THE “Filipino First” mentality that guided the crafting of the 1987 Constitution will not propel the Philippines to a higher economic growth path that is needed to eradicate poverty, according to a framer of the country’s charter.
In the first plenary of the virtual Arangkada Philippines Forum on Wednesday, constitutionalist and economist Bernardo M. Villegas said removing restrictions to foreign investments would allow the country to recover from the pandemic and help eradicate poverty.
Villegas said the economy must post growth of 6 to 7 percent in the next three to five years and as high as 8 to 10 percent in the next five to 10 years to end poverty in the Philippines.
“We just cannot go back to normal. We have to accelerate our growth rate to about 8 to 10 percent in the next 5 to 10 years somehow replicating what China was able to do during the time of Deng Xiaoping,” Villegas said.
“I feel a little more responsible because I was part of the group that wrote this Constitution. We have to finally remove that ‘Filipino first’ mentality that is so obsolete in the present context,” he stressed.
By removing “Filipino First,” Villegas said, restrictions imposed on foreign investments particularly in sectors such as telecom, advertising, media, and higher education can be lifted.
A lawyer and investment adviser speaking at the same Arangkada forum was equally blunt: The 1987 Constitution needs to be rewritten to eliminate foreign equity restrictions, allowing more investments to flow into the country.
At the forum hosted by the Joint Foreign Chambers on Wednesday, Atty. Anthony A. Abad, a senior partner at Abad, Alcantara & Associates, did not mince words when he said that the 1987 Constitution is a “constitution that was written in haste.”
“You should not leave constitutions to be written up by politicians. It actually should be written up by economists and people who will understand the economic effects of the constitution,” he stressed.
One repercussion is the imposition of 40-percent foreign equity restrictions, he noted, saying such measures simply “do not work.”
Digital sector’s promise
THESE sectors currently restricted—telecom, advertising, media, and higher education—now make up just one sector and that is the digital sector, according to Villegas. The digital sector will pave the way for greater economic growth which includes electronic commerce which has seen a rapid growth during the pandemic.
Liberalizing these sectors, Villegas said, should be made immediately if not during the first few months of the term of the next administration.
“I cringe every time I think that people cannot invest even 1 percent in university education in the Philippines because of our [restriction] in media and so those are areas that I hope the next administration will address,” Villegas said.
Invest in agriculture
ONE this has already been addressed, Villegas said the country would be able to grow the economy faster to reach 8 to 10 percent if the government would significantly invest in agriculture.
Villegas said 75 percent of the country’s population is in the rural sector, specifically agriculture. Investing in agriculture will mean investing in lifting the poor from poverty.
Foundation for Economic Freedom Calixto V. Chikiamco agreed and said that agriculture should really be seen as agribusiness and commercial farming.
Chikiamco said while the farm sector may be prone to biosecurity threats, this can be best addressed through bigger farms. This means amending provisions in the Constitution on agrarian reform.
Currently, he said, the country’s farmlands are fragmented, leaving the average land size in the Philippines at only 1 hectare or less.
Regulation outside Charter
MEANWHILE, Abad explained that, “We’re not saying that we should not regulate investment but that does not have a place in the Constitution.”
What needs to be done instead is craft new legislation separate from the Constitution—that underwent deliberation—to put up needed restrictions, he clarified.
“So, it doesn’t matter if you make it 90-10, 70-30, 51-49, 60-40—doesn’t work. It is ineffective. It is only successful in violation and it’s very difficult to actually monitor this type of restriction,” he further explained.
In relation to this, the lawyer underscored that the Philippines is a part of the global economy—and its participation is key to maximizing the economic opportunities.
An example of this is the Regional Comprehensive Economic Partnership (RCEP), he cited. It is a trade deal covering the Asean members and their free trade agreement partners. The Philippines has yet to signify its ratification.
As such, to be able to have greater participation, Abad said that governance is key.
“It is important to not disconnect your economy from your political system. They work hand in hand,” he pointed out.
Opening up the retail sector
WHILE Abad welcomes the Retail Trade Liberalization measure, he said it may need further tweaking as capital requirements might still be too costly for foreign investors.
The measure, which is awaiting the President’s signature, lowers the minimum paid-up capital requirement of foreign companies to about $500,000 or P25 million from $2.5 million or P125 million previously. But some retail establishments will only have less than $100,000 capital in some instances, he said. “We should not fear small investments,” he said. “Remember that retail trade is a great opportunity for entrepreneurship and employment.”
“So that restriction should not be in place because it is just going to be another disincentive and it only forces investors to go to other countries,” Abad explained.
Still, he said the bill should be passed immediately, with further amendments scheduled later.
Abad also called for the passage of the amendments to Foreign Investment Act and the amendments to the Public Services Act, both of which are seen to liberalize the economy.
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