By Hilarion M. Henares Jr.
THE most glaring abuse by a foreign investor is that of Ford Philippines. As per its 1975 financial statement, Ford invested only P1.3 million, incurred a deficit of P4.8 million, and borrowed from local sources P168.5 million. Bloodsucker!
Our study covering 31 foreign companies during the period 1971 to 1976, the initial period of Martial Law, shows the following:
l. At the end of 1971, they had total assets of P2,077.8 million, which was financed by foreign sources to the extent of 25 percent, or P524.3 million, and by local sources to the extent of 75 percent, or P1,553.5 million.
The foreign sources are: foreign loans, P143.6 million; and P380.7 million original investment, which is assumed to be the equity capital at the end of 1971 (the real original capital, to which previous years’ stock dividends were added, could not be determined at this point).
The local sources are local borrowings, other liabilities, and capital surplus.
2. During the intervening five year period from 1971 to 1976, their total assets increased by P2,552.9 million, which was financed by foreign sources to the extent of 26 percent or P1,888.9 million.
Foreign sources consist of foreign loans, P661.2 million, and new investments, P2.76 million.
Of the 74 percent from local sources, P621.9 million or 24 percent is from reinvestment of profits, and P1,266.95 million (50 percent) from local borrowings.
3. At the end of 1976, they had total assets of P4,630.7 million, which was financed by foreign sources to the extent of 26 percent or P1,188.6 million; and by local sources to the extent of 74 percent or P3,442.4 million.
The funding of assets and sources of funds during this period show the effects of Martial Law on foreign business operations.
It is noticed that there is a remarkable consistency in the funding of assets by the 31 foreign companies under study. Before, during and after the five year period from 1971 to 1976 under study, assets are financed 74 percent from local sources.
It is pertinent to repeat here that in a previous period of ten years from 1956 to 1965, Bantegui reports that the assets of 108 American firms were financed 88 percent from local sources.
(Actually, Bantegui counted Reinvestments as having come from foreign sources; Reinvestments, for purposes of this study, was shifted to “local sources” to be consistent with Fernando Fajnzylber’s UN study on US-based companies in Latin America, and with the author’s conviction that reinvestment of profits are of a local source.)
In the period of Martial Law, increase of assets was financed mostly by local sources. The most prominent of the 31 foreign corporations under study are as follows:
1) Ford Philippines, which financed its increase in assets during the five years (P123.3 million) with local borrowings of 144.3, or 110 percent of the value of the assets. Local borrowings were also used to finance operating deficits and to repay foreign loans.
2) Carnation Philippines, which financed P40.9 million increase in assets through foreign sources, P4.3 million (10 percent) and local sources P36.6 million (90 percent). Of the 90 percent from local sources, only P4.7 million (12 percent) constituted reinvestments.
3) Findlay Miller Timber Co., which financed P17.9 million increase in assets with P23.3 million from local sources, or 130 percent of the value of the assets. Local borrowings were also used to finance repayment of foreign loans.
4) Globe MacKay Cable and Radio secured from local sources P52.9 million, or 106 percent of the value of the increase in assets (P50.1 million). Of the 106 percent, only 19 percent represented reinvestments.
Imagine, these bloodsuckers borrowed from us Filipinos even more than they needed for capital expenditures!
To recapitulate, comparing the 1956-65 period with the 1971-75 period, we find that of the assets employed (100 percent):
Foreign investments decreased from 4 to 0.1 percent; foreign loans increased from 8 to 25.9 percent; and total foreign sourcing increased from 12 to 26 percent of total assets employed.
Reinvestments increased from 4 to 24 percent; local borrowing decreased from 84 percent to 50 percent; and total local sourcing decreased from 88 to 74 percent.
One fact stands out above all: contrary to the claims of the multinationals, most of the capital expenditures of these foreign firms are financed from local sources (from 74 to 88 percent of the total), mostly borrowings from our banks and the Filipino people.
Foreign firms bring in only 12 to 24 percent of their capital needs -- a far cry from we Filipinos are led to expect.
Hernares, Hilarion Jr. Beggar and King – Make My Day Book 19.
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