IBON Features | Cha-cha to remove the nationalist economic provisions will reinforce the worst aspects of Philippine economic policy-making and drastically reduce the country’s policy space for real progress
IBON Features— The renewed initiative for Charter Change (Cha-cha) following the midterm elections where Team PNoy candidates and allies dominated over Congress was expected. Several lawmakers, including Liberal Party (LP) members Speaker Feliciano Belmonte and Rep. Romero Quimbo, announced this week that the new Congress will push revisions on the Constitution, especially on what they call as “restrictive” economic provisions.
Among the provisions that Belmonte believes restrictive are the 60-40% equity limitation on foreign investors, including in educational institutions, and the ban on foreign ownership of land and foreign investment in mass media. LP House members, as well as representatives in the minority bloc, threw their support behind Belmonte. The House speaker has continued to lobby Congress for changes in foreign investment limits even though top officials of the President’s Liberal Party, including Pres. Aquino and Senator Franklin Drilon, have supposedly ruled out Cha-cha.
Attracting foreign investments has always been among the primary reasons behind past administrations’ attempts at amending the economic provisions of the 1987 Philippine Constitution. Big business, US lobby groups and foreign investors have been pushing for Cha-cha to remove restrictions on foreign ownership and nationality requirements in public utilities, banking, media and other vital sectors. Cha-cha has, in fact, been described as the last barrier in fully opening up the Philippine economy to foreign business and capital.
Pres. Aquino’s supposed disinterest towards the push for Cha-cha does not mean that he disagrees with its objectives. Since the start of its term, the Aquino administration has given liberal privileges and generous incentives to foreign investors. In fact, it prioritizes the same industries that were identified by the Joint Foreign Chambers of Commerce (JFCC) as relevant globally, even as these areas — including mining, tourism, business process outsourcing industry, electronics and information technology — have contributed little to overall employment and gross domestic product (GDP).
Charter Change or not
The Philippine Constitution at present provides protection and regulation of key domestic sectors including the preservation of national sovereign rights over the county’s national wealth and resources. These provisions protect remaining key strategic sectors such as public utilities, education, natural resources, land ownership and professions. But Cha-cha advocates assert that these remaining strategic enterprises should be completely opened up to foreign ownership to encourage foreign capital flow into the country.
The recent call for Charter amendments is the latest among many attempts to Cha-cha. The past administrations each launched an attempt at Cha-cha that involved amending the nationalist economic provisions of the Constitution: Fidel Ramos’ PIRMA or People’s Initiative for Reform, Modernization and Action; Joseph Estrada’s CONCORD or Constitutional Correction for Development, and Gloria Arroyo’s Consultative Commission (Con-Com) and Union of Local Authorities (ULAP)’s Cha-cha efforts. Efforts to liberalize the economy intensified during these administrations despite the failure of their Cha-cha campaigns. At present, Aquino is continuing the same economic thrust of opening up economic sectors to foreign investors. Its public-private partnership program (PPP) encourages local and foreign private companies to invest in economic activities and provide them with risk guarantees to ensure their profits.
Aquino’s, as well as past governments’, economic policies have in many ways already reduced the Constitution’s economic provisions to mere rhetoric. But a much watered-down charter will remove options for a legal recourse to defend national patrimony and people’s rights amid the intensifying role of foreign corporations in the economy.
Before the House announced its plan to push Cha-cha, the renewed call for Constitution amendments came from foreign chambers of commerce like the American Chamber, Japan Chamber of Commerce and Industry, the EU, among others. The US is determining Philippine economic policy through its so-called Partnership for Growth (PfG) with the country while the EU is forging a bilateral EU-PH free trade agreements (FTA). These countries, faced with a prolonged economic crisis, are seeking greater access to the country’s natural resources and economy given the already limited space for growth in their own economies. All these entail further pressure on the Philippine government to amend the Constitution.
Foreign economic institutions have been straightforward about advancing their economic interests in the Philippines through multilateral and bilateral dealings. In recent years, no less than the JFCC and the Office of the United States Trade Representative (USTR) recommended constitutional adjustments to allow foreign business to expand their ownership of Philippine resources, utilities and services.
The primary recommendation of the JFCC was to “amend Constitution restrictions on Foreign Direct Investment (FDI)” and to “further liberalize FDI laws”. Aside from constitutional amendments, the JFCC also enumerated changes in laws, which it believes hinder foreign capital from entering the Philippine economy. These include laws on fiscal incentives, labor, and the negative list in the Philippine constitution that bars foreign equity from 100% and below, including the following: mass media; practice of all professions; trade enterprises; cooperatives; private security agencies; small-scale mining; utilization of marine resources; and nuclear weapon and pyrotechnic manufacture, repair, stockpiling and distribution.
The JFCC enumeration also included sections in the Constitution that regulate and prohibit monopolies and limit foreign equity from 60% and below in areas such as exploration, development and use of natural resources, public utilities such as telecommunications, facilitation of overseas employment, among others. This negative list is similarly cited in the Constitutional provisions identified by the USTR as barriers to more open trade.
Ideally, foreign direct investments can play a key role in development, and the country should strategically restrict and strictly regulate foreign investment to gain net benefits for the economy. However, an extremely open investment environment such as the one created by the Philippine government in its race-to-bottom with other countries to attract investors does not provide such conditions. Compared with other Asian countries where governments provide a responsible intervention in their economy, the Philippines is seen to be at a disadvantage: it has not attracted much investment, and has not been able to extract much advantage from existing investments because it gives too many local incentives to foreign investors. Foreign investment has to be regulated to be developmentally beneficial.
Profit over people still the bottom line
The country’s experience in the past decades shows that creating a very open environment for foreign investments does not bring about economic development or improved people’s welfare in the country. Today, the record high 11% unemployment rate, insufficient wages, poor social services, weak agriculture and manufacturing are all significant indicators of the country’s worsening economy.
While the Philippine government continues to further open up the economy, there has been a trend worldwide against liberalizing and towards protecting the economy. In 2010, for instance, 36 countries pushed for economic restrictions on foreign investment in the natural resource and financial sectors.
Cha-cha to remove the nationalist economic provisions will reinforce the worst aspects of Philippine economic policy-making and drastically reduce the country’s policy space for real progress. The last decades of globalization have seen increased foreign trade and investment driven by a systematic neoliberal economic policy offensive by the advanced countries. The globalization period from 1981 to 2010, however, also saw that the economy actually contracted – in 1984, 1985, 1991, and 1998. Overseas remittances have also been a much greater contributor to growth especially since the mid-1990s than foreign investments. These general trends give cause to question the FDI and national development connection. It underscores the fact that the quantity of investment cannot in and of itself be assumed to be a good thing.
Should Cha-cha push through, this would result in the further diminished government control over the economy and compromise sovereign rights of Filipinos over its resources. The Philippine government, including the House representatives pushing for Cha-cha, should realize that the 1987 Philippine Constitution has provisions on a “self-reliant and independent national economy” and strident concern for equity, redistribution and social justice. In spirit, the present Constitution is pro-poor, pro-people and pro-Filipino; it just needs to be put into practice. IBON Features