‘Economic Cha-cha to generate 1.6 million jobs’

MANILA, Philippines — Opening up the economy to foreign investors by amending restrictive economic provisions in the 1987 Constitution could generate 1.6 million jobs, a study by the University of the Philippines (UP) said.

In its paper submitted to the House committee on constitutional amendments, the UP Research and Extension Services Foundation-Regulatory Reform Support Program for National Development (UPPAF-RESPOND) found that easing the constitutional provisions that bar foreign ownership of certain industries would cut down unemployment by 40 percent to a rate of 5.1 percent from 8.7 percent recorded in October 2019.

“The new jobs will totally offset the annual job losses in domestic trade, finance, real estate and business services, and allow for significant job recovery rates in manufacturing (38 percent), construction (35 percent), other services including health and tourism (25 percent) and transport and storage (19 percent),” read the preliminary study.

The study further found that foreign direct investments (FDIs) “will increase by $57 million for every one unit point improvement in the Regulatory Restrictiveness Index (RRI) Equity Restriction score,” which could translate to $16.2 billion (about P777 billion) in additional FDIs.

The RRI measures the statutory restrictions on FDIs of a country based on foreign equity limitations, screening or approval mechanisms, restrictions on the employment of foreigners as key personnel and operational restrictions on branching, capital repatriation or land ownership, according to the Organization for Economic Cooperation Development.

“In the case of the Philippines, the removal of all Foreign Equity Restrictions (or allowing 100 percent foreign ownership in all economic activities) is equivalent to the improvement of the FER score of 0.281 in 2019 to zero which translates to a nominal increase of FDI amounting to $16.2 billion,” the study said.

The additional FDI is more than triple the country’s current FDI up to October 2019, which amounts to $5.25 billion (about P252 billion).

According to UPPAF-RESPOND, the additional FDIs of $16.2 billion “will raise economic demand and total output that will eventually lead to the generation of up to 1.6 million new jobs,” thereby improving the country’s employment rate.

With these findings, UPPAF-RESPOND head and UP National College of Public Administration and Governance professor Enrico Basilio agreed with proponents of economic Charter change (Cha-cha) led by Speaker Lord Allan Velasco that the amendments will improve the investment climate in the country.

On the other hand, a former House leader opposed amending the Constitution at this time, saying it is counterproductive and would distract Congress from focusing on necessary pandemic response measures.

“Speaker Velasco would do well to return Cha-cha to the back burner as devoting the chamber’s attention to this highly divisive and counterproductive activity is just a waste of taxpayers’ money, especially at this time when we legislators could best be earning our keep  by working with the executive department on measures to deal with the lingering pandemic,” said former deputy speaker and Camarines Sur LRay Villafuerte.

“The Congress’ time and effort would be best spent, not on tackling Cha-cha, but on passing pending measures and crafting new measures that would beef up our  COVID-19 response,” he added.