For RP to compete, we need to change

Sensibly, DOJ Secretary Raul Gonzales reversed an earlier DOJ opinion stating that an international airfreight forwarder is a public utility and thus subject to the 60/40 ownership rule. Opinion No. 98 signed by Gonzales last Nov. 9 overturned Opinion No. 49 signed in May by then-Acting DOJ Secretary Merceditas Gutierrez. Opinion ruled that by the nature of their undertaking, international airfreight forwarding companies are considered public utilities and should follow the 1987 Constitutional provision limiting foreign ownership of businesses in certain sectors to 40 percent.

The country would have surely lost billions in investments had we stubbornly stuck to Opinion No. 49. Gonzales stressed that a definitive stand on the issue is important if we are to attract more investments and create more jobs to spur the country’s economic growth. If we really want to start moving and solve the fiscal crisis, we really have to give foreign investors more leeway.

As was pointed out by businessmen in a resolution, it is high time to sit down and examine our options regarding Constitutional reforms. If we are to be globally competitive at all, we need to give foreign investors a reason to want to invest in the country. For starters, we have to review the 60-40 limitation. Foreign businessmen have been complaining that labor costs are getting higher and higher compared to other countries like China. Because foreign businessmen can’t own the land where their factories and offices are built, they have to pay high rental rates.

Lawrence Summers, formerly a US Deputy Treasury Secretary and also the World Bank’s Chief Economist, was quoted in the book The Commanding Heights explaining that three things happened that changed economies in recent years. "First, people have seen that it is better for the markets to take the lead from the public sector and compete among each other.

Secondly, markets are able to do things that required government coordination. And thirdly, a gradual refinement in economic science has led to an upward revision in elasticities, in how systems respond. There is a greater response to tax rates than people used to think. If you interfere with property rights, business responds by going elsewhere. That’s because economies are more global," he explained.

Even NEDA Sec. Romulo Neri seems to have acknow-ledged this noting that the Constitution’s protectionist provisions have made the country lose out on foreign investments. Much of China’s growth can be attributed to foreign investments that have an annual average of $40-B. In contrast, Neri had said we’re lucky if we get $1-B a year in investments. Malaysia is also getting the bulk of investments because it treats investors fairly. Recall that former Prime Minister Mahathir recently recommended that we treat investors right in his last Manila visit. In fact, Mahathir related their government’s policy of meeting regularly with investors before the annual budget is made to consult them on what incentives and other assistance they might need. These are then factored in the budget for next year. Since the mid-1980s, Mahathir’s leadership and vision transformed the country’s former plantation economy into an industrial economy that still grows at an annual rate of 6 percent or more. Mahathir certainly knows what he is talking about. This is a view shared by San Miguel Vice-Chairman & CEO Ramon S. Ang. During a private dinner for US Amb. Frank Ricciardone the other night, he told our small group that it was high time for us to make the country globally competitive. Don Ramon, as we fondly call him, emphasized that this can be done through the necessary constitutional reforms and, more important, by respecting international diplomatic and business agreements. Mon Ang has been at the forefront in the global expansion of SMC’s operations. He, too, knows what he is talking about. His dream is to make SMC a $15-B revenue operation in the next three years.

International agreements repudiated by the Supreme Court’s rulings have resulted in several fiascoes like PEA-Amari deal, the aborted sale of the Manila Hotel, and the development of NAIA3 by Fraport. If we don’t straighten up and fly right, we will surely miss the next round of investments in the medium-term. American investors are interested to go in but they can only wait and see how economic reforms will be effected. As a matter of fact, there have been quite a number of Bush businessmen friends and supporters who have been coming in and out of the country to look into possible investments. Aware of the US global defense posture, these businessmen are beginning to see the potential of turning the country into a services and logistics hub to support this strategy. Analysts projected that the defense and aerospace industries, among others, will benefit from the Bush victory.

NEDA’s Medium-Term Philippine Development Plan proposed the liberalization of media and opening it to foreign ownership. But then again, Article 16, Section 11 of the Constitution limits media ownership to Filipinos. CNN and BBC can already be viewed through satellite and cable networks so media ownership is irrelevant nowadays. We can’t keep our heads buried in the sand. I’m sure even ABS-CBN’s Gabby Lopez wouldn’t mind having foreign partners in their operations to give them better global leverage.

A well-known lawyer, who is close to the Administration, told me at a recent dinner that GMA is strongly in favor of shifting from the present form of government to a French parliamentary form of government in order to give the country a more accountable leadership. I believe that this is good news because the French model, where a strong President is directly elected by the people while parliament runs the government, is responsive to global and market trends. This should be carefully considered by constitutional change advocates.

It is really time for change. Our systems are too outdated for a world that now works, lives, plays, and travels on Internet speed. We should have the foresight to see the short to long-term implications of a Bush victory on the world. With China emerging as a superpower challenger, for example, we have to factor all these variables and have the flexibility to plan. Only through change and foresight can we ride the coming waves and be competitive in this ever-changing world.

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