Charter Change is not the answer

 

The impetus to amend the economic provisions of the 1987 Philippine Constitution comes from the basic argument that such revisions are necessary to ease up restrictions on foreign investment. Proponents of Charter Change say that the nationalistic economic provisions of the Constitution are hampering the flow of foreign direct investment. They claim that these provisions are driving foreign investors away.

Makati City business centre awaits more foreign investors to the Philippines.

On paper, meaning by simply reading the 1987 Constitution alone, foreign equity has been limited to 40 per cent in the operation and management of public utilities, exploitation of natural resources, ownership of private lands and educational institutions, and to 30 per cent in the operation of advertising agencies.

In reality, however, these provisions have been watered down, diluted or even circumvented by legislation passed by one administration after another right after the 1987 Constitution was enacted during the term of President Corazon Aquino. Through one amendment after another, laws have been passed by Congress to ease regulations and provide incentives to foreign investors.

1991: Corazon Aquino Administration exempts foreign investors

The Corazon Aquino administration passed the Omnibus Investment Code which exempted foreign investors and corporation from the 60 per cent rule in operating local enterprises that are considered pioneer projects and priority areas of investment. In 1991, investment laws for foreign capitalists were further liberalized by the Foreign Investments Act.

The subsequent administrations of Fidel Ramos, Joseph Estrada and Gloria Macapagal-Arroyo also enacted laws favouring foreign investors. In 1995, the Special Economic Zone Act was passed. It was followed by related laws creating special economic zones in Cagayan, Zamboanga City and in the Calamba-Batangas-Quezon (Calabarzon) area where foreign corporations were allowed full freedom to operate.

1994: Congress enacts all-out liberalization of trade

In 1994, the General Agreement on Tariffs and Trade (GATT) was also ratified, thus enhancing an all-out liberalization of trade. Further laws were passed by Congress that liberalized foreign investments such as the Bank Liberalization Law of 1994, the Build-Operate Transfer Law of 1994, the Mining Act of 1995, the Oil Deregulation Law of 1997, and the Investment House Liberalization of 1997.

To make the environment more attractive to foreign investors, Congress also passed legislation that weakened labour unions and pulled down the cost of Filipino labour. In 1989, for example, the Wage Regionalization Act was enacted to offset demands for wage increases and abolish national minimum wage standards. The Labour Code was also amended to allow contractualization of labour and impose additional restrictions on the right to strike. As a consequence, the number of unions and unionized workers in the Philippines has dropped by more than 80 per cent since.

Attracting foreign investments has always been the key element in the economic development programs of the previous administrations from Cory Aquino to Gloria Arroyo. Foreign capital was invested in privatized and deregulated industries such as power generation, water and electricity distribution utilities, road infrastructure, transportation, and in business process outsourcing to take advantage of the deregulated regime and generate big profits for foreign corporations.

A computer programmer at a busy call centre work station in Manila. Photo courtesy
 of Jay Directa-AFP File. Click link  http://www.youtube.com/watch?v=gdOpLnsnej4
 to view "Global investors confident of more foreign investment flows for Philippines."
 Notice no mention of economc restrictions on foreign investments.

So, all this talk about the restrictive provisions of the 1987 Constitution is nothing but hot air. The patrimony provisions in the Constitution are merely aspirational, without teeth and reduced to ideal norms that have been crushed by legislation and sycophantic administrations to foreign investors.

Yet PH still lags in attracting foreign direct investments

Compared to China, a communist country without the fundamental freedoms that Filipinos enjoy and with a very restrictive economy, the Philippines received only more than $9 billion foreign direct investment in 2009 as against $60 billion for China. In 2010, foreign direct investment in China was estimated to have reached $115 billion.

Yet, the Philippines is a constitutional democracy, where people speak English like a first language and have freedom of speech, religion, an established judicial and legal system, and among other things, are familiar with the Western way of life.

On the other hand, while China is the largest economy in the region, it is also the most restrictive. Foreign corporations are investing more in China in spite of its record of human rights violations, use of child labour, tainted products and probably the world’s biggest violator of intellectual property rights.

Why do our leaders in government and those in business continue to blame the Constitution for the country’s inability to attract foreign capital? Despite limits imposed by the Constitution, previous administrations and Congress have run around them by liberalizing laws and regulations in favour of foreign corporations. Yet, foreign investors remain cool on the Philippines.

One keen Filipino observer noted that “the economic provisions of our Constitution are not the reasons why foreign investors are shying away from our country. Corruption, uneven playing field, ineffective governance and leadership, changing rules, no sense of urgency for reforms and a negative country image, among others, are the reasons why. Certainly, Charter change is not the solution.”

Dr. Bernardo M. Villegas, Senior Vice President of the University of Asia and the Pacific and a columnist in the Manila Bulletin, continues to insist that “a major explanation for the unattractiveness of the Philippines to the outsiders is the restrictiveness of our Constitution and other laws that are anti-foreign investors.” Villegas is convinced that amending the Constitution will result in attracting much-needed foreign equity capital in the form of foreign direct investments.

In fact, PH is lowest in business competitiveness

The IMD-World Competitiveness Yearbook 2011 results released recently by the Asian Institute of Management showed that the Philippines has slipped in business competitiveness as compared to its neighbours in the Asia-Pacific region. The Philippines is still the laggard in Southeast Asia compared to its competing neighbours Singapore, Thailand, Malaysia and Indonesia which again emerged with higher rankings.

According to the competitiveness report, the Philippines ranks poorly in infrastructure, one of the four major categories used in measuring the countries’ competitiveness. The other factors are economic performance, government efficiency, and business efficiency.

Notice that restrictive economic provisions, such as those found in the 1987 Constitution, are not cited as impediments to competitiveness. China, for example, which is a very restrictive economy, ranks very high in the competitiveness survey and is in a league of its own.

With dependence on foreign loans and foreign investment as the centrepiece of economic development plans, the influx of foreign capital into the Philippine economy has not resulted in dramatic improvements. Instead, the local economy continues to slump in a constant state of crisis.

Considered as the engine of economic growth, manufacturing, for example, has continued its decline in spite of foreign investments.

The number of manufacturing firms has fallen from 7,500 in 1999 to 4,600 in 2008, resulting in a drop in employment from 1.1 million to 860,000 or a decline of 4 per cent in its share in total employment. Manufacturing contributes only around 23 per cent of the total gross domestic product—the same level it was more than 50 years ago.

Using the Constitution as cover-up for laggard economy

Proponents of lifting the constitutional restrictions on foreign investment are not being honest to the Filipino people, or continue to be in a state of denial. Restrictions on foreign equity exist only on paper.

Despite legislation designed to liberalize infusion of foreign capital, the economy remains stagnant and our leaders in government and those in business are ignoring the real causes and looking for an easy scapegoat.

Instead of identifying corruption in government, indecisive leadership, excessive bureaucratic red tape, and poor infrastructure, they’re all blaming the Constitution as the major impediment to economic growth because it limits foreign ownership and control of local businesses.

Cha-Cha, one more time

True to the saying that change is the only thing constant in this world, the Philippine Congress is back to its perpetual obsession for amending the Constitution. This time as a bicameral assembly, both houses of Congress have agreed on a formula that will propose revisions in the Constitution without the so-called involvement of the sitting President.

The first time the Philippines had its own Constitution was when the country was on the brink of gaining independence from Spain. It was largely symbolic for it embodied the First Republic until the Americans took over the islands and put the country under its colonial tutelage. Three Constitutions had since been adopted after the Commonwealth era but the Philippines never really became free from American stranglehold, as this latest initiative by the Philippine Congress to amend the Constitution could have been triggered by the constant lobbying of the American ambassador to the country.

Every time a new Constitution was adopted, hopes that the revisions would bring about positive change to the country quickly dissipated, only stirring up yet more calls for another round of revisions.

Just like the popular cha-cha-cha dance, every step forward is followed by a step backward, and that is exactly the enduring pattern of constitutional reform in the Philippines. Aptly termed Cha-Cha for charter change, it is like an affliction that won’t go away.

Cha-cha-cha. Photo courtesy of dabuda. Click image to view "Juana Change -CHACHA,"
 http://www.youtube.com/watch?v=A_Hy-V0MUmo&feature=related

The last time the Philippines had a major overhaul of its Constitution was in 1987 after the fall of the Marcos dictatorship. Ferdinand Marcos himself installed his own Constitution in 1973 which was later superseded by the 1986 Freedom Constitution when Cory Aquino was catapulted to the presidency.

During the administration of Cory Aquino, a period of respite from Cha-Cha fever held sway as she said time and again that she was not interested in changing the Constitution, apparently the same tack now being taken by her son, President Noynoy Aquino.

Failed Cha-Cha attempts

Amending the Constitution was initiated during the terms of Presidents Fidel Ramos, Joseph Estrada and Gloria Macapagal-Arroyo, but the reformers could not agree on the mode of charter change.

Congress wanted revisions through a constituent assembly, with both houses of Congress sitting as one body. But the elected representatives in both houses were not sure how to approve the amendments once drafted and debated by both houses, and they were all consumed by nagging suspicions that the president at the time only wanted to stay in power for a longer term.

Others wanted a constitutional convention, where a separate election would be held to choose the delegates who would draft the amendments to the Constitution. But none of the sitting presidents was as strong as Ferdinand Marcos, the only president able to call a constitutional convention during his regime to draft a constitution to legitimize the New Society. Still others attempted to change the Constitution through a people’s initiative, which was shut down by the Supreme Court twice; first, for lack of an enabling law for the proposed revisions in the 1987 Constitution, and second, for failing to comply with the basic requirements of the Constitution for conducting a people’s initiative.

With the latest Cha-Cha initiative, both houses of Congress will consider amendments to the Constitution separately, vote on their respective proposals in accordance with the required number of votes under the Constitution, and submit the approved changes to a national referendum. But the revisions will only touch on economic provisions, not on structure of the government or term limits of the presidency.

Pressure from the United States

Undoubtedly, the impetus could have come from Washington, D.C. For a long time, the United States has been pressuring the Philippine government to adopt charter change to allow foreign companies to build majority stakes in companies that are currently barred under the present 1987 Constitution.

U.S. ambassador to the Philippines Harry K. Thomas Jr. made no qualms about the American policy to see that the Philippines change its laws and amend its Constitution in order to join the Trans-Pacific Partnership (TPP) which has been endorsed by the U.S. government. The TPP aims to eliminate tariffs among countries who signed up to the regional undertaking by 2015. Among those who have already agreed to participate are Australia, Brunei, Chile, New Zealand, Peru, Singapore, Vietnam and the United States.

During President Noynoy Aquino’s visit to the United States last year, he asked American support for joining the TPP. Aquino told the Council for Foreign Relations in New York: “Envisioned as a platform for economic integration across the region, the TPP countries would be in a best place to become the region’s leading hub for trade, investment and growth.”

So all this talk that President Aquino is not on board the current Cha-Cha initiative could just be a smokescreen. Aquino appears to have given tacit approval to the U.S. ambassador when the latter has been making speeches that the inability of foreign companies to gain a majority stake in the Philippines has been a constraint to economic growth.

In his speech before a forum on Philippine-US relations organized by the Washington-based Asia Society last August 2011, Ambassador Thomas said “our priorities in the Philippines are basically the same as the priorities of the Philippine government.” He added that the United States is currently “pleased to see the Chief Justice of the Supreme Court and also the Speaker of the House now open to changing parts of the Constitution on the economic side.”

The 1987 Philippine Constitution provides that Filipinos should own majority shares (60 per cent) in companies doing business in the country, especially those involved in strategic industries. This provision, however, has easily been circumvented by Congress and other joint oil exploration ventures between the Philippines and foreign companies. The Mining Act of 1995, for instance, masks the mining operations of wholly-owned foreign mining companies as a partnership between the government and the foreign corporation. The Nampalaya project in offshore Palawan is also another example of a partnership between the Philippines and foreign companies that violates the Constitution, whereby Shell and Texaco were allowed to get a 90 per cent stake in the entire project while the Philippine National Oil Corporation is left with only 10 per cent.

Trans-Pacific Strategic Economic Partnership

The Trans-Pacific Partnership (TPP), also known as the Trans-Pacific Strategic Economic Partnership Agreement, is a multilateral free trade agreement that aims to further liberalise the economies of the Asia-Pacific region. The original agreement between the participating countries took effect on May 28, 2006. U.S. President Barack Obama had proposed a target for settlement of negotiations between member-countries by the next APEC summit in November 2011.

The objective of the agreement was to reduce all trade tariffs to zero by the year 2015. It is a comprehensive agreement covering all the main pillars of a free trade agreement, including trade in goods, rules of origin, trade remedies, sanitary and phytosanitary measures, technical barriers to trade, trade in services, intellectual property, government procurement and competition policy.

TPP to make cheaper drugs less accessible

The Trans-Pacific Partnership has been criticized largely for some provisions that threaten to extend restrictive intellectual property rights, which would have geographical ramifications and a broad impact on citizen’s rights, particularly due process, privacy and freedom of expression rights. The agreement would also have lasting restrictive impact on the future of the Internet’s global infrastructure and innovation across the world. In other words, the TPP will rewrite the global rules on intellectual property enforcement.

One example of the obvious deleterious effect of the agreement would be to alter current policy regarding provision of affordable drugs for the prevention and treatment of HIV/AIDS. Expansion of intellectual property barriers would enable pharmaceutical companies to hold or renew patents for longer periods, thus limiting the availability of cheaper generic medicines and treatment. Prices of medications to treat HIV and AIDS globally have fallen dramatically in the past 20 years, largely due to intellectual property legislation which allows for more wide-spread access to patents that used to be heavily guarded by large pharmaceutical companies.

As a result, the TPP will benefit predominantly big transnational companies and powerful countries like the United States. Matthew Kavanaugh, director of the U.S. Advocacy for the Health Global Access Project (GAP), said that the TPP in fact is a “beachfront strategy for gaining a hold in Asia for a certain set of countries, for a certain set of interests."

Cha-Cha and the TPP

If the Philippine Constitution will be amended to open up its patrimony provisions in order to secure membership in the exclusive TPP club, it will be a total sell out of our economy. Once the nationalist economic provisions in the 1987 Constitution are removed, the result will be the unhampered plunder of the country’s resources and the unregulated extraction and repatriation of profits.

For change, Revolution, not Cha-Cha. Photo courtesy of pelikula76.

As in the past, the President and Congress have easily bypassed the Constitution by circumventing its economic provisions that limit foreign ownership and participation in local industries, particularly in the exploration and exploitation of natural resources.

During the previous months, President Aquino signed an agreement allowing China to lease 1.2 million hectares of land for agricultural production. Not to be outdone, Japanese corporations were also able to obtain a lease from the government for one million hectares for bio-fuel production. So obviously, the United States government wants a sweeter deal than the ones the Philippine government has given to China and Japan.

The best minds in the Philippine Congress have not yet started to sit down in earnest and tinker with the economic provisions of the Constitution, yet the country’s wealth and resources are already up for grabs by foreign corporations. This current initiative to amend the Constitution is a mere formality, a charade to cover up what is already a blatant breach of the fundamental law of the land by the very same people who are now championing charter change.