con-ass economics

promise ni nograles, reported by manila standard today june 8, charter change will be limited to economic provisions:

LAWMAKERS who will convene as a constituent assembly will be limited to easing the economic provisions of the Constitution to provide investors with the stability they need for their investment and allow them to own land, House Speaker Prospero Nograles said yesterday.

Under the recently-approved House Resolution 1109, the assembly “will tackle only the two economic provisions of the Constitution on foreign land ownership,” Nograles said.

…By focusing on economic provisions, the assembly would assure foreign investors that they could stay here for the long term since they could own the land where their factories and buildings were located, Nograles said.

…Nograles also criticized National Economic Development Authority director general Ralph Recto for warning that Charter change would cause more shocks to the economy.

“If Neda thinks that this could cause more shocks to the economy, it is also therefore correct that the reason why our economy has been suffering from shocks, since most of us can remember, is because of this Cha-cha issue,” he said.

on the same day, former neda director-general cielito habito, in his business column in the inquirer, blasted the house of representatives for sinking so low:

Lame excuse for Con-ass
By Cielito Habito

THE BRAZENNESS with which the majority in the Lower House rammed the now-infamous House Resolution No. 1109 through is yet another instance of naked exercise of political brute force that properly earns them that monicker many of them despise–claiming “larger” to be more apt than “lower.”

… Indeed, many believe that this current Lower House has sunk the Philippine legislature to its lowest point ever in our nation’s political history.

Economic provisions

Proponents of the resolution would have us believe that it has become so urgent to amend the 1987 Constitution that we now have to resort to the fast-track method available to effect Charter change (“Cha-cha”).

And this fast-track way is to convene the legislature into a constituent assembly (“Con-Ass”) to act on proposed amendments. The purported rationale–which as the last and relatively brief “whereas” clause in the resolution, comes across more as an afterthought–is that the economic provisions of the current charter need urgent revision.

To quote: “Whereas, there is a specific proposal that for the Philippines to be internationally competitive in attracting foreign investments and technology transfers that the economic provisions of the Constitution is proposed to be amended in an appropriate manner …”

The economic provisions being alluded to are those in Article XII on National Economy and Patrimony limiting foreign ownership in certain reserved economic activities to 40 percent.

Could easing up on these provisions really save our economy from recession at this time?

No urgency

There are two questions involved here: First, do we really need these amendments now? Second, do we even need these amendments at all?

The first is easier to set aside. The second is open to debate, and has indeed been debated for some time now.

Let’s tackle them one by one.

Are these legislators telling us that opening our economy even wider to foreign ownership cannot afford to wait until after the 2010 elections? Can foreign direct investments really lift our economy out of the current downturn?

Well, I have news for them (as if they didn’t know!). The UN Conference on Trade and Development (Unctad) reports that flows of foreign direct investments (FDI) fell globally by 21 percent in 2008, and will likely fall even deeper in 2009.

For developed countries, the source of the global downturn, the decline is even steeper at 33 percent. Note that much of what is reported as FDI are in the form of mergers and acquisitions, where existing enterprises merely change hands; thus, no newproduction and employment necessarily result.

Greenfield investments, or those that start new production activities, are projected to fall even more steeply.

Will an urgent Constitutional amendment to permit full foreign ownership in the very few remaining restricted economic activities be the key to rejuvenating our economy at this time, then? (I could almost hear someone say … “Hello?!”)

Wide enough

This brings us to the second, more debatable question. Is a constitutional amendment to eliminate all restrictions on foreign ownership even desirable or necessary at all?

Consider the following:

First, investment in this country had been opened substantially to foreign participation as far back as 18 years ago, with the Aquino administration’s Foreign Investments Act of 1991.

That law turned around our foreign investment policy from a “positive list” mode-where foreign participation was only allowed in a limited list of investment areas-to a “negative list” approach.

Here, all activities were opened to foreign investment except those in a short list of strategic enterprises limited to Filipinos by the Constitution (e.g., public utilities, exploitation of natural resources).

This opening up led to the surge in foreign investments that the country reaped in the 1990s.

Second, even within the few remaining restrictions in law, the government has found creative ways to open the way for foreign participation, such as through coproduction, joint venture, or production-sharing agreements, or in the case of mining, through the controversial Financial and Technical Assistance Agreement (FTAA) mechanism, which virtually opens mining to 100 percent foreign-owned companies.

Some may disagree, but the door for foreign investors is wide enough.

Other things are keeping them away.

But why even bother debating this now? We’ve known all along that the economic provisions are only being used by the Palace sycophants as a smokescreen.

Clearly, the real agenda is to shift to a parliamentary system (forget about the “covenant” in the “whereas” clauses promising no term extensions; this all becomes inapplicable if the whole structure changes), thereby paving the way for perpetuating those now in power.

You think the Lower House has brought the country low enough? Think again.