"By opening our doors, we would be encouraging the entry of foreign investors who do not like to break the law."
"By opening our doors, we would be encouraging the entry of foreign investors who do not like to break the law."(First of two parts)
This morning, the task force formed by President Duterte to propose various Constitutional reforms will formally present their recommendations for the first time to the House committee on constitutional amendments headed by Cagayan de Oro Congressman Rufus Rodriguez.
It’s been a long and bruising ride for those of us who’ve provided support for this cause, in one form or another, ever since Duterte took office in 2016. Over that period, the campaign has morphed: first, from a single-minded focus on federalism, to a diverse range of reforms today; and second, from the objective of replacing the 1987 Constitution wholesale, to a more pragmatic approach of winning what battles we can win today while keeping our powder dry for the original target.
Today seems to be an auspicious moment to summarize the area of proposed reform that seeks to reduce if not dismantle the protectionist language in the 1987 Constitution that discriminates against foreign investors based solely on their alien citizenship. That’s always been my assignment, buttressed to a great degree by the intellects of my fellow “raging incrementalists” in the Foundation for Economic Freedom.
In fine, these are the main points we’ve been making, and which are thankfully now echoed by much of the President’s economic management team:
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One: the Philippines is the most restrictive against foreign direct investment (FDI), globally as well as just within the region (ranked number 1 in both cases), based on a 2014 FDI regulatory restriction index compiled by the Department of Finance. More recently, as of 2018, World Bank data over the preceding 10 years shows that FDI into the Philippines only averaged 1.6 pct of its GDP, the lowest within the entire ASEAN where the average was 5.89 percent.
Two: Not surprisingly therefore, the Philippines also lags the rest of its peer group of the six largest ASEAN members when it comes to the quality of its infrastructure, based on a 2015 global ranking conducted by the World Economic Forum. Not only are we the bottom dweller overall; we are also the bottom dweller in each and every category of infrastructure surveyed—from roads to ports to telephony.
Three: As a result of poor FDI and infrastructure, jobs are fewer and poverty is higher. Over 10 million Filipinos now work abroad, whether permanently or temporarily. As of 2015, we were the only country to fail to cut our poverty rate by half in the preceding 25 years. One might of course object that self-rated poverty has in fact dropped substantially since, under Duterte. This of course begs the question of how much faster, or how much earlier, the improvement might have unfolded with the right economic policies.
Four: Duterte himself is no stranger to, let alone enemy of, the idea of liberalizing. The ten-point agenda he brought into office in 2016 included the following as its third item: “Increasing competitiveness and the ease of doing business…as well as pursuing the relaxation of the Constitutional restrictions on foreign ownership”. This was echoed by both local business groups and foreign chambers of commerce, indicating the underlying soundness of the idea.
The record thus shows that citizenship-based restrictions on foreign investment are binding constraints to growth. They have importantly contributed to lower investments, fewer jobs, poor infrastructure, and non-inclusive development. Today, when a global economy is changing even faster because of technology and cross-border openness, it does us no good to remain inflexible and unresponsive because of decades-old restrictions hard-wired into nothing less than the basic law of the land.
Continued tomorrow
