Fernando Fajardo
Cebu Daily News

In last week’s forum in Manila of the National Competitiveness Council, Trade Secretary Peter Favila was reported to have told industry leaders and local government executives that restrictive economic provisions of the Constitution must be amended to erase biases against foreign investors. Accordingly, one such restrictive provision is the ownership of land that is limited to Filipinos. Agree or disagree?

The news report citing this issue written by Max de Leon for Business Mirror was circulated by email in Cebu among the members of Cebu Business Club and other concerned business people in Cebu. It interesting to see what they had to say about the issue. Gordon Alan Joseph said only a few words when he e-mailed the news item to his friends in business: Please let somebody inform him (Favila) that the World Bank says otherwise. But Ben Dapat was more expressive in his reaction.

Here is Ben’s line: Ownership of land is not the foremost obstacle to having foreign investments come to the Philippines. There are certain areas that ownership of land may be vital to them, but not all kinds of businesses. But these are taken cared of by the Long-Term Lease Law or the Special Economic Zones Law or any special law that may be passed. And not all kinds of foreign direct investments are desirable in our Country. Rich countries who want to locate in our Country for whatever reason may do so if we open our land resources to foreigners at the expense of the Filipinos. Has anyone heard about the many claims on the Spratleys? Is this the kind of foreign investments that we want? We are already strangers and economically oppressed in our own land right now by “Filipinos” who don’t even pay the right taxes on their businesses, if at all. And we have a very large population and increasing every day.”

Roger Lim agrees to everything that Ben said but he added more: I have been working with foreign-owned companies virtually all my life. Land ownership was never a serious impediment in our investing in the country. It is not absolutely necessary. It falls under the category of “it’s something nice to have”. For as long as the opportunity to make a decent return on investment is available, and repatriation of profits is allowable, even with tax, investors will come. When, the company I was working with decided to invest in India in 1986, India was more restrictive than the Philippines but many companies came. Call it the Herd factor.

Roger also has something to say about the judiciary: Many people forget that the judiciary is also an important factor that foreign investors take into consideration. It is in their top 5 of the list of ten items on their check list. Can they get a fair shake? Corruption that can be costed as expediting expense, and does expedite transactions, does not drive away foreign investors. The under-the-table extortion and unfair competition is the one that discourages foreign investors. That’s the kind of corruption and judiciary that we have. Favila may not know what he is talking about.

So there you are my dear about how some of our businessmen in Cebu think of foreign ownership of land. It’s a non-issue as far as attracting foreign investments is concerned.

The Japanese is one of the major, if not the biggest, investors in the country. So before I wrote this piece I tried to look for materials that had something so say about what factors they considered before committing to invest. This led me to an IMF article, “Japanese Foreign Direct Investment in East Asia with Particular Focus on ASEAN4,” written by Shujiro Urata of Waseda University in 2002.

Based on a survey, for Asia as a whole, Urata listed the following factors determining Japanese FDI: On top is the prospects of increase in local demand, followed by availability of low wage labor, prospects of increase in regional demand, presence of other Japanese firms, industry promotion by host government, good infrastructure, capability to produce products for the Japanese market, cheap land/finance, availability of locally produced parts, and availability of engineers.

Based on my readings, however, those who think of maintaining our wages at the lowest possible level to attract FDI will be surprised to know that it is not entirely correct because labor cost is better appreciated only if adjusted for productivity.

Similarly, cheap land as a factor for attracting foreign investment does also imply that foreign investors are interested in buying land because the same land can be rented on a long- term basis or can be had under other arrangements as what is being done in most of the economic zones in Asia. Finally, China which had attracted the biggest part of the FDI in Asia, does not rest its case in allowing foreigners to own land. Market size is its number one attraction, along with low wage labor, adjusted for productivity, of course.