DESPITE the enactment of business-friendly laws during the previous administration, foreign direct investment (FDI) inflows have not been as large as those streaming to the country’s Southeast Asian neighbors because of the Philippines’s restrictive, inward-looking Constitution, a senior lawmaker said on Sunday. The restrictive charter, he said, turns off foreign capitalists because it prohibits them from taking full control of Philippine corporations and owning lands needed for their local businesses.
Camarines Sur Rep. and National Unity Party (NUP) President LRay Villafuerte made the statement as the House Committee on Constitutional Amendments recently held its sixth public consultation on proposals to reform the 1987 Constitution.
Hence, the need for a Constitutional Convention (Con-Con) comprising duly elected delegates to work on, and clear the way to, amendments to the oft-putting economic provisions of the 1987 Charter that bar foreigners from having 100-percent control of corporations they invest in or buying lands needed for their operations because they are limited to owning or controlling a maximum 40 percent of these businesses, said Villafuerte.
Villafuerte said the Con-Con route at this early stage of the Marcos presidency is the more feasible route, in lieu of legislators convening themselves into a Constituent Assembly (Con-Ass), as he asserted on TV that the House of Representatives would go ahead on this latest Charter Change (Cha-Cha) initiative even if the President said recently that amending our Constitution is not one of his administration’s priorities.
Asked on whether the House would continue with its series of nationwide hearings and public consultations on pending bills seeking constitutional reforms either through Con-Con or Con-Ass, Villafuerte replied: “Of course, definitely. The problem in our country is basically poverty. We need to create jobs, and in order to create jobs we need foreign investments, foreign capital.”
Villafuerte said the House is “targeting to have more marathon hearings, and possibly, decide on this issue by April…so the Senate will be able to decide on this matter before the year is over … and maybe we can have a plebiscite by the first quarter of next year.”
“Now, if we can’t have a plebiscite to approve the would-be proposed constitutional amendments by the first quarter next year, I think we have to wait another five years, which means the next President, to keep Charter Change rolling. That’s the sad reality,” he said.
Best time is now
Villafuerte said the best time for Charter Change to happen is right now at the start of the Marcos presidency when such an initiative wouldn’t raise doubts about a possible hidden agenda to extend terms of incumbent elective officials.
“If you will look at it, a main source of poverty in the Philippines is our low agricultural output. There’s a lot of lands in the country that are idle. We need foreign capital and foreign technology [to harness such idle lands],” said Villafuerte, who authored one of the measures (House Bill 4926) aiming to introduce constitutional amendments via the Con-Con route.
“So in order to have more foreign capital flowing into the country, we should allow ownership as part of the menu for investors,” he said.
For Villafuerte, the incessant challenge of price spikes in foodstuff and other farm goods is rooted in a structural problem. “The purpose of agrarian reform was really to help our farmers. We supported that but, let’s admit …that it was a failure in the sense that when we gave lands to our farmers, there was no capital available for them to make their farms truly productive.”
“The result was low agricultural output. So, what’s the solution? We need foreign technology, we need foreign capital. And if you will look at all the countries that have really progressed, these are those that have allowed foreign ownership. If you’re a foreigner who wants to invest in agriculture and other sectors, the basic thing here is you want ownership,” he said.
Asked whether constitutional change is really necessary, given that the 18th Congress wrote in the past Administration a trio of liberalization laws to attract foreign investors, Villafuerte noted that he was among the authors of these three laws, “but basically, it all boils down to the ownership structure. Basic sectors in our country limits foreign ownership to up to 40 percent … of public utilities, media, education, natural resources development, among others.”
The three laws mentioned are Republic Act (RA) 11647, RA 11595 and RA 11659 that reformed, respectively, these laws on foreign investments, retail trade and public services.
Because of the 60-40 ownership cap in the Constitution—60 percent of businesses for locals and only 40% for foreigners—these three new laws stopped short of allowing foreign capitalists to take full control of domestic businesses, Villafuerte said.
“We already made the changes in these three laws, but there remains the constitutional restrictions on foreign ownership that we need to address through Charter Change,” he said.
If an investor wants to manufacture a certain product, for instance, one basic point is that this person would want land ownership, Villafuerte said.
He noted that two factors that dampen investor appetite in the Philippines are high electricity rates and slow Internet speeds.
He explained that only the entry of greater foreign investments in the resources-intensive energy sector, for example, will lead to better and cheaper power services for consumers, “but 100-percent foreign ownership is not allowed in the power generation or development business.”
“We need ports, we need airports, we need telecommunications infrastructure. So why don’t we allow greater foreign capital and technology into these sectors that are crucial to rapid and sustainable growth and development?” he stressed. “Other countries are doing that…first world economies are allowing foreign ownership.”
Right now, he said, foreigners are going around the 60-40 ownership cap by marrying Filipino nationals so they can buy land and put up businesses there that can own or control 100 percent.
Earlier, Villafuerte said he expected strong support for the Con-Con proposal because of its timing, its focus on economic provisions of the Charter, and his proposal to prohibit would-be Con-Con delegates from running in the immediate elections following the ratification via a plebiscite of the proposed amendments.
