(Continued from yesterday)
“Filipino First”ers have long ruled the debate, begging the question of which Filipinos we’re talking about. Current events, framed by Duterte’s customary profanity, have convinced many of our people that the largest Filipino companies do not always behave well when they enjoy too much market power. Holding similar passports, after all, does not guarantee better behavior.
The President has issued repeated threats of nationalizing the businesses of the oligarchs, but this resurrects the risk of being swamped again by inefficient and bureaucratic government-owned enterprises. The fiscal burden this may create should still be fresh in our minds: from MWSS to NAPOCOR to NFA to the crony GFIs—the list goes on. The lesson ought to be clear: Government isn’t in the business of doing business, but of ensuring a level playing field for businessmen.
Instead, what would be more effective is to enlarge competitive space by opening up monopolized or oligarchized sectors to foreign competitors of comparable size, who can then give the locals a run for their money. Relatedly, if we’re worried about depending too much on money from, say, China, then we ought to encourage investors from other countries to come in and, likewise, give the Chinese a run for their money.
The rubric of “nationalism” is often invoked by those—especially from the Left—who continue to oppose the liberalization of foreign investment policy. This is practically an insult to our many successful Asian neighbors—led by Singapore, Taiwan, Korea, now China—who have open, robust and growing economies, but who would be greatly offended if you accused them of lack of nationalist sentiment or tradition.
Other critics are concerned to keep out foreign misbehavior. But as a matter of fact, what actually happens is that constitutional restrictions lead to “adverse selection” in favor of investors who are willing to aggressively push the envelope, or even bend or break the law. The restrictions add to the complexity and uncertainty of the rules of the game, while also presenting opportunities for corruption as firms try to curry favors from government functionaries to work around the constraints.
Instead, by opening our doors, we would be encouraging the entry of foreign investors who do not like to break the law. In fact, because such investors generally come from countries with higher standards of corporate behavior and regulatory compliance—on issues ranging from environmental sustainability to intellectual property to labor rights—our country thereby benefits from their presence here, in terms of quality of governance as well as competition.
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None of this discussion is intended to suggest that the job is over once citizenship-based restrictions are written out of the Constitution. Far from it: All this will do is to open the door, no different from other countries who already opened their doors long before we did.
But we will still have to work hard at actually bringing in foreign investors. They will have well-known concerns about, among others: the state of our infrastructure, quality and cost of our labor force, strictness of environmental compliance, reasonableness and stability of the regulatory environment, honesty of the bureaucracy, independence of the judiciary, the state of peace and order—the list just goes on.
Eliminating citizenship-based restrictions isn’t a panacea for improving the country’s competitiveness. But these reforms do have a major role to play within a broader package of policies that will also address the above investor issues.
Readers may write me at [email protected].
