THIS report is divided into three sections: 1) Profitability of foreign companies; 2) The Sources of Funds from which they derive their capital requirements; 3) The Flow of Funds indicating the impact of their operations on the nation's Balance of Payments position.
To gain the proper perspective, effort shall be made to refer to previous studies on the same subject, especially “Aspects of the US Investments in the Philippines, CY 1956 to CY 1965” by BG Bantegui, Director, Office of Statistical Coordination and Standards, National Economic Council, a memorandum dated September 20, 1968, addressed to the Staff Secretariat of the NEC Working Committees on the Laurel-Langley Trade Agreement.
Also we include CB overall statistics on Invisible Payments and Disbursements of Foreign Exchange for the years 1964 to 1976, as it bears on the overall (as compared to those of the 31 companies under study) Outflow and Inflow of Foreign Funds.
The CB data available does not distinguish between interests paid by the public and private sectors, so we decided not to include them in our summation, knowing that the Outflow of Funds would then be actually greater than indicated in this study.
At the turn of the century, American businessmen and US-based companies entered the Philippines under the umbrella of free trade between the Philippines and the USA. Their investments were mostly in agriculture, in extractive (mining) industries, and trading.
They preempted the most profitable businesses possible under the American colonial administration. Filipinos were not in a position to compete. And restrictions were placed on goods originating from Japan and Europe.
Thus the Philippines became an exclusive market for American goods, a “happy hunting ground” for American trading companies that were spared competition from their natural competitors and technological equals from Europe and Japan.
When Import and Exchange Controls were instituted in 1949, a “historical pattern of import” policy was followed in the allocation of scarce foreign exchange resources. Thus US trading companies that dominated the import trade during the prewar and postwar years were able to maintain their domination of the local market and continued to preempt the most profitable businesses in the country.
By 1954, the Central Bank (CB) changed its policy and started to re-allocate exchange on the basis of “Contribution to the National Economy,” guided by criteria based on dollar savings, local employment, use of local materials, “marketability” of the product concerned, and ownership oriented towards “Filipino First.”
But these were the days of US “parity rights” granted by the Bell Trade Agreement, which gave the Americans the right to equal status with Filipinos in the operation of public utilities and exploitation of natural resources, and by the Laurel Langley Agreement which extended these parity rights to “all business activities.”
Thus in spite of the “Filipino First” policy of the Central bank, Americans in principle enjoyed equal status with Filipinos in the allocation of foreign exchange. In practice, US companies acquired a status superior to Filipino entrepreneurs, firstly because of the mystic aura surrounding the concept of foreign investment as an indispensable source of needed capital (actually little new investment came in; most capital employed by foreign companies were a little reinvestment and massive borrowings from local credit sources); and secondly, because of the “marketability” attached to the foreign brands, built up for 50 years with no competition from Filipino, Japanese, or European companies.
In all the maneuverings among businessmen to secure dollar exchange allocations for their enterprises, a pattern evolved by which Filipino entrepreneurs took the initiative in establishing pioneer industries in competition with the imports of US trading companies, then petitioned the CB to ban imports and reallocate the dollars to Filipino manufacturers.
Forced to abandon the importation of competing products, US companies then decided to initiate manufacturing operations here, and demanded extra dollar allocations for the importation of machinery and materials.
More often than not, US companies by virtue of the “marketability” of their products were given dollar allocations to manufacture products at the volume previously imported, allocations far in excess of those given to Filipino pioneers.
And more often than not, those same US companies were allowed to keep their previous allocation for use in importing other products not yet manufactured.
To gain the proper perspective, effort shall be made to refer to previous studies on the same subject, especially “Aspects of the US Investments in the Philippines, CY 1956 to CY 1965” by BG Bantegui, Director, Office of Statistical Coordination and Standards, National Economic Council, a memorandum dated September 20, 1968, addressed to the Staff Secretariat of the NEC Working Committees on the Laurel-Langley Trade Agreement.
Also we include CB overall statistics on Invisible Payments and Disbursements of Foreign Exchange for the years 1964 to 1976, as it bears on the overall (as compared to those of the 31 companies under study) Outflow and Inflow of Foreign Funds.
The CB data available does not distinguish between interests paid by the public and private sectors, so we decided not to include them in our summation, knowing that the Outflow of Funds would then be actually greater than indicated in this study.
At the turn of the century, American businessmen and US-based companies entered the Philippines under the umbrella of free trade between the Philippines and the USA. Their investments were mostly in agriculture, in extractive (mining) industries, and trading.
They preempted the most profitable businesses possible under the American colonial administration. Filipinos were not in a position to compete. And restrictions were placed on goods originating from Japan and Europe.
Thus the Philippines became an exclusive market for American goods, a “happy hunting ground” for American trading companies that were spared competition from their natural competitors and technological equals from Europe and Japan.
When Import and Exchange Controls were instituted in 1949, a “historical pattern of import” policy was followed in the allocation of scarce foreign exchange resources. Thus US trading companies that dominated the import trade during the prewar and postwar years were able to maintain their domination of the local market and continued to preempt the most profitable businesses in the country.
By 1954, the Central Bank (CB) changed its policy and started to re-allocate exchange on the basis of “Contribution to the National Economy,” guided by criteria based on dollar savings, local employment, use of local materials, “marketability” of the product concerned, and ownership oriented towards “Filipino First.”
But these were the days of US “parity rights” granted by the Bell Trade Agreement, which gave the Americans the right to equal status with Filipinos in the operation of public utilities and exploitation of natural resources, and by the Laurel Langley Agreement which extended these parity rights to “all business activities.”
Thus in spite of the “Filipino First” policy of the Central bank, Americans in principle enjoyed equal status with Filipinos in the allocation of foreign exchange. In practice, US companies acquired a status superior to Filipino entrepreneurs, firstly because of the mystic aura surrounding the concept of foreign investment as an indispensable source of needed capital (actually little new investment came in; most capital employed by foreign companies were a little reinvestment and massive borrowings from local credit sources); and secondly, because of the “marketability” attached to the foreign brands, built up for 50 years with no competition from Filipino, Japanese, or European companies.
In all the maneuverings among businessmen to secure dollar exchange allocations for their enterprises, a pattern evolved by which Filipino entrepreneurs took the initiative in establishing pioneer industries in competition with the imports of US trading companies, then petitioned the CB to ban imports and reallocate the dollars to Filipino manufacturers.
Forced to abandon the importation of competing products, US companies then decided to initiate manufacturing operations here, and demanded extra dollar allocations for the importation of machinery and materials.
More often than not, US companies by virtue of the “marketability” of their products were given dollar allocations to manufacture products at the volume previously imported, allocations far in excess of those given to Filipino pioneers.
And more often than not, those same US companies were allowed to keep their previous allocation for use in importing other products not yet manufactured.
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