Joint Foreign Chambers of the Philippines

Joint Foreign Chambers of the Philippines
American Chamber of Commerce of the Phils., Inc. Australian-New Zealand Chamber of Commerce (Phils.), Inc.
Canadian Chamber of Commerce of the Phils., Inc.  European Chamber of Commerce of the Phils., Inc.
Japanese Chamber of Commerce & Industry of the Phils., Inc.  Korean Chamber of Commerce of the Phils., Inc.
Philippine Association of Multinational Companies Regional Headquarters, Inc.
April 28, 2015
HON. ARSENIO BALISACAN
Director General
Socioeconomic Planning Secretary
National Economic and Development Authority
NEDA Building, Josemaria Escriva Drive
1605 Pasig, Metro Manila
Dear Secretary Balisacan:
The Joint Foreign Chambers applaud and appreciate the continued efforts of the
National Economic Development Authority (NEDA) to consider various means by
which foreigners may contribute to the country’s economic development.
It has come to our attention that the Department of Trade and Industry (DTI) is
interpreting the Foreign Investment Act (FIA) in a manner that impairs foreign
residents in doing business in the Philippines. In particular, the DTI maintains that
a foreigner who wishes to do business as a sole proprietor is a “domestic market
enterprise” and hence required to invest the equivalent of $200,000 in paid-up equity
capital before being registered. See Attachment 1.
We have trouble understanding this interpretation for at least two reasons. First it is
apparent from Section 5 of the FIA that "non-Philippine nationals" may "do
business" as "single proprietorships" as an alternative to investing in domestic
market enterprises. See Attachment 2 for an annotated excerpt from this law.
Second, “paid-in capital” is a concept pertinent to investments in corporations, not
sole proprietorships.1 We are unaware of an authoritative definition of paid-in capital
that contemplates its use outside the corporate context.
Currently tens of thousands of foreigners reside in the Philippines. Many have skills
and knowledge that could contribute to the economy. For instance, an artist might
wish to sell jewelry wholesale or a seasoned consultant may wish to offer business
advice on a part-time basis. Various constraints, however, such as work permit
requirements, or the requirement of establishing 60 percent majority-Filipino-owned
company discourage them from doing so. This is particularly acute with respect to
1
Paid-in capital is commonly defined as "capital contributed to a corporation by investors through
purchase of stock from the corporation.” See, e.g., Google E-Study Guide for Business Essentials
and Wikipedia.
part-time, contract-based work, which is becoming more and more the trend both
here and globally.
We believe that the time is right for NEDA, under its statutory authority, to consider
the issuance of new regulations that would clarify the intent of Section 5 that sole
proprietorships are not domestic market enterprises. Such a change would allow
foreigners to register and do business in non-protected sectors of the Philippine
economy. Restrictions in the professions or retail trade would not be affected. Such
reform would increase tax revenues (the sole proprietors would presumably be
issuing official receipts and paying VAT and income tax) and could lead to greater
investment and use of more traditional corporate vehicles as various foreigners
succeed in their efforts.2
Previously we have applauded your public statements regarding NEDA’s efforts to
find ways to open up the economy via changes to various laws. However, as we
know, such efforts take time and have uncertain outcomes. This is an opportunity
for NEDA and this administration, through the mere issuance of a clarifying
regulation, to remove a constraint to doing business in the country and to harness
the skills and knowledge of thousands of residents.
We look forward to discussing this matter further with you. We are also ready to
provide assistance with drafting, research etc., should you think this is a matter worth
moving forward on.
Regards,
RHICKE JENNINGS
President
American Chamber of Commerce
of the Philippines Inc.
JULIAN PAYNE
President
Canadian Chamber of Commerce
of the Philippines, Inc.
TOM GREALY
President
Australian-New Zealand Chamber
of Commerce of the Philippines Inc.
MICHAEL RAEUBER
President
European Chamber of Commerce
of the Philippines, Inc.
2We very much doubt that few, if any, foreign sole proprietors would maintain this structure
for doing business once he or she begins hiring employees. The risk of personal unlimited
liability would deter most from doing so.
YOSHIO AMANO
President
Japanese Chamber of Commerce
& Industry of the Philippines, Inc.
HO-IK LEE
President
Korean Chamber of Commerce
of the Philippines, Inc.
SHAMEEM QURASHI
President
Philippine Association of Multinational Companies
Regional Headquarters, Inc.
Cc:
DTI Secretary Gregory L. Domingo
PRC Chairman Florentino C. Doble
DTI Undersecretary Nora K. Terrado