Introduction:

The 1987 Philippine Constitution dictates as part of its state policy under Article 2
Section 19 that: The State shall develop a self-reliant and independent national economy
effectively controlled by Filipinos (Philippine Constitution, 1987), a provision which calls for
the effective Filipino control of the economy (de Leon, 2011, p. 110). Furthermore, the
Constitution devotes an entire article to discuss on this matter, under Article 12, which is entitled
National Economy and Patrimony (Philippine Constitution, 1987), this article talks on the
manner of distribution of a more equitable distribution of opportunity, income, and wealth (Art
12, Section 1).

Article 12 Section 2:

.. The exploration, development and utilization of natural resources shall be

under the full control and supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture, or production-sharing
agreements with Filipino citizens or corporations or associations at least sixty per centum
of whose capital is owned by such citizens.

The above-said provision talks on the manner of ownership of the Philippines natural
resources and its utilization. The Constitutions Framers intended the provision to give the
Philippines economy undue foreign control (Narra Nickel Mining and Development Corp. vs.
Redmont Consolidated Mining; GR No, 195580), and to ensure the conservation of Filipino
posterity (Bautista, pp. 390, Philippine Law Journal Volume No. 61) , by implementing a 60-40
ownership scheme. This scheme requires companies to have atleast a 60 % Filipino owners/
capital, so that the state may grant the permit to allow the exploitation of its resource. Such
scheme reiterated in RA 8179 enacted on March 28, 1996 and its scope and coverage was set
forth in Executive Order (E.O.) 98, which was passed by President Benigno Aquino on Oct 29,
2012.

E.O. 98 speaks of industries that are on the Negative Listing of the Philippine
Government, these industries ownerships are subject to the States regulation. We thus, focus on
List A where the mining industry is classified under it. Under E.O. 98, Exploration,
development and utilization of natural resources which has an ownership restriction for
foreigners of up to 40 percent. This restriction has prohibited foreign corporations/ association,
those comprising of less than 60 % Filipino, from exploiting the Philippines natural resources
through mining. This paper will focus on the cost-and benefit analysis on the actors of the said
law.
Subjects of the Law

Our terminal report focuses on the Foreign Investors and the Government agencies that are
tasked to approve and monitor the Foreign Investors.
This will revolve under RA8179 or the Foreign Investments Act. of 1991.
Section 2 states that:
SEC. 2. Declaration of Policy. - It is the policy of the State to attract, promote and
welcomeproductive investments from foreign individuals, partnerships, corporations, and
governments, including their political subdivisions, in activities which significantly contribute to
national industrialization and socio-economic development to the extent that foreign investment
is allowed in such activity by the Constitution and relevant laws. Foreign investments shall be
encouraged in enterprises that significantly expand livelihood and employment opportunities for
Filipinos; enhance economic value of farm products; promote the welfare of Filipino consumers;
expand the scope, quality and volume of exports and their access to foreign markets; and/or
transfer relevant technologies in agriculture, industry and support services. Foreign investments
shall be welcome as a supplement to Filipino capital and technology in those enterprises serving
mainly the domestic market
but not all kinds of businesses needs to follow this law the scope of this law - This Act shall not
apply to banking and other financial institutions which are governed and regulated by the
General Banking Act and other laws under the supervision of the Central Bank.

For the Case of Foreigners who wants to invest and do business in the Philippines, they need to
register at the the Securities and Exchange Commission (SEC) and in the Bureau of Trade
Regulation and Consumer Protection as part of the Department of Trade and Industry.
Despite the many steps for registration, the Philippine Government also offers incentives to the
Foreign Investors, if they want to avail of the incentives, the need to register to the Board of
Investments.

But even if there are many requirements for investors, it is not an assurance that they can open
ANY business here in the Philippines, there are restrictions.
There is what we call the Foreign Investment Negative List, where List A shall enumerate the
areas of activities reserved to Philippine nationals by mandate of the Constitution and specific
laws.
While List B, includes businesses which involves firearms, ammunitions, military gadgets and
etc. If you are inclined to open this kind of business, you need to secure a permit and approval
from the Department of National Defense (DND).
All permits processed will be recommended by the Government Offices specialized for that field
(SEC,BOI,DND,MGB) will be endorsed by by the National Economic Development Authority
(NEDA) and will be only approved by the Office of the President

In our Terminal Report, we will focus in the Mining Industry,

Anyone who wishes to engage and open business connected to Mining must follow the steps
above and secure a permit and approval from the Department of Environment and Natural
Resources (DENR) and from the Mines and Geosciences Bureau who is specialized to do tasks
regarding this matter.
The Mines and Geosciences Bureau is in charge of inspecting and assuring the safety of the
Mining Sites. If ever they find a violation, they have the right to temporarily close the Mining
Site. And recommend to the higher offices that it may be permanently closed and will not be
given a permit to continue their business.

Situationer:

Undeniably, the Philippines have been a subject to foreign investment with its natural
resources, a strong labor force, it being a tropical country with beautiful beach lines and rich
history. However, it has been hard for the Philippines to attract more investors due to some
factors. To mention a few, the corruption rate in the country. On the Corruption Perception
Index, although ranking 85th out of 175 countries, the Philippines still belongs to the lower two-
thirds of 175 countries with scores below 50, the data shows an improvement from the previous
CPI especially when comparing 2014 and 2012. (Corrales, 2014) Another factor would be the
crime rate. United States Department of State Diplomatic Security, categorized Philippine crime
rate High on April 2015. (Security, 2015) This categorization was further supported by the
report of Philippine National Police that there was an increase of 46% of crime rates nationwide.
There were 352,321 index crimes for the first six months of the year, which is 37.3 percent more
than the 256,592 cases reported in the same period last year. (Felipe, 2015) Lastly, many argue
that the Protectionist Clause is one of the prevailing reasons for the slow FDI in the country.

The Constitution (Art. XII) grants that the 60% ownership of franchises shall be granted
to the Filipinos and 40% are to foreigners. Many said that this discourages foreign investors. On
the data of Claudette Malana, author of the Economic Issue of the Day release of the Philippine
Institute for Development Studies, Philippines lag behind their neighboring country which is
Singapore and Indonesia. Data showed that Philippiness FDI only increased to $2.8 billion in
2012 while the latter countries were $56.6 billion and $19.2 billion, consequently. (Malana,
2014). Furthermore, To sustain the growth of the Philippine economy, these restrictions need to
be examined and amended, as they have constrained FDI (Malana, 2014) There have been a
series of movements in both Senate and House of Representative to amend the provision yet
none of them saw the light of the day.

Apparently, there have been passed legislation and Executive Orders to further strengthen
and implement the provision. Among these is The Philippine Mining Act of 1995, Republic Act
8179, Commonwealth Act no 108 or the Anti-Dummy Law. Yet on March 1995, Pres. Fidel
Ramos passed Republic Act 7942, which allowed foreign companies to enter into a joint-venture
with the Philippine Government through a Financial and Technical Assistance Agreement (
FTAA), subsequently such law was challenged in the landmark case of La Bugal Balaan vs.
Ramos, where the Supreme Court upheld its constitutionality. Because of this, it allowed foreign
corporations to conduct mining operations in the Philippines while being clothed with the
protection granted by their respective FTAAs. This period saw an increase in invest in the
mining industry : Investments in the mining industry generally escalated from 2006 to 2010.
The upsurge in foreign mining investment can be attributed to the decision of the Supreme Court
to uphold the constitutionality of the Financial or Technical Assistance Agreement (FTAA)
(Board, 2013). Such period of prosperity was short-lived when the current president enacted E.O.
79 an act which sought to regulate the mining industry in the Philippines. This law even provided
for the limitation as to the areas where a corporation may conduct expedition (E.O. 79 Sec. 1).
As a matter of fact, this law even taxes foreign corporation operating mining expeditions here in
the Philippines these include paying taxes to local and national government, taxes such as
corporate income taxes, excise tax, special allowance, withholding tax on dividend or interest
payments, and other such taxes and fees as required by law but only commences after the
expiration of the recovery period (Raymundo, 2014). Because of this, the Mining Investments
here in the Philippines has decreased as a result of the reforms introduced by the Executive
Order. As a result government revenue has shrunk dramatically after the passage of such E.O.
on 2012.
Economic Analysis:

a) Government:

The Philippine Government as it employs and uphold the 60-40 ownership

scheme enjoys the self