Infra, governance seen as more critical to FDI than charter reform

ENHANCEMENTS to infrastructure and governance are key to attracting foreign investors, not just opening up the economic provisions of the 1987 Constitution, analysts said.

“Attracting FDI (foreign direct investment) is not just about economic provisions (of the Constitution), it’s also about maintaining a good socio-economic-political environment conducive to the conduct of business,” John Paolo R. Rivera, president and chief economist at Oikonomia Advisory & Research, Inc., told BusinessWorld in a Viber message.

Legislators have pitched the Charter reform campaign as a means to open up industries to foreign capital and encourage more FDIs.

The Philippines has one of the most restrictive economies in Southeast Asia as the Constitution limits foreign participation to a 40% equity stake in most domestic companies. The Philippines ranked third most restrictive out of 83 economies — scoring 0.374 on a scale of 0 (open) to 1 (closed) — according to a 2020 FDI analysis by the Organization for Economic Co-operation and Development.

“The RBH (Resolution of Both Houses) No. 7 is necessary but not sufficient,” Foundation for Economic Freedom President Calixto V. Chikiamco told BusinessWorld via Viber, referring to how the proposal could open the economy to foreign investment.

He added: “RBH No. 7 just inserts the phrase ‘unless otherwise provided by law’ (into the Constitution), meaning Congress has to pass a specific law first in order to open up education, advertising, and public utilities to 100% foreign investment.”

While ease of doing business policies and a well-managed economy are important factors for foreign investors, Mr. Rivera said that “good housekeeping and good governance” are also key considerations for foreign investors.

He added that the Philippines should also have “excellent infrastructure” to further attract foreign investment. —