With a firmer grip on Congress, President Aquino is expected to push for changes in foreign equity restrictions to attract more capital in order to create more jobs and reduce poverty incidence.
But his political leaders are divided on how to initiate the changes.
On one hand, Quezon City Rep. Feliciano Belmonte Jr., who is expected to retain the speakership, prefers Charter change (Cha-cha).
On the other hand, Budget Secretary Florencio Abad Jr. wants to focus the modifications on the “negative list” of investment areas that are off limits to foreigners under the 22-year-old Foreign Investments Act (FIA).
“Many of the restrictions are just executive or legislative issuances that can be amended. But I continue to believe in amending the economic restrictions in the Constitution,” Belmonte said in a text message.
Among the 1987 Constitution’s economic provisions that proponents of Cha-cha want amended are those that restrict foreign ownership of public utilities to just 40 percent and ban aliens from owning land in the country.
Three modes
There are three ways to amend the Constitution—via Congress acting as a constituent assembly (Con-ass), a constitutional convention whose delegates are elected, and a people’s initiative.
Administration lawmakers may be able to muster the numbers to convene a Con-ass and proceed with Cha-cha should they get the green light from Malacañang.
Belmonte expects the ruling Liberal Party (LP) to have at least 105 members, or roughly a third of the House of Representatives, as well as to further cement its coalition with the Nationalist People’s Coalition, National Unity Party, Nacionalista Party and administration-friendly party-list groups.
With at least 16 allies of Aquino in the Senate, Sen. Franklin Drilon, campaign manager of the administration-backed Team PNoy in last week’s midterm elections, is expected to wrest control of the Senate leadership from Sen. Juan Ponce Enrile of the United Nationalist Alliance (UNA).
Belmonte’s view was shared by another ally of Aquino in the Senate.
Sen. Ralph Recto said: “I prefer constitutional amendments. The Foreign Investment Act is [the] next best option.”
Recto said though that the President was not too keen on Cha-cha. “But he knows we must allow more FDI (foreign direct investments) to create jobs and modernize our economy. It can be done by liberalizing the investment policy through amendments to the Foreign Investment Act.”
Past Cha-cha efforts
Efforts to amend the Constitution were mounted during the previous administrations of Fidel V. Ramos, Joseph Estrada and Gloria Macapagal-Arroyo, but these did not prosper. The Church and civil society opposed these moves on the grounds that these were aimed at lifting the term limits of public officials, including the President’s.
“Instead of Cha-cha, the Department of Finance has been reviewing the ‘negative list’ with the objective of opening up previously restricted areas of investment,” Abad said in a text message.
Finance Secretary Cesar Purisima did not reply to the Inquirer’s query.
Aside from anticorruption, good governance and sustainability of reforms, Abad said Congress’ main priority was inclusive growth, which could be addressed by making investment areas more accessible to foreign investors.
No trickle-down effect
While the economy has soared during President Aquino’s first three years—the stock market has zoomed to historic highs, the peso has become robust, and the country has achieved investment grade status (from Fitch Ratings and Standard & Poor’s)—this has not translated into an increase in employment opportunities and reduction in poverty.
Portfolio investments, or hot money, have surged, but FDI has remained abysmal at $1.5 billion this year, 50 percent down from its 2007 level.
Last year, the Joint Foreign Chambers of the Philippines issued a statement lobbying the government to shorten the foreign negative list in its next biannual listing in 2014.
“Despite continuous advocacy over almost a decade, responsible public sector leaders have yet to assign priority to shortening the list, with the exception of the economic provisions of the Constitution.
“Amending these constitutional restrictions has been advocated by congressional leaders and a study was reportedly prepared at the request of President Aquino but not publicly released. However, little attention has been paid to removing other restrictions from the list,” the foreign chambers said.
Overdue
The chambers said a review was overdue. “This could be done by an interagency team instructed to review various restrictions on foreign equity investment … taking into consideration whether restrictions impede investment, job creation and competitiveness. A report with specific proposed amendments could be ready by the time the 16th Congress is convened,” they added.
They pointed out that since the FIA was enacted in 1991, there had been only two major changes made: the Retail Trade Liberalization Act (2000), which opened retail trade to foreign investors bringing in at least $2.5 million; and Executive Order No. 158 issued in 2010, which allowed 100-percent foreign equity in gambling in economic zones (by presidential proclamation).
The foreign chambers noted the Philippines’ miniscule 3-percent share of net FDI inflows into Southeast Asian region last year.
“While many factors explain this situation and there is good reason to expect the amounts to rise in 2013 and thereafter, a negative list that is too negative is one of the factors effecting FDI that can be further liberalized,” they said.
Foreign investments in the country are limited to zero percent in media; 40 percent in mining, oil and gas, agriculture and forestry, telecommunications and transportation; 60 percent in banking; 65 percent in power; and 75 percent in light manufacturing.
Source: Gil C. Cabacungan, Philippine Daily Inquirer, 21 May 2013
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