THE country’s economic growth in the past five years has been acknowledged by various international credit-ratings agencies. With its strong macroeconomic fundamentals, the Philippines has been described by the Deutsche Bank as a “bright spot” among emerging markets with “positive growth prospects.”
But the last thing we should do is to be lulled into complacency by favorable reviews from international finance institutions.
While we can be proud that our economy is doing well, the stark reality is that we are lagging behind our neighbors in attracting foreign direct investments (FDI).
According to the latest Bangko Sentral ng Pilipinas (BSP) statistics, total FDI flows went down 40.1 percent to $2.019 billion in the January-to-June 2015 period from $3.373 billion in the first semester last year.
In June net FDI decreased 30.9 percent to $383 million from $554 million in the same period last year. This is also lower than May 2015’s tally of $403 million.
According to the BSP, our six-month FDI total was lower than even just the first-quarter total of most of our Asean neighbors. Our six-month total of $2.019 billion is lower than the January-March FDI inflows of Singapore ($16.88 billion), Indonesia ($5.293 billion), Thailand ($5.104 billion) and Malaysia ($2.368 billion).
While FDI have soared in Asean member-nations such as Singapore, Malaysia, Indonesia or even Vietnam, the FDI we have attracted, both in terms of volume and value, is not something to crow about since we have been perceived as far from investment-friendly.
That foreign investors are not flocking to the country in the numbers we want is, of course, due to a number of factors. There’s the lack of adequate infrastructure, especially in the rural areas where investments are most needed; high electricity rates; bureaucratic red tape and the obligatory bribes to facilitate the release of the needed permits and licenses to operate businesses here; and peace and order problems, such as the recent kidnapping of two Canadian tourists and a Norwegian resort owner and his Filipina wife by suspected Abu Sayyaf bandits.
Add to that long list the perception by the international investor community that we have trade restrictive measures that make us too protectionist.
As a matter of fact, the International Chamber of Commerce (ICC) ranks the Philippines in the bottom third of 75 economies it assessed as part of its Open Markets Index (OMI).
The OMI’s third edition, released by the ICC last month, ranked the Philippines No. 60 with a score of 2.9 out of 6 in the OMI. We got the lowest score of 1.9 in terms of FDI openness (policies toward investments and attractiveness to foreign investors); 2 in trade openness; and 3 in trade-enabling structure.
On the other hand, Singapore and Hong Kong were judged the most open economies, both with a score of 5.5 out of 6. Sudan, Ethiopia and Bangladesh were ranked the lowest at Numbers 75, 74 and 73 with respective scores of 1.8, 1.9 and 1.9.
And here’s more bad news: The Philippines is also one of only 9 economies whose OMI scores have fallen steadily since 2011.
It’s not just abroad where our inability to attract more FDI is being noticed.
The private think tank Stratbase ADR Institute (ADRi) believes that the failure of the national government to implement one key economic reform being pushed by both foreign and local business groups has been “holding the Philippines back from becoming a globally competitive investment destination.” This, it said, is the amendment of the restrictions on foreign ownership enshrined in the 1987 Constitution.
The think tank has argued that “if the Philippines is to promote itself as an investment destination and facilitate the entry of FDI, the country must bring its policy on foreign ownership to global standards, and relax the limitations on foreign ownership.” Further on, it said: “The limits set by the country’s constitution on foreign equity in real estate and in key industries has set up a half-open and restrictive business environment that has frustrated the influx of much-needed FDI.”
As we pointed out in an earlier column, House Speaker Feliciano Belmonte Jr. has actually authored Resolution of Both Houses 1 (RBH 1) that seeks to amend the economic provision of the Constitution to allow change in foreign-ownership limits to be legislated by Congress. Senate President Franklin Drilon, it should be noted, has expressed support for the amendment of the restrictive provisions.
Belmonte has described RHB 1 as “the simplest yet more beneficially effective” constitutional reform that would lead to the influx of foreign direct investments that can create more jobs for Filipinos.
With the insertion of “unless otherwise provided by law,” RBH 1 will remove restrictions or caps on seven constitutional provisions: (1) Section 2, Article XII on exploration, development, and utilization of natural resources; (2) Section 3, Article XII on alienable lands of the public domain, including agricultural, forest or timber, mineral lands and national parks; (3) Section 7, Article XII on conveyance of private lands; (4) Section 10, Article XII on reserved investments; (5) Section 11, Article XII on grant of franchises, certificates, or any other forms of authorization for the operation of public utility; (6) Section 4 (2), Article XIV on ownership, control and administration of educational institutions; and (7) Section 11 (1 and 2), Article XVI on ownership and management of mass media and on the policy for engagement in the advertising industry.
Unlike ordinary legislation, constitutional amendments require an absolute three-fourths vote by both chambers of Congress. If RBH 1 passes the legislative mill and moves on to a plebiscite, it needs to get at least 217 votes in the 289-member House and at least 18 votes in the 24-member Senate. But once approved by Congress, RBH 1 does not have to be signed by the President into law like the regular enrolled bills passed by both chambers, because it needs only to be ratified through a plebiscite.
The bad news for economic Charter-change (Cha-cha) advocates is that RBH 1 is not likely to pass in the 16th Congress, as there is no more time to deliberate on it as lawmakers would be very busy scrutinizing the 2016 budget and focusing on the May 2016 elections.
Economic Cha-cha is an idea whose time has come. But will the next administration heed the call of the times? Let’s wait and see.
E-mail: ernhil@yahoo.com.