Economic Cha-cha gains ground (Business Mirror (Philippines))

ernesto-m-hilarioCALLS are mounting for amending the nearly three-decade- old 1987 Constitution to make it conform to new conditions and, thus, hasten the country’s long-standing bid to join the ranks of the developed economies.

Former Chief Justice Reynato S. Puno is now leading the charge against what he described as a stale and outmoded 1987 Constitution that has concentrated power in the central government in Manila, and widened the gap between the rich and the poor in society, instead of reducing poverty. He has organized a multisectoral movement, which is called Bagong Sistema, Bagong Pag-asa, that wants to shift from the current presidential-unitary to a federal-parliamentary system.

The shift is needed, the movement says, to decentralize government, put a stop to systemic corruption and achieve inclusive growth. They want to rewrite the Charter through a constitutional convention (Con-con) consisting of both elective and appointive delegates. For this purpose, they suggest holding a referendum in the May 2016 polls to determine whether the people want a Con-con.

Puno’s initiative to change the 1987 Constitution appears to be gaining ground among business leaders and academics. But where the retired magistrate wants no less than a total overhaul of the Charter, others want a quicker approach by changing only the economic provisions restricting foreign ownership.

The proponents of economic Charter hange (Cha-cha) want the adoption of Resolution of Both Houses 1 (RBH 1), authored by House Speaker Feliciano Belmonte Jr., which seeks to add a five-word phrase-unless otherwise provided by law-to seven economic provisions of the Constitution to allow greater participation of foreign investors in various enterprises, including agriculture, mining, public utilities and mass media. The inclusion of the five-word phrase in a piece of legislation would fast-track the amendment of the 1987 Charter. If approved by both chambers of Congress and later by a plebiscite, RBH 1 would do away with lengthy discussions in a Con-con. Sen. Ralph Recto has filed a counterpart measure in the Senate.

Support for RBH 1 comes from a broad range of personalities. Francis Lim, president of the Shareholders’ Association of the Philippines and former head of the Philippine Stock Exchange, expressed disappointment that President Aquino, in his latest State of the Nation Address, did not prod Congress to push the economic Cha-cha initiative: I was waiting for him to ask Congress to amend the economic provisions of the Constitution during his last year in office, as a more friendly investment climate will definitely multiply a million fold the trickle-down effect of his reform agenda.

Former Finance Secretary Ramon R. del Rosario Jr. has appealed to Belmonte and Senate President Franklin M. Drilon to pursue amendments to the economic provisions of the Constitution to allow our country to compete effectively for much-needed job-creating investments.

For his part, former Director General of the National Economic and Development Authority and now Ateneo de Manila University economics Prof. Cielito Habito concedes that $6.2 billion worth of foreign direct investments (FDI) in 2014 was a record amount, nearly double that of the previous year and more than six times the annual average in the past decade, but, at the same time, laments that our neighbors, including Vietnam, have continued to attract far more.

It’s not a particularly good time to be missing out once again on foreign investments flowing into our region, with foreign companies either exiting from China due to rising labor costs there, or seeking a second base of operations besides China, Habito said, adding that we should be moving even more aggressively at this time, rather than allowing the election fever to make us drop our guard on needed reforms.

Calixto Chikiamco, president of the Foundation for Economic Freedom (FEF), believes that the Philippines can achieve inclusive economic growth only by lifting all restrictions to foreign participation in Philippine businesses, including removing foreign-ownership restrictions in the Constitution. He has also called for reducing the foreign investment negative list; lowering the capital requirements for retail trade; and even liberalizing immigration rules to allow foreigners with certain skills to work here.

The FEF is batting for approval of RBH 1, because it will attract more investments needed to sustain economic growth that will create enough jobs for Filipinos, and also facilitate the entry of foreign competitors that can do away with the monopolies of existing market giants. At the same time, it believes that more foreign investments would enhance consumer welfare through better service delivery and more choices for domestic users.

The Philippines has a low domestic-savings rate but this can be augmented by foreign investments, it said. It is the firm belief of FEF that opening up the economy to foreign investors and allowing more freedom in investments and flow of factors of production will lead to more economic activity that will benefit all.

Australian executive Peter Wallace of the Management Association of the Philippines opined that RBH 1 will not even change the Constitution, but will only allow Congress-at a later date-to review the economic provisions and decide to change them, or not to change them. And to make that decision after wide discussion with everyone and all interested parties. It provides the opportunity to take into account how much the world has changed since 1987, and to allow us to make changes from which all will benefit.

Foreign business organizations in the country have also been urging the Aquino administration to review its business and investment policies in order to stem the decline in FDI.

John Forbes, a senior advisor at the American Chamber of Commerce of the Philippines, observed that Southeast Asia is now the fastest-growing economy and that Vietnam is getting the most rise in FDI inflows within the region. He says that the Philippines can capture more, if only it would reexamine its restrictive economic policies.

Henry Schumacher, vice president for external affairs at the European Chamber of Commerce of the Philippines Inc., emphasizes that further opening up of the Philippine economy would increase FDI inflows. What we would like to see, from a foreigner’s point of view, is that the door will be opened a bit wider so that more competition can be created, which is good for Filipinos, he said.

From another perspective, the Economic Research Institute for Asean and East Asia also says that the Philippines is among the more restrictive economies in Southeast Asia in terms of FDI. The European Union-Asean Business Council has, likewise, noted that access to the region’s markets is crucial to encouraging greater investments. It, likewise, argues for the lifting of restrictions on foreign ownership and foreign competition. If there’s a groundswell of support from various sectors for economic Cha-cha, why is President Aquino against it?