Opening up of economy to foreigners pushed

President Aquino’s successor should make amendments to the Constitution that would open up the economy to more foreign investments its top priority if the country is to continue on its trek to a higher growth path.

Former Socioeconomic Planning Secretary Cielito Habito said Mr. Aquino’s ascent to power in 2010 marked a turning point for the Philippines.

Investors flocked to the country, attracted by a government they could trust.

However, the current administration’s reluctance to support key measures that would make the economy truly investor-friendly still serves as a turnoff to foreign money.

“It’s clear that we’re sorely lagging behind because our neighbors have been getting multiples of the levels we get in FDI (foreign direct investments). They have been more liberal in terms of foreign investments in their countries,” Habito said in a press conference.

Under the Constitution, foreign investors are still unwelcome in many of the country’s major industries, including power generation and distribution, telecommunications and water utilities.

President Aquino has said he would not support moves to amend the 1987 Constitution, despite moves by his allies in Congress to change certain economic provisions.

Habito said the country needed to get over its “age-old resistance” to amending the Constitution, noting that the potential benefits outweigh the risks.

Habito was speaking at the local launch of the United Nations Conference on Trade and Development’s (UCTAD) 2014 World Investment Report.

The Ateneo de Manila University economist presented the UNCTAD report’s results to the local press.

According to the report, the Philippines showed a significant improvement in investment inflows during the last four years, based on several indicators.

For instance, the average growth in gross domestic capital formation or the contribution of fixed investments to the economy was 0 percent from 2004 to 2009.

In 2010 to 2013, capital formation has risen an average of 11.4 percent annually.

This improvement was seen across several sectors. In manufacturing, capital formation rose by an average of 8.1 percent in the first half of Mr. Aquino’s term versus an average of 3 percent in former President Gloria Macapagal Arroyo’s 2004 to 2010 term.

In private construction, investments rose by an average of 11.7 percent during Mr. Aquino’s time versus 4.3 percent during the past administration.

Despite these gains, the country remains behind most of its regional peers in attracting investments.

Last year, $3.86 billion in FDIs entered the country, UN data showed. While this was better than the $1-billion-a-year average during the previous administration, it was still lower than Vietnam’s $8.9 billion, Malaysia’s $12.3 billion, Indonesia’s $18.44 billion, and Singapore’s $63.77 billion in the same year.

Habito said due to foreign ownership restrictions, control of key industries has become concentrated within a small group of rich families and companies.

“The issue is concentration of economic power in the Philippines. We need more contestability in the market to diffuse this concentration,” he said.