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Commentary

Economic liberalization crucial to federalization

12:04 AM June 28, 2017

A mandate given to the administration’s Consultative Committee (Con-Com) on constitutional reform is to review the economic policies prescribed in the 1987 Constitution. Studying the wisdom of establishing an open economic regime in the new charter falls within this purview.

Many Charter-change proponents endorse liberalizing key industries in the economy such as telecommunications. Some would even go as far as completely opening the utilization of our natural resources to foreign entities. The core selling point of these advocates is the potential influx of foreign direct investments (FDIs) to the country. But notably, recent FDI figures are already at a record high.

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In a letter submitted to the Senate committee on constitutional amendments, the Makati Business Club, one of the vocal and ardent promoters of economic liberalization, cited three major impediments to FDI growth in the Philippines: “(1) the perception of high levels of corruption in government; (2) restrictive foreign ownership rules; and (3) uncompetitive labor compliance costs.”

Clearly, simply removing foreign ownership restrictions would not automatically bring in FDIs because the other two obstacles must be addressed as well. And given that the Philippines currently ranks 101st in the Corruption Perceptions Index 2016, opening industries to foreign ownership without the accompanying governance and labor reforms will probably only result in modest, if not minimal, growth in FDIs.

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Still, the Con-Com should give serious consideration to further liberalizing the economy. Per the Philippine Development Plan 2017-2022: “Market competition promotes inclusive economic growth. It is a cross-cutting strategy to expand economic opportunities and increase access to such opportunities” (Chapter 16, National Competition Policy Framework).

Economic liberalization can significantly increase economic opportunities for many Filipinos. Consider removing, for instance, foreign ownership restriction on secular educational institutions (Art. XIV, Sec. 4 (2)). It then becomes plausible to imagine a learning institution such as Newcastle University establishing a campus in Naga or Bacolod in addition to its campuses in Malaysia and Singapore.

And while investors in education may not bring spectacular FDI numbers, if the scenario painted here does occur, a whole range of economic opportunities immediately becomes available to Filipinos in these areas.

The Con-Com should also reconsider the restriction on mass media (Art. XVI, Sec. 11 (1)). Again, removing this obstacle makes it possible to envisage international film outfits establishing a fixed presence in Mindanao, which is utterly rich in history and
replete with breathtaking scenery. Reshaping this region in the image of Auckland, New Zealand, would obviously be challenging, but it would not be wishful thinking.

The Con-Com can likewise consider liberalizing the advertising industry (Art. XVI, Sec. 11 (2)). Removing foreign ownership restriction here can pave the way for global boutique firms to set up shop in major growth centers such as Cebu and Cagayan de Oro. Again, ad agencies, as with mass media outfits, may not bring in staggering amounts of FDI, but they can bring a lot of economic opportunities along the value chain for Filipinos outside Metro Manila.

In the context of the impending Charter-change process, economic liberalization as contemplated here is vital given our massive and still growing population. It also aligns with President Duterte’s federalization directive. More importantly, it also complements this administration’s move to invest heavily in infrastructure in the poorest regions of the country.

But it is important to remember that economic liberalization does not mean the absence of government regulation. State intervention is still necessary in order to ensure that trade practices are fair and just, labor and consumer rights are protected, and our national patrimony is preserved. Simply put, under an open economic regime the community’s welfare must still be the priority over and above everything else.

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Michael Henry Ll. Yusingco, a practicing lawyer, is the author of the book “Rethinking the Bangsamoro Perspective.” He conducts research on current issues in state-building, decentralization and constitutionalism.

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TAGS: economic liberalization, federalization, foreign investments, Inquirer Commentary, Inquirer Opinion, Michael Henry Ll. Yusingco
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