On Cha-cha: Opening up the Constitution for Filipinos and local businesses

IN 2019, the Journal of Southeast Asian Economies published an article on “Structural Inequality in the Philippines,” authored by Philip Arnold Tuaño and Jerik Cruz. The article in the peer-reviewed journal made some interesting observations about the systemic inequality in the Philippines.

According to the abstract of the study posted online, “new evidence suggests that key forms of wealth inequality have been rising. These trends are caused not only by poor human and physical investment as well as the adverse effects of premature de-industrialization but also by the dynamics of an oligarchical political economy in which political dynasties and family-linked conglomerates have substantially curbed the capacity of non-elite formations and players to assert more developmental policy regimes and substantive democratization.” (Emphasis mine.)

This means that many of the opportunities and resources in the Philippines are still concentrated by political and governmental forces to a limited privileged people. Whether we call them oligarchs, cronies or political families, the idea is still the same — a huge majority of Filipinos are deprived of access to resources and opportunities in our current system, as it is being controlled for a very limited few by those running the system and by the institutions.

Some would argue that the success of these limited few still often results in the growth of the economy, thus may still be good for everyone. However, this is not often the case since, historically, economic growth in the country does not always result in uplifting the lives of the poor and the most challenged.

The same research article said that while average incomes have risen, this did not immediately translate to the overall improvement of the generation of quality employment and the reduction of poverty and inequality. On the contrary, there are high levels of income inequality and social exclusion in the country compared to other Asean neighbors, even with the low rate of upward socioeconomic mobility.

In 2009, the Asian Development Bank published a study titled “Poverty in the Philippines: Causes, Constraints and Opportunities.” It noted that one of the causes of poverty in the country was the “high and persistent levels of inequality (incomes and assets), which dampen the positive impacts of economic expansion.” Also, one notable finding in the ADB study is that “economic growth did not translate into poverty reduction in recent years.”

The reality in the Philippines since the publication of the ADB study has not really changed that much, as we can still see and feel the slow and negligible changes in the lives of the poor within our communities despite reported socioeconomic developments on charts and graphs by economic managers.

This puts into focus the current efforts to open or at least liberalize the foreign ownership restrictions found in the economic provisions of the Constitution. The Senate is at locker heads against those who wish to proceed with the deliberation of amendment through a constituent assembly where both houses are to vote jointly. This is sternly opposed by the Senate, led by the zealous and able Senate President Juan Miguel Zubiri, as it would greatly dilute the vote of each senator during the deliberations, thus negating the bicameral nature of Congress and reducing the checks and balances within the legislative branch.

Many are also opposed, claiming that this is actually a prelude to the amendment of the more contentious political provisions, like lifting the ban on term limits and changing the government to a federal or parliamentary form.

Nonetheless, it is clear that the economic provisions seem to be the preferred door by Charter change advocates through which they seek to open the discussions for changing the Constitution, whether in a limited or extensive manner.

So, let us look at and simplify this proposal of advocates for what it is and the premise of their argument that “opening the door for greater foreign ownership would allow greater economic benefit for the country.”

It is in this idea that I have some qualifications if not reservations. It is not that I do not believe in attracting investors and capital into the country. On the contrary, I am really for raising the competitiveness of the country to attract foreign capital investment. But to argue that local investments and Filipino businesses are insufficient to achieve the growth desired for the country at this present time and situation is still premature, in my opinion — simply because Filipinos are still limited in accessing resources and in doing business because of the continuous regulatory capture of institutions and regulatory offices by the few. This continues to increase the regulatory burden against ordinary Filipinos and MSMEs, who could not get into the game because of a captured system.

Ordinary Filipinos are hardpressed in doing business and accessing resources in their own country. Unless we put in our Constitution ways how to make things easy for those who are already in the country, we cannot jump to the conclusion that we do not have enough internally and locally. In fact, opening the economic provisions to foreign ownership could be disastrous because they will be subjected to the same bureaucratic problems in the country today. The real way to energize the economy is to open businesses to the Filipinos and make it easier for them to access their resources. The amendments, if ever, on the economic provisions must be to find a way of opening up the economy to Filipinos before we even consider foreigners.

The 2020 World Bank Doing Business report stated that the Philippines ranked 95th out of 190 economies with a score of 62.8, jumping 29 notches from 124th place and a score of 57.68 in 2019. According to official data, the total approved foreign investments reached P13.05 billion in the third quarter of 2022. These were driven by investments from Japan (34.5 percent), followed by South Korea (15.5 percent) and Singapore (12.6 percent).

This shows that easing business transactions in the country by simple government bureaucratic reforms automatically improves international investments in the country.

Moreover, it is the ordinary Filipinos, especially the struggling ones, who would directly benefit from these reforms in the bureaucracy as they are the usual victims of red tape and corruption at the lowest levels.

If Congress is pushing for economic reforms in the Constitution, then it must first prioritize easing capital access and doing business for local Filipinos and existing industries. The current Republic Act 11032, or the “Ease of Doing Business and Efficient Government Service Act,” was a good start, but as someone who had the opportunity to implement it in its infancy, I believe that it needs a lot of constitutional alignment and support to achieve the desired ease of doing business outcome in the country.

The automatic approval practice and the regulatory reform and streamlining of government agencies may be given a more prominent push through the Constitution. Furthermore, the institutions involved in streamlining and reengineering the bureaucracy must likewise be revisited and studied for mergers and possible concentration of this function to a constitutional body focused on this alone.

The laws on real property taxes and local government unit systems on lands should likewise be examined, as many citizens are being victimized by unscrupulous local officials who unduly foreclose and take hard-earned private property due to missed and minuscule real property tax payments.

The role of and alignment of LGUs with the national government’s efforts to streamline local services must also be revisited. I have personally witnessed so many conflicts between streamlining policies issued by national government agencies like the Department of the Interior and Local Government, Department of Trade and Industry, and Department of Finance, where LGUs simply duck the responsibility of issuing their own local ordinances that run counter to these national policies. LGUs normally pull out the card that it has local autonomy and that the Local Government Code allows them to come up with their own revenue measures and regulations promoting the general welfare.

Most importantly, the firm implementation of the prescribed government processing times and automatic approvals of complete applications must be strongly implemented. The consequences of sitting on applications for months and years without due reasons or explanations must be strongly castigated by disciplinary bodies as it is the ordinary people who suffer and the few who are able to do business in certain industries. A constitutional review of these would greatly benefit the people in my humble opinion.

There are still many other reforms that may be considered by Congress in tackling the economic provisions or other provisions in the Constitution that could help boost not only the economy but also immediately address the common pain points of ordinary Filipinos and businesses.

In summary, if constitutional amendments are to be pushed, I believe the economy must be opened to help Filipinos and local industries first by easing the burden of excessive bureaucracy. Who knows? This might be the kick and capital that we are all so ardently looking for.