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[OPINION] Game-changing reforms

April 11, 2023 | 5:25 pm

Introspective | By Calixto V. Chikiamco


Former President Rodrigo Duterte may have been better known (notoriously?) for his controversial drug war internationally, but his substantial legacy has been on the economic front. Despite the economic contraction that happened under his watch during the pandemic, he can be credited with numerous game-changing economic and social legislation.

Here’s a partial list: the Rice Tariffication Law, the Corporate Recovery and Tax Incentives for Enterprises Act better known as CREATE (reforming incentives and reducing taxes), the Tax Reform for Acceleration and Inclusion Law or TRAIN 1 (reducing personal income taxes on individual taxpayers), the Public Service Act Amendment (liberalizing foreign ownership in transport and telecommunications), amendments to the Corporation Code, the Build-Build-Build Program (hiking infrastructure spending to 5% of GDP), the Foreign Investment Act Amendment, the Retail Trade Liberalization Law, membership in the free trade bloc RCEP (Regional Comprehensive Economic Partnership), amendments to the Bangko Sentral ng Pilipinas (BSP) and Social Security System (SSS) Charters, the Increased Sin Taxes (RA 11346 and 11467), the Ease of Doing Business Law, the Real Estate Investment Trust Revised Implementing Rules and Regulations,the Personal Property Security Act (RA 11057), EO 127 on Satellite Broadband, EO and DAO on mining permit liberalization and lifting open pit mining ban, RA 11231 (Agricultural Free Patent Law) and RA 11573 (Land Titling Simplification Law) and, lastly, a political and economic achievement, the Comprehensive Bangsamoro Peace Agreement.

What about President Bongbong Marcos? So far, I haven’t seen his administration putting game-changing reforms or economic legislation on his agenda, save for one or two. The ratification of the country’s membership in RCEP and the issuance of the Implementing Rules and Regulations of the Public Service Act Amendment may be said to be game-changing, although the initiative started with the previous administration.

Another initiative that started under the previous administration (by former Socio-economic Planning Secretary Karl Chua) but which the Marcos Jr. administration implemented is the liberalization of foreign investments in the Renewable Energy sector. Previously, only majority-owned Filipino firms were allowed to invest in solar, wind, and ocean, under the old protectionist Department of Energy (DoE) Implementing Rules and Regulations (IRR).

However, Marcos Jr.’s Department of Justice issued an opinion that the natural resources provision in the Constitution didn’t cover solar, wind, and ocean as these energy sources weren’t depletable and represented kinetic, rather than potential energy. The DoJ opinion paved the way for the energy department to issue a new IRR to allow 100% foreign ownership in solar, wind, and ocean projects.

Because of this new IRR, a Danish firm, the Copenhagen Infrastructure New Markets Fund, recently pledged to invest $5 billion in developing 2,000 megawatts (MW) of wind energy in the Philippines. Kudos to Energy Secretary Raphael “Popo” Lotilla, who had been championing this reform, and Justice Secretary Crispin Remulla for making this investment possible.

A reform that the Marcos administration can rightfully proclaim credit for is the amendment to the IRR of the Build-Operate-Transfer (BOT) law or Public-Private Partnership law. The Duterte administration rushed a BOT IRR that was unfriendly to private investors before bowing out. Faced with an unfavorable fiscal climate for increasing infrastructure spending, the Marcos administration rightfully corrected the BOT IRR.

However, implementation is still unremarkable, and we have yet to see a fat pipeline of projects that will see fruition soon.

A piece of the Marcos administration economic legislation that could be game-changing is the New Agrarian Emancipation Act, which has yet to be signed by the President into law, although the bill had been ratified by both the House and the Senate on March 22.

The New Agrarian Emancipation Act condones agrarian reform beneficiaries’ P57-billion debt covering 610,054 agrarian reform beneficiaries (ARBs).

Probably, the Marcos Jr. administration wasn’t looking or was totally clueless, but the New Emancipation Act could have been a giant step backward rather than forward. As I wrote about in my last column, the House version contained a pernicious provision that said condoned farmers are prohibited from selling or leasing their land for 10 years, thereby preventing any form of land consolidation and tying them to the land even if they are too old or unwilling to farm.

Fortunately, the Senate dropped this provision during plenary and its version was eventually adopted in the bicam version ratified by the House and Senate. Both chambers, however, decided not to touch the existing Comprehensive Agrarian Reform Law (CARL), which contained a provision that agrarian reform beneficiaries can’t sell or lease their land for 10 years.

However, because CARL started in 1987 and we have the longest-running land reform program in the world, the majority of the Certificates of Land Ownership Award or CLOAS issued are now more than 10 years old.

I said the legislation could be game-changing because it will allow farm consolidation by leasing. However, it may be too soon to celebrate yet. After it’s signed by President Marcos Jr. into law, the Department of Agrarian Reform must formulate the IRR. It could put up new obstacles like requiring its permission for any sale or lease.

The administration should also optimize this law by getting the Land Bank or the National Development Company to consolidate farmlands by leasing them and subleasing to agribusiness ventures. And, no, this won’t lead to the displacement of farmers. Firstly, they will earn a rental income rather than the paltry income they earn from farming their own small plots presently (that is why most farmers now are just working part-time in farming). Secondly, they could be hired as farmworkers with more benefits and a steady income in larger, more productive agribusiness farms.

Apart from the New Agrarian Emancipation Act, I don’t see anything substantial in Mr. Marcos Jr.’s agenda that could be game-changing. The Maharlika Investment Bill, if passed into law, could even be a black mark on his record. The benefits of a merger of the Development Bank of the Philippines (DBP) and Land Bank are doubtful. TRAIN 3 or the Land Valuation Act, which started under President Duterte, has yet to be passed into law.

Charter Change to remove the foreign ownership restrictions in the Constitution can be game-changing, but Mr. Marcos Jr. has shown little enthusiasm for it.

There’s a lot of nice legislation in the Philippine Development Plan but I don’t consider them game changing. None of them address the big binding constraints to Philippine growth.

What are some of these game-changing legislations that I would like to see?

I would like to see an Apprenticeship Law. The present Apprenticeship law in the Labor Code restricts apprenticeship to technical industries only and limits it to six months. An expanded Apprenticeship Law will involve the private sector in improving the training and increasing the productivity of our workforce, most of whom graduate from K-12 without employable and relevant skills. An Apprenticeship Law will be both a labor market and education reform.

The economy should get a boost and food inflation could be controlled if the administration abolishes all quantitative restrictions and applies tariffs on all food imports, just as the previous administration did with rice with the Rice Tariffication Law. Short of that, the administration should pass a Livestock Development bill that will reduce the tariff on corn, which accounts for 60% of the cost of livestock. Our neighbor, Vietnam, imposes a 2% tariff on corn, while we insist on controlling the importation of corn and impose a tariff of 15% for out of quota importations when our projected shortage is 2 million metric tons annually. The result is high prices for pork and chicken, making them unaffordable to poor families suffering from protein malnutrition.

With the price of rice expected to increase in the coming months due to events beyond the administration’s control, such as the global shortage of fertilizers and the coming El Niño or dry season, the administration should be proactive and get the price of corn, a staple substitute, to fall. Otherwise, the administration may face a political crisis if both the price of rice and corn become unaffordable.

There are other bills that I would like to see go into law that are similarly game-changing: The Tree Growing Bill and the Forest Cadaster Bill, which will spur the development of the wood industry and help regreen our denuded forestlands; the repeal of RA 3018 and amendment of PD 194, which will liberalize foreign investment in the critical rice and corn sectors; and the Salt Industry Development Act, which can reverse the decline of the domestic salt industry.

If President Marcos Jr. wants to equal or surpass the economic achievements of former President Duterte, he must do more in getting game-changing economic legislation passed. Merging the DBP with Land Bank and organizing an ill-conceived Maharlika Investment Fund are not going to be up there with the historic economic achievements of President Duterte like the Rice Tariffication Law or the Public Service Act Amendment. These won’t make, in the words of his father, “this nation great again.”