"On rice and corporations"
President Duterte has signed two landmark laws.
The first has to do with the production and importation of the Filipino people’s basic food—rice.
Since rice is 15 percent of household spending and food is 50 percent of total household spending, the rice tariffication law is supposed to bring down inflation and bring down the price of rice. Initially and instantly, imported rice will flood the market and rice speculators and greedy traders will go out of business since big corporations will now engage in rice production, importation and direct selling.
The second measure has to do with rules on how to put up corporations or businesses and how they should behave. Forming corporations will now be much easier. One person, you, can form a corporation by yourself. You needed five people to do that before.
The Revised Corporation Code of the Philippines is supposed to spur new businesses, with easier rules. It does not follow. Why?
The problem of small businessmen is not how to form a corporation. You can always hire a lawyer from Padre Faura to do that for you. It is how to raise money or capital. There should be a new law that will force greedy banks to open up their lending windows to small businessmen and entrepreneurs. The lending rules are stacked against the small man.
Did you know that only four families own the entire Philippine banking system? There is a fifth owner—the government. State-owned Land Bank and DBP have the same strict lending rules as the big private commercial banks. The banking system is one big cartel. To its eternal credit, the Bangko Sentral ng Pilipinas helps perpetuate this cartel.
The Philippine banking system used to be the largest in Southeast Asia. Today, it is the smallest—thanks to the small-minded thinking of our banks and the BSP. Only one bank in Bangkok or one bank in Singapore is equal in size to the size of the entire Philippine banking system.
Yet, the Philippine population is 21 times that of Singapore, and 1.55 times that of Thailand. Meaning, our banking system should be 21 times bigger than Singapore’s or 1.5 times bigger than Thailand’s.
Here are the highlights of the Rice Tariffication Law, per the NGO GRAINS:
• The Minimum Access Volume will revert to the 2012 level of 350,000 tons from the current 805,200 tons.
• In-quota Most Favored Nation rates will remain at 35 percent.
The MFN tariff for out-quota imports is raised from 50 percent to 180 percent.
• In- and out-quota imports from ASEAN countries will be levied a uniform 35 percent duty.
• A Rice Competitiveness Enhancement Fund will be created consisting of an annual P10 billion ($192.3 million) appropriation through the next six years.
• The Fund shall consist of all duties collected from the importation of agricultural products, except rice, under the MAV mechanism, including unused balances and collections from repayments from loan beneficiaries including interests, if any.
• A special rice safeguard duty shall be imposed for the industry’s protection from extreme or sudden price fluctuations.
• The NFA’s role is confined to local paddy procurement and buffer-stocks management.
• In the interest of the Philippine rice industry and Philippine consumers, and upon the recommendation of the NEDA and the Department of Agriculture, the President may enter into trade negotiations or renegotiations of the Philippine international trade commitments on rice.
• The NFA shall, in accordance with the rules, regulations and procedures to be promulgated, maintain sufficient rice buffer stock to be sourced solely from local farmers.
• Any and all laws, rules, regulations, guidelines, and other issuances imposing quantitative export restrictions on rice are repealed. The exportation of rice shall be allowed in accordance with the established rules, regulations and guidelines.”
• No immediate changes to 2018-2019 imports are expected. It is, however, expected to encourage more imports from ASEAN countries, and less from non-ASEAN sources. The potential for import growth in the medium to long term will depend mainly on the performance of Philippine domestic production.
Here are the main features of the new Corporation Code, per my friend, the London School of Economics-trained lawyer Mike Toledo:
1. INCORPORATORS: Removal of the minimum number of incorporators.
2. MINIMUM CAPITAL STOCK: Imposition of a P1,000,000.00 minimum capital stock on stock corporations. This effectively increases the minimum paid-up capital to P62,500.00.
3. CORPORATE TERM: Removal of the 50-year corporate term. This means that unless there is a provision in the Articles of Incorporation with regard to the term of corporate existence, the corporation will exist perpetually unless sooner dissolved.
4. ONE PERSON CORPORATION: Allowance for a single person—whether natural or juridical—to organize and put up a corporation. However, this is subject to the requirement of a minimum capital stock of P1million to be paid up in a lump sum at the time of incorporation.
5. CORPORATE OFFICERS: Chief Executive Officer is made the alternative title to President and Chief Financial Officer is made the alternative title to Treasurer. Also, the inclusion of Compliance Officer as a mandatory corporate officer on top of the president/CEO, treasurer/CFO, and corporate secretary.
6. BOARD MEETINGS: Allowance of remote communication methods in attending board meetings subject to provisions of the corporate by-laws.
7. NATIONALITY OF A CORPORATION: Formalization of the test in determining the nationality of a corporation, i.e. the control test.
8. REMOVAL OF A MEMBER OF THE BOARD OF DIRECTORS OR TRUSTEES: Empowering the SEC to remove disqualified members of the Board of Directors or Trustees.