‘Why we need to amend the restrictive economic provisions’ (Continued from last week)

Of the original five members of ASEAN – Indonesia, Malaysia, Philippines, Singapore and Thailand – we are unique in that some important economic sectors are singled out for specific protection under the Constitution, the fundamental law. All the other countries simply left all matters pertaining to economy and business to ordinary legislation.

The political constitutions of these other countries are much simpler compared to ours. They principally focused on describing the aspirations of the nation, the structure and the form of their government institutions, and the duties and responsibilities of the main officers of their government.

As result of this, all business and economic matters are the subject only of ordinary legislation in these countries. For this reason, economic and business issues became simple and much suited to the management of the challenges and problems of the current period.

Over the long haul, this big difference in approach to many economic policies made the Philippines lag behind other countries. In the immediate postwar period, we were equal to or ahead of these other countries in terms of economic achievements. However, today, we are at the tail-end of economic accomplishments when compared with all of them!

There are many reasons for this. But their having greater legislative flexibility in the enactment of laws pertaining to business and economy accounts for their relative success in comparison to us.

Unlike us, all the economic issues in these other countries are governed by laws and regulations that could be undertaken through ordinary legislation. If they make any mistakes or misjudgments in their economic policies, they can remedy those mistakes by legislating the corrective reforms. They have greater flexibility than us to make legal and other adjustments.

In our case, the restrictive provisions are fundamental laws that have to be obeyed as a matter of course, or the intended action is completely abandoned. In the case of countries that are free from fundamental law restrictions, they only have to pass laws in their parliament to remedy the problem.

In the presence of restrictive provisions in the fundamental laws in the Constitution, the threat of adverse action is sufficient to deter future projects. In our case, the presence of these higher economic laws in the Constitution exposes project proponents to legal challenges that could ultimately mean delays if not complete abandonment of the projects.

That is why Singapore, Thailand, Malaysia and, later, Indonesia have overtaken us in economic growth and in industrial accomplishments! And today, we look up to their examples of success, whereas during the early postwar period, they were copying some of the early steps that we were taking to achieve progress.

The Duterte administration had to pass clarificatory legislation that allowed a liberalization of the retail trade law, redefined “public utility” to enable 100 percent ownership of foreign capital for energy generation projects, and the further liberalization of the foreign investment law.

These accomplishments were enacted only in 2022, as the Duterte government’s term ended. I notice that the Senate, which has been the major source of delay in that legislation, takes great pride in the final passage of these recent reforms.

As a nation, we are very slow to react to the needs of the times. I would hope that all our leaders will look to the important needs of our whole people rather than the limited protests against change of powerful interests and constituencies. I still find a large agenda of reforms to encourage foreign capital participation in the progress of our economy.

Our actions with respect to the easing the burdens and obstacles toward the opening of the economy to greater competition are very slow and insufficient. We have to keep pointing out that we are far behind other countries that have surpassed our economic achievements to make some elements of our policy-making institutions to move forward.

Yet, as we go through the implementation of these new laws under the Marcos government, I am not surprised if some sectors of society would question the constitutionality of some future projects because the existing constitutional economic restrictions are there above all.

Our experience in Philippine jurisprudence is the constant threat of project stoppage, simply because an interpretation of the fundamental provisions of the Constitution, could be used to derail or stop projects. If those provisions were much more liberal – or better yet, if they did not appear in the Constitutional text but simply were relegated to simple legislative actions – we would be in as good a situation as our neighbors that do not have to deal with fundamental details of law that we are required to comply with.

This alone is sufficient to remind us of previous cases in which the stoppage of project decisions have cost the nation dearly in terms of economic progress for all of us Filipinos. These have contributed to our loss of position in economic achievements among our member countries in ASEAN.

Let me cite a few egregious examples in the past.

(1) The energy discoveries in our offshore – relatively small as they have been – were made possible because the state allowed, during the 1970s, to engage well-funded foreign exploration companies under service contract to explore for energy discoveries. The principle was questioned in the courts after the EDSA People Power and was resolved only in the highest court in the early 2000s. Instead of enlarging the explorations, they essentially stopped during the interim. Today, we need to engage foreign capital in discoveries related to the search for energy, both traditional and renewable!

(2) Highly restrained by the admonitions and restrictions of the restrictive economic provisions of fundamental law, the Board of Investments bypassed many opportunities to admit foreign direct investments in manufacturing (textiles, autos, pharmaceuticals, chemicals), in land-based forestry and agricultural projects, and in major mining projects. (In contrast to our experience, Thailand rose to become a manufacturing hub in the ASEAN. Thailand’s industrialization effort was behind ours by almost a decade and a half during the early postwar period. In Thailand’s study of our investment incentives law, they rejected our emphasis on joint ventures and selective foreign investment policies in favor of a more open approach in attracting foreign capital).

For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/