As we move toward globalization, investment across the
borders is now becoming a trend. Foreign investments in the country continue to soar. Many see foreign investment in a country as a positive sign and as a source for future economic growth. It is actually beneficial to our economy that foreigners believe in the Philippines as a lucrative venue to place their money by establishing profitable businesses and, at the same time, serving the general public. One of the many industries that is appealing to foreign investment is the business of freight forwarding, which is also a much-needed service for efficient and effective transportation of goods and commodities.
It may be unknown to many that the operation of freight
forwarding in the Philippines is considered under Philippine laws as operation of a public utility. A public utility is defined as a business or service engaged in regularly supplying the public with some commodity or service of public consequence, or essential to the general public. As its name indicates, the term implies public use and service to the public. A public utility under the Constitution and the Public Service Law is one organized for hire or compensation to serve the public, which is given the right to demand its service. In one opinion rendered by the Securities and Exchange Commission, air freight forwarding is tantamount to engaging in domestic air commerce and/or transportation.
As an operator of a public utility, the corporation must adhere
to the requirements found under Article XII, Section 11 of the Philippine Constitution which provides that the operation of a public utility shall be granted only to citizens of the Philippines or to corporations organized under the laws of the Philippines, at least 60 per centum of whose capital is owned by Filipino citizens. The participation of foreign investors in the governing body of any public-utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation must be citizens of the Philippines. Notably, one of the requisites is that at least 60 percent of the shareholdings of a public-utility corporation must be owned by citizens of the Philippines. Conversely, foreign equity participation in public utility is limited to 40 percent.
Generally, there is the same set of requirements for the
incorporation of a domestic corporation, may it be wholly or partially foreign-owned. A corporation with more than 40- percent foreign equity shall have to comply with the requirements set forth in the Foreign Investments Act of the Philippines. In the case of a freight forwarder, which, again, is considered a public utility, what is most important is to comply with the 60/40 ownership requirement as mentioned above. This equity requirement is further reinforced in Executive Order 184, Series of 2015, which promulgated the most recent foreign-investment negative list. Considering that a freight forwarder shall operate as a public utility through air-transport services, an endorsement/clearance from the Civil Aeronautics Board (CAB) is an additional requirement for incorporation. A Letter of Authority shall have to be secured from CAB. It is an approval issued by the CAB authorizing a person or entity to engage in airfreight forwarder, general sales agent, cargo sales agent and off-line carrier.
For freight forwarders that will exclusively operate domestically,
the minimum paid-up capital is P250,000, while those that will have international operations, the minimum paid-up capital required is P2,000,000. It is interesting to note that in one case decided by the Court of Appeals in 2013, involving one of the largest freight forwarding companies in the world, it ruled that such company was a foreign corporation and, therefore, could not conduct business in the Philippines because air freight forwarding was a public utility reserved for Filipinos.
While foreign investments help boost our economic growth, our
laws significantly protect our citizens by setting limitation for foreigners who want to set foot in the countrys most in- demand industries.
Indeed, doing business in the Philippines by foreigners is not a
right granted to them, but a mere privilege regulated by our laws. Such regulation, especially in public utilities, is not merely intended to prioritize Filipinos to engage in business in the country, but most important, to protect the consuming public of the products and services they avail.
The State is bound to protect its citizens, more so, to keep an
eye on matters imbued with public interest. Salus populi est suprema lex.