The Phl Constitution – Amending the restrictive economic provisions

The chairperson of the House Committee on Constitutional Amendments, Congressman Rufus B. Rodriguez, has invited many stakeholders to answer the following questions in a hearing to be held at the House this Thursday, Jan. 26.

Whether or not it is necessary to amend the Constitution?

If in the affirmative, what is your preferred mode of amendment?

What are your proposed specific amendments, if any?

I was one of those asked these questions in my capacity as emeritus professor of Economics at the University of the Philippines. I suspect it is not only because of that position that I am being asked for my views.

As a private citizen during the last two decades, I have espoused the need to amend the restrictive economic provisions of the Philippine Constitution in order to create a more favorable climate for the entry of foreign direct investments (FDIs) into the country.

Before that time, my previous career in government and in international work on economic development has given me relevant perspective on this important issue.

Original sin of Phl development. In an effort to articulate the lost opportunities to expand contribution of FDIs in our national development effort, I have called the restrictive economic provisions of the constitution the “original sin” of our national development policy. These constitutional provisions provided the main drag on our efforts to bring in foreign capital to assist our economic progress and modernization.

The recent successes of our immediate neighbors in East and Southeast Asia on the economic front are wide-eyed examples for us not to have read into the future, so many decades ago, by clinging on to these provisions.

Remember that while we are discussing the provisions of the 1987 Constitution, all these provisions were first crafted in the original Philippine Constitution of 1935. That was the political constitution that made possible the Commonwealth government of 1936, which in 1946 became the basis of the Republic of the Philippines.

That was almost nine decades ago!

Amending the restrictive provisions in the economy will bring a lot of credibility to the efforts to invite foreign capital into the Philippine economy. This action alone can announce to the world that we are serious in opening the economy to the participation of more foreign capital in our progress.

Answers to three questions posed. Let me then answer the three questions posed by the House committee briefly.

There is an urgent need to amend the Philippine Constitution with respect to the restrictive economic provisions. This is imperative if we are to accelerate the momentum of growth by further opening the economy to accelerate the entry of foreign capital to assist in our efforts at pushing national development.

I do not believe that the current exercise should include any amendments that cover political provisions of the Constitution. Adding political amendments will kill the effort to revise the restrictive economic provisions for which there is now much public recognition of the need.

The above answers the first and the third questions. As to the mode of amending the Constitution, I believe that the method of undertaking the amendments through a constituent assembly would be the most expeditious process. It is also the most cost-effective way to accomplish the task, as there is no need for new elections.

The argument that a Constitutional Convention requires a special expertise of qualified candidates to amend the constitution is blunted by the fact that there is enough expertise within the composition of Congress. In addition, there are channels of getting expert advice from the general public.

For the rest of these remarks, let me elaborate on the reasons for pushing for the amendments of these provisions.

Economic history. Some economic history will help clear our minds.

During American colonial times, the Philippines economy was a model of progressive development before the Second World War.

American private and public (colonial) investments made our country speed up Philippine economic development. Free trade induced the influx of private American investments in Philippine agriculture, industry, and commerce.

All these developments further induced rapid progress in transportation, communications, and infrastructure throughout the islands. Filipinos were the ultimate beneficiaries of this economic progress.

During those times, Filipino business entrepreneurship was encouraged by the improvement of economic conditions. Foreign business entrepreneurship fueled progress in the Philippines. Filipino capital expanded in many areas of industry and commerce.

Our national leaders closed their eyes to the progress that Filipinos had enjoyed during the period of independence struggle and focused their sights on what they saw as inequities of exploitation by foreigners of our natural resources and major businesses. So, they introduced the restrictive provisions in the political independence Constitution.

Early during our independence and after the destruction of the country brought about by the Second World War, the United States enacted war damage compensation and economic rehabilitation legislation to help pay for private destruction in our economy. The massive infusion of help made us recover quickly.

But most of the war compensation paid to American citizens whose industries and property were destroyed was repatriated back to America and did not come back in terms of reinvestments. The provisions of the Constitution had a lot to do with this development. That was substantial American capital that did not come back!

The industrial policies that followed the import and exchange controls that dominated Philippine economic policy for at least two decades followed these constitutional restrictions. Even though we had special trade relations with the United States, we did not capitalize on the preferential trade in the export business.

In the meantime, our neighbors have progressed with the foreign investments contributing heavily to their economies.

The progress of the “tiger economies” of East Asia – South Korea, Taiwan, Hong Kong, and Singapore was fueled by the heavy participation of foreign capital.

The steady progress of Thailand and Malaysia all these years has been made possible by the role of FDIs in their economy. The awakening of Indonesia lately is due to the important role given to the foreign investment policies in many sectors of its economy.

The rapid progress of Vietnam lately has been massively pushed by a heavy dose of foreign capital infusion. China’s spectacular economic awakening was facilitated by foreign capital inflows into that economy.

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/