Should restrictive economic provisions stay? (1) | Inquirer Opinion
Commentary

Should restrictive economic provisions stay? (1)

The Philippines remains one of the most restrictive economies in the world. In 2020, we ranked third among 84 economies in the Organization for Economic Cooperation and Development’s index measuring regulatory restrictiveness on foreign direct investments.

The prohibitive economic provisions in the 1987 Constitution have remained despite the game-changing amendments to the Public Service Act, the Foreign Investments Act, and the Retail Trade Liberalization Act early this year. These restrictions include foreign ownership in the media, advertising, and education sectors, and ownership of land. The restriction on foreign ownership range from requiring at least 60 percent Filipino ownership, to total prohibition.

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Removing these restrictive provisions is crucial in sustaining the interest of foreign investors and the momentum achieved so far in the government’s liberalization efforts. More importantly, we need to keep up with the times and with our neighbors. All the economic, technological, social, and political developments that have transpired in the past years globally have made these economic restrictions outdated.

Changing times. The 1987 Constitution has never been amended in the past 35 years despite previous attempts during the Estrada and Arroyo administrations, and a number of proposals in Congress.

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Dr. Cielito Habito, an economist and former National Economic and Development Authority director general, allayed fears that foreigners would “brainwash” Filipinos through mass media and advertising, since millions of Filipinos now have cable television and can access all kinds of information through the internet.

In the education sector, foreign ownership caps prevented the Philippines from hosting topnotch universities seeking to establish a presence in Asia. Unlike us, Malaysia and Singapore now have branches of Yale University and Johns Hopkins University.

The Constitution prohibits foreign ownership in mass media and allows only 30 percent foreign capital in advertising agencies, and 40 percent in educational facilities. Removing these restrictions is expected to bring the following benefits:

Free competition would result in improved quality and faster delivery of services to Filipinos, and;

Transfer knowledge and state-of-the-art technology that can improve the efficiency and productivity of sectors concerned, as well as raise the skill level of Filipino workers, thereby increasing their chances of employment.

Need to act fast. Proponents of the outright removal of the restrictive economic provisions from the 1987 Constitution believe that restrictions are better left to legislators to give Congress the flexibility to enact or change laws, that can better respond to changing global conditions. The change is timely and urgent as the country struggles to face and overcome the challenges brought about by the pandemic and recent geopolitical events.

Amending the Constitution or any of its provisions will have to be approved by either Congress acting as a constituent assembly, or a constitutional convention as was the case in 1971.

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But if the amendment is limited to a few provisions, like the restrictive economic provisions, it can be done faster through a joint and concurrent resolution in both chambers of Congress. If the Senate and the House could approve it by November, it is possible to submit the prospective constitutional amendments to the people for approval in a plebiscite to coincide with the upcoming barangay elections in December this year.

Given the importance of this matter, we urge President Marcos Jr. to convene the Legislative-Executive Development Advisory Council and make this a priority measure that would be mutually agreed upon by the legislative and executive branches of government.

By doing so, the administration would achieve what may be the most important economic reform, attract more foreign direct investments, and expand opportunities to make the country’s economic growth more inclusive and sustainable.

(To be concluded)

Gary B. Teves served as finance secretary under the Arroyo administration.

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TAGS: economy, Public Service Act, Retail Trade Liberalization Act of 2000
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