IBON corrects Rep. Quimbo – PH really is among the most open to foreign ownership in region

February 29, 2024

by IBON Foundation

At the on-going House of Representatives (HOR) hearings on economic Charter change (Cha-cha), Marikina 2nd district Rep. Stella Quimbo said the point of Cha-cha is to open up the economy so she was “shocked” at IBON’s claim that the Philippines is now already among the least restrictive economies to foreign investment in the region. She referred to IBON’s infographic comparing foreign ownership limits of different countries which was presented at the first HOR Cha-cha hearing on Monday, February 26.

At the plenary deliberation on Tuesday night, February 27, Rep. Quimbo claimed IBON “cherry-picked” data and coaxed National Economic and Development Authority (NEDA) Undersecretary Rosemarie Edillon to support her position that the Organisation for Economic Co-operation and Development’s (OECD) foreign direct investment (FDI) restrictiveness index lists the Philippines as “182nd – third from the bottom”.

IBON attended the plenary deliberations on Wednesday, February 28, to oppose the opening up of public utilities and took the opportunity to correct Rep. Quimbo.

Numerous economic Cha-cha proponents refer to the OECD’s FDI index and its ranking of the Philippines to justify removal of foreign ownership controls in the Philippine Charter. The OECD index is however only up to 2020, in contrast to IBON’s infographic which is updated until 2024 to date.

IBON’s infographic presents foreign ownership restrictions in all major sectors of the economy, contrary to Rep. Quimbo’s odd accusation of cherry-picked data. At Tuesday’s plenary, Rep. Quimbo scored IBON: “Parang nagkaroon ng cherry-picking, parang namili ng sectors na bukas na anyway. Halimbawa may telcos, mayroong retail trade, mayroong tourism, mayroong healthcare, mayroong power… railway, airports, etc.” (It seems like there was cherry-picking, that sectors were chosen that were open anyway. For example, telcos, retail trade, tourism, healthcare, power… railway, airports, etc.)

The accusation is odd because the supposed restrictiveness of the economy can only be assessed properly if as many sectors as possible are looked at. The sectors in IBON’s infographic were as identified in the World Bank’s Investing Across Borders (IAB) report in 2012, which has been discontinued. Foreign ownership restrictions were updated using the United Nations Conference on Trade and Development’s (UNCTAD) online Investment Policy Hub which tracks country investment policies. IBON also referred to the Investment Climate Statements for 2023 of the United States (US) Department of State for additional verification.

IBON also explained that a country’s foreign investment regime is composed not just of any Constitutional requirements but also of other prevailing laws. The infographic looked at foreign investment restrictions in their totality and not just, as some proponents erroneously do, only at Constitutional provisions.

Education and advertising are not included only because they are in neither the World Bank IAB report nor even in the OECD FDI index. This is presumably because they are not sectors of major foreign investment interest. Rep. Quimbo is erroneous in accusing IBON of “[leaving] out a lot” and particularly mistaken in claiming that “if we included these sectors… it would be false to conclude that the Philippines has the least restrictive economy.” Including them does not in any way change the conclusion about the country’s openness if, as should be done, as many sectors of the economy as possible are looked at.

In any case, IBON also shared its observation of the weak correlation between FDI restrictiveness and FDI flows and stock at the hearing, pointing out how this shows that foreign investment restrictions are not even the main factor determining the amount of foreign investment.

In the Senate and HOR hearings, IBON notes how some proponents, forced by facts to concede openness, dig their heels in and argue that economic Cha-cha will nonetheless still signal the country’s openness to foreign investment. This reasoning is peculiar and reduces the momentous act of Constitutional change to a public relations gimmick for foreign capital.

Charter change proponents will keep trying to find justifications for Congress to start tinkering with the 1987 Constitution. However, the facts clearly show that claiming that the Philippines has among the most restrictive foreign ownership regulations in the world cannot be one of them.