• Don’t think ‘Charter change,’ just think ‘change’

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    (Author’s note: This column is based on a much longer, similarly titled essay first published in November 2010)

    The topic of Charter change has found its way back onto the public radar in the wake of this month’s midterm elections, and it is worth taking a step back and taking a broad look at the issue. There are, at the moment, three different perspectives on Charter change. The first, and whether anyone likes it or not, currently most operative of these perspectives is the one held by President Benigno Aquino 3rd, which is to do nothing to alter the Constitution, and instead focus on improving and enhancing existing institutional systems.

    The second, which enjoyed a brief period of relevance about two years ago but has declined into extremist ranting since then, is the polar opposite of the President’s view: A prescription of three initiatives to completely remake the Philippines’ socio­political landscape, including changing the system of govern­ment to a Parliamentary system, reorganizing the country into a Federal Republic and dropping all restrictions to foreign investment and ownership to boost the economy.

    The third perspective, which has gained traction in the last week or so, is a minimalist compromise position: Make such adjustments—constitutional or otherwise—that are necessary to promote greater investment and economic development, and table the more contentious issues of political system change until such time as improved economic circumstances make their necessity obvious, if ever.

    The problem each of these perspectives attempts to address is simply a lack of prosperity: There is too little of it for the country collectively, and what prosperity there is inequitably finds its way into the hands of an extremely small, privileged segment of the population.

    Most everyone can agree on the problem; where debate arises is in the real causes of the problem, and the best approach to solving it.

    The “do-nothing” policy of President Aquino is wrong, for the very obvious reason that it is not working. Poverty, unemployment and income inequality have not improved, but have actually grown worse through the first half of his term; the bureaucracy continues to be riddled with inefficiency and graft, and while some basic macroeconomic improvements (the fiscal foundations for which everyone but the President gives credit to his predecessor) have attracted equity investment, the continuing unfavorable environment for doing business on the ground is reflected in the country’s embarrassing foreign direct investment (FDI) figures. Malaysia, which has also lately held a contentious election of questionable credibility, reported this week it had collected $16.3 billion in FDI in the first quarter of 2013—more than 10 times the $1.5 billion the Philippines attracted through all of 2012.

    The “grand formula” approach combi­ning a federal parliamentary system with full economic liberalization is naïve, because it makes the elementary mistake of confusing correlation with causation; because other, more successful nations have these political features, the conclusion is that applying the same features will result in the same sort of success. This kind of perspective is dangerous, because it disregards the possibility of unintended consequences and unexpected outcomes. Every successful system elsewhere in the world has evolved according to its particular social and cultural environment; the prescriptive approach, however, makes the contrary assumption that the systems cause the evolution of social and cultural environments, despite there being very little evidence to support that point of view.

    The third perspective, while not perfect, is the most reasonable, because it allows for practical actions: Initiatives that are incremental, immediate and politically feasible. The downside, of course, is that there are many options, ranging from actually amending the Constitution, to creating new legislation, to making administrative changes to existing frameworks such as the Special Economic Zone Law and the Foreign Investment Negative Lists. The more choices that are presented to policymakers and stakeholders (keeping in mind, of course, that the choice to “do nothing” presently carries a lot of influence), the larger the debate, and the greater the risk the necessary compromises will not be achieved.
    To minimize that risk, specific recommendations should be made. Earlier this week, Budget Secretary Florencio “Butch” Abad Jr. suggested the Foreign Investment Negative Lists could be reexamined. Several business groups, most recently the Philippine Chamber of Commerce and Industry, have urged the government to pursue amendment of the Constitution’s economic provisions. One of those ideas is probably better than the other, but both are worthy of detailed discussion and debate. Let those who are serious about either of these ideas present some specifics, and they are certain to find a ready audience. If there has been one lesson that this country should have learned in the last three years, it is that merely talking about reforms does not magically make tangible reforms happen. There is much to do, and a reform path ahead that is measured in years, if not decades—it will not get any shorter, if no one takes the first step.

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