Philippine Ambassador to the UK (2003-2009) Edgardo B. Espiritu wrote the following piece in 2003 during the presidency of Gloria M. Arroyo. In this article, he pointed out the urgency of sharpening the country’s economic competitiveness as the trend toward globalization was becoming irreversible. His call for economic reform and the need for Constitutional leeway to make the economy more accommodating and flexible still rings true and relevant today, thus, the Times is republishing it.
THE current national and international scene is so full of uncertainties. The imminent war in Iraq creates huge instabilities in oil prices, in exchange rates, in stock markets and in our daily lives. The continued fighting in the south, the constant threat of terrorist attacks, and the still high crime rate can give one the impression that it is no longer safe to live in this country. A thousand and one problems call for immediate attention — from garbage to traffic to drugs to bad roads to high power and water rates. In an environment like this, one cannot really blame government if at times it appears to be engaged merely in firefighting. Our leaders’ energies are sapped just being preoccupied with these immediate concerns.
Although we may have little choice but to address these problems with short-term remedies that bring immediate relief, we have to realize that the real cure often lies in sustained, long term and fundamental reforms. For instance, given the irreversible globalization trend, we have to realize that we must at this time already be laying down the foundations for the country’s long-term competitive strategy. And in this effort, we must start with the most basic changes. This brings us to the matter of changing the fundamental law of the land, the Philippine Constitution.
Charter change again?
I’m sure many will frown at again hearing yet another proposal for charter change. Some will dismiss this as highly irrelevant given the “more important and pressing” problems today (but without realizing that precisely many of these problems can be traced to a lack of or a flawed long-term development strategy). Still some would relate this to the political skirmishes that form the prelude to the coming national elections. Thus, the President herself said that although she sees the need to change certain provisions of the Constitution, she would rather that this be done during the term of the next administration, lest her decision not to run in 2004 may again be misinterpreted.
But the sooner we do this the better, for we are already fast losing competitiveness in the very dynamic global economy. I should make it clear though that my position regarding charter change is that we should focus first on the economic sphere. This is where many of the provisions are already outdated and put us at a competitive disadvantage relative to most countries.
A lot of work has already been done with regard to reviewing and analyzing the economic provisions of the Constitution. You will recall that the last administration created a “Preparatory Commission on Constitutional Reforms” precisely for the purpose of evaluating and recommending proposals on the economic provisions of the Constitution. This Commission was made up of highly competent and well-respected authorities not only on constitutional law but also in various relevant fields, such as economics, business, education, mass communications, and labor relations. I had the opportunity to participate as a resource person in some of the proceedings of the Commission, and I can say that it did its job with seriousness, impartiality and rigor. It’s a pity its work has in affect been shelved as the administration that created it lost all of its credibility and was eventually deposed.
Economic policy should not be carved in stone
The common theme that runs through the Commission’s recommendations is that since economic policy should take account of important factors that are very dynamic in nature, it should not be set down in the Constitution or “carved in stone,” so to speak. Rather, the responsibility for economic policy formulation should be given to the Executive Department and Congress, and they should be given enough flexibility to do this in a way that is responsive to the requirements and opportunities presented by the current environment. I fully agree with this basic principle.
The economic policies that are contained in the present Constitution were after all designed to respond to a particular economic environment that prevailed a century ago.
The basic principle or tradition behind these policies is “nationalistic protectionism.” This is why they are very restrictive and inward looking. Certain important areas of the economy, such as natural resources-based industries,public utilities, mass media, advertising, and educational institutions, are reserved for Filipino citizens or corporations owned or controlled by such citizens. Likewise, foreigners are prohibited from owning land.
It may come as a surprise to many to know that these policies were not set down first in the 1935 Constitution but were really part of early American colonial policy in the Philippines. That policy, contained in U.S. Public Law 235 of 1902, which became the first organic act of the Philippines, prohibited large American corporate investments in agricultural and industrial enterprises in the Philippines tha would compete with agricultural and industrial interests in the U.S. Moreover, under the same law, Philippine economic development was envisioned to be supported primarily by domestic capital.
These policies were carried over into the 1935 and subsequent constitutions of the country, up to the 1987 charter.
Amending the restrictive provisions to achieve competitiveness
Certainly, such policies are no longer congruent with the present realities of globalization and the intense competition among countries, particularly for foreign direct investments (FDI). These provisions definitely put us at a disadvantage, considering that none of our Southeast and East Asian neighbors have such restrictive provisions in their respective constitutions and that their economic and investment policymaking is done merely by legislative action. It is not surprising therefore that even the boom years of 1992-1997, prior to the onset of the regional financial crisis, the Philippines received only about 6% of the total FDI flows into the ASEAN-5 nations of Singapore, Malaysia, Thailand, Indonesia and the Philippines.
With regard to land ownership, liberalizing provisions so as to allow foreign ownership, particularly of industrial and commercial land, will contribute a lot in enticing foreign investments into the country. It is certainly important to foreign investors to be able to own and control the land in which their factories and facilities are built. This is part of production. Moreover, based on rough calculations, the areas that are likely to be affected by liberalization, which are those that are currently allowed for commercial and industrial uses, account for less than 1% of the total land area of the country.
That the country needs enormous amounts of capital to achieve sustained development is quite obvious. Just to fill in the considerable backlog in basuc infrastructure (roads, bridges, ports, etc.) and public utilities (power generation and distribution, water supply and distribution) already requires financial resources beyond what is available locally, not to mention those our domestic saving-to-GDP rate is among the lowest in the region at only about 20% compared with 30%-50% for our neighbors, we rae clearly in relatively greater need of foreign investements.
Likewise, unless one has been living in an isolated desert island in the last two decades, it should be clear to all of us that there is a global revolution going on in telecommunications and information technology. To be able to catch up or maintain its competitiveness in terms of productivity and growth, a country must be able invest substantial amounts of resources in acquiring and constantly upgrading new technology. This is particularly important in the areas of mass media, education, and manpower development, and in the so-called knowledge industries. But thewse are precisely some of the areas where the Constitution restricts foreign investments. It is widely recognized that Filipinos are excellent workers, but if we do not have enough fund for this purpose, how can we expect them to remain competitive internationally.
Amending and liberalizing the economic provisions of the Constitution and transferring to the Executive and Legislative Departments of Government the responsibility for economic policymaking may appear to some as being “un-nationalistic.” Given the irrevrersible trends of globalization and international economic integration, a nationalism that is based on exclusion and control has lost its relevance. Rather, a nationalism that focuses on the results in terms of promoting a country’s interests, of achieving greater employment and sustained economic control over productive resources, is perhaps the kind of nationalism that we need at this time.