Constitution must boost economy

The debate on whether it is time to amend the Constitution is once more on. But this time, many of those who opposed it in the past are thinking that maybe it is indeed time to do something at least in the area of making the Constitution more attuned to the needs of a global marketplace.

When asked how he feels about it, P-Noy took the position that he would rather move the economy without touching the Constitution. He believes it can be done. The business sector thinks otherwise.

My initial instinct is to support P-Noy on this. Converting Congress into a constituent assembly to amend the economic provisions may also open the possibility of amending some political provisions like shifting to parliamentary system. This is likely to be more contentious and distract national attention again from other urgent concerns.

Of course it helps that P-Noy has no ambition to perpetuate himself in power unlike Ate Glue. But amending the Constitution is always bloody in this nation under the thumb of self serving politicians. We need a quick and simple process limited to the economic provisions.

 I am told that such a simple approach is now available. Former Supreme Court Justice Adolf Azcuna has suggested a very simple amendment that wouldn’t require electing delegates to a Constitutional Convention and a large budget for their expenses. Maybe Azcuna, a trusted legal adviser of the late President Cory will be consulted by P-Noy on the matter.

Justice Azcuna’s formula, now advocated by Speaker Sonny Belmonte and agreed to by Senate President Juan Ponce Enrile, is to amend the economic provisions in the Constitution by simply inserting the phrase “unless otherwise provided by law” in those economic provisions.

A joint resolution passed by both houses of Congress acting as a constituent assembly should not be that controversial even if the leftists will make a lot of noise. We can also have it ratified in next year’s elections and save money on a separate referendum.

According to Azcuna, once adopted, Congress can pass the necessary laws to spell out the new framework for foreign investments in these strategic areas of the economy. Those who still believe in keeping the restrictions will have time to convince Congress one sector at a time.

Indeed, we need to make the economic provisions of the Constitution more in line with globalization and other trends in the economic environment in today’s world. The countries that flourish today benefit from trade and international investment flowing both to and out of their economies.

Now, even China and Russia with strong central planning and economic restrictions are making moves to open their economies. China’s membership in the WTO signals its readiness to play by the rules of the open market. Even Burma is opening up.

Unless we make our Constitution friendlier to foreign investors, we should expect to continue to lag behind Thailand, Malaysia and even Vietnam. The need for FDI is clear if we want to create more jobs, alleviate poverty and modernize the economy.

The economists in the Foundation for Economic Freedom (FEF) recently called for the removal of any and all such Constitutional restrictions to foreign investment saying such are now outmoded. A good example cited is the restriction on the ownership of mass media.

The ownership restriction on mass media and advertising was justified by some members of the Constitutional Commission as a means of preventing foreign media ownership from controlling the way we think. But the restriction didn’t make sense then and more so now in the age of the Internet.

International media can now be freely accessed through the Internet. Social media, on the other hand, respect no national boundaries. Even repressive governments find it nearly impossible to control access to the Internet… making the reason for the constitutional ban meaningless.

But P-Noy pointed out that “we grew 6.4 percent in the first quarter, why is there a need to change the Constitution?”

FEF president Toti Chikiamco gave him the answer in an open letter to him. The need is there, Mr. Chikiamco wrote, “because Mr. President, we don’t want to continue to grow the economy on the backs of our Overseas Filipino Workers. The simple fact is that economic growth for years now has been propelled by consumption spending, mainly due to the remittances of OFWs, not by any action of the government.”

The FEF president continued: “We want our growth transformed from a consumption-driven one to an investment-driven one because only an investment-driven growth will grow jobs and reduce unemployment, increase productive capacity, improve competitiveness, and put the country on a higher plane of sustainable growth.

“The sad fact is that the Philippines has one of the lowest, if not the lowest, investment rates in the region. Foreign investors don’t find it appealing to do business in the Philippines…”

The worse part is that the prohibition is circumvented anyway through the use of dummies or multiple layering of ownership, and other creative schemes. It keeps the usual economic rent seekers in business. This increases the cost of doing business and decreases transparency so as to project a seamy side of our business environment we can’t be proud of.

The FEF also pointed out that “by keeping out foreign investors in certain areas of the economy, we are inadvertently strengthening the position of domestic monopolies…” As one of my economist friends puts it, “utilities, media and telecoms are too important to our economy to be the exclusive domain of our selfish elite and of foreigners who are willing to pretend they are Filipinos.”

The FEF letter also debunked fears that Filipino entrepreneurs will be overwhelmed by the entry of foreign competitors. “Time and again, Filipino-owned enterprises have shown that they can compete with the best of them, like Jollibee, and even thrive in foreign shores. We have to have faith, Mr. President, that the Filipino will excel.”

Former NEDA Chief Gerardo Sicat, a member of the FEF, also pointed out that now is the right time to introduce those reforms. Dr. Sicat: “world economic conditions are relatively difficult at the moment.... the right time to undertake reforms is when expectations are low. When the prospects turn brighter, the proper policies are already in place and the country can reap the benefits. Thus, we do not miss the boat.”

Dr. Sicat observed that “our high-growth neighbors think regional and their economies are further outward looking. That makes their enterprises competitive regionally and internationally.”

We should rearrange our investment incentives pattern, Dr. Sicat observes. “The old mindset is still behind the investment incentives laws under the Board of Investments. Yet our export incentives under the PEZA are geared toward international markets.

“There is a link that is missing in these two incentives laws. The supply networks essential to support the industrial supply base of our export manufacturers in the PEZA do not exist within our boundaries as a result. The reason is that the domestic market has been nurtured by restrictive economic policies.”

Of course cha cha alone isn’t going to automatically get our investment climate extremely attractive. We still have to work on our usual problems with bureaucratic red tape, corrupt judiciary and inadequate infrastructure. But cha cha to reform the economic provisions is an important step in the right direction.

P-Noy must indeed open his mind to the possibilities of amending the Constitution if only to make its economic provisions in line with world market developments. The Constitution must enhance economic growth, not be a hindrance to it.

Grapevine

I heard that a number of local banks approached by the MVP group are showing reluctance in financing the purchase of GMA 7. The MVP group reportedly offered the shares of stock of the network as collateral for the loan.

But the market value of those stocks could change quickly. GMA 7 stocks now have a P/E ratio of over 29 (according to the PSE website) compared with ABS-CBN’s a little over 11. Given the fairly substantial amount needed to buy control of GMA 7, the high cost of producing content and the reality of a limited advertising market in the country, bankers have reason to fear the ability of the new owners to make enough profits to service the loan.

Of course MVP can always go to his Indonesian principals for support. So here is an example of how our constitutional restriction on media ownership can be rendered toothless.

Book worm

Ruth Marbibi sent this one.

Guy to new girlfriend: What sort of books are you interested in?

She: Cheque books.

Boo Chanco’s e-mail address is [email protected] Follow him Twitter @boochanco.