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THINKING GLOBAL

Charter change focuses on economics

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Charter change in the past was unpopular because of the general belief that it was a ploy of incumbent politicians to prolong their stay in power through a shift to the parliamentary form of government. Fortunately, all efforts involving Charter change today are focused on amending the economic provisions. There is no talk about reforming the political system.

I am glad that the House committee on constitutional amendments started a public consultation and information campaign, the first of which was in Cebu City last September 8, 2011, at 1 p.m. at the Social Hall of the Provincial Capitol, Osmeña Blvd.  The entire focus will be on introducing reforms in the restrictive economic provisions of the 1987 Philippine Constitution. Needless to say, as I have written many times in previous columns, I endorse fully the following recommended amendments to the Constitution:

1.) The removal of the 60%-40% equity limitations on foreign investors;

2.) Removing the control and management exclusively by Filipinos in companies with foreign equities;

3.) Expanding the role of foreign investors in the exploration, development and exploration, development and utilization of natural resources;

4.) Allowing foreign ownership of industrial (and commercial) lands;

5.) Liberalizing media by allowing foreign investments in media;

6.) Liberalizing the practice of profession in accordance with the principle of reciprocity;

7.) Liberalizing investments in educational institutions by allowing foreign investment in tertiary education;

8.) Extending the 25 years + 25 years land lease agreement.

I am convinced that these amendments to our Constitution will significantly help in attracting much-needed foreign equity capital in the form of Foreign Direct Investments (as distinguished from the very volatile portfolio investments in the stock markets). The Philippines, although awash with domestic savings today, direly needs long-term capital for the vast requirements of infrastructures, energy, mining, transport and telecom, and other very capital-intensive investments that are needed in attaining the goal set in the Philippine Development Plan, 2011-2016  of a 7 to 10% growth in GDP over the next five to ten years or even more.  Just consider that China has been growing at 10% in GDP for more than 20 years by investing close to 50% of its GDP, compared with the measly 15% rate of investment in the Philippines.  he head of the Board of Investments, the leading government agency that promotes investments in the Philippines, Undersecretary Cristino Panlilio, has estimated that we need at least $5 billion of FDIs annually for our GDP to grow at 7% or more annually. Our present level of FDI is less than $2 billion.

As stated in a letter written by the Honorable Loreto Leo S. Ocampos, chair of the House committee on constitutional amendments, the above-mentioned economic reforms will enable the Philippines to catch up with its ASEAN neighbors in economic growth. He showed in a table accompanying the letter how dismal the Philippine performance in attracting FDIs compared with our peers Thailand, Malaysia, Indonesia and Vietnam, without mentioning China that is in a very different league all its own. The figures for 2003 to 2007 systematically showed FDIs in the Philippines at one-fourth to one-third of the ASEAN countries. Latest figures from the UNCTAD show that from 2008 to 2010, during the so-called Great Recession, the Philippines did even more poorly compared with countries like Indonesia and Vietnam, which are at the same level of development.

During those difficult years, we averaged about $1.8 billion of FDI yearly while Indonesia attracted an average of $10 billion and Vietnam about $6 billion. In the World Bank Doing Business Report of 2011, under the category of “Ease of Doing Business,” the Philippines ranked the lowest in East Asia with a score of 148 compared with Vietnam’s 78 and Indonesia’s 121. Even India, which has an impossible bureaucracy and rampant corruption, scored higher than the Philippines at 134. Clearly, a major explanation for the unattractiveness of the Philippines to the outsiders is the restrictiveness of our Constitution and other laws that are anti-foreign investors.

I fully endorse another major objective of the economic reforms being planned for the Philippine Constitution. In the words of Chair Ocampos, it is the intent of the proposed amendments “to make the economic policies more flexible to meet the ever-changing dynamics of domestic and foreign economic environment. The economic provisions should not be carved in stone in the Constitution. Economic policies are better addressed by electorally accountable bodies of government. Simply put, economic questions can easily be remedied by simple legislations.” The volatility of the global economic environment, with which our national economy is intricately intertwined whether we like or not, is more obvious than ever in 2011 when all the advanced economies are threatened by a double-dip recession owing to the huge debts that they have accumulated through years of extravagant overspending.  This is obviously a time that we have to be wary about over borrowing.

To attract foreign capital, we must give preference to foreign equity investments in our capital stock, especially infrastructure, energy and mining. As the leading semi-globalization guru, Dr. Pancaj Ghemawat has written in his new book World 3.0: “Foreign direct investment (FDI)—foreign companies buying, setting up, or reinvesting in businesses in a country—represents a long-term commitment even if the rate at which such commitments are entered into varies greatly from year to year. FDI helps transfer knowledge and information as well as capital, and functions, like trade, as a channel for product market integration with the prospect of adding value just as broadly.”

Granting that it might have served an important purpose of safeguarding national sovereignty during the era of the Cold War in the last century, when small countries like the Philippines were being used as pawns by the world powers, the “Filipino First” policy no longer makes sense in a more economically integrated world (the appropriate word according to Dr. Ghemawat is “semi-globalized”). In order to attract more FDIs, direly needed for faster growth that is a pre-condition for attacking poverty, we must purge the 1987 Constitution of its overly nationalistic tone. The first article that has to be amended is that which appears in the Declaration of Principles in Article 2, Sec. 19, which reads: “The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.” The irony is that this provision has only preserved the feudalistic and monopolistic structure of the Philippine economy.

The absence of competition from abroad has guaranteed the stranglehold that a few families have over the national economy. That is why it would be better to word this Article as follows, as suggested in the letter of Chair Ocampos: “The State shall develop a self-reliant, productive and competitive economy that will best serve the interest of the Filipino people.” As the Philippine Development Plan insists again and again, economic growth must be “inclusive.” Not only the economic elite must benefit from “Filipino First.” The entry of foreign direct investments can have a large multiplier effect that will uplift the masses from poverty as has been shown in the past in the cases of large mining companies that have built roads, schools and other infrastructures in the most remote and impoverished territories of the Philippines. “Filipino First” must not refer to the feudal lords but to the vast consuming and working masses that benefit from the entry of foreign direct investments.

For comments, my new e-mail address is bernardo.villegas@uap.asia.


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  • http://pulse.yahoo.com/_4Q5EHNRA6LXAHGXPSMAXBGJ4ME isidro

    Dr. Villegas’ thinking is a wishful one. The main reason why investors preferred other countries is because their leaders are honest and straight. Not corrupt.

    What Filipinos need is a Character Change not Charter Change.

    We need to examine our soul. We need total cleansing. If we succeed in eliminating corruption, and we will maintain the principle of “HONESTY IS THE BEST POLICY” there will be more investors in our country because we have natural resources, intellectual and hardworking people. What we lack is integrity, honesty, and care for our people. Kanya kanya attitude. 

    Sa mining na lang, ilang investors ang umalis kasi niluluko sila ng mga Filipino, Chinese-Filipino.

    Di mo na kailangan ng Doctor of Economics. Simple mind at common sense lang. Baka naman nabayaran na naman ang ating mga legislators at mga economists ng foreigners so that they will have complete control of our economy particularly on mining. We have a proven reserves of mineral worth trillion dollars enough to pay our foreign debt. Yan I think ang target ng mga foreigners.

  • Aubrey Servito

    1.) The removal of the 60%-40% equity limitations on foreign investors;Please research  The Foreign Investment Act (RA 7042).  It states what foreign investors can and cannot reasonably own.

  • Anonymous

    Mr Villegas you are a bankrupt economist. you were a macro ecomic consultant to the Marcos Regime, what happened to the economy of the country, almost bankrupt save only by barrowing from IMF,WB, and ADB which plunge the country into a very deep indebtedness, for which up to now the Filipinos that were born in 1986 and so on and so forth, but not yet born when the debt was incurred are paying together with the nation.

    You manage and consulted with a Victoria Sugar Central in Negros, you failed miserably, the company under your watch. stagnated if not shrink or incurred looses. 

    So what is it that you can bring to the table for this new cha-cha. Nothing, except to dismantle the Constitution and pave the for the Foreigner to exploit more intensely of what remains of the national Patrimony. Ed, your brother would have acceptable to offer his recommendations. 

  • http://pulse.yahoo.com/_2KSMCRHDB7KIRKQ4SACSMYKWYQ richardb

    Let those provision stay for now, improve first on eradicating red tape plus improvement on bureaucratic process. We are currently too vulnerable for exploitation.

    1. 60-40 this are just being circumvented check with SEC and do background checking of existing foreign companies and its board and stockholders. Foreign investor is not concerned here. They are much concerned on corruption and difficulty on doing business
    2. Filipino control in company with foreign equities? this is a joke and not happening, foreign companies are run by expat not filipinos.
    3. Expanding the role of foreign investor on exploration? they are already on lead they just wanted more control and exploit, this is really the bottomline crooks in congress wanted to sell the Philippines. Why we are in a hurry to explore and exploit our mineral resources, leave it there leave it for future Filipinos it wont be gone. Hindi mapapanis at tataas pa ang value. When we have the right technology and resources we will have much more gain.
    4.Allowing ownership of industrial/ commercial lands? Few benefits majority of investor is not interested to aquire lands, its difficult to liquidate. If there will be political or whatever instability hindi nila madadala ang lupa papunta sa mas stable na bansa.
    5. Liberalizing the media- With the rapid development of technology and internet, CNN, Google, Yahoo? bakit pa sila mag invest at magset up ng local company, they are already everywhere because of internet.
    6. Liberalizing the practice of profession?- This sounds okay since filipino professional can compete. who is effective a filipino doctor/ lawyer/ cpa or foreign professional? Presyo lang ang pinagkaiba, syempre mas mura kung Filipino.
    7. Liberalizing investment on education- This needs urgent attention, at least if there will be foreign educational institition or funded graduates will be more competetive.
    8. Extending 25+25 lease- no problem here but not that important. 

  • bgc4vrbtravels

    For the longest time, economic changes due on the Philippine Constitution had been put back and opposed due to lack of trust and suspicions on the motives of politicians.  But now, the atmosphere seems to be timely and proper; it’s too bad the President is not yet fully sold out on the economic changes due on the Constitution.  People puts new confidence in the new administration and unless the President himself would like the promised pledges of investments in his foreign trips to disappear, the pertinent changes in the Constitution already due yesterday should be put in place fast.  More so, considering the slow grind of the legislative mill here.  Putting the necessary legislative infrastructure is of course not enough.  For example, the price of electric power in this country, the state of transportation infrastructures, the cost of transport itself, the peace and order situation, etc., need some revisits.  Then there is the matter of attitude.  Unless we give in somewhat, we will forever be the slave of our negativism, cynicism and despair. A more positive outlook and faith in people under changed conditions would be a new wind.  Of course, I still hope that we can restore all things in Christ and that the Natural Law will be respected. 

  • Anonymous

    I probably missed something in the news article, but I did not find the reason why foreign capitalists will suddenly come in droves once ownership of enterprises is relaxed. Just because other countries in the region have less restrictions, doesn’t mean that is the reason. Surely, foreign capitalists goes through a more complex analysis than that before deciding where to invest.

  • http://pulse.yahoo.com/_WOJKEHU4WDIXWTVH527TZ4GVOY BlueHornet

    I THINK CONGRESS SHOULD PRIORITIZE FIRST THE PRIORITY BILLS LIKE RH BILL AND SIN TAXES!

  • Anonymous

    The entry of Foreign Direct Investments (FDI’s) and a foreign investment friendly constitution that could, through their multiplier effects on the local economy, benefit more people (through jobs, competitive pricing of exportable and other consumer products, increasing consumer capacity to buy, appropriate infrastructure building, etc., etc.) would indeed produce long term blessings on a broader spectrum of Filipinos than directly perpetuate the interest of a few families or fewer Filipino capital.  In many cases, due to investment selection and a protected national interest and management, many aspects of business opportunities are not exploited as they present less incentive (if at all) to long term investments.  Thus a meager “investment portfolio” which does not encourage job creation and a resort to “dummy investment” are uncomfortable compromises by foreign capital to come to the country with an easy “exit” mechanism just in case, due to volatile investment policies in the country that change with the season and burden, for example and in addition, new enterprises with a higher power tag (we have the highest electricity rate in Asia besides more expensive transport costs).

    Thus, thinking Filipinos should see through the falsely premised articles of Mr. Walden Bello which squarely put the reason for the economic progress of Indonesia, Thailand and Vietnam on the aggressive population control measures adopted by the said countries, surpassing the once progressive Philippines, second only to Japan.  What’s worse, proponents of the rh bill make it appear that the Catholic Church is “backward and antiquated” and, being influential in Catholic Philippines, should take the blame why the country had been surpassed by Indonesia, Thailand and Vietnam.

    It is a wonder indeed, why the move by Congress, despite the long period of Dr. Villegas’ well known advocacy in writings, public fora, etc., have only now come to realize the wisdom of amending the limiting economic provisions of the Constitution.  But, better late than never: we need to play catch up and time is running out on us.  At the same time poisoning the mind of innocent Philippine constituents that would push this country to neo-colonization and the stranglehold of international contraceptive drug companies has to stop.  Here, the “Filipino first” policy founded on morality and the promotion of genuine full human development have pertinent, current application.  No to the rh bill!

    • http://pulse.yahoo.com/_ZUJ5PWPGPIHIHNGC66C5WHKNZA Roberto

      It is just the problem that all those who now promise that only economic matters would be amended, have each just one vote and can not enforce their promises. And there are so many of the previous administration now pro Aquino that of course they could try the same that beforewas feared to happen in Chacha.



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