus , to get those investments – Aquino had to undergo a “hard sell”. In advertising a hard sell is an advertisement or campaign that uses a more direct, forceful, and overt sales message. In Pinoy terms – it’s called “Pakapalan ng mukha” because people aren’t budging.

The hard sell approach is used when the “soft sell” isn’t getting any bites. A soft sell is an advertisement or campaign that uses a more subtle, casual, or friendly sales message.

Here’s the thing – our ASEAN neighbors don’t have to do a “hard sell” in order to attract investors. Take for instance Singapore – and a sprinkling of the magnates who have VOLUNTARILY moved into the city state:

• AUSTRALIAN coal magnate Nathan Tinkler, Australia’s wealthiest person under the age of 40, will relocate to Singapore, joining a notable list of other foreign tycoons moving to the affluent city-state. A spokesman for the 36-year-old Mr Tinkler confirmed his move and said that while he would be bringing his wife and four children to Singapore to be closer to some of his key investors, the operations of his investments would remain in Australia. According to Forbes magazine, Mr. Tinkler is Australia’s 26th-richest person, with a net worth of US$825 million in 2012.
• New Zealand billionaire Richard Chandler relocated to Singapore in 2008
• US investor Jim Rogers set up shop in the city-state in 2007.
• Malaysian citizen Ong Beng Seng and his wife, Christina, whose wealth almost doubled to $1.9 billion as shares of their U.K. fashion house, Mulberry, soared.
• In 2011, billionaire Facebook co-founder Eduardo Saverin relinquished his U.S. citizenship and joined nearly 1,800 other Americans to do it last year — up from 235 in 2008. Saverin, 30, a Brazil-born resident of Singapore who helped launch Facebook with his Harvard schoolmate Mark Zuckerberg, reportedly renounced his U.S. citizenship in September before the company announced its planned initial public offering of stock. Owning an estimated 4 percent of Facebook, he stands to make $4 billion when it goes public.

Did Singapore’s Prime Minister need to spend taxpayers’ money in order to convince each of these tycoons to set up shop in Singapore. Obviously NO!!!!

Did Singapore’s Prime Minister need to talk to these tycoons and convince them to go into a joint venture with Singaporean nationals, provided further that the foreign equity be limited to 40% only? Obviously NO!!!!

Here’s more – Aquino was boasting a year on year GDP growth of 6.5% – guess what, Singapore grew by 10%!

– the Ministry of Trade and Industry said that the economy grew 10% in the January-March period compared with the previous quarter, revising an earlier estimate of 9.9% expansion released last month.

Singapore’s “soft sell” netted more tycoons opting to do business, even live permanently in Singapore.

In contrast, Philippines “hard sell” has to waste tax money and force foreign investors to partner with Aquino’s cronies.

The Philippines competitive strategy has remained unchanged while its neighbors continue to improve on removing barriers to investments and trade.

If we recall, a competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices.

So what gives? What competitive strategy is the Philippines pursuing such that it only captured 2% of all FDI that went to ASEAN?

Our neighbors are competing on labor costs, infrastructure costs AND the regulatory framework (aka ease of doing business). Filipinos compete on the basis of price or a cost-focus strategy while our competitors focus on differentiation having already beaten the Philippines in terms of cost.

Having open economies, free trade and free markets provides our competitors the flexibility and vibrancy to respond to market signals quickly. In contrast the Philippines and Filipinos needs to have government “study” the matter, deliberate it in Congress and see if it “protects” the welfare of Filipinos, then there’s the rallies from the left. The Filipinos launch the product by the time the product’s lifecycle has matured – welfare state, corporatist, protectionist policies and “Filipino time” is a heady cocktail.

Businesses are willing to pay higher rates for premium talent which can drive revenue – thus “high” labor costs isn’t an insurmountable barrier.

The bogeyman of the Philippine government for its failure to attract investments is “corruption”. Let me tell you about Russia – despite political risk and tales of corruption, investors remain interested in—or at least curious about—investment opportunities in Russia.

Let me ask you this – how can we attract investments when our laws barely allow foreign investors to participate in the first place?

It’s the economic policy STUPID!

Remove the 60/40 restrictions on foreign equity. Remove the need for foreign investors to have a partner who must be a Filipino national. The decision to go into a joint venture with a Filipino national MUST be left to the discretion of the investor and not as a compulsory piece of legislation.

By keeping foreign investors out – and limiting them to businesses where they can’t own 100% – Aquino kepts jobs and food on the table from Filipinos. It is a conclusion which is supported by fresh empirical data – notably the recent SWS survey that showed the biggest increases yet – in joblessness, poverty, and hunger.

The results prompted BS Aquino to ask SWS to explain the results given his “efforts”. What an effin dumbass – it’s the other way around – you, Noynoy – yes YOU – have lots of explaining to do. But obviously it hasn’t gotten through his thick skull and peanut brain. BS Aquino’s exhortations to Pinoys about gaining freedom from poverty and corruption is the height of callousness considering that it his corporatist protectionist welfare state policies that perpetuate the highest income inequality in Southeast Asia.

It’s not surprising that the Oust PNoy movement was launched recently. C’mon people – you shouldn’t have voted for him in the first place – DUMBASSES! But really – better late than never – WHAT TOOK YOU SO LONG? If and when it does happen it will bring a sense of irony and poetic justice – BS Aquino ousted by real people power. But I digress.

So Aquino “attracted” investments? A grovelling hard sell isn’t attraction – that’s desperation.

The Philippines 15th congress is pushing for rationalization of fiscal incentives that government grants business entities. That’s too little, too late. Our neighbors in ASEAN have fiscal incentives, too – AND they have something better – they don’t restrict foreign equity to 40% – nor do they require that foreign investors partner with Filipino nationals.

Here’s another retarded Filipino mindset – ““Foreign investors don’t mind paying taxes but are scared of unstable conditionalities,” according to Valenzuela City Rep. Magi Gunigundo. Obviously this moron of a congressman has not heard about French investors rushing out of France and into Belgium due to France’ tax rates of 75%! Or of Facebook co-founder Saverin moving to Singapore because of the absence of capital gains tax.

As pointed out by the Guide Me Singapore website:

Investors turn to Singapore for establishing their operations for several reasons. The ease of setting up and operating businesses is a prime motivator. Another central determinant is Singapore’s tax regime – well-known for its attractive corporate and personal tax rates, tax relief measures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties.

Singapore’s economy is characterized by economic openness, free trade and free markets. It is the diametric opposite of the Philippine economy – protected, regulated trade, protected markets.

The website Mongabay.com summarizes the investment policy framework of Singapore below:

* the government abolished all currency exchange controls

* Singaporean residents (individuals and corporations) were free to move funds, import capital, or repatriate profits without restriction

* Likewise, trade regulations were minimal.

* Import duties applied only to a few items (automobiles, alcohol, petroleum, and tobacco), and licenses were required only for imports originating from a few Eastern bloc countries.

* There were no export duties.

* There was no capital gains tax.

* Special incentives existed for foreigners, including concessionary tax arrangements for some nonresidents, relief from double taxation, and permission to buy commercial and certain residential property.

* In 1985 extensive tax reductions were introduced to reduce business costs.

BS Aquino’s talk on freedom, people power, and independence rings hollow – not when Filipinos are shackled to political dynasties, limited choices, and personal liberties ran roughshod over by its own political-economic elite.

We don’t have to go far to find out what attracting investments and investors really means – check out the billionaires and magnates right next door – in Singapore.

BongV has written 384 stories on this site.

BongV is the webmaster of Antipinoy.com.