Now is the time

Our updated unemployment and underemployment statistics released last week, while not markedly different from recent periods, produced quite a stir. I think this is because the figures came on the heels of the report on our very impressive 7.2 percent GDP growth for all of 2013, the second highest in Asia. With a combined unemployment and underemployment rate of 26.4 percent for 2013 based on official government figures, the question that should be uppermost in the minds of our national leaders is: What more do we need to do to create the jobs that will address this critical problem?

The simple answer is we need to attract massive investments into our economy for it is primarily through appropriate investments that jobs are created. We need investments in industry and agriculture, in factories, in infrastructure, in utilities, in hotels and resorts. We need investments in Metro Manila, in Mindanao, and the rest of the Philippines. To its credit, this administration has significantly increased infrastructure spending and is committed to elevate the level from our current 3 percent to 5 percent of GDP, in line with our Asean neighbors. And the much vaunted PPP (public-private partnership) projects seem finally to be getting off the ground with the enthusiastic participation of the private sector. Yet sufficient jobs are not being created and unemployment and poverty remain at unacceptably high levels.

I would contend that sustained and extensive poverty and unemployment constitute a larger national crisis than Supertyphoon “Yolanda.”  And our response should exhibit at least the same level of urgency and scale as we have mobilized for Yolanda. We should not be content with timid solutions like tweaking negative lists. We must pull out all the stops and do all we can to bring in the massive investments that we urgently need!

It is in this context that I view as extremely timely and critical the current initiative of Speaker Feliciano Belmonte to introduce surgical amendments to our Constitution that will allow Congress to open up significant sectors of our economy to enhanced foreign participation.

Last Tuesday I had the privilege of representing the business community at the first public hearing of the House committee on constitutional amendments, where I expressed the unanimous support for the Belmonte resolution of all the major business organizations in the Philippines. My colleagues in the foreign business chambers likewise indicated their unanimous support.

Our support stems from our conviction that the relaxation of the Constitution’s economic restrictions will vastly improve the environment for foreign direct investments (FDI), and that this constitutional amendment is the key to more jobs and inclusive economic growth.

Let us look at some interesting World Bank statistics for China, Thailand, Indonesia and the Philippines for the period 1980-2012. With total FDI of $2 trillion, China’s GDP per capita rose from $193 to $7,784 or 3,933 percent. Thailand’s GDP per capita grew from $683 to $5,480 or 702 percent, with total FDI of $130.4 billion. Indonesia had total FDI of $122.4 billion and GDP per capita growth from $536 to $3,557 or 564 percent. And the Philippines, which had the highest 1980 per capita GDP of the four at $685, saw this grow to $2,587 or 278 percent in 2012, with total FDI of $36 billion. While foreign investment was not the only reason for the growth disparity, it was a major factor.

The IFRI Center for Asian Studies’ 2011 study of FDI into the Philippines came to the conclusion that there were three primary impediments: high levels of corruption, high labor costs, and restrictive foreign investment rules. These impediments must be minimized if we are to attract the massive investments we need.

To those who are reluctant to support Charter change due to a fear of divisive disruption, I would argue that the risks far outweigh the fears. This is especially true given the simplified surgical approach espoused by Speaker Belmonte. Recently US Ambassador Philip Goldberg discussed with the Makati Business Club the shift in US economic policy toward Asia centered on the Trans-Pacific Partnership (TPP). The 12 countries currently negotiating to join the TPP include three of our major trade partners, the United States, Japan and Korea, and four of our Asean neighbors. From a purely defensive standpoint, we will be at a significant competitive disadvantage if we do not also join the TPP, whose members will account for 40 percent of the global GDP. And if we truly wish to be a key strategic partner of the United States in Asia, can we afford not to be in the program it considers the centerpiece of its refocused Asian strategy? Relaxing the economic restrictions in our Constitution is a condition to our full participation in the TPP.

For the Philippines to achieve its goal of genuinely inclusive economic growth, we need to generate the jobs that will allow the benefits of our impressive growth to reach the masses of our people. To generate the needed jobs, we need massive investments; there is no other effective way. And to attract sufficient investments, we need to open our economy wider. A positive first step will be to amend the restrictive economic provisions of our Constitution. We have a golden opportunity before us, because of our enhanced standing and the

current vigor of our economy, and the renewed interest of Japan and the United States. But we cannot be timid. Now is the time for bold, decisive action. We must seize the moment.

Ramon R. del Rosario Jr. ([email protected]) chairs the Makati Business Club.