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Leaders reject 40% foreign ownership, okay to partnerships

Posted September 04, 2022


Senate Committee on Cooperatives Chairperson, Senator Imee Marcos, came up with a very controversial amendment to the Cooperative Code - allowing foreign ownership limited to forty percent. Co-op leaders react strongly.

Co-op leaders have rejected a proposal allowing foreign investors to own up to 40% of shares in co-operatives, and instead pushed for business partnerships.  

Senator Imee Marcos filed on July 22 Senate Bill 418 proposing amendments to the Cooperative Code.  Of the changes being proposed, what caught the attention most was allowing foreign ‘investors’ to own up to 40% shares in Philippine co-operatives.

The co-op leaders, through the United Cooperative Movement of the Philippines (UCMP) have drafted a Position Paper, stating in part: “ . . . with all due respect to our Honorable Senator, WHILE WE ARE OPEN TO FURTHER DISCUSS THE PROPOSED INVESTMENT OF FOREIGNERS IN THE SUBJECT BILL, we in the cooperative sector see no immediate need for the infusion of foreign equity, particularly at the level of primary cooperatives. We reckon that the Filipino nationals who are members of the different primary cooperatives can adequately sustain their respective cooperatives, guided by the cooperative values of self-help and self-responsibility . . .”

Also submitting separate drafts were MASS-SPECC in Mindanao, and NATCCO Network.

MASS-SPECC stated: “If the intent of the Senate Bill is to attract foreign capital to the underdeveloped part of the economy like agriculture, the cooperative may not be the best vehicle for this.  This is especially so if the control of the cooperative goes to investors whose primary concern is the return on their investment and to take advantage of tax privileges granted by law to co-ops.”

NATCCO Network extensively quoted the International Cooperative Alliance (ICA): “ . . . the difference between the value of a membership share in a co-operative and an equity share in a personally owned and/or joint stock investor-owned company. A membership share in a co-operative is invested in the co-operative as common working capital for its business to-operate to meet its members’ needs and aspirations and is not a tradable asset. A co-operative membership share is essentially different from an equity share in an investor-owned company: the latter is aimed at a generating a return for the investor, including capital gains, and is, generally, tradeable.”

NATCCO also cited the Rochdale Pioneers who saved in order to expand the capital of their co-operative, which is a hallmark of the Cooperative Value of ‘Self-Help’ and the Cooperative Principle of Autonomy. 

Thus, under co-operative principles, the members themselves will generate the capital needs of the co-op. 

Senator Marcos now chairs the Senate Committee on Cooperatives.

At an online meeting held on August 30 attended by co-op leaders and officials of the Cooperative Development Authority, Senator Marcos made clear: “Gusto ko lang naman matanggal ang kooeratiba sa “Negative List” for foreign investors para matulungan ang agrikultura.  Yun lang naman yun.”  (I just want co-ops to be taken out of the ‘Negative List’ for entry of foreign investments.  That’s all there is to it.)

She added: “I know you are opposed instinctively – almost a knee-jerk reaction.  I understand that.  However we need to bring investments to the countryside.”

To CDA Chairman Joseph Encabo, she said: “I know CDA Chairman Joseph Encabo is violently opposed.” 

Encabo gave his opinion: “The context that a foreign investment   through handholding or development assistance, cooperatives that are involved in agriculture.  I think we can optimistically come up with further study and come up with a win-win solution.  We believe that our agri sector with participation of co-ops must be reinforced to be more productive.  We just need to ensure that foreign investors will not control our co-ops.  But if we can develop a framework of partnership and collaboration . . .”

Senator Marcos interrupted and said: “We can limit foreign investments to secondary cooperatives!  Common or preferred shares?  With voting rights or non-voting?  Joint-venture?  That can be discussed.”

SB 418 currently is limited to individual investors, but there are actually some farmer associations in China and Taiwan that are interested in investing in agriculture in the Philippines, she said.

Professor Bien Nito of the University of Asia & Pacific recognized that there are opportunities especially from the Indian Cooperative federations like the National Federation of Farmers’ Procurement, Processing and Retailing Cooperative of India, the Indian Farmers Fertilizer Co-operative Limited, and the National Agricultural Cooperative Marketing Federation of India.  He emphasized that we can align ‘cooperative-to-cooperative’.

Also mentioned was the Singapore National Cooperative Federation of Singapore.

Ang agri natin ay napakasama ng sitwasyon dahil kulang sa investments.  Radical ang ating solusyon ngayon at hindi puwede business as usual.  Kung baga ICU na! Kailangan mag-isip tayo . . . mag-experiment kasi hindi puwedeng ganito na lamang.” (Our agriculture is in a bad situation due to lack of investments, and needs radical solutions, and no longer business-as-usual, like it’s in the intensive care unit.  We need to think . . . experiment because this cannot be.) 

Senator Marcos proposed putting up a technical working group on the amendments to the Cooperative Code.  She said her office could file the Bill, in coordination with Senator Robin Padilla, the Senate Committee on Cooperatives Vice Chairperson.


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