The wisdom of amending constitution

Published March 5, 2021, 12:15 AM

by Dr. Bernardo M. Villegas


(Part II)

Dr. Bernardo M. Villegas

Let me stress that I am in favor of opening up these strategic sectors to more foreign equity not because I believe in untrammelled free market economics.  Unrestrained free markets do not serve the common good.  There should always be a strong role of the State to prevent the undesirable consequences of the absolute autonomy of the market, such as monopoly power that hurts the consumers, the inequitable distribution of income and wealth, the destruction of local enterprises by all-powerful global corporations and the employment of slave labor by multinational corporations.  It is possible that ten to twenty years from now, some of these threats may loom very large in the global and domestic markets.  Then, it would be necessary to have our future Legislature limit once again the foreign ownership of our strategic sectors.  That is why, I find the phrase “unless otherwise specified by law” a wise legislative move.  It will still be incumbent upon the  legislative body  to monitor what is happening to the global, regional and domestic economies and make whatever adjustments are needed in our laws to promote the common good.  What is irrational is to enshrine foreign equity provisions in our fundamental law.

Let me stress the importance of attracting long-term capital from abroad in telecommunications, infrastructures, media and education.  As mentioned above, despite the fact that our level of domestic savings has improved significantly in the last ten to fifteen years (from an average of 20 percent of GDP to 32 percent) these savings do not support long-term capital.  Fortunately, our Government has been very prudent over the last decade or so in keeping our debt-to-GDP ratio at very manageable levels of 30 to 40  percent.  Now that there is a need to borrow billions of dollars to address the double problem of the pandemic and the economic slowdown, our Government has a lot of elbow room to obtain more credit without endangering our financial stability.  These borrowings will be used for expenses related to the pandemic and to continue the Build, Build, Build program as well as to spend higher percentages of the annual  budget on education and health.  There is need, however, to get the private sector to complement the government efforts in improving our infrastructures by spending heavily in telecom, airports, tollways and educational institutions for the reskilling and upskilling of our human resources.  Domestic capital is grossly inadequate for the necessary levels of investments in these strategic sectors.

We don’t want a repeat of the disaster of  the PIATCO case in the building of the Manila International  Airport.  The long delay in its completion would have been avoided if the German investors were allowed to own the majority share in the project so that they did not have to tolerate as partner a Filipino consortium that was plagued with corruption.  A more recent example of how allowing greater equity participation  in the building of an airport can redound to the common good is the Megawide case.  Megawide, with a foreign partner, built one of the best international airports in Mactan, Cebu.  Now its desire to replicate this success story in the rehabilitation of the Manila International Airport has been frustrated by the issue of foreign equity participation.  It does not really matter if the Manila International Airport is rebuilt by an enterprise with a foreign group having majority share as long as the group can deliver a world-class international airport.  There are literally dozens of airports all over the country that we have to improve over  the next decade or so.  Tourism, which has the largest multiplier effect on employment, has the greatest potential for growth in the next decade or so, especially as international tourism recovers.  Meanwhile, domestic tourism will recover first.  We need to invest heavily in airports.  We should be thankful that Ramon Ang of San Miguel Corporation is bullish in constructing the Bulacan International Airport.  But he is one in a million among Filipino investors.  We need very badly foreign participation.    Our Northeast Asian neighbours, i.e. Japan, South Korea and Taiwan are looking for opportunities to invest their surplus long-term capital in infrastructures like airports, railroads, and subways in which they possess the greatest technical competence to construct and manage.  We should seize the opportunities now and in the next decade or so.  Already the Japanese are helping us in constructing the railroad from Clark to Bulacan and one of the subway systems in Metro Manila.  All these can be much  facilitated if we allow greater equity participation of foreign direct investors in these vital facilities.

(To be continued)