Business Matters

Paths to inclusive growth


Last June, Philippine Business Groups (PBG) including the Joint Foreign Chambers (JFC) sent a letter to President Aquino listing key issues and proposed measures that his administration should train its sights on to achieve its vision of inclusive growth through job generation, poverty reduction, and global competitiveness. PBG also includes the Makati Business Club, Management Association of the Philippines, Philippine Chamber of Commerce and Industry, Business Process Association of the Philippines, and Employers Confederation of the Philippines, among others.

The letter and a detailed annex focused on: accelerating transportation infrastructure and addressing the high cost of logistics; promoting an antitrust and competition policy; addressing smuggling and improving trade facilitation; rationalizing fiscal incentives; retaining the Mining Act, complemented by implementing a competitive fiscal regime; resolving the high cost and inadequacy of power supply; revisiting restrictive provisions in the Constitution and in other laws; and reforming the judicial system.

The response was prompt: a meeting of the PBG and JFC with the Cabinet economic cluster, a critical output of which was an agreement to hold more regular dialogues so that the government and business can work together in acting on the proposed priority issues.  This can very well be the most critical public-private partnership endeavor yet. But as we often say, “abangan and susunod na kabanata!”

Some of the issues mentioned made it into the President’s State of the Nation Address, auguring well for concrete results (though that remains to be seen).  But the Sona was silent on two critical issues—an antitrust and competition policy and restrictive provisions in the Constitution and in other laws. I will highlight them by sharing the rationale and recommendations made in the annex of the letter.

* * *

An effective antitrust law and competition policy will bring about a level playing field that will encourage productive investments. The passage of an antitrust law is critical in the light of commitments by Asean member-countries to introduce competition policies in their respective jurisdictions in preparation for regional integration in 2015.

In the 2012-2013 World Economic Forum Global Competitiveness Report, the Philippines scored the lowest among eight Asean countries (ranking 84th among 144 economies) in terms of effectiveness of antimonopoly policy and of extent of market dominance (ranking 98th overall).

The Philippines lacks a comprehensive piece of legislation that embodies competition policy.  Each sector and industry is covered by several laws and issuances that often grant administrative and regulatory powers to different government agencies, often resulting in conflict due to overlapping jurisdictions. Moreover, existing laws do not capture the complexities of the current market. For example, provisions of the Revised Penal Code and the Civil Code have remained unchanged since passage in 1930 and 1949, respectively.

As a remedy, the following steps were recommended: Tap the private sector to provide inputs to the competition and antitrust measure, using House Bill 4835 as a working draft; strengthen the Office for Competition under the Department of Justice in order to have a ready pool of experts once an independent competition agency is established; and strengthen the regulation of unfair competitive practice.

* * *

We commend the government for amending Republic Act 7353 (Rural Act of 1992) and passing RA 10574 which allows the infusion of foreign equity into the capital of rural banks.  By

allowing up to 60 percent foreign ownership of rural banks and allowing them to accept real property mortgages and take possession of such up to five years, we will hopefully see a reversal of the rising trend of rural bank closures, which averages in the 20s every year.

In the same respect, we hope that the administration will push for the amendment of the economic provisions in the 1987 Constitution that impede healthy competition, industry efficiency and, therefore, service and price efficiency.  In addition, we strongly encourage the revision of the 9th Foreign Investment Negative List to cut the list of industries where foreign participation is limited.  We believe that by taking these steps to liberalize key sectors in our economy, the administration will bring in fresh knowledge, innovative systems and technology, and new jobs for our people.

These were the steps recommended: Review the economic provisions of the Constitution to  encourage private-sector participation and the entry of  foreign direct investments (FDIs); review the Foreign Investment Negative List and reduce the restrictions in it; consider the possibility of amending the Constitution through an act of Congress or acting as a constituent assembly by appending the phrase “except when otherwise provided by law” to the economic provisions, but with clear stipulation of the safeguard against indiscriminate ownership of land for speculation.

Action on the two priorities mentioned will send the right signals to foreign investors, together with our increased investment grade ratings, that the Philippines is truly open for global business.  While FDIs have certainly been increasing, we unfortunately continue to lag behind our neighbors in Asean. What we all need to understand is that in this global economy, increased FDIs are critical for job generation and sustaining the needed growth momentum.

Peter Angelo V. Perfecto is the executive director of the Makati Business Club.

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  • Jao Romero

    there are 2 laws that this administration can pass that would make this government a lasting legacy. Anti-trust, and FOI. while many thought the battle won last year over the RH bill was significant, it hardly registers as a major victory in my view.

    the real battle is won when a FOI bill and an anti-trust bill are passed. i’d say even the abolishing of pork barrel (if it does happen) pales in comparison to these 2 bills.

    the anti-trust bill if passed, would open up the markets like nothing in this country ever could. it would bring progress so much that even if everyone in the government steals 90% of the country’s coffers, it won’t matter. jobs and money would come in. the markets would be free from oligarchs and a semblance of real capitalism would dawn on the country. that’s the answer to everybody’s question when they ask: what makes the Philippines different from other corrupt Asian countries that have still managed to do well, despite their corruption? the market, is free.

    FOI is the weapon the citizenry needs to fight back. reforms won’t have to be so dependent on who the sitting President is. with a FOI law in place, the citizenry can continue the fight PNOY will leave behind.

    we must institutionalize change. with FOI, we can do it.

  • Chloroform

    FOI (without the right-to-reply) will provide a better environment for inclusive growth… related to 2nd to the last paragraph, I also heard rumors about persons buying lands at low price and selling it high to the government to be converted to roads…

  • Fulpol

    retaining the Mining Act…


    Mareng Winnie Monsod just exposed the scam on mining…. repeal the Mining Act

    • Joseph20112012

      Would you want to prefer the unsafe politician-owned small-scale mining instead? Despite its flaws, Mining Act of 1995 is better than nothing and in fact in order to lure more Western mining companies to mine our mostly untapped mineral resources, we have to scrap the 60/40 restriction on production-sharing agreement in favor of Filipino mining interests and let Western mining companies to invest 100% in large, mining, or small-scale mining projects.

  • Jesus C. Gregorio

    National economic growth must come from the grass-root level of our society. It will be superficial and short lived if not. Why not create leverage with something that we have in abundance everyday – wet organic waste?

  • Ulipur

    We are lagging very much behind our neighbors in attracting FDI and in attracting tourists….contrary to the claims of this govt.

    Kaya sobra ang dami ng unemployed and underemployed.

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