The coronavirus pandemic triggered global recession in 2020, which is seen by many economic experts and fiscal planners as worse than the financial crisis in 2008-2009. I find logic in the House of Representatives’ push to amend the “restrictive” economic provisions of the 1987 Philippine constitution to pave the way for the opening of the country’s economy to foreign capital. After almost a year of restrained fiscal activities, and following the virtual economic lockdown because of the Covid-19 pandemic that started in March 2020, it’s time for the country’s economic recovery program to shift to higher gear.
However, as Chairman of the Federation of Philippine Industries (FPI), I am concerned that if the industry sector is not properly consulted and the proposed constitutional amendments to remove the “restrictive” economic provisions of the Constitution are not extensively discussed with local manufacturers, the good intention to open the already battered Philippine economy to foreign capital to facilitate its fast recovery could be outweighed by whatever negative impact it may have on the local industry.
I suggest that as the House Committee on Constitutional Amendments deliberates on the issue to remove the restrictive provisions of the Constitution on particular industry sectors, it must clearly define where foreign investors can enter.
I still believe that Filipino owned manufacturing companies will spend most, if not all, of their earnings in the country. On the other hand, foreign owned companies will very likely remit their earnings in the Philippines to their home countries. Moreover, Filipino owned companies will hire Filipinos even for their top management positions. Foreign-owned companies will most likely bring in their management and even production officials from their home countries.
This makes it really important to clearly define where foreign capital can invest in the Philippines, if only to avoid economic distortion in the country’s economy, particularly in the local industry sector.
Perhaps, our legislators can review the Special Economic Zone Act and figure out what provisions can be amended to make it even more attractive to foreign investors. We have many Freeport zones all over the country. But how many of them are able to fully utilize their investment potentials?
And why is Vietnam getting the attention of foreign capital? Why is the Philippines not on the radar screen of many foreign investors in China that have relocated to other countries for their production hub? Perhaps, our legislators can ponder on these questions and try to seek viable answers.
If the purpose to amend the restrictive economic provisions of the constitution is to attract foreign capital, maybe the House should consider studying the Vietnam economic formula. Moreover, I also suggest for the country’s manufacturing sector, in particular, to be consulted for its inputs to the proposed constitutional amendment to help maximize the economic benefits of the measure with the least, if not zero, distortion to the local manufacturing industry’s economic viability.
Dr. Jesus Lim Arranza is the chairman of the Federation of Philippine Industries and Fight Illicit Trade; a broad-based, multisectoral movement intended to protect consumers, safeguard government revenues and shield legitimate industries from the ill effects of smuggling.