Turning negatives to positives

This week continues to be nerve-gripping as one big news after another unfurls, with repercussions that will define new, sometimes uncertain, changes in how things will be in the immediate and longer term.

In the US, the results of Americans’ votes will define by today what direction the country will take after the 21-month campaign strut polarized ideologies and split the nation pretty much in half, straight down the middle.

But whether it is a Clinton or Trump win, the biggest task would be to heal a divided nation of more than 320 million people, and keep its fragile momentum of growth going forward to contribute to restoring normalcy in the global economic environment.

In the Philippines, how the Supreme Court decision giving President Rody Duterte the hand to allow former president Ferdinand Marcos’ remains to be formally buried at the Libingan ng mga Bayani is causing also a furor, and whether it will polarize the nation is still something to watch.

This is another negative that needs to be turned into something positive, if the country needs to avoid getting into a political turmoil against the President which could affect our economic growth trajectory path.

The bigger news for me, which did not get as much populist attention being in the realm of business, is the attempt of the government to change the contents of the so-called Foreign Investment Negative List (FINL) in the Foreign Investment Act in a more radical manner.

There’s no polarizing element here, but it’s still about turning negatives to positives.

Constitutional change

As backgrounder, the FINL is administratively managed, although strictly confined to the stipulations of the 1987 Constitution where foreigners are limited to 40 percent equity in utilities but bars foreign investments entirely in media and education.

The last administration under former president Benigno Aquino III had introduced more changes in the FINL in 2012 and 2015, but did not seriously attempt to initiate legislative action that would change the Philippine Constitution on the matter.

This appears set to change under the Duterte government, especially after hurdling the first step to changing the Constitution happened last Oct. 19, when the House Committee on Constitutional Amendments approved a proposed resolution calling for a constituent assembly to speed up the process for charter change.

Of course, this move is in relation to Duterte’s campaign promise to transition into a federal style of government, but opening the gates of constitutional change will mean that reviewing the Constitution’s strictures on foreign ownership is also fair game.

All these seem to be something likely to happen, although on the farther horizon, because any change in the Constitution requires massive amounts of legislative work. But then again, the current government has started work on this early enough, thus there’s time.

Relevance

The country needs to ease its rules on the negative list, not just in view of the global trend to bring down trading barriers of goods and services, but also to give ourselves a chance to bring inclusive growth (another global trend, even for developed countries like the US) to more Filipinos.

Investments in public-private projects under the government’s PPP program have been moving, but still too slowly largely because of the magnitude of amounts needed. Thanks to our locally based mega companies, new infrastructure initiatives are breaking ground, yet there’s more work ahead that needs to be done.

Foreign money would be crucial to kick-start additional infrastructure projects, but more importantly, to finance business growth in many key areas of the country’s economy – agriculture included – that could open new job opportunities for more of our countrymen.

For now, areas where foreign ownership is still limited include the use of natural resources, ownership of private lands, operation of public utilities, educational institutions, rice and corn production, supply of goods to government-owned or controlled corporation, operation of facility requiring public utility franchise, and commercial fishing vessels.

In many of these areas, the dogma underpinning the decision of those who crafted the 1987 Constitution needs to be reviewed to incorporate developments that have swept the world in the last three decades, and make the Constitution relevant for future growth.

Rural economic reinvigoration

In particular, we need to reinvigorate our agriculture sector where majority of the country’s rural labor force are employed, and which accounts for the high poverty in these areas. Correspondingly, agriculture has continued to contribute less and less to the economic engines of growth, now accounting for about 10 percent of GDP.

It’s a great irony that the Constitution inhibits the inflow of much-needed investments in agriculture, but aspires to uphold human dignity of every Filipino. What could we possibly risk by allowing foreign capital in rice and corn production that cannot be mitigated by laws that will negate abuses or even increase our comfort levels of not becoming irreversibly dependent on foreigners for what we regard as food staples.

In exchange, we have so much to gain. Decades of neglect in the agriculture sector, whether impeded by the Constitution or the ineptitude of past administrations, have continued to keep inclusive growth a far dream for our nationalistic bureaucrats.

Think of the poor 30 percent of the country’s labor population finally gaining better comfort levels from improved salaries and long-term (not seasonal) employment from the right investments. Not only will we see a gradual drop in poverty rates, but could expect better food prices.

Urgency

Yes, the need to review the Constitution has now become all the more an imperative to be able to hurdle what seems to be the last block in our push towards joining the newly industrialized countries clique. And the sooner this is resolved, the better.

The rest of the world is waking up, and while we are currently being regarded as a preferred investment ground, we may find ourselves being pushed to the sidelines once again if we lose momentum.

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