An infusion of cash from foreign investors might be the boost our economy needs

Published June 5, 2021, 11:00 AM

by Manila Bulletin

Changing economic policies in our constitution

By Karl Aguilar

Illustration by Shaun Landaas, design by Jules Vivas

Among all the sovereign countries in the world, the Philippines is the only country that has specified in its constitution the limits to which a foreign company or organization can own in an enterprise established here, in some cases none at all.

That alone should be a red flag in itself because economic policies evolve over time and change quite often, thus they are not meant to be tied down to something as binding as a constitution. And while some countries have economic restrictions in place, it is important to note that these countries were prudent enough to set these restrictions purely in legislation and not in their constitution so they can make changes more swiftly and easily when needed.

Secondly, compared to matters such as system of government or human rights, tying down economic policies in the constitution does not factor in the country’s stability. On the contrary, such an action is detrimental to the country’s economic growth and, in worse cases, may end up affecting the country’s overall stability that the constitution is supposed to uphold in the first place.

We have seen these negative effects unfold over the last 30 years or so since the 1987 Constitution has imposed a maximum 40 percent ownership limit to foreign entities that wish to own certain enterprises here, except in some areas like mass media where foreign entities are not even allowed to own even a single percentage of such enterprise. That does not even count the fact that some enterprises are attempting to go around these restrictions just to attract more foreign capital because the constitution is not allowing them to have access to additional cash infusions as there aren’t that many local Filipino investors with the huge amounts of money these enterprises sorely need for their growth.

On the other end, the conglomerates that have dominated the country’s economy for so long are enjoying the benefits of having little to no competition, gobbling up small competitors who have few resources to compete with them while not having to worry about foreign players who would have had the resources and know-how to compete with them head-on. As a result, these conglomerates are content to charge high prices for mediocre (at best) products or services because they can and the poor Filipino consumers have no choice anyway but to “patronize” them.

But the most adverse effect of these constitutional restrictions is the increasing number of Filipinos working overseas to feed their families, most of them doing so reluctantly because jobs are scarce—jobs that foreign direct investors would have been able to mostly fill, preventing the breakup of families and the mental and psychological anguish many overseas Filipino workers regularly experience because they’re so far away from home.

Yet, despite the very obvious effects of this restrictive economic policy, there are people who seem to avoid acknowledging the problem itself. Instead, they are mouthing ideas like giving financial support to SMEs (good luck sourcing funds for that), “creating more economic zones” (which is a “beating around the bush” solution that is limited in scope and a source for red tape and tax avoidance for scrupulous companies here), and sending out more OFWs (are we seriously promoting the idea of peddling off our people abroad for labor?). Why are they not acknowledging the problem that is staring them in the face?

The one possible reason I can think of here is trauma, trauma that is brought about by our country’s history. From the subjugation by Spain to control by the US to that short brutal period under Japan to even today with the fear of possible encroachment by China: instances of foreign dominance, real or imagined, have been a point of pain and contention over the years.

With the knowledge and resources foreign investors can bring here, not to mention the higher pay our people can earn working for them, this incentivizes people to eventually set up their own businesses and be more successful with more people being able to patronize them than before.

This is not meant to be dismissive of our past and present nor a call to “let bygones be bygones.” In fact, they should be ingrained in our collective memory. But we live in a world that is becoming smaller each day, thanks to technology and rise of the idea of a “global community.” We cannot afford to isolate ourselves as we end up on the losing end of this fast-changing world.

Lest we forget, the likes of Jollibee, San Miguel Corporation, and Liwayway Holdings (the makers of Oishi) are themselves foreign direct investors in the countries they have a presence in. And guess what—they were never asked to give up their Filipino majority ownership. So why are we not reciprocating the favor? If anything, that makes us Filipinos—sorry to say—hypocrites.

If we have to look at our history for the basis of how we formulate our economic policy, it should never be one that is based on fear, distrust, or even xenophobia. Rather, we must look at our history as the basis for formulating a more nuanced policy. One that is welcoming of foreign enterprises that can contribute positively to our country’s economy and our people’s benefit while also wielding its power to cut them down the moment they act to the detriment of the country and the people. It is by being welcoming and assertive rather than being unwelcoming and fearful that we gain the respect of the countries that we think may have historically looked down on us.

And even if we decide not to deal with foreign investors of some countries, we should not be closed to all of them. After all, there are still about 180+ sovereign countries whose investors we can deal with, some of whom we even share a common past with. The world is not limited to two or four countries and there is so much opportunity out there to build a rich network that our country can benefit from.

Ironic as it may seem, an open economy benefits our homegrown business environment even more. With the knowledge and resources foreign investors can bring here, not to mention the higher pay our people can earn working for them, this incentivizes people to eventually set up their own businesses and be more successful with more people being able to patronize them than before. And with government revenues increasing thanks to the corporate taxes paid by these foreign investors and the income taxes paid by their employees, the government can now afford to do more projects on their own even without relying on foreign loans and provide greater financial assistance to specific sectors.

Even with a global pandemic that has severely limited transportation and forced some countries to cut off ties with other countries, the importance of foreign direct investments has become more apparent than ever as our closed economy is limiting our chances to quickly recover. It is time for us to face the hard facts: We need all the help we can get. 

We cannot afford anymore to remain tied to the oppressive chains of constitutional economic restrictions. It is time to free ourselves and attain the growth that our country can attain. It is time for us to show to the world that we are ready and open for business while assertive of our rights and our place in the sun.

Karl Aguilar is a freelance content strategist, writer, photographer, historical heritage enthusiast, and constitutional reform advocate. He is the principal founder of The Konstitusyon Project, an online initiative which aims to educate people on matters related to the constitution and constitutional reform. He gained fame as a winner of the top prize of the Philippine edition of Who Wants to be a Millionaire back in 2011.