Foreign investment easing seen as achievable goal ahead of federalism shift

THE GOVERNMENT should make foreign investment liberalization its priority as Congress moves to amend the constitution, instead of being sidetracked by the long process of adjusting to federalism, a former Secretary of Finance said.

Margarito B. Teves, who was finance secretary in the Arroyo administration, said the government needs to meet certain prerequisites before being deemed capable of running a federal state, and meeting these milestones could take a long time.

He said for now, Congress should move to remove or at least relax restrictions against foreign investment contained in the 1987 constitution.

“Meeting preconditions for federalism will take time. In contrast, lifting economic restrictions can be done immediately,” Mr. Tevez said in a forum during the Management Association of the Philippines’ general membership meeting in Makati.

These conditions include expanding the capacity of local government units (LGUs), and a strong and efficient bureaucracy in both the federal government and the federated regions.

“The removal of economic provisions can stand on its own regardless of whatever form of government the Con-Ass (Constitutional Assembly) will decide on, and later ratified by the people. It sends a dramatic signal to foreign investors that they are welcome to invest in the Philippines to create jobs and level the playing field that will lead to more competition, to the benefit of the Filipino consumers,” he said.

“If the target is to have something approved by May 2019, it is easier if we just remove the restrictive economic provisions, and then eventually… there’s no consensus later on whether we should go federalism or continue with our present system of government it does not matter. The economic provisions can go with any form of government,” added Mr. Tevez.

Areas with foreign investment restrictions are: mass media, the practice of professions, the utilization of marine resources, contracts for public works, advertising, natural resource exploration, land ownership, operation of public utilities, educational institutions, and weapons manufacturing, among others.

Some sectors are also governed by special laws such as the retail trade, cooperatives, private security agencies, small-scale mining, ownership of cockpits, private radio networks, private recruitment firms, and enterprises producing and processing rice and corn, among others.

The government is seeking to ease foreign ownership restrictions, starting with those that can be done without legislation, via its 11th Foreign Investment Negative List currently with the Office of the President, and awaiting President Rodrigo R. Duterte’s signature.

“If we go through amending the restrictive economic provisions, we don’t have to go through this negative list anymore. Some portions in the negative list have to hurdle the issue of whether the constitution will allow us to accept foreign investment. If the constitution should delete those restrictions, then any areas now can be worked out by foreign investors. That should not be very difficult,” said Mr. Tevez.

Separately, a former member of the 1987 Constitutional Commission said that it has not been established whether federalism will lower poverty in regions.

“Federalism is a risky political experiment that is vulnerable to unintended consequences. Federalism is not even mentioned in the Philippine Development Plan 2017-2022 and Ambisyon Natin 2040,” according to Christian S. Monsod.

“If the government’s road map works without federalization, how much do we save?,” he added.

The National Economic and Development Authority estimated that the shift in government structure would cost P150-247 billion.

“We have largely failed in addressing mass poverty and gross inequalities and the underdevelopment of outlying areas not because of the Constitution. But because we have not fully implemented it, especially its social justice provisions and its mandate of local autonomy,” said Mr. Monsod.

“Devolution can be done with or without federalism. There’s no consensus of the superiority of federal or unitary system, or vice versa. So why shift?” he added.

He added that a prerequisite to an efficient federal form of government is a functioning political party system. “We don’t have that,” said Mr. Monsod.

“Federalism tends to serve the interest of, and thus further entrenches, existing dominant groups in the region, in our case political dynasties.” —