"Every step to curtail foreign investments at a time when we clearly are bypassed by FDI (foreign direct investments) compared to our neighbors, and at a time where we are recognized as a potential investment haven, must be seen as a step in the wrong direction," said Henry J. Schumacher, vice-president of the European Chamber of Commerce of the Philippines (ECCP).

American Chamber of Commerce of the Philippines director Robert M. Sears, meanwhile, called the proposed rules another example of policy inconsistency. "It does not help FDI when the rules or their interpretation are changed midstream for existing investors. That’s one reason we lag other ASEAN countries in FDI," Mr. Sears said.

A United Nations Conference on Trade and Development report released last month said the Philippines was behind its Association of Southeast Asian Nations neighbors in terms of FDI. While the $900-million total as of the first half of 2012 was up from last year, it was well below Singapore’s $27.4 billion or Indonesia’s $8.2 billion.

Foreign business chambers have been pressing the government to lift ownership restrictions, which they claim have limited the country’s attractiveness. Mr. Schumacher and Mr. Sears’ objections to the SEC rules followed complaints aired by market players during a dialogue last Friday.

The draft rules, released earlier in the week, followed an Oct. 9 Supreme Court decision to uphold its interpretation of the constitutionally mandated 40% foreign ownership limit.

On June 28, 2011, the high court had declared the cap should be based on common and not total outstanding shares. In its October ruling, the court added 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."

This restriction, Philippine Stock Exchange (PSE) President and CEO Hans B. Sicat claimed last Friday, would particularly affect FDI and the equities market. Capital raising by firms would be curtailed, he added, a point echoed by businessmen who also attended the dialogue.

The ECCP’s Mr. Schumacher, though, admitted that the SEC’s move to define ownership limits under the Constitution had provided "clearer rules [as] investors were kept in the dark before."

Stakeholders have been given until Nov. 30 to submit their position papers to the SEC. Final rules are expected to be released by the middle of next year. A question over the sale of a Philippine Long Distance Telephone Co. (PLDT) stake to Hong Kong’s First Pacific Co. Ltd. had prompted the Supreme Court to issue the June 28 ruling.

The Oct. 9 decision rejected appeals filed by the PSE president, the SEC, and Manuel V. Pangilinan and Napoleon L. Nazareon, PLDT chairman and president, respectively. PLDT, despite its objections, has moved to comply with the high court’s definition of the ownership limit.

In June, it received SEC approval for a plan to issue preferred shares with voting rights -- which would limit foreign ownership in the telecommunications company to 35% from 64%. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, has a minority stake in BusinessWorld. -- ENJD

Source: Business World; News, 11 November 2012