More investments, more jobs

Immediately after President Aquino’s state of the nation address, Senate President Juan Ponce Enrile came out with a statement in support of removing the 60-40 economic rule that works against foreign investments.

As far as I understood him in the 15th FVR lecture series, this initiative will not be through Charter change but merely through legislation. He was pretty emphatic about that to discourage any speculation that he was promoting “Charter change.” I can see why he would be cautious.

He gave a time frame to enact a new law to remove the restrictions  before the end of the year. I believe he also has the cooperation from Speaker Feliciano Belmonte.

Enrile is convinced that this economic provision in the 1987 Constitution has discouraged more direct investments into the country. Foreign direct investments in the Philippines amounted to $552 million, down by 15 percent from the same period last year while China received $60.89 billion. Even Vietnam received $5.6 billion or 10 times more than the Philippines.

Having put himself forward as a concerned government official he faces a dilemma between his awareness of what is right for the country and the fear of the economic and political elite going against his initiative. The Palace threw cold water to his statement that “the Philippines cannot afford to lose the chance to attract foreign investments by default.”

Surprisingly the Palace referred to his initiative as charter change despite his protests that it will be done through legislation. Since charter change is anathema to the establishment he can expect rough sailing. It was not needed at this time cried the Palace. So what happened? How did the Enrile-Belmonte legislative reform morph into charter change? Unless Enrile was misquoted he may have walked into a trap to block the initiative even before it has begun.

It was the Palace that tarred it as ‘charter change’. The Palace spokesperson said it would not support the Enrile-Belmonte bill.

So the lines are drawn  on one side is the legislative in favor of a law to make the Philippines more attractive to direct foreign investments and the other, the executive that says it is not needed. Enrile riposted that removing the 60-40 restriction on foreign investments may not solve all the bureaucratic problems of laws and regulations. But enacting a new law would be a strong signal that the Philippines, like other countries in the region, is open to direct foreign investments.

For those who want more comprehensive reforms, it would be prudent that we support the Enrile-Belmonte bill anyway. It is a way forward. Jobs are so badly needed that it would be incomprehensible that we should refuse investments.

Yes, let us simplify what the problem is all about. We need more investments to create more jobs. Filipinos should not have to scour the world looking for jobs. It is time that government serves its citizens and not the other way around. It is not enough reward to call them heroes because their remittances help to run the country.

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Having said that it did not want Charter change the Palace added that restrictions could be eased through laws and administration rules. So which is which? If it can accept changing the law to allow for more investments to come, then the Enrile-Belmonte initiative should be encouraged, not turned down. As the Palace observed rightly this was done in power generation, shipbuilding and oil refining.

Enrile said the bill would have a built-in guarantee against any attempt at “shot-gun amendments.” Through the ordinary process of legislation it will have to be passed by a three-fourths vote by Congress but will not require convening Congress into a joint session.

Representatives of foreign corporations here said in a round table conference at the CRC that in some cases they have been subjected already to rules that were illegal. There is no one monitoring these illegal rules since each department makes its own rules. 

This, someone in the meeting said, may be because the restrictions in the Constitution has encouraged this kind of thinking — to make it difficult for foreign investments. Who is to check on those who apply illegal rules?

Whatever reforms will be made have to be done fast, so the Philippines is not left behind when investments are poised to come to the region because of economic problems in developed economies. Unless, the government moves fast, the Philippines will once again lose opportunities.

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At the round table conference held at the CRC some weeks ago, the so-called illegal rules were particularly distressing. According to some of investors present the 60-40 provision were being imposed on foreign corporations even if these were not included as restricted  in the Constitution.

Among these are contractors and the maritime industry. The Philippine Contractors Association Board has made its own rules and regulations. Under its rules “the regular license shall be reserved for and issued only to construction firms of Filipino sole proprietorship or at least 70 percent owned by Filipinos. Since construction is not listed in the negative list on foreign investments it must be deemed open to direct foreign investments.

In the maritime industry, the same limitations are practiced. So much more jobs could be generated if the qualifications were not imposed on maritime related activities like the training of ordinary seamen and/or officers. The rule imposed by the MARINA says that training schools for the maritime industry is limited to Filipino citizens or partnership with at least 60 percent owned by Filipinos. Since maritime training is also not listed in the foreign investment negative list the limitation is illegal.

These are only two examples of how restriction on foreign investments has encouraged different departments to make their own rules. I am sure there are many others.

We have created a hostile environment for direct foreign investments so we should not be surprised that other countries in the region, including Vietnam, should go ahead of us in providing jobs for their people and boosting their economies.