Expect the next Philippine President to start moves to ease restrictive economic provisions of the 1987 Constitution within his or her first year in office in a bid to draw into the country more foreign direct investments.
Thus said economist Bernardo Villegas who expressed certainty that “whoever wins” the presidency in May 2016 would start the ball rolling for Constitutional change early in his or her six-year term, based on his discussions with “three leading presidential candidates.”
These constitutional amendments will focus primarily on the current prohibition on foreign ownership of land and limits on the equity participation of foreign investors in locally-founded firms.
“I have been to many roadshows around the world and everywhere, prospective investors tell me the same thing: They will invest more in the Philippines if these restrictions are lifted,” he said.
The 1987 Constitution bars foreign parties from owning land and limits foreign participation in most types of companies to an equity share of 40 percent.
In the meantime, certain sectors like mass media and education are completely off limits to foreign ownership.
Villegas said these protectionist prohibitions had doomed the country to suffer “mediocre” economic growth rates for decades.
Even the 6 to 7 percent economic growth in recent years may be considered mediocre, he said, compared to the explosive growth of countries like Vietnam, Burma (Myanmar) and India when comparing similar stages of development with the Philippines.
“Without these constitutional restrictions, [the Philippine economy] could be growing at 8-10 percent annually,” said the UA&P professor who rose to prominence after predicting the Asian economic boom of the 1990s.
Villegas, one of the founding professors of the University of Asia and the Pacific, made this prediction at the launch of the 2016 Investment Guide of KPMG Philippines—touted as a “bible” for foreign investors in the country published by the audit and consulting firm together with Villegas and his research team.
The KPMG Philippines investment guide focused on the country’s readiness to join the so-called Asean Economic Community (AEC) which will take effect on Jan. 1, 2016, and—theoretically—result in a more seamless and more competitive regional market made up of 500 million consumers.
“We are bullish about the AEC and we think the Philippines has strengths which will allow it to be competitive with our neighbors,” KPMG Philippines vice chair Noel Bonoan said, echoing the findings of Villegas.
Bonoan said, however, that the government could do more to help make Philippine firms more competitive vis-a-vis their competitors from around the region.