The big push to amend the 1987 Constitution where prohibitive economic provisions are concerned is on, particularly in the wake of President Marcos’s series of trips abroad to perk up interest in the Philippines as an ideal destination for foreign investments.
Recent presentations in Frankfurt and London made by the Philippine Economic Team led by Finance Secretary Benjamin Diokno, Bangko Sentral ng Pilipinas Governor Felipe Medalla, NEDA Secretary Arsenio Balisacan, and Budget Secretary Amenah Pangandaman on the state of the country’s economy last month were warmly received by finance and business executives in attendance.
They were particularly impressed by how the economy performed and how the Philippine GDP exceeded set growth targets despite global inflationary pressures.
In the UK, Deputy Ambassador to the Philippines Alastair White, speaking on behalf of the British government, declared that the Philippines has been “identified as a priority country for British investment partnerships.”
One especially enthused attendee at the Philippine Economic Briefing in London, Saif Malik, who heads Standard Chartered Bank’s Global Subsidiaries and the bank’s UK Client Coverage, cited the country’s “credit profile, stable financial system and strong economic recovery and reform momentum,” and promised that the “bank will be opening our global business center in the Philippines soon.”
There is no doubt that the President and his economic team and their efforts to put focus on local business and the economy have created a stir overseas. Investor interest has perked up, particularly since, as distinct from his predecessor, they see the incumbent President as particularly savvy and keen on opening the country’s economy to investors — no matter if these investors may be from the US or Europe.
Investors will always be interested in any area where their investible funds are safe from state interference and can yield the best returns. They will have the Philippines in mind, but they will also be considering other countries — Vietnam, Thailand, Indonesia, Malaysia, etc. — in the region. Ultimately, they will ask: what competitive advantage over another does a country offer?
Indubitably, factors foremost in an investor’s mind before he invests will be: how easy (or how difficult) will it be for me to do business in a country, and what restrictive policies are there that exist and which I must hurdle before I will put my money into a country?
The last World Bank Ease of Doing Business Report was in 2020 where it ranked the Philippines 8th, among the lowest in ASEAN, that is, just below Indonesia (7th) and above Laos (9th) and Cambodia (10th) in terms of ease of doing business in.
In 2021, then Finance Secretary Carlos Dominguez lamented that foreign investors perceived the country as being “the most restrictive among the ASEAN,” and this strictness, he stressed, had negatively affected inflows of foreign direct investments into the Philippines.
Only the Philippines, among ASEAN countries, has a 40 percent restriction on equity in telecommunications, electricity, agriculture, and education. Along with Vietnam and Indonesia, the Philippines prohibits foreign investors in media firms. Vietnam restricts foreign stakes in telecommunications, agriculture, mining, electricity, and waste management, but the restrictions are above 50 percent which means foreigners can have majority ownership in companies in those sectors.
On 21 March 2021, former President Rodrigo Duterte enacted into law amendments to the Public Services Act (Republic Act 11659). The law, principally authored by Rep. Joey Salceda, reclassifies telecommunications, railways, expressways, airports, and shipping under public services with foreign investors allowed to own 100 percent equity in these industries.
Also classified as public facilities but putting a 40-percent cap on foreign equity are power distribution and transmission, petroleum and petroleum products, pipeline transmission systems, water pipeline distribution systems, and wastewater pipeline systems, including sewerage pipeline systems, seaports, and public utility vehicles.
Nearly 11 months after RA 11659 was enacted, no Implementing Rules and Regulations for the law have been issued. Without the IRR, the law is inutile.
Said an irate Salceda, “Shouldn’t we be throwing everything we have on hand at the problem of low foreign direct investments? I fought very hard in Congress amid dozens of interpellators to get this law passed quickly. Only the IRR is needed. The ball is entirely in NEDA’s court. Where is it?”
Making the Public Services Act effective is just one issue. If the government cannot move forward and go beyond issuing an IRR for that law, how can it even begin to tackle amending the Constitution to lift all other prohibitive economic restrictions therein which would facilitate the entry of urgently needed foreign investment inflows?