Research group IBON said that the Marcos Jr administration’s reasons for amending economic provisions in the Constitution or economic Charter change (Cha-cha) are erroneous. Cha-cha will only bring more of the same foreign investment liberalization that has stranded the country’s development for decades and left millions of Filipinos struggling amid a jobs crisis.
The group raised four main points on why economic Cha-cha is a non-solution and will only perpetuate the country’s problems:
First, more foreign investment does not mean development. The stock of foreign investment is now 28.3% of the country’s gross domestic product (GDP). In relative terms, the Philippines now has more foreign investment than China, South Korea or Taiwan did during their economic take-off in the 1970s and 1980s. This shows that large foreign investment is neither necessary nor sufficient for development.
Second, foreign investment has not fundamentally developed the Philippines, with only fleeting short-term gains. Annual foreign investment inflows have increased significantly since the early 1980s – from an annual average of US$187 million (equivalent to 0.5% of GDP) in 1980-1984 to US$8.56 billion (2.5% of GDP) in 2015-2019 and US$10.6 billion in 2021-2022 (2.7% of GDP). Majority of total approved investments though have gone into foreign-dominated manufacturing (foreign direct investment [FDI] is 52% of approved manufacturing investment in 2011-2022) rather than domestic agriculture and Filipino industries.
Yet despite allowing 100% foreign ownership, the manufacturing sector is at its smallest GDP share in 75 years at 17.6% for the first three quarters of 2023. This is the lowest since the 16.3% in 1949. There has also been a conspicuously large decline in the sector’s employment to its lowest in 20 years. Meanwhile, the GDP share of agriculture is at its lowest in history at 8.4 percent.
Third, Philippine development does not depend on opening up the economy. The outdated context of accelerating globalization that Cha-cha proponents are clinging to is antiquated, especially after the 2008-2009 global financial and economic crisis. Protectionism and investment regulation have been growing since then and foreign trade and investment have plateaued amid slowing global trade and growth.
Global growth is expected to slow for a third consecutive year to 2.4% in 2024, with global growth in 2020-24 marking the slowest half-decade of growth in 30 years. International trade is also losing its steam as a growth driver with global trade growth weakening to 0.6% in 2023. Global investment growth is likewise expected to remain tepid.
Amid this global economic downturn, many countries have already reevaluated and backtracked on investment liberalization. According to the United Nations Council for Trade and Development’s (UNCTAD) Investment Policy Hub, over 60 governments have terminated 405 international investment agreements (IIAs), as of March 2023. In contrast and consistent with its unchanged foreign investment fixation, the Philippines has 41 IIAs in force including three new ones signed since 2008.
Lastly, reducing so-called restrictiveness does not even guarantee foreign investment. Despite even more liberalization under the current administration, the Philippines’ net FDI of US$6.5 billion in the first ten months of 2023 was down by 18% from the same period the year before. This is barely half the recent peak of US$12 billion in 2021.
IBON said that ultimately, the foreign investment the government hopes to attract with economic Cha-cha will only benefit local oligarchs and foreign corporations. The group stressed that FDI contributes to domestic development only when strictly regulated and best in the context of national industrialization policy – as done historically and currently by the world’s biggest industrial powers.