Mr. Rozzano Rufino B. Biazon

January 17, 1996 Mr. Rozzano Rufino B. Biazon Chief Legislative Officer Philippine Senate BF Condominium, 5th Flr. Aduana St. cor. Solana St.,Intramuros, Manila S i r : This refers to your letter dated January 5, 1996 requesting for comments on the following Bills: A. Senate Bill No . 179 AN ACT PROVIDING FOR THE TERMS, CONDITIONS AND LICENSING REQUIREMENTS FOR MULTINATIONAL COMPANIES OPERATING REGIONAL OR AREA HEADQUARTERS OR REGIONAL WAREHOUSES BUT NOT DOING BUSINESS IN THE PHILIPPINES, AND FOR OTHER PURPOSES. 1. It is recommended that in Sec. 2(a),the phrase " upon favorable recommendation of the Board of Investments " be deleted. It may be worth mentioning that under the Foreign Investments Act of 1991 the SEC is empowered to license foreign corporations and register domestic corporations with foreign equity without prior recommendation by the Board of Investments. We find no reason why such requirement is imposed in licensing regional headquarters of multinational companies. We believe that insofar as the licensing process is involved, prior recommendation from the Board of Investments is not necessary. This recommendation is in line with the present policy of the Government to eradicate bureaucratic red tape. 2. In Section 2(1-B),it is suggested that a proviso stating " and shall not derive any income from services with the Philippines" be inserted. This provision would make the law clear that regional headquarters of multinational companies cannot do business in the Philippines for profit. 3. It is also suggested that in the public interest and/or for the effective implementation of the Act, the Securities and Exchange Commission be given the " visitorial power " over regional headquarters registered pursuant to the Act, to read as follows: "SECTION (2) ... (2) VISITORIAL POWER In the public interest and/or for the effective implementation of this Act, the Securities and Exchange Commission may, through its duly authorized representatives, exercise the following functions: (a) Conduct such investigations as it deems necessary to determine whether or not an international company which has registered its regional or area headquarters in the Philippines is complying with the provisions of this Act, including but not limited to conducting necessary examination of the books and records of accounts of the regional or area headquarters, determining all the facts and circumstances concerning the matter to be investigated, including making pertinent inquiries from its personnel, and taking such other acts necessary for the proper exercise of its authority. (b) Take such proper proceedings to revoke or cancel the license of the regional or area headquarters of multinational company in case the same is found to have willfully violated any provision of this Act. prcd (c) Require reports for the proper compliance of the required remittance under this Act. (d) Do any and all acts necessary for the discharge of any of the above functions, powers, duties and responsibilities." 4. If the foregoing recommendations are adopted, Section 2 (2) should be correspondingly renumbered and re-worded to read as follows: "(3) To promulgate such rules and regulations necessary to implement the provisions of Section 2 of this Act within sixty (60) days from the effectivity of this Act." B. Senate Bill No . 553 AN ACT ESTABLISHING A NATIONAL POLICY ON COUNTER TRADE. The Commission supports the objective of the Bill as it is in keeping with the national policy to adopt the present trend of globalization and will serve the government's thrust of fostering international trade competitiveness and concerted efforts to harmonize and coordinate enforcement of international agreements. C. Senate Bill No . 965 AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS, REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 1180, AS AMENDED, AND FOR OTHER PURPOSES. The Commission likewise supports the objective of the Bill as it is in keeping with the present State policy to adopt more liberal economic statutes aimed at encouraging foreign investments which would bring about significant improvement of the Philippine economy. Opening foreign investments entry and participation in the retail trade business would prevent the trade sector from lagging behind the rest of the economy. However, while the Commission does not interpose, objection to the passage of the Bill, it is suggested that the word " capitalization ", under Section 3 of the Bill be clarified whether it refers to the authorized capital, subscribed capital or paid-up capital. Take note that the capital structure of a corporation consists of the authorized, subscribed and paid-up capital. Under the Foreign Investments Act of 1991, the paid-up portion is used as the basis for determining the required statutory minimum capitalization at the time of incorporation. Thus, to be consistent with said Law it is suggested that the term "capitalization", in case of corporate entities, be replaced with the term "paid-in equity capital ", the term used in the Foreign Investments Act of 1991. D. Senate Bill No . 1088 REVISED INVESTMENT COMPANY ACT. We highly recommend the passage of the Bill as it was the SEC itself which drafted and introduced the Bill to the Senate and House of Representatives. There is a pressing need to adopt the Bill in order to hasten the Philippine capital market development. The amendments introduced therein are designed to make the law responsive to the growing challenges and challenges of the securities market and in order to adopt the present trend of world capital market. E. Senate Bill No . 1159 AN ACT TO STRENGTHEN THE PROHIBITION AGAINST MONOPOLIES AND CARTELS OF BASIC NECESSITIES OR PRIME COMMODITIES, AMENDING FOR THE PURPOSE REPUBLIC ACT NUMBERED EIGHT HUNDRED AND FIFTY-ONE OTHERWISE KNOWN AS THE PRICE ACT. The introduction of the Bill is imperative, timely and deserve support in the light of the growing reports of alleged business cartels of certain industries or basic commodities by some businessmen resulting in unreasonable increase in the price of prime commodities. Very truly yours, (SGD.) PERFECTO R. YASAY Acting Chairman