Two reports this week—a rather misleading headline about legislative intentions toward Charter change in Tuesday’s Philippine Daily Inquirer, and the issuance of a long-expected correction to a Securities and Ex change Commission (SEC) rule on foreign equity limits—have fired the enthusiasm of constitutional reform advocates, and have seemingly raised the possibility that long called for adjustments, particularly in the economic provisions seen as a hindrance to increased foreign direct investment, might be made in the new Congress.
The anticipation, however, may be misplaced. At best, the various statements are mere window-dressing at this point. While they do provide an opportunity to subject the issue to more public discussion than it has had in recent months, there is nothing about the Aquino administration’s record on Charter change—particularly in view of its “success” in the recent elections—to suggest that the President, his legislative bloc, or economic managers have had a sudden change of heart.
To illustrate how the government’s apparent new-found interest in Charter change is being misinterpreted, consider the clarification of the SEC rule, which elicited this random comment from a Facebook user sharing the good news: “Mark this day in our history, May 21st 2013, the beginning of the end of the monopoly . . . regarding foreign ownership and the control of the economy.” But what the SEC’s rule change says exactly is, “The required percentage of Filipino ownership shall be applied to both the total number of outstanding shares of stock entitled to vote in the election of directors, and the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors . . . . All covered corporations, shall at all times, observe the constitutional or statutory ownership requirement.”
All that means is that the 40 percent constitutional limit on foreign equity will not be applied separately to voting and nonvoting shares, but will be applied to voting shares and the total of all shares; in other words, a foreign investor may not own more than 40 percent of the voting shares of a Philippine corporation but he can own more than 40 percent of nonvoting shares, provided his ownership does not exceed 40 percent of the entire corporation. Which is as it should be, according to the Constitution as it is now; the SEC simply cannot allow the constitutional limit to be exceeding; if anything, all the rule change does is relax regulations that were even more restrictive than provided for in the law of the land. But the headline in the Philippine Star business section, “SEC lifts 40 percent cap on foreign ownership,” tends to make it sound like something actually happened; it is not necessarily an inaccurate headline, but one that leaves out some rather important qualifying details.
Likewise, the Inquirer’s Tuesday headline, “House to push Charter Change,” was not really an accurate description of the government’s current perspective or intentions, and the lead of the article itself contains what is likely a completely baseless presumption: “With a firmer grip on Congress, President Aquino is expected to push for changes in foreign equity restrictions to attract more capital in order to create more jobs and reduce poverty incidence.” Why anyone would assume Mr. Aquino would do that is a mystery, given that every suggestion that constitutional changes should be made has been dismissed by the President, often with the somewhat immature and not nearly as amusing as he apparently thinks it is reminder that, “If it [the economy]ain’t broke, don’t fix it.” In fact, the last concrete action President Aquino took toward anything related to the space for foreign investment was the signing of Executive Order 98 on October 29, which actually expanded the Regular Foreign Investment Negative List.
And true to form, almost immediately after comments from current House Speaker Feliciano Belmonte Jr., Budget Secretary Florencio Abad Jr. and Sen. Ralph Recto indicating their interest in at least thinking about adjusting economic and investment provisions in the next legislative session, President Aquino made a point of reiterating his disagreement the very next day, telling reporters on the sidelines of a Philippine Navy event that, “I don’t think they [economic provisions]are necessary detri ments to getting foreign investments in this country.” Therein is the entire problem: Even when his political allies suggest that even minor changes could be made, even when the business community which has generally been supportive, perhaps to a fault, of Mr. Aquino’s leadership unequivocally states restrictive economic provisions are obstacles that needs to be removed, the President, well aware that he has firm enough control of the government to serve as a choke point for any initiative, quickly uses that influence to stop a line of inquiry he finds disagreeable, for reasons one suspects are more personal than anything else.
But while President Aquino may be secure in his belief in his own infallibility, the rest of us don’t have to simply accept it; and after all, he owes his singular control of the management of the country to a considerable structure of political support. The fact that bits of that structure have expressed a more rational perspective, cautious and limited though it may be, on economic liberalization does provide at least a dim glimmer of opportunity. Working on making the Exclusion List a little more investor-friendly may be a good place to start; it sidesteps the thorny issue of outright constitutional amendment, and can be accomplished either through executive or legislation action. What is not a good approach is that taken by either of the two discernible forms of “Charter change advo cacy” so far—that of the business sector, which has so far been resigned to simply mentioning it, or that of the social media-based “constitutional reform movement” that stubbornly insists its specific prescription of off-the-shelf political solutions of questionable applicability is the only framework that will be acceptable. If the country’s stakeholders are truly interested in making progress, then engaging in frank dialogue with policymakers on specific steps that are practical, immediately necessary, and achievable in the short term is the mission that should be undertaken now.