Let the Constitution do the trick

The current administration’s integrity-based leadership and sound fiscal management are putting our country back on the global map of business.

This year, for the first time, the Philippines was given “investment grade” status by major credit agencies such as Fitch Ratings, Moody’s Investors Service and Standard & Poor’s. Indeed, these upgrades are institutional affirmation of our country’s resurgent economy in the face of uncertainties in the global arena.

But, my question is: How do we ensure sustainability of this economic success such that the masses will truly benefit from it? How do we turn this economic growth into inclusive growth?

As a student of economics, I feel that progress has not trickled down to the masses because it is not enough. Having a resurgent economy is insufficient, we need to sustain the growth. Unless investor confidence is translated to tangible investments in the form of foreign direct investments (FDIs), such will not be felt by the broader segment of our population. More FDIs mean more jobs due to capital infusion. Also, FDIs will assist on effective transfer of knowledge and technology.

Insignificant

Despite the average gross domestic product growth of around 6 percent since 2010, our FDIs have remained insignificant. Based on the 2013 UNCTAD World Investment Report, the Philippines lags behind its Asean counterparts in terms of FDIs. We recorded only $2.79 billion FDIs in 2012, which is way behind Singapore’s $57 billion, Indonesia’s $19.8 billion, Malaysia’s $10 billion, Thailand’s $8.6 billion and Vietnam’s $8.3 billion.

Also, Myanmar and Cambodia nearly equaled the Philippines’ FDIs with $2.24 billion and $1.55 billion, respectively. The prospect for this year remains bleak. According to the Bangko Sentral ng Pilipinas, the FDIs in the first quarter of 2013 is 2.8 percent lower compared to that of the first four months last year.

As a result, the country’s unemployment rate of 7 percent in 2011 was more than double the regional average of 3.2 percent, and higher than that of Indonesia (6.6 percent), Myanmar (4.0 percent), Malaysia (3.1 percent), Singapore (2.7 percent), Brunei (2.6 percent), Vietnam (2.0 percent), Cambodia (1.7 percent), Laos (1.4 percent) and Thailand (0.7 percent). This further demonstrates the exclusionary character of the country’s growth.

We can do better.

Dismal performance

Our dismal performance on FDIs and employment generation is not due to our government’s incapacity or our people’s lack of industry. There are inherent legal limitations we have previously bound ourselves to, particularly the restrictions on foreign investors’ equity in nationalized businesses found in the Philippine Constitution.

Thus, in order to realize the full benefit of inclusive growth, the restrictive economic provisions in our Constitution, which hamper the in-flow of foreign capital investments, must be revisited.

The foreign investor equity limitations in the Philippine Constitution were meant to safeguard our sovereignty from world powers that tend to use and abuse with impunity less powerful nations like the Philippines. When they were introduced, these foreign ownership limits served an important purpose. However, in the present economically integrated world, the limitations no longer make real sense as they are now a hindrance to real progress.

In the face of the ever-changing dynamics of the economic environment, we badly need structural changes in our Constitution to make our economy competitive in the global arena. The economic provisions should not be carved in stone in the Constitution.

One alternative may be that economic policies are better addressed by electorally accountable bodies of government. Simply put, economic questions should be remedied by simple legislation. In the modern world, the Philippines cannot survive, much less meaningfully compete, with a policy of total “self-reliance” or “self-independence.” The world’s economy today is so intertwined that any nation that chooses to be alone is bound to lose or to remain a loser.

Stepping up

Speaker Feliciano Belmonte Jr.’s Concurrent Resolution No. 1, which seeks to amend the restrictive economic provisions in the Philippine Constitution, is a welcome development. To date, various reputable business organizations, such as the Alyansa Agricultura, American Chamber of Commerce in the Philippines, Australia-New Zealand Chamber of Commerce of the Philippines, Canadian Chamber of Commerce of the Philippines, Employees’ Confederation of the Philippines, European Chamber of Commerce of the Philippines, Japanese Chamber of Commerce and Industry in the Philippines, Korean Chamber of Commerce in the Philippines, Makati Business Club, Management Association of the Philippines, Philippine Association of Multinational Companies Regional Headquarters Inc., Philippine Chamber of Commerce and Industry and Philippine Exporters Confederation Inc., have stepped forward to support the initiative toward gearing our nation’s mind-set from insular to regional economic outlook.

The past administrations have attempted to amend certain portions of the Philippine Constitution, but those efforts never took off, because they were suspected to have been motivated by selfish political ends. Now, with President Aquino’s sincerity and uprightness, high approval and trust ratings, unquestioned legitimacy to the Presidency, this administration is best fitted to offer the necessary changes in the Constitution.

I hope that the President listens, and become the leader who will allow progress to trickle down to the masses.

(The author, formerly president and CEO of the Philippine Stock Exchange, is now co-managing partner and head of the Corporate and Special Projects department of the Angara Concepcion Regala & Cruz Law Offices. The opinions expressed in this column are solely his personal views. He can be contacted at [email protected].)