Rep. Rufus Rodriguez, chairman of the congressional committee to amend the Constitution, invited me to react to the committee’s proposals in its public hearing last week at the Batasang Pambansa.
I gave brief extemporaneous remarks in that meeting. They summarized my ideas on this important subject, including those in several essays in this column. Two other references at the end widens the framework.
Most urgent constitutional issue: amend the restrictive economic provisions. The most urgent issue is to amend or soften the restrictive provisions on foreign investments in the constitution.
These provisions were enacted in 1934 when the country’s generation of independence leaders drafted the political constitution in preparation for the Commonwealth period and then, independence.
Through subsequent constitutional changes, such provisions were maintained and even became more enhanced. Thus, they have become the “original sin” in our failure to access foreign direct investments for almost eight decades now!
The leaders of the independence movement had feared that America would control our future through the foreign investments of its citizens. What they have achieved was to make it difficult for subsequent leaders to flex our nation’s muscles to adjust to changing needs and circumstances.
Perhaps the generation of leaders saw those provisions as simply providing a convenient setting for the nation’s future economic directions. At that time, the Philippines had a high degree of human resource development and the economic and social infrastructure in place was well ahead compared to many other regions in Southeast Asia.
World War II dislocation and destruction worsen the recovery. When independence arrived in 1946, the national economy — human resources and institutional and economic capacities — were badly disrupted and ruined by World War II.
Rebuilding from the war practically dissipated the generous war damage payments to Filipinos and to Americans at the beginning of independence.
For Americans, the money partly restored their wealth. Most of their rewards from those war damage payments led to repatriation of capital back to America. Those in the public utilities were hampered from further expansion because of limitations in the constitution. The handwriting on the wall foreclosed their future in the country.
Filipinos who received war damage payments helped to restore their consumption toward prewar levels. Those who helped to rehabilitate their industries before the war were led into investing in import displacing activities under “inward-looking” development policies.
The restrictive provisions in the constitution served as a model for more restrictive economic development policies for our leaders. They followed restrictive nationalist lines in crafting policies that added more barriers to the vital participation of foreign direct investments.
In contrast, we have witnessed that among the new and revitalized nations of East Asia after the war, foreign direct investments gave instant benefits of new incomes and employment as well as technological change that enhanced productivity.
Foreign direct investments constituted a major economic benefit. They supplemented the nation’s resources by adding foreign savings, by accessing technology. It also helped expand new enterprises to penetrate other markets in foreign countries.
Foreign direct investments brought in more employment, higher productivity, and consequently a rise in worker incomes. Such consequent economic benefits further multiplied domestic economic activity, including the acceleration of development of home businesses.
Make it simple. The amendments proposed can be much more simplified. The general principle is to keep economic provisions away from the purview of the political constitution.
The simplest political constitutions in many countries do not even discuss economic goals and principles. These countries, therefore, are able to fashion their economic policies through the legislative process, unhampered by fine details of policy that are provided in their basic political constitutions.
Why can’t we do the same?
The most successful countries in economic growth do not contain limiting provisions in their political constitutions, except in terms of general statements of goals and principles.
The Philippine constitution should not be corralled by details of economic policies in the basic law.
The legislative process has sufficient capacity to introduce details of economic policy and to provide appropriate safeguards. If early leaders make some mistakes, the same legislative process should be able to correct them without the high bars set for constitutional amendments.
In our country, the restrictive constitutional provisions not only provide for long delays in adjusting economic policies to solve the instant problems of today. They enhance the barnacles of resistance to economic and social reforms.
The federal constitution: How many federal states? The current constitutional proposal for reforms also covers that of converting governmental relations into a federal structure.
The main guideline for creating federal states should be economic viability of each major region. Too many federal states destroy the advantage of size and scale. Economic viability of a governing unit also enhances “competition” among the states, which is essential toward strengthening the nation’s survival.
I have advocated that if the government is going the path of a federal political structure, there should only be four states, one based on the division of the country into four major regions – Luzon, Visayas, and Mindanao, and the final state being crafted out of the Bangsamoro provinces of Mindanao.
The three main regions are strong economically and each has sufficient economic scale to be successful. The Bangsamoro region is the weakest economically but could be, initially, helped by these three entities and the nation-at-large.
Such a political structure will help to conserve very important revenues and administrative and institutional resources for the nation. Each region has sufficient economies of scale and the potential for growth on their own.
Moreover, this structure will foster a good training for national leadership among the regional leaders.
References: For those who want to read beyond these ideas, I have written more on this subject: (1) my column in Philippine Star: for instance, (a) Jan. 17, 2018; and (b) Jan. 24, 2018; (2) “American private direct investments in the Philippines after independence,” Philippine Review of Economics, vol. 52, December, 2015; (3) “Legal and constitutional disputes and the Philippine economy,” Philippine Law Journal, vol. 82, December, 2007.
“For the Tourism Secretary Berna Romulo-Puyat.” Congratulations on the informative advertising of the country’s ability to host international conferences which CNN International shows in its current emissions. However, CNN should be told to remove the statement saying, “This is a paid advertisement.” CNN does not qualify that its many tourism ads and features are paid advertising. So why should ours be an exception?
My email is: gpsicat@gmail.com. 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.p h/gpsicat/