ADVANTAGES AND DISADVANTAGES
OF FOREIGN INVESTMENT LIBERALIZATION
Advantages
of Foreign Investment Liberalization
The advantages of foreign
investment liberalization include the following:
(a) job creation - by establishing
new business enterprises or expanding existing business enterprises,[i]
(b) consumer price reduction - by increasing the supply of goods and services,
(c) tax generation – on income
earned from new jobs created, and from enterprises established or expanded,
(d) technology transfer - by
adopting and improving foreign technology,
(e) access to foreign markets - by
tapping foreign investors to sell Philippine goods and services in their
homelands,
(f) anti-corruption - by allowing
the entry of independent foreign competitors vis-a-vis the existing Filipino cartels of government suppliers.
[i] Notably, it takes about Php190,000.00 to employ one rank-and-file employee for one full year in Makati City. This estimate includes the applicable daily minimum wage and benefits, social security and the proportionate cost of modest office space and utility charges used for the employee. On the other hand, it takes about Php100,000.00 to employ one employee for one full year in Region I which has the lowest daily minimum wage rate. Demosthenes B. Donato, Do’s and Don’ts of “System Change”, 10 September 2016.
Out of the estimated Philippine population of 101,802,706 for 2015, some 65,459,140 (64.3%) are in the labor force. Out of the total labor force, some 3,927,548 (6.0%) are unemployed while 12,240,859 (18.7%) are underemployed. Id.
If we multiply the number of workers unemployed (3,927,548) by the lowest estimated cost of employing one worker for one year (Php100,000.00), we have the staggering amount of Php392,754,800,000 representing the total cost required to employ all the unemployed for just one year. Id.
Thus, the urgent need to tap
all financial resources, both local and foreign, for job generation.
Clearly, the opening of the various
sectors of the economy to free competition among all interested local and
foreign investors is ONLY about promoting economic efficiency and social
justice for the general welfare of the people, particularly the middle class
and the “masa” class.
Certainly, it is NOT about placing
any unreasonable or insurmountable burden on Filipino capitalists of the
“mayaman” class who have sufficient financial resources, management expertise and
business experience to compete against legitimate foreign investors.
Economically, the policy of foreign
investment liberalization promotes sustained development throughout the country
in parallel with the growing population.
Socially, the policy protects the
Filipino family whose loved ones are otherwise constrained to work overseas in
order to provide a better life for family members left in the country.
As common sense tells us, the
preferred social policy is to let foreign investors move into the country and
hire Filipinos locally, rather than let Filipinos move overseas, leave their
families behind, and work for foreign employers in a foreign land under a
foreign government.
Disadvantage
of Foreign Investment Liberalization
One disadvantage of the
liberalization of foreign investments is that it leaves the country open to the
entry of foreign governments, cartels, groups, and other elements who may
pursue agendas prejudicial to the basic securities of the people. These basic
securities of the country pertain to its defense or external security, internal
security, food security, water security, energy security, environment security
and resource security (human, natural, industrial).
To address and avoid this
disadvantage, the government may establish a Foreign Investment Council[ii]
to review any and all foreign investment transactions in any and all sectors
and regions of the economy. The Council
will be empowered to suspend or prohibit any foreign investment transaction if
in the reasonable exercise of its discretion it determines that such action is
necessary to address a risk posed to any basic security of the State.
This institution of a Foreign
Investment Council may strike a balance between the need to liberalize foreign
investments for economic and social gains, and the need to protect the basic
securities of the people and the State.
This material was written ex-gratia
by Demosthenes B. Donato
for Tanggulang Demokrasya
(Tan Dem), Inc.
All intellectual property rights are granted to the public
domain.
14 January 2017. Makati City, Philippines.
Disclaimer: The views and opinions expressed in this
material are those of the author
and do not necessarily reflect the official policy or position
of TanDem.
[i] Notably, it takes about Php190,000.00 to employ one
rank-and-file employee for one full year in Makati City. This estimate includes
the applicable daily minimum wage and benefits, social security and the
proportionate cost of modest office space and utility charges used for the
employee. On the other hand, it takes about Php100,000.00 to employ one
employee for one full year in Region I which has the lowest daily minimum wage
rate. Demosthenes B. Donato, Do’s and
Don’ts of “System Change”, 10 September 2016.
Out of the estimated
Philippine population of 101,802,706 for 2015, some 65,459,140 (64.3%) are in
the labor force. Out of the total labor force, some 3,927,548 (6.0%) are
unemployed while 12,240,859 (18.7%) are underemployed. Id.
If we multiply the number of
workers unemployed (3,927,548) by the lowest estimated cost of employing one
worker for one year (Php100,000.00), we have the staggering amount of
Php392,754,800,000 representing the total cost required to employ all the
unemployed for just one year. Id.
Thus, the urgent need to tap
all financial resources, both local and foreign, for job generation.
[ii] See US Defense Production Act of 1950, as amended
by FINSA, Section 721 (50 U.S.C. App. 2170). Executive Order No. 11858 (as
amended by Executive Order No. 13456), re Foreign Investment in the United
States.
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