Crossroads (Toward Philippine economic and social progress)
Philippine Star, 18 July 2012
The subject of amending the restrictive economic provisions of the Constitution took center stage in the public media recently. These economic provisions have an impact on the country’s policies toward foreign investment.
I will make an effort to summarize the points coming from the main political power centers. Then, I add further thoughts.
“President’s ‘Don’t fix what ain’t broke’ comment.” In reacting to the issue of amending the economic provisions of the Constitution, President Aquino used an American aphorism, “Don’t fix what ain’t broke,” adding further,“… under the present Constitution, I think we are capable of reaching economic heights.”
However, President Aquino left an opening to hear other ideas: “You have to listen to different ideas and come up with what’s best for our people.”
“Senate president Enrile elaborates.” Senate president Enrile’s own take no doubt has been sparked by his long experience in government, in legal practice as well as in business. He deplored the inability of the country to attract foreign investors on the limitations imposed by the constitutional provisions. He also said that some foreign investors have resorted to dummies to conduct business in the country.
He observed that Charter change proposals in the past have all failed because of a prevalent fear that “somebody might take advantage of the situation for his own personal interest.”
He further added that it is not laziness but fear that sets us back – fear that people would lose their privileges, their wealth, their influence on events, including politicians like himself who might lose control over their land and their businesses.
“Speaker Belmonte speaks.” The Speaker of the House Feliciano Belmonte spoke mainly on strategy and on limiting the effort to revise only the restrictive economic provisions. This was what he meant by Charter change in the current context.
“I refer to nothing more than the economic provisions. I don’t want to deal with any other aspect of [constitutional change]. That’s why for me, it’s not as difficult or complicated,” said Belmonte.
“I think that constitutional changes should not be a part of the agenda of anybody but it should be the agenda of everybody. I don’t look at it as anything partisan or the property of anybody. For me, this is for all of us,” he said.
“I want it done through a constituent assembly, voting separately, because it is faster…. [The House and the Senate] can meet as one but we should vote as two separate entities,” Belmonte said.
Speaker Belmonte was specific on how to undertake the change. It will be undertaken by the introduction of a single phrase on the specific provision of Article 12 on national economy and patrimony of the 1987 Constitution which spells all the specific restrictions, “unless otherwise provided by law,”
Thus, once this process is accomplished with the required two-thirds vote of the House and Senate meeting as one body but voting separately, the political organs of the country will still be in control of the manner in which the policy will evolve.
“A Solomonic solution?” As Speaker Belmonte says, “It will still not be automatic as it will require a law, which means it will have to go through the lawmaking process where the President is the final arbiter. ” After all, any legislation when passed by Congress is approved by the President to become law.
Thus, the amendments to the economic restrictions will be a two-stage process. The first stage is voting on the constitutional amendment. The second stage is the introduction of a law in Congress that will define the new rules. That would be accomplished by subsequent congressional action.
The foregoing represents a vision of compromise on how to deal with the constitutional amendment process. In this way, the first stage which is the critical one, could be speedy and manageable.
“FDI policy is actually broken and needs repair.” Existing policy on foreign investments needs improvement. The reforms in governance and fiscal programs cannot fully compensate for the deficiencies and defects of existing FDI policies in the Constitution.
Malacanang is of the belief that these latter routes are adequate to achieve the economic goals. In fact, most administrations in the past have thought the same.
But the remedies applied have often been in the nature of working around the language of the law, sometimes by redefinition and at other times through regulatory assertion.
All these methods are indirect approaches. They have contributed to the string of abortions and delays of investment plans and projects. Truly, we have had delays and delays and delays and challenges and challenges that have been the bane of implementing private and public investments in our country!
Why not act reassuringly by direct methods?
An amendment of the inflexible provisions of the economic restrictions can immensely improve the government’s investment policies and our image before the world.
When we increase the number of economic participants, when we allow greater entry of potential investors, we increase the degree of competition among those willing to invest in our country. This creates a healthy competitive environment.
Eventually this will bring down costs of projects, in effect, fostering economic efficiency, innovation and sound management, hence, higher productivity.
The economic literature is replete with studies showing the linkage of high FDI inflows and economic growth. (My colleague, Winnie Monsod, thinks otherwise). There is indeed some indication of causality (and not mere correlation) between FDI and growth when the appropriate economic (read: econometric) investigation is applied.
Some of this causality happens in a two-way chain, high FDI leads to higher growth, which leads to even higher FDI. This is the evidence for wide groups of countries. This is also the experience of East Asian countries.
But more importantly, the restrictive provisions of the constitution have simply added transaction costs within the economy.
The 60-40 rule has encouraged corrupt practices, legal dummies and alliances, various methods (including twists in legal language) of circumventions, knotty legal issues such as what has come up in the current Supreme Court case on the definition of public utility capital in PLDT and to the long delayed, on-again, off-again promotion of the mining industry and other critical projects
With the constitutional provisions left unamended, there will always be good excuses for wily lawyers to hamstring the approval processes for new investments and the country will be held hostage to delays and high costs borne by all, especially the poor. Investments that do not take place spell a loss of employment of Filipinos in their homeland.
The restrictions are the root cause of high utility tariffs (e.g., electricity, shipping and cargo handling, and so on), the burden of which falls disproportionately on the costs of production and, ultimately, on the poor.
They discourage genuine competition in various local markets and reinforce monopolistic tendencies, entrenching only those who are ahead of the pack.
2 comments
The debate on charter change | Per Se says:
Jul 26, 2012
[…] Foreign investment policy is “broken” and needs repair. […]
Michelle Cabling says:
Jul 28, 2012
Speaking of repairs in public policy, couldn’t help but share my recent paper on this subject.
Public Policy Models: The best fit for the Philippines
The public policy, albeit a relatively young concept in public management, enjoys numerous models and approaches in the policy creation. As it finds its way and use in the public policy process, it has developed, borrowed and adapted its approaches from other disciplines like social science, economics, etc. It has also adopted a combination of these models in situations that warrant the use of various models than a sole approach. Flexibility leads to a much tighter public policy as it employs different approaches in consolidating the best response to a social problem. Different strokes for different folks, as they say, and public policy has a great collection of models to choose from to enrich the science of public policy process. These models and approaches to public policy can be either process-oriented or effect-oriented. An approach can be either more attuned to the flow of the process or more focused on the end goal. Both approaches are not better than the other but more appropriately, these approaches guide the policy makers based on which models suit it best for optimum results.
One way of looking at the models, and how these approaches are best exhibited, can be viewed by looking at where the ‘power’ lies in the concept of the models. Ultimate power seems to be very strongly centered on the institutions in the institutionalist and neo-institutionalist models as these approaches elevate the institution to be the sole governing power in the system. There is power emanating from the few members of the public or the groups in elite, group and system models but the balancing of interest among these competing groups or adding the public’s feedback somehow gives some influencing power from the public. While in streams and windows model, power is given to those who can address the significant events that causes a social problem and is in its nature, reactive. Proactive models such as game theory, incremental model, mixed scanning and even strategic planning models generate much foresight to the solution of a situation or the output of the public policy. Where the power emanates and lies in the course of public policy creation has a huge weight on how the policy will be considered and accepted. Legitimising public policy is giving law teeth to be able to solve a social concern and that in the end, it requires a degree of ‘power’ to be successful.
In a democratic sense, where there is more participation of the public in the public policy process, the models are quite limited in options. Majority of the models offer limited participation of the majority public to which the policy is supposed to be directed. Models such as elite, institutionalist and new-institutionalist and most of the prescriptive models offer little public voices in the public policy creation. Specific groups or a few have their voices heard in group theory (the group’s point of view) and system model (via feedback) but there is no model available that includes major participation of the public. To a certain degree, public opinion is gauged by the policy makers from their constituents. However, there is no major public voice that is weighed in aside from the voice of the policy makers who are duly elected to represent the people. In the present day, technology and social networks bring enormous capacity for the masses to voice out their opinion on certain social issues. This could be a ripe time to incorporate ‘public voice’ directly in the public policy process and add more venues for the public to govern its nation.
The Philippines, which started its formal government during the Spanish occupancy of the country, has a very strong root of elite model of public policy, which is very much present in the current system. From the very first president of the Republic of the Philippines, Emilio Aguinaldo to the present day composition of our Senate, it shows how strong the influence of elite theory. Moreover, the presence of more than one family member serving in the Senate and Congress shows how Filipinos are still attached to nepotism or dynasty, in which the elite or ‘few’ maintain a long line of service in the government and propagating the elite model. Jose Rizal, a well-known elite, is our country’s foremost hero also shows how strong elite model runs in our country. In the last decade, Filipinos have seen the rising of the group representation known as ‘party-list’ have been allowed to represent certain groups in the lower house of Congress such as Akbayan, Ako Bikol and Gabriela to name a few. Currently, the party-list groups occupy at least 41 seats in the Lower House. This shows that the Philippine public governance is evolving into a more participatory system and it is plausible in the near future to legitimise the voice of the public, not only in choosing their representations, but even in the creation of public policy.
Even if the Philippines cannot drastically change to a more rigorous model of conceiving public policy, there are cases that it can optimise the models that are available. It benefits not by using the best there is but by using the right and best model in the situation it tries to resolve. As social events occur and warrant changes in the existing policies, the country can best use incremental model. Growing intensity and frequency of storms and other disasters every year can best use incremental model to strengthen the existing policies in environmental sanitation and sustainable developments. However, a strategic planning model can be best adapted in cases relating to boosting the Philippine economy as it will include rational course of actions and incremental actions to existing laws. It is right time for the country as well to veer away from so much institutionalism and bank more of the science that the prescriptive output models employ. More importantly, it is not so much for the Philippines to adhere to these models to produce the best public policies. I truly believe that the addition of a stronger ‘public voice’ is what’s lacking all these models and one that my country may be the first to adapt. After all, it boasts internationally to breathe a democratic form of government of the people, by the people, for the people and public should have a core participation in its policy creation.