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Do you want to defeat poverty or not?

/ 11:12 PM August 08, 2012

“If it ain’t broke, don’t fix it.” Well, it is broke. The Philippines has been the poorest performing country among its comparable neighbors over the past 30 years. There are many reasons for this, but paucity of job-creating, wealth-creating investment is certainly one of the principal ones.

Investment by Filipinos has been impressive, but it’s not enough. Foreign investment is needed, too. The Philippines has had the lowest level of foreign direct investment (FDI) among its neighbors over the past 25 years—only $32 billion versus Thailand’s $107 billion.

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There’s been enough research done to establish that there is a link between the two. We obviously need more FDI, but it is turned away by the “Do not enter” sign. President Aquino wants empirical data, hard facts to justify the need for constitutional change before he would (hopefully) agree to it. The data exist and I hope he’ll be convinced by them, but there’s also a “soft” fact he must consider. It’s called perception. And perception is as important as reality. Perception is reality to the perceiver.

If the Constitution is reviewed and the economy opened up, it sends a message: We want you to come and join us.

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Is a guest greeted at the front door with a smile or a frown? With a smile, you want to stay; with a frown, you look for reasons to leave early, if you enter at all.

We are now in a world different from that in 1935. Yes, 1935: That’s when the restrictions in the Constitution were written. The 1987 Constitution just continued them with minor modification.

There may be only a few areas restricted to 60:40, or worse, to 100-percent exclusion, but it creates an image of restrictions, not openness. It says to those looking for where to invest (and there’s a wide choice, as the numbers show) that this is a country that reluctantly wants you because there’s a frown on its face. You look for somewhere more welcoming. We want people to sit up and take notice. “It’s more fun in the Philippines” is doing it for tourism. “Hi, you’re most welcome” may do it for investment.

And what is there to be scared of? Jollibee is a resounding success in Hong Kong and Vietnam. Ricky Razon has taken over key ports in Indonesia, India and South America. Henry Sy has four malls in China and plans to build more. The Filipino has more than proved his ability to compete against anyone.

So, open up. As many as 2.8 million Filipinos need jobs, 11 million if you accept the more believable SWS numbers. Families numbering 3.1 million are enrolled in the conditional cash transfer program; that alone indicates the urgent need for far, far more jobs than the domestic economy can provide. We need more FDI.

Charter change isn’t unnecessary, as the President claims. It’s essential.

The Constitution was written in a far different world, where there was no “one world” but many fiefdoms (countries of independence), where technology was in its infancy. It was a time when national confidence had been destroyed by the Marcoses, and protectionism seemed a reasonable position to take.

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The one fundamental change I’d like to see is: GET RID OF THE SPECIFICS. A constitution should state general principles; the details should be defined by law that can change as the world changes. Today there are no (economic) borders in the world, except as arbitrarily dictated by a country’s leaders. Or, in our case, by an overly restrictive Constitution. The Constitution should establish the general principles and grand objectives that a nation should strive for in a general way that can withstand time. Congress can then pass laws that adapt to the times.

I believe the current economic provisions are one of the root causes of our economic problems. These restrictive provisions have essentially shaped the country’s inward-looking and “nationalistic” economic policies for decades. They are major barriers to economic progress as they have made doing business here costly and limited. Foreign capital is needed to spur business, bring in new technology, provide healthy competition (some business sectors are concentrated in the hands of too few), generate jobs, provide income, and ultimately lift many Filipinos from poverty.

We need massive job creation. Strictly Philippine investment just can’t do it, that’s a proven fact. We need to revive the manufacturing sector to create many of the jobs. Domestic demand for products won’t do it, we must internationalize.

So we need to amend the Constitution. The economic provisions need to be overhauled; they’re too inward-looking and out of touch with the 21st-century reality of global interdependence. And they need to adapt to changes in the economic environment—e.g., labor flexibility, information age, etc. As they’re currently written, these provisions promote an economic structure that doesn’t reflect and best use the strengths of the Philippine economy.

As to how to do it, the issue of “how it is changed” needs to be resolved. Practical reality at this time says fundamental change to the Constitution won’t fly, to try it will end in failure. The consensus is to look only at the economic sections, and here the simplest solution is for both chambers of Congress to separately review the sections listed above, and by a three-fourths vote in each chamber, take it to the people in a plebiscite, ideally while they are voting in the 2013 midterm elections.

Let’s get it over with. But please, not at the expense of agreed priority bills. Let’s get both done.

There’s an exciting new interest rising in the Philippines. To turn it into meaningful and truly inclusive economic growth requires the passage of some critical bills and the opening of the economy. Let’s hope Congress will rise to this challenge. It can.

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TAGS: business, charter change, economy, Government, Investment, Like It Is, opinion, Peter Wallace, Politcs, Poverty
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