Why attract foreign investors?

Do we really need to revise our Constitution to attract foreign investors? It will help. We have provisions in our current Constitution that deliver the message that foreign investors are not welcome. While the recent revision of the Public Service Act clears foreign investment in some key industries, the Constitution still requires full Filipino ownership of mass media.

In today’s internet era where mass media (news and entertainment) are universal in reach, our ownership restrictions look ridiculous. Are we going to set up something like China’s digital great wall to keep everything foreign out?

But more important in discussing Charter change is our need to speed up the pace of our economic growth. Even war-torn and communist Vietnam outpaces us now because they have opened up their economy to all sorts of foreign investors.

Why do we need foreigners to invest here? Isn’t there enough Filipino capital?

Nope. Filipino capital is not enough. That’s because we have a parasitic, rent-seeking economic elite dominating our economy. They are not risk-taking entrepreneurs like the Thais and the Vietnamese. They invest in “sure” businesses like real estate and have been using capital earned in the Philippines to invest in foreign property markets too. Guess who owns one of the tallest buildings in Madrid? A property taipan. In the case of sugar, they depend on government protection. Yet, for decades, they kept a good part of their dollar earnings abroad.

Our “capitalists” do not have the nerve to invest in export-earning manufacturing. They are happy to produce products for the domestic market that are protected by high tariffs. Today, we do not have a respectable manufacturing sector that could support the economy by producing jobs and earning from exports.

That is why our economy is largely consumer-driven and heavily dependent on imports even for our basic food items. Foreign investments will give our economy another leg in addition to OFWs and BPOs. Removing the ridiculous restrictions on foreign investments delivers the message that finally, the Philippines is ready to do business.

It is unfortunate that we have a very inward directed attitude toward investments. From the oligarchs that constitute our economic elite to the leftist labor leaders and academics, the message is delivered that foreigners are not exactly welcome. We prefer Filipino First, or Filipino Only in business and industry.

The 1987 Constitution was written in a hurry by a group of appointed individuals who basically represented the ruling elite. It served its purpose of bringing back democratic institutions after the ouster of the Marcos dictatorship by the EDSA People Power Revolution. Restrictive provisions on foreign investments and lack of consistency in government policies pushed investors to our neighboring countries, making them tiger economies while we eat their dust.

We need a constitution, laws and regulations that will give investors more certainty. We are so proud to have the revised Public Service Act that liberalized investments in a number of key industries. But the PSA is being challenged in the Supreme Court. Bureaucrats and sectors of the economic elite are making it difficult to enable existing liberalizations to be maximized.

For example, floating solar is being questioned by the Department of Environment and Natural Resources (DENR), insisting that 60/40 ownership is needed because it involves “surface rights.” If DENR prevails, there goes the massive investments we need in renewable energy (RE). Filipinos do not have the capital resources on the scale that will support the RE program of the Department of Energy.

We should have learned a lot of lessons from our neighbors over the past thirty years on how to become a tiger economy. Some of those lessons require pure and simple good governance and common-sense economic policies. But unlike our neighbors, we have more ambulance-chasing lawyers and bureaucrats than engineers and entrepreneurs. And these lawyers and bureaucrats compromised to special interests are experts in putting legal roadblocks to economic growth.

Honestly, China and Vietnam had more restrictive policies including the declaration that all land belongs to the state. But foreign investors are not interested in owning land. Give them a good long-term lease on land where they can build their factory and a good and predictable regulatory environment and they are happy to make everything from cars to iPhones.

Sometime during the 80s, a business delegation of Filipino executives visited Thailand. They asked their Thai counterparts what was their secret in attracting all those foreign investors that boosted their economy even if we were ahead in crafting an Investment Incentives Law. The Thais told them that they studied our investment incentives laws and implemented the spirit of what our laws and regulations prescribed.

That’s not surprising. We have the best brains developing the best plans but we have pretty lousy bureaucrats who cannot implement. We are unable to profit from our best minds.

So, other than revising the economic provisions of the Constitution, we need good governance. Deal with the top complaints of the foreign investors who came, studied our environment and then left for Vietnam, Thailand or Malaysia. Why did Intel leave Cavite for Vietnam?

One big complaint of investors, local and foreign, is red tape that leads to corruption. Establishing a business requires business permits from the barangay, mayor, executive department, and specialized agencies. We have passed a law creating an agency supposedly responsible for cutting red tape. It has yet to make a difference.

Speaking of red tape, the worst is dealing with many predatory local government units (LGUs). LGUs are notorious in extorting what they can from investors, foreign and local.

When Lilia de Lima was running the Philippine Economic Zone Authority, she made it a point to shield the investors in her ecozones from the LGUs. She negotiates with the LGUs for them and mostly convinces the LGUs that having those investors in their localities is good for their constituents.

In a future column, I want to share the exchange of views and experiences in one of my Viber groups on LGU extortionist activities that discourage investments. LGU corruption is one big disincentive for investors, local or foreign. That’s something beyond the ability of Charter change to cure.

Boo Chanco’s email address is bchanco@gmail.com. Follow him on X or Twitter @boochanco