Charter Change to liberalize foreign investments pushed
July 4, 2013 at 14:55
The Philippines is growing faster than China, but some Filipinos feel it could do even better and are urging Philippine President Benigno Aquino III to redraft the protectionist constitution enacted on his mother’s watch in the 1980s.
The country has won new fans among global investors this year, shaking off its old reputation as one of Asia’s perennial laggards. Government data set first-quarter growth at 7.8% from a year earlier, above China’s 7.7% growth in the period. Some research firms have pegged the growth rate even higher using other measures: According to Credit Suisse’s calculations, the country’s economy expanded by an annualized 9.1% in the first quarter.
In March, the Philippines secured a coveted investment-grade credit rating from Fitch.
But unemployment is still high – at 7.5% in April – and many Filipinos see a window to encourage more foreign investment to extend the country’s sudden growth spurt.
They want to see the Philippines drop decades-old rules that limit foreign shareholders from owning more than 40% in utility and mining business and bar them entirely in other sectors, notably media and education. They also want to let overseas investors own or extend the leases on land on which they build their factories.
A growing swell of lawmakers, businesses and economists now say shaking up the constitution could lure global manufacturers to the Philippines and help it catch up with the likes of Vietnam, which last year attracted over $10 billion in foreign direct investment compared with the Philippines’ tally of $2 billion.
“Now is the time to change,” said Bernardo Villegas, an economist and senior vice president at the University of Asia and the Pacific in Manila. “Think of how much more we could achieve if we allow more foreign investment to help us.”
Streamlining the constitution – what Filipinos call “cha-cha,” or charter change – is a difficult dance, however.
The document has a status almost approaching that of a sacred text. It was developed under the watch during the presidency of Mr. Aquino’s mother, President Corazon Aquino, following the 1986 “People Power” revolt that drove late dictator Ferdinand Marcos from power. Among other things, it limits presidents to a single, six-year term and has sweeping investment safeguards designed to ensure the primacy of Filipino investors and prevent the country’s resources ever being bundled off to foreign powers.
Several leaders have attempted and failed to revise the constitution. Some changed course after facing noisy street protests accusing them of attempting to turn back the Philippines’ political clock and extend their terms in office.
The 53-year-old Mr. Aquino might have better prospects initiating a change – assuming he is interested. He reluctantly ran for president in 2010 after a public clamor following his mother’s death the year before; many people who know him suggest he is counting the days until he can leave the hot seat.
Mr. Aquino has repeatedly said he isn’t interested in rewriting the constitution. He prefers to focus instead on cleaning up the country’s reputation for corruption and make its government more efficient – a policy that his supporters have dubbed “Aquinomics” and which has impressed economists with its impact.
Moody’s Analytics economist Glenn Levin recently predicted that the Philippines’ economy could expand by 7% in both 2013 and 2014 amid a consumer boom fueled by growing remittances from the country’s overseas workforce and its rising outsourcing industry.
Some of Mr. Aquino’s closest allies, however, contend that cleaning up government alone isn’t enough to provide the long-term economic boost that the Philippines needs to put a dent in the gut-wrenching poverty that still blights many of its 100 million people. By government measures, some 30% of the country’s population live below the poverty line.
House Speaker Feliciano Belmonte hopes to change Mr. Aquino’s mind before the president’s term expires in 2016. He is pushing Congress to add exceptions to the constitution to encourage more foreign investment, while several prominent senators have also voiced their support for more limited proposals that stop short of providing investors more access to land but which allow them to enter a broader range of businesses. (Dow Jones)
