Executive Summary: Policy Issue Paper: Should the Book Board allow Foreign Equity in

Local Book Publishing?

Book Publishing is part of mass media, but not of news media. The reality of de-massification of
mass media is one reason why book publishing should no longer be considered part of mass
media. Today, owners and publishers of books and magazines no longer produce mass market
books in huge volumes but employ target marketing techniques to identify very specific market
segments and therefore produce limited copies to avoid losses and easily recover their
investments.

In the Philippine Constitution, foreigners are not allowed to invest in mass media as reflected also
in the Negative A list of the Board of Investments which list mass media, except recording, as
among areas where foreign investors are excluded. A SEC official explains that foreign investors
are allowed to go into book printing but not book publishing. A BOI employee opined that there
is still a chance for book publishing to be de-listed, just like musical recording. NBDB can just
coordinate with NEDA to request that book publishing be excluded considering that the Negative
A listing is only valid legally for two years and that NEDA prepares a Negative A List every time
a new Medium Term Development Plan is crafted. The best time to resolve this issue is now,
when Government has already proposed foreign ownership of media since last year.

Of the three policy options presented, Option Two is recommended, which is to hold a
consultation first and to request various stakeholders to submit position papers on the subject and
come up with a consensus e.g. a minimum of 25% to a maximum of 40% equity. A positive stand
on the issue will then justify NBDB’s request for a legal opinion from the DOJ, DTI, BOI,
NEDA, and SEC on the matter. A favorable opinion from DOJ or NEDA can then be sent to BOI,
DTI, SEC for their information and guidance and eventual delisting of book publishing from
BOI’s Negative A List. A favorable opinion will lead the NBDB to schedule a follow-up
consultation to set up plans, program, projects, and activities with the stakeholders for this
purpose.

Major book publishers, mostly family-owned, might not be supportive of this move as they will
not benefit directly from this initiative, except for those expanding into global markets or would
be needing additional investments for relocating in the Book City. Entry of foreign book
publishers as investors can take various business formations e.g. set up a representative office,
branch office, domestic subsidiary, regional headquarters, engage in joint venture, purchase
shares and partnerships in Subic, Bataan or any preferred Export Processing Zone. They can
provide capital, state-of-the art technologies, training, professionalism in book selling and most of
all, will challenge local book publishers to be more competitive, to continuously improve their
processes, among others. Safety nets are proposed to prevent a negative externality e.g. foreign
ownership of local book publishing industry like in the US, Australia, and South Africa.
Should the Book Board allow Foreign Equity in Local Book Publishing?
By Ed Sabalvoro, EA V, Office of the Chairman, NBDB
1 November 2005

I Rationale:
This paper will attempt at explaining why the NBDB should explore the possibility of
getting the participation of foreign investors in the local book market by allowing foreign equity
in local book publishing companies. Partnership with foreign companies has already been
explored by local book publishers in the textbook program as well as joint ventures or co-
publication. The only thing that has not been experimented on is foreign ownership of equity in
local book publishing companies and their direct participation in the local book market.

This paper will try to discuss if allowing foreign equity in local book publishing
companies possible, why it should be pursued, how much, and to determine creative and
innovative ways how the NBDB can generate interest and investments from foreign book
publishers or investors without resorting to giving in to the temptation of selling out local book
publishing companies in favor of big foreign book publishers. This paper will show how the
NBDB can allow foreign equity by advocating that book publishing should not be understood as
part of mass media and present the options available to ensure that foreign equity, if allowed, will
be beneficial, not detrimental to the local book publishing industry. This will also explain how
foreign investors can participate as players in the local book market.

With the enactment of law of RA 8047 in 1996, the National Book Policy in 1999, and
finalization of the National Book Development Plan in 2004, no foreign investor has ever owned
any equity in any local book publishing company.

Scope and limitation:

This paper will justify the need to exclude book publishing from the common
understanding of mass media due to de-massification of print media products specially books and
that book publication in the Philippines has not really reached mass media proportions. Two, it
will justify the need for the entry of foreign book publishers, merely as a development
intervention to provide the needed investments, training, state-of-the-art technology, among
others, and help prop up the local book industry and the reading public. Three, it will show how
the National Book Development Board can provide the safety nets to ensure the continuous
growth and development of local book publishers by creating an enabling environment that will
get the support of the private sector, non-government organizations, and various government
agencies.

Definition of terms:
Books: All non-periodical hardcover volumes regardless of length, excluding coloring
books, and all non-periodical softbound volumes over 48 pages.
http://www.publishingcentral.com/articles/20030124-21-3c43.html

Trade Books: Books designed for the general consumer and sold primarily through
bookstores and to libraries ('trade,' then is in reference to the traditional trade markets these books
are sold in). Though trade books were traditionally hard cover, in recent years more soft cover
trade books have been common. http://www.publishingcentral.com/articles/20030124-21-3c43.html
 Mass-Market Books: Books sold predominantly through mass channels that extend
beyond traditional trade outlets, such as book and department stores, to include newsstands, drug
stores, chain stores, and supermarkets. Mass market paperbacks are usually printed on less
expensive paper than trade paperbacks, and their covers are more likely to attract a mass
audience. http://www.publishingcentral.com/articles/20030124-21-3c43.html

Textbooks: Books designed for classroom use rather than general consumption. This
category also includes workbooks, manuals, maps and other items intended for classroom use.
Textbooks usually contain teaching aids, such as summaries and questions that distinguish them
from consumer oriented materials (like trade books). http://www.publishingcentral.com/articles/20030124-
21-3c43.html

Media: is the whole body of communications that reach large numbers of the public via
radio, television, movies, magazines, newspapers and the World Wide Web. The term was coined
in the 1920s with the advent of nationwide radio networks, mass-circulation newspapers and
magazines.

The mass media reaches a mass audience. That audience has been viewed by some
commentators as forming a mass society with special characteristics, notably atomization or lack
of social connections, which render it especially susceptible to the influence of modern mass
media techniques such as advertising and propaganda. During the 20th century, the advent of
mass media was driven by technology that allowed the massive duplication of material at a low
cost. Physical duplication technologies such as printing, record pressing and film duplication
allowed the duplication of books, newspapers and movies at low prices to huge audiences.
Television and radio allowed the electronic duplication of content for the first time. Mass media
had the economics of linear replication: a single work could make money proportional to the
number of copies sold, and as volumes went up, unit costs went down, increasing profit margins
further. Vast fortunes were to be made in mass media.

Conflicting Government Policies:

The National Book Policy recognizes that book publishing as a priority investment area.
Section 2.1. provides that “The book publishing industry shall be permanently recognized as a
priority investment area in the Philippines.” Section 2.3. specifically provides that “Joint
Ventures with foreign publishers shall be established to facilitate the exchange of technology and
markets, and strengthen domestic publishing capabilities.”

However, said provisions runs counter to the provision of the 1987 Philippine
Constitution: Article XII: National Economy and Patrimony: which provides on Section 11. (1) that
“The ownership and management of mass media shall be limited to citizens of the Philippines, or to
corporations, cooperatives or associations, wholly-owned and managed by such citizens.

The Congress shall regulate or prohibit monopolies in commercial mass media when the public
interest so requires. No combinations in restraint of trade or unfair competition therein shall be
allowed.”

The National Book Development Plan

The NBDB has provided measures generating foreign investments in its 2005-2010
National Book Development Plan but these are more related to the creation of a Book City (see
Annex 1 of NBDP) which will be realized together with DTI-BOI. Investment Promotions are
scheduled in 2006. The lack of consultation with relevant government agencies like the BOI,
NEDA, in the making of the Book Plan requires that a review be conducted and consultations be
held to resolve the issue of foreign equity, their specific programs for book and book
publishing/printing being a mandatory inclusion in the Investment Priorities Plan.

The Book Plan doesn’t mention anything about conducting investments promotion by
relevant government agencies for the purpose of getting foreign investors to partner with, to
invest in local book publishing or to set up their regional headquarters in the Philippines, among
others even if book and textbook publishing and printing are mandatory inclusions in the
Investment priorities Plan.

II Opportunities for Foreign Investors in the Philippines

Publisher services of SPI technologies (with four offices in the Philippines) have
reportedly utilized the local talents to do copyediting and content production (of journals and
books) for foreign publisher-clients (see http://www.spitech.com/SPIPublisher/default.html). A
foreign based book publisher - Whitman Publishing have successfully contracted NBDB-
registered authors and illustrators for their overseas publications. Imported books are sold and
distributed locally via their local representatives or agents through an organization called
Publishers Representatives Organizations of the Philippines or PROP which also allow local
reprints of professional and academic books.

The problems plaguing the book industry such as low annual book production, poor
quality textbooks and others mentioned in pages 8-12 of the National Book Policy are still valid
up to now and these can be improved or resolved if only foreign investors are allowed equity in
local book publishing companies. (See Annex E for details)

How foreign Book Publishers can set up Office in the Philippines

According to a DTI/BOI website, there are a number of business structures that foreign
investors may use to establish their operations in the Philippines which they may form on their
own or in partnership with local investors e.g. set up a representative office, branch office,
domestic subsidiary, regional headquarters, joint venture, purchase shares and partnerships. (See
Annex D for Details). However, allowing foreign investors to own and operate local book
publishing companies will be a long and arduous struggle and the NBDB can learn from many
local industries that have not pursued that option and just stayed within the limits of the 1986
constitution which prevents foreign participation in the Negative A List of the BOI.

Getting foreign entities to own and operate local book companies will only happen if
books are not considered part of mass media just like what the Music industry did for de-listing
musical recording from BOI’s Negative A List. In Canada, book publishing was excluded in its
Interim Report on News Media. Maybe, the interpretation should focus on book publishing as
being separate from news media considering book publishers, as content providers, reach the
readers a bit late than newspapers and broadcast.

III Book publishing is part of mass media, not of news media

A contemporary economic phenomenon is de-massification. The mass media are capable
of reaching tremendous numbers of people, but most media today no longer try to reach the
largest possible audience. They are de-massifying, going after narrower and narrower segments
of the mass audience via target marketing strategies. “Today’s companies are finding it
increasingly unrewarding to practice mass marketing or product-variety marketing. Mass markets
are becoming “de-massified.” They are dissolving into hundreds of mini-markets characterized
by different life-style groups pursuing different products in different distribution channels and
attending to different communication channels” (Kotler: 280).
From Mass marketing to target marketing of books, traditional to New Media:
Companies are increasingly embracing target marketing. Target marketing helps sellers
identify marketing opportunities better. The sellers can develop the right offer for each target
market. They can adjust their prices, distribution channels, and advertising to reach the target
market efficiently. Instead of scattering their market effort (“shotgun” approach), they can focus
it on the buyers with whom they have the greatest chance of satisfying (“rifle” approach).

Accordingly, mass media is in transition from the traditional business model to a new
media model, from mass audience programming, few channels, little feedback, analog, separate,
more gate keeping, and with passive receiver to one characterized by the following:
narrowcasting - segmented audience, more channels, more feedback, digital, integrated, less gate
keeping, active receiver.

The same can be said of a trade book publisher, who divides the market for his/her books
into distinct groups of buyers who might require them. He/she will try to identify different ways
to segment the market and develops profiles of the resulting market segments. After which, the
book publisher/seller develop measures for his/her books to be attractive and select one or more
market segments to introduce his/her books. The third step, the publisher then positions his/her
books and looks for specific market segment that will adopt the title – schools, elementary, high
school, etc.. The same thing applies to trade books, academic books. In the Philippines, initial
printing is 1,000-2,000 copies for a trade book is common place while in the US, it is 5,000
copies.

From this perspective alone, we can already deduce that books should not be considered
part of mass media. Even mass market books e.g. romance novels and novelettes which sell for
ten pesos do not reach the masses. Hence, the NBDB can already look at books not as mass
media products but merely printed media products for a very specific segment of the book
market. Even electronic books cannot reach the masses since not all Filipinos own a computer nor
have the time and money to subscribe or purchase electronic books that are locally produced.

IV Policy Options Available:

The National Book Development Board shall have the following policy options in
allowing foreign book publishers to set-up office in the country and even produce books for local
use.
First Option is that NBDB shall solicit opinions from DOJ, DTI, BOI, NEDA, and SEC
and provide then with position papers. A favorable opinion from the DOJ or NEDA can be sent to
the SEC and the BOI for their information and guidance and eventual de-listing of book
publishing from BOI’s Negative A List. NBDB will then hold consultations and relay the
opinions to stakeholders and set up programs, projects, activities in conjunction with relevant
private and public organizations especially in drawing foreign investors into the local book
industry. Safety nets are set up so that the local book publishing industry will benefit. The
Governing Board can then come up with new rules allowing foreign investors to a maximum of
40% equity in a local book publishing company. A new rule promulgated can be published jointly
with concerned government agencies.

A second option is to hold a consultation first and request various stakeholders to submit
position papers on the subject and come up with a consensus. A positive stand on the issue will
then justify NBDB’s request for a legal opinion from the DOJ, DTI, BOI, NEDA, and SEC on the
matter. A favorable opinion from DOJ or NEDA can then be sent to BOI, DTI, SEC for their
information and guidance and eventual delisting of book publishing from BOI’s Negative A List.
A favorable opinion will lead the NBDB to schedule a follow-up consultation to set up plans,
program, projects, and activities with the stakeholders for this purpose. The Governing Board can
then come up with new rules allowing foreign investors to a maximum of 40% equity in local
book publishing company. A new rule promulgated can be published jointly with concerned
government agencies. The NBDB takes a supporting role in the actual submission of policy
proposal and once approved will take a critical role in come out with new rules and in ensuring
foreign investors comply with the requirements.

A third Option is merely to ignore the issue and establish partnership with DTI and BOI
for possible programs, projects or activities where book publishing and printing can be given due
attention by said agencies. As a mandatory inclusion in the Investment Priorities Plan (IPP), said
government agencies shall come up with concrete plans to really prop up the local book industry.
A good start is getting foreign investors for the Book City which can be created in Subic, Bataan
or any preferred location, as reflected in the 2005-2010 National Book Development Plan. The
NBDB can also be proactive by setting up partnerships with various government agencies, major
stakeholders e.g. publishers and printers to create a council responsible for drawing in to the
country investors e.g. invite book printing manufacturers and suppliers to hold an exhibit in
partnership with CITEM or investment road shows abroad considering that the publishing and
printing of books and textbooks is a mandatory inclusion in the 2004 Investments Priorities Plan.
This means also that the NBDB should stick to its plan to set-up a Book City instead of a virtual
one.

Positive Externalities:
This will encourage foreign book publishers to set up shop in the Philippines whether in
Subic or in Metro Manila, encourage the transfer of technologies, the use of state of the art
publishing and printing technologies, this will provide make books more affordable, accessible,
access; will force local book publishers to innovate and to be competitive; create the best
environment for book printing; foster the development of skills in book publishing; promote use
of state of the art technologies and use of local and indigenous raw materials; will help in
establishing an efficient distribution system of books in the country and support their promotion
in the international market; support an efficient book utilization program for institutions, promote
reading habits and effective nationwide network of libraries and reading centers; will create a best
condition for the development of local authorship especially if they hire, train locals.

Stakeholder Analysis:
Options 1,2 WITH DIRECT POSITIVE WITH NO DIRECT POSITIVE
RESULTS (Option 2) RESULTS
SUPPORTIVE (Technology, skills training, state-of- Huge Book Publishing companies e.g.
STAKEHOLDERS the art equipment, capital, etc.) for Rex, Phoenix Publishing House, Vibal
Small book publishers (BEAP) Publishing House;
Small book printers (BDAP)
Authors, creative workers, Printers and (They will gain a lot in Option 3 if they
workers, Bookstore chains are willing to relocate in Subic, Bataan or
NBDB any location where the Book City will be
set up physically.)
(Access to wide array of imported
books, services) for - Higher education
institutions Elementary and high
school educational institutions
NON-SUPPORTIVE
STAKEHOLDERS

Safety Nets for Local Book Publishers:

For all three options, the NBDB will be required to set up safety nets to regulate the ownership or
participation of foreign investors in the local book market, in case they are allowed a minimum of
25% to a maximum of 40% equity in local book publishing companies. According to newspaper
report, proposals to open media ownership were outlined in a draft of the Medium-Term
Philippine Development Plan 2004-2010, which was recently published by the National
Economic and Development Authority (Wilson).

1. Local Book publishers in partnership with the academic community shall be encouraged to
form a book content watchdog to monitor books produced in respect to bias, accuracy, balance
and fairness, errors, etc.;
2. The concept of book authors, writers, creative industry workers establishing independent
companies providing various services to the book industry and partnerships shall be encouraged;
3. All book industry workers employed with local and foreign-owned book publishing
companies shall be registered with the NBDB and or relevant government agency e.g. TESDA;
4. The NBDB shall have oversight functions on the operations of foreign book publishers in
the country.
5. A rule specific to participation of foreign investors in the local book market shall be
promulgated by the Governing Board specifically concerning ownership concentration, non-
media subsidiaries, foreign-ownership and anti-competitive business practices. These are:

- Foreign owned individual publishing companies must be limited to national market share of
20 per cent;
- Ownership must be restricted to one branch of the media (cross ownership restriction) and
will be discouraged to own other mass media formats – newspaper, broadcast,
magazines;
- Foreign Book Publishing companies must be precluded from owning controlling interests in
companies whose main business is not book publishing;
- Foreign Book Publishing Companies participating in the DepEd’s Textbook program must
be precluded from introducing textbooks in Filipino culture, social studies, Philippine
history, Pilipino, Araling Panlipunan; among others.
- Foreign Book Publishing companies should be permitted to enter the Philippine book
market only if they intend to set up new ventures (a publishing or book printing
company) and takeovers of existing facilities should be prohibited;
- A code of fair competitive practice should be drawn up to prevent existing local or foreign
book publishers from obstructing new entrants (e.g. not allowing freedom of
distribution, access to retail outlets and access to printing)

Implementation Plan
The following activities should be pursued by the NBDB in a minimum of three (3) to six (6)
months. First is to present the policy issue paper to the Governing Board for discussion and
decide on pursuing policy options available. Second, a policy decision shall be made by the
Governing Board on approving the conduct of a consultation with book publishing industry
stakeholders. Third, during the consultation, a proposal on the limitations on foreign equity as
provided in the constitution, opportunities at NEDA and the discussion on whether there is a need
to allow foreign equity in local book publishing companies from 25% to 40% equity will be
discussed. Fourth, as soon as a consensus is reached, the NBDB can then submit a position paper
of book industry stakeholders and seek an opinion from the Department of Justice as well as from
the NEDA. Fifth, as soon as an opinion is made by the DOJ and NEDA, the Governing Board
shall consult relevant agencies and promulgate the Implementing Rules which will be published
in a newspaper with nationwide circulation. Sixth, the NBDB and relevant government agencies
e.g. NEDA, BOI, DTI, the book industry stakeholders shall set up programs, projects and
activities to draw in foreign investors to the book publishing industry.

V Analysis and Recommendations

It is recommended that the NBDB should pursue Option Two. The NBDB, as enabler and
facilitator, shall consult first the stakeholders on its proposal to possibly allow foreign investors to
participate in the local book industry. As soon as a consensus is reached, it shall seek the opinions
primarily of the Department of Justice and NEDA and propose that book publishing be excluded
from mass media and should be de-listed in BOI’s Negative A List. A minimum of 25% to a
maximum of 40% foreign equity shall be proposed in a local book publishing company
considering that book publishing is no longer a mass media because of the reality of de-
massification of media and target marketing for media products. If Option Two fails, i.e. no
positive opinion is made by the Department of Justice or the NEDA on the de-listing of book
publishing the best alternative left is Option Three where Investment Promotions Agencies like
the DTI and BOI shall sell the idea of a Book City and invite potential investors to set up a
representative office, branch office, domestic subsidiary, regional headquarters, joint venture,
purchase shares and partnerships in Subic, Bataan or any preferred Export Processing Zone.
Option three will benefit big publishers. Option One is not recommended.

Interviews made on 21 October 2005

- With Donna Lipar of One-Stop-Action Center of the Board of Investments – who advised that
the NBDB can confer with NEDA for the exclusion of book publishing from BOI’s Negative A
List which accordingly is made every 2 years or whenever another medium term development
plan is drafted.
- With Erly Cabatig of Corporate and Partnership Registration Division of the Security and
Exchange Division – who commented that indeed no foreign equity is allowed in book
publishing except printing considering that editorial, layout, production is part of book
publishing.
References Cited:
1. Benjamine M. Compaine. The Future of Media Companies in the International Arena.
http://users.primushost.com/~bcompain/valencia.htm. 1992, 1998. [This study was
undertaken in 1991. It was originally published as a case note by the graduate business school
of the University of Navarra, Instituto De Superioress De La Empresa, Barcelona, Spain.]
2. Vin Crosbie. The One Thing you should know about the ‘New Media’:Publishing: Free or Fee?
http://www.clickz.com/experts/design/freefee/article.php/1468371. September 24, 2002.
3. Eve Horwitz Gray. Wesgro Background Report on the Publishing Industry in Western Cape.
August 2000.
4. James Hall, Culture-Africa: Publishing Takes on NEPAD. http://www.ipsnews.net/interna.asp?
idnews=26250
5. Ray Eldon Hiebert. The Growing Power of Mass Media.
http://www.southernct.edu/~seymour/cases/heibert.htm
6. Bernie Cahiles-Magkilat. Caution aired on moves to lift foreign ownership cap
http://www.mb.com.ph/BSNS2005101646792.html
7. Erin Willis. Concentration of Ownership in the Mass media: A threat to the Free Exchange of
Information. http://www.peak.sfu.ca/cmass/issue3/concentration.html.
8. Karl Wilson. Opening RP media to foreign ownership easier said than done
First posted 04:14am (Mla time) Oct 07, 2004 Agence France-Presse
http://news.inq7.net/nation/index.php?index=1&story_id=14097.
9. ______. PHILIPPINES: Manila may open up media to foreigners: Philippine media seeks to open
itself to foreign participation. The Straits Times. http://www.asiamedia.ucla.edu/print.asp?
parentid=15207 Tuesday, September 28, 2004.
10. ______. Missing in MTPDP Objectives: A Compliant Media. http.today/abs-cbnNEWS.com.
11. ______. Report: Foreign Ownership of U.S. Book Publishing Reaches 50%.
http://www.writenews.com/1998/071698.htm. Thursday, July 16th, 1998.
12. ______. Book Industry Statistics. htttp://www.parapublishing.com/getpage.cfm?
file=statistics/index.html
13. Department of Canadian Heritage Book Publishing Program. Book Publishing Industry
Development Program (BPIDP), 1999- 2000 Activity Report. April 2000
http://www.pch.gc.ca/progs/ac-ca/pubs/ic-ci/pubs/report-rapport/bpidpar_e.html
14. Standing Senate Committee on Transport and Communications. Interim Report on Canadian
News media: Fourth Report. April 2004.
Books:
1. Philip Kotler. Marketing Management: Analysis, Planning, Implementation and
Control. 1988.
2. National Book Policy.
3. National Book Development Plan

ANNEX A : BOI Investment Negative Lists

List A includes limitations made by constitution or special law.
No foreign participation is allowed in mass media; except recording, most licensed professional services (e.g.
accountants, lawyers, engineers);retail trade; cooperatives; private security agencies; small-scale mining; fisheries;
rice and corn farming
25% foreign equity is allowed in :recruitment agencies; locally funded public works projects
30% foreign equity is allowed in : advertising
40% foreign equity is allowed in : resources development and utilization; land ownership; public utilities; educational
institutions; financing companies; construction
List B restricts foreign investment for reasons of security, defense, health, morals and protection of small and
medium-sized enterprises.
40% foreign participation is allowed in : explosives; munitions; armaments; dangerous drugs; massage clinics;
gambling; domestic market enterprises with capital less than USD 500 000, provided enterprises don't use advanced
technology; small-scale export enterprises with capital less than USD 500 000; depleting natural resources
List C which limited foreign equity by the capacity of existing enterprises was removed in October 1994.

Annex B. How can Foreign Investor do business in the Philippines (culled from BOI website)
Before a foreign corporation can do business in the Philippines, it must register with the Securities and Exchange
Commission (SEC) to acquire status as legal persons with all the rights, benefits and privileges of a corporate citizen.
Those who wish to avail of investment incentives should first seek approval from the Board of Investments (BOI) or
the Philippine Economic Zone Authority (PEZA) before filing an application with the SEC. Businesses operating in
one of the 39 cities and towns that are defined as “Ecozones” by the Special Economic Zone Act, are entitled to
additional incentives.

Since the liberalization of the foreign investments law, 100% foreign equity may be allowed in all areas of investment,
except financial institutions and those included in the fifth regular Foreign Investment Negative List (effective October
22, 2002). (See Annex A – Investments Negative Lists)

A foreign Investor can also opt to set up a legal office in the Philippines and not invest in the local book industry just
like what SPI Technologies Inc. is doing in the Visayas e.g. setting up of regional headquarters of multinational
corporations (MNCs). Other foreign investors made the Philippines as their back offices for payroll accounting and
inventory management; software development and systems maintenance; website design and maintenance; call centers,
data warehousing and data conversion; insurance claims processing; medical transcription; and content development.
Republic Act 8756, allows the regional headquarters of MNCs to derive local income from their Philippine operations.
Prior to this, such regional headquarters were allowed to act only as administrative branches for international
operations and were not allowed to conduct local business that involved commercial transactions. The new law also
grants expatriates working at regional headquarters special multiple-entry visas, tax breaks such as exemption from
payment of income taxes and the local (10 percent) value-added tax. Under certain conditions, supplies imported by
these regional headquarters can be exempted from customs duties, internal revenue taxes, export taxes and other local
taxes.
The Philippine government requires regional headquarters (RHQ) and regional operating headquarters (ROHQ) of an
MNC to submit certificates of remittance to the Securities and Exchange Commission (SEC), within 30 days of receipt
of its certificate of registration. The initial funding requirement for an RHQ is US$50,000 while the ROHQ is required
to remit initially the amount of US$200,000 or an equivalent amount in other foreign currencies. An ROHQ is a foreign
business entity, which is allowed to derive income in the Philippines, by providing qualifying services to its affiliates,
subsidiaries, or branches.

Annex C. Comparative Analysis Foreign Ownership of Book Publishing Companies in three (3)
countries:

USA: Number of Publishers - 6 large publishers (in New York); 3-400 medium-sized publishers; 86,000 small/self-
publishers. The six U.S. conglomerate publishers are 1. Random House, Inc.; 2. Penguin Putnam Inc.; 3.
HarperCollins;4. Holtzbrinck Publishing Holdings; 5. Time Warner and 6 Simon & Schuster, Inc.. Four are
foreign owned. making US book publishing 50% foreign owned --PMA Newsletter, September 2003
http://www.PMA-online.org (cited in Book Industry Statistics http://www.parapublishing.com/getpage.cfm?
file=statistics/index.html and http://www.writenews.com/1998/071698.htmThursday, July 16th, 1998)

Canada: Of 321 book publishing firms surveyed in Canada in 1996-97. Of these, 301 were Canadian-controlled and 20
were foreign-controlled. It reports that the low profitability of BPIDP recipients can be explained by the easy
access of foreign publishers to the Canadian market. Foreign benefit from economies of scale far greater than
those enjoyed by Canadian publishers. This gives them an advantage over Canadian publishers in terms of
pricing. Canadian book prices are not based on the real cost of publishing but on a competitive price with
foreign titles published at a lower cost and sold at lower prices in the Canadian market. • The gross margin
differential between Canadian and foreign publishers is a key challenge facing the industry. Foreign firms
generate a gross margin on sales nearly 10 percentage points higher than Canadian firms of comparable size.
Canadian firms have higher costs of sales mainly resulting from the limited economies of scale in publishing
for a relatively small market. As a result, operations of Canadian publishers cannot be fully capitalized from
earnings. • Canadian publishers, like other cultural industries, are perceived as high risk and based on small
profit margins. This, coupled with the difficulty of gauging a book's potential market success, makes it
difficult for publishers to gain access to working capital through financial institutions; • Undercapitalization
and its effect on succession and the long-term health and stability of the industry are serious concerns for
publishers. “Books and magazines in Canada consist of a mixture of Canadian-owned and foreign
publications. The dominant Canadian book publisher is McClelland and Stewart, although the most
successful Canadian publisher internationally is Harlequin Enterprises, leader of the romance-novel market.
Subsidiaries of American and British firms play an important part in Canadian book publishing.”
Comparative Foreign Media Systems http://www.uky.edu/~huc129/com249/formedia.htm
South Africa. John Wiley and Pearson operate with agents in South Africa. But the following are Oxford University
Press SA (publishers and agent), Cambridge University Press (publisher/distributor), and The Readers Digest
Association (Publisher). The trade book market is dominated by multinational companies which import books
into South Africa. Of these multinationals, Penguin publishes a local list, and Random House has begun to
publish local titles. Jonathan Ball acquired the Harper Collins agency, and then was absorbed by Naspers.
Local publishing companies have been through a period of consolidation: Naspers has restructured and
merged some of its trade publishing companies. David Philip has been acquired by New Africa Media; the
media arm of New Africa Investments Limited (NAIL) a black empowerment investment company, and is
expanding its lists as a result. Growth in the trade market would be positively affected by substantial growth
in tourism. Struik works closely with the Western Cape and national tourist bodies and would support
initiatives to boost tourism.

Sixty percent of the school textbook market in Africa is dominated by two multinational publishing
companies – neither of which is African, (in francophone Africa, 95 percent of school textbooks and other
books are produced by French publishers).

Three other multinational firms control a further 20 percent of the continent’s market – again, none of
these are African companies. As a result, only one out of five books sold in Africa is produced by a
publishing house based on the continent.

Even in South Africa, the most developed nation in sub-Saharan Africa, over three-quarters of books sold are
published by foreign multinational companies. Ownership patterns in the rest of the industry reflect the
 legacy of apartheid: 15 percent of book sales originate with white-owned South African publishers, and only
8 percent from local black publishing companies.

Annex D. Business Structures: Based from provisions determined by the Foreign Investment
Act of 1991, a foreign corporation may establish itself in the Philippines through one of
several means such as:
1. Representative Office whose activities are limited to promotion and information dissemination regarding
the products and services of the company it represents. A representative office cannot trade but it can
oversight a local agent.
2. Branch Office may conclude sales contracts with local entities in its own name and engage in income-
producing activities in the same manner as its parent company. The head office of the company provides
the capital to its branch; likewise, it oversees branch management and is accountable for all branch
operations and obligations. Its mode of formation, operation and procedures for liquidation are similar to
those of a domestic corporation.
3. Domestic Subsidiary or domestic corporation is either wholly owned or at least majority-owned by a
foreign parent corporation. But the liability of the parent corporation to creditors of the subsidiary is limited to
its shareholdings in the domestic subsidiary. Establishment of a domestic corporation is the most common
form of business organization used by foreign investors. A corporation may be wholly foreign-owned or may
have local participation. Under the Corporation Code of the Philippines, corporations may be formed for any
lawful purpose by at least five shareholders of whom at least two must be nationals of the Philippines
including .the person nominated as the company secretary. Foreigners with the correct residence visas can
be nominated as company treasurers or as "treasurers in trust" prior to the appointment of a Philippine
national as treasurer in situations where visa conditions do not allow a foreign shareholder to hold such a
position. The Code also requires a minimum paid-in capital for stock corporations of at least P5,000. Some
investment areas have higher minimum paid-in capital requirements.
4. Regional Headquarters act as centers for supervision, communications and coordination for the
company's subsidiaries, branches or affiliates in the Asia-Pacific Region. Special incentives are available to
companies that establish their regional headquarters in the Philippines.
5. Joint Venture is possible when foreign and domestic corporations enter into a joint venture and form a new
domestic corporation, which is to perform a single, specific undertaking or project with each of the partners
contributing to its performance. Unlike in some other countries, a joint venture in the Philippines does not
have a legally separate, recognizable identity.
6. Other modes are possible e.g.
(1) A foreign company may purchase shares in an existing corporation.
(2) A foreign-owned domestic subsidiary can merge or consolidate with a domestic corporation.
(3) A technology transfer arrangement involving licensing of computer software and transfer of systematic
knowledge for a product's manufacture, among other things, may be entered into by domestic and
foreign countries.
(4) A foreign corporation may enter into a five-year management contract that enables it to manage all of
the business of a domestic corporation not involved in wholly or partially nationalized enterprises.
7. Partnerships are formed by two or more persons acting as partners with the partnership having a separate
legal personality from each of the partners. By contributing capital, foreign investors may join a
partnership. Partnerships are often used by professional firms as the preferred form of association.
Repatriation of Capital and Profits - The Bangko Sentral ng Pilipinas or BSP ensures that the repatriation
of capital and the remittance of dividends, profits and earnings can be made using foreign exchange from
the banking system.”

ANNEX E. Problems Affecting the Local Book Industry (P. 8-12 of National Book Policy)
“Under authorship and creative activities: lack of trained and competent authors, editors, designers,
graphic artists and production specialists; inadequate, if not complete absence of a systematic survey of
reader preferences or demands which may guide authors and publishing houses; lack of incentives for
authors and artists due to the limited number of research grants and fellowships, weak enforcement of
copyright law, low royalties, and high taxes imposed on authors;

Publishing and Printing: Lack of opportunities for local publishers to build their book publishing
capabilities; (decreasing) budget allocation for textbooks due to the very limited public expenditures for
education; book prices in the country tend to be prohibitive and; when compared to ASEAN countries,
Filipino buy books at a greater sacrifice; concentration in Metro Manila, and its virtual monopoly of, the
book industry stunt growth and development of publishing capabilities in the regions; the outdated
techniques and equipment and the low level of technology available to the industry affect the
productivity and quality of books produced; the industry is plagued with lack of expertise, with most
publishing houses inadequately staffed and unable to produce quality manuscripts and camera-ready
materials;

Marketing and Distribution: bookstores, book outlets or warehousing facilities are highly concentrated in
Metro Manila; Market information is weak and marketing system limits the production or reprinting of
books; Transportation facilities are in poor condition and transport and postal costs are high;

Readership and Library Systems: Filipinos rely more on television and radio for information and
entertainment rather than on books, and attention given to the latter is prompted mainly to obligation to
meet school requirements; library network, considered a vital line of conduct for encouraging book
reading on a wide scale, is non-existent in the countryside hardly are reading materials appealing to the
masses or relevant to the promotion of their vocation; reading programs and other readership campaigns
deal almost exclusively with textbooks, promoting reading for enjoyment, livelihood and self-
improvement is neglected;”