Economic amendments won’t impede anti-corruption efforts, FEF says

The Foundation for Economic Freedom (FEF), founded by former finance secretaries, reinforced its stand that amending economic provisions on the 1987 Constitution shall not hinder the fight against corruption.

In a statement on Wednesday, April 17, the policy advocacy group noted that the removal of restrictions “is not being proposed as a magic bullet that will cure all ills and should not be seen as neglecting to fight corruption, investing in infrastructure, or improving the rule of law.”

“These initiatives are not mutually exclusive and can be addressed simultaneously. There’s no reason why we can’t walk and chew gum at the same time,” FEF said.

This is a response to a discussion paper from the University of the Philippines’ School of Economics (UPSE) titled “How to Change a Constitution by Hand-waving” that opposes proposed amendments to economic provisions of the Constitution, saying it lacks a comprehensive understanding of historical context.

FEF said that it agrees with the paper stating that other factors that affect foreign direct investments (FDIS), like rule of law, infrastructure and corruption, should be address.

“This, however, does not rule out the need for reducing restrictions on foreign equity,” it said.

The group also cited the case of the renewable energy (RE) sector, which it said has attracted billions of dollars in investments since the industry’s liberalization.

The Philippines has been described as the fourth best destination for RE investments and the “new darling” of global RE investors, it said

“In summary, it is easy to find fault with proposed solutions to problems, while being completely comfortable with doing the exact same thing that created the problems in the first place. After 100 years of solitude from FDI, we believe it’s about time we try solving the problem,” FEF said.

FEF also argued that economic restrictions on FDIS act as a barrier preventing foreign investors from accessing the country’s market and benefiting from its institutional frameworks.

Further, it questioned how investors could fully experience the enabling factors if they were initially barred from entry.

“We believe that removing the restrictions is a necessary condition since we have to open the door first for investors to be able to come in. For foreign businesses to benefit from better institutions and processes, they must enter the country first. How does one even experience all of the other enabling factors if one is barred from the getgo?” the FEF asked.

“There is a need to signal that the Philippines is open to FDI and demonstrate a “credible commitment” to this economic framework. Removing these anti-fdi provisions in the Constitution will signal our openness to foreign investment,” the group said. “Giving flexibility to Congress to change the rules will improve contestability in a market dominated by existing monopolies and duopolies. This means that actual competition or even the threat of competition from foreign players will lead local players to improve the quality of and access to, their goods and services if they know that new entrants from abroad can be facilitated by Congress.”

It noted that entry of a third participant in the telecommunications sector and a service provider using satellite technology has prompted dominant players to improve their service and increase capital spending.

The group commented on the UPSE’S opposition to giving lawmakers the flexibility and discretion to determine economic policy through the addition of “unless otherwise provided by law” in the Charter’s economic provisions.

The UPSE paper’s assertion that the choice between flexibility versus rigidity in policy-making by transferring to lawmakers the power to determine economic policy is actually more sinister, and is a choice between discretion and rules, according to the group.

“Allowing for flexibility in our economic policy to be more responsive to changing local and global conditions does not throw out the rule book. It merely situates rulemaking in the proper venue. Adding ‘unless otherwise provided by law,’ merely allows Congress to craft laws that must still align with constitutional principles,” it said.