The Economic Folly of Charter Change

Cha-cha proponents argue that removing the Constitution’s nationalist provisions is key to reviving foreign investment flows into the country. Yet this is a weak argument for an effort that is also about President Gloria Macapagal-Arroyo’s extension in power beyond 2010.

BY SONNY AFRICA
IBON Foundation
Posted by Bulatlat

Amid lack of public consultation and accusations of railroading legislative processes, the committee on constitutional amendments in the House of Representatives approved this week the resolution filed by Speaker Prospero Nograles to amend the economic provisions in the Constitution.

Proponents of Charter change (Cha-cha) argue that removing the 1987 Constitution’s nationalist provisions is key to reviving foreign investment flows into the country. Yet this is a weak argument for an effort that is moreover about Pres. Arroyo’s extension in power beyond 2010.

There have been repeated efforts to remove dozens of nationalist and other progressive economic provisions of the 1987 Constitution since the 1990s. The main focus is on the charter’s provisions on economic sovereignty beginning with the overall declarations of nationalist economic policy covering foreign economic relations and domestic policy thrusts (Art. II. Declaration of Principles, Sec. 7, 17, 19, 21).

Other targeted provisions to be amended include:

1. Restricting foreign ownership, the degree of their involvement in decision-making and the grounds for expropriation (Art. XII, Sec. 1, 10, 11, 17, 18, 19; Art. XIV, Sec. 4; Gen. Provisions, Sec. 11)
2. Regulating the exploration, development and use of the national patrimony and defining corresponding rights, privileges and concessions (Art. XII, Sec. 2; Art. XIII, Sec. 7, 8)
3. Giving preference to Filipinos and stating the responsibility to protect, encourage and promote Filipino economic activity (Art. XII, Sec. 12, 14)
4. Giving the state various powers by which to assert national sovereignty, specifically in terms of:
a. Regulating trade, monopolies, and other economic activity in the public interest and in favor of Filipinos (Art. XII, Sec. 1, 6, 12, 13, 19; Art. XIV, Sec. 12; General Provisions, Sec. 11);
b. Defining treaty-making powers (Art. VII, Sec. 21); and
c. Giving the Supreme Court the power to assert the constitution’s nationalist provisions (Art. VIII, Sec. 4, 5).

The basic argument for amending these provisions is that the wholesale removal of all manner of protection and regulation of key domestic sectors will increase foreign direct investment (FDI) flows into the country and hence promote national development. Cha-cha proponents argue that strategic enterprises, natural resources, land ownership, public utilities, professions, education, mass media and advertising should be completely opened up to foreign capital. It seems that the mere presence of foreign capital is taken to mean that development is happening.

This argument however is very wrong. Foreign investment can play a role in domestic economic development only under very specific conditions and a liberal investment environment does not provide those conditions. This is proven by the experience of countries that have been able to use foreign investment to their benefit. It is also affirmed, unfortunately in a negative manner, by the poor experience of the Philippines with foreign investment.