Revisit Belmonte cha cha proposal

August 10, 2016 at 10:15

Revisit Belmonte cha cha proposal

DEMAND AND SUPPLY By Boo Chanco (The Philippine Star) Updated August 10, 2016 – 12:00am

The discussions on whether to have a con con, a con ass or a con com have all brought out the reality that cha cha cannot be rushed. The discussions on federalism, for instance, reveal how complicated the concept is and it will take time for people to understand it sufficiently.

It is the same thing about having a parliament or keeping the present Congress… whether it should be bicameral or unicameral. Right now, surveys show people are not well informed about the issues for adopting one thing or another in our Constitution.

It is clear cha cha will take time. I am not sure we can have something ready for ratification in time for the local election in less than three years. If we take the longer route of a con con, we may need Duterte’s six year term to get a document ready for ratification.

The right thing to do is to think in terms of cha cha in tranches. Let us do the less contentious things first that we need right away like loosening the controls in the economic provisions. We need to attract more investments, mostly from foreign sources, to expand our industries or create new ones. We need these new investments to create jobs.

It is time to revisit the proposal of former Speaker Sonny Belmonte for a simple amendment that will remove outright Constitutional restrictions and give Congress the chance to decide what kind of control we need for foreign investments.

It will be recalled that Speaker Belmonte proposed to amend the Constitution by inserting the phrase “unless otherwise provided by law” in the economic provisions limiting foreign ownership in certain areas of the economy.

A joint resolution of Congress constituting itself as a con ass for the sole purpose of introducing this simple amendment to the economic provisions will enable us to fast track economic development. This can be ratified during the mid-term election in less than three years from now.

President Duterte can convene a con com to study and make recommendations on federalism, parliamentary and other changes to the form of government without rushing.

After the con com is done, the President can call for a con con or ask Congress to convene again as a con ass to act on the con com’s proposals. By this time, the public would have had the time to digest the intricacies of the proposed changes in the political provisions.

In the meantime, we would have addressed the urgency in updating our Constitution’s economic provisions. The restrictions now in force are no longer relevant to our needs.

Just think of the telco duopoly of PLDT and Globe and see why it doesn’t make sense to allow the entrenched local elite (oligarchs to Mr Duterte) to enjoy vast economic powers over the rest of us consumers. Protectionism is bad economic policy that punishes the lowly consumer.

We need to open up key areas of the economy to more foreign investments, thereby providing more competition, facilitating technology transfer, generating jobs, and improving consumer choice.

The DICT and NTC are talking of auctioning off “excess” frequencies to a third telco to compete with the entrenched duopoly. But we know this is just a ruse of government regulators beholden to industry to calm down an angry mob of consumers who are demanding more competition to drive down prices and vastly improve services.

If even the mighty San Miguel, with the very daring Ramon Ang surrendered in the face of the duopoly’s might, what other local entity will dare step up to the challenge? Only a big international telco can have the resources and the latest technology to be that third player.

Those restrictive provisions in our Constitution signal to foreign investors that they are not welcome, especially in critical areas like the establishment and operation of public utilities that are crying out for improved service quality. Our current level of Foreign Direct Investments (FDI) remains the lowest among the ASEAN 5, namely Vietnam, Malaysia, Indonesia, Thailand, and the Philippines.

The Belmonte proposal will give Congress the flexibility to determine which areas of the economy should be opened to increased foreign participation. The Philippines is among the very few nations with specific economic restrictions lodged into its Constitution. Most countries allow their legislatures to determine economic policy.

The economists in the Foundation for Economic Freedom (FEF) declared in a position paper that engaging in economic charter change would be beneficial for the medium- and long-term. We need to be competitive in this period of ASEAN integration, and for that to happen we must be attractive as an investment destination.

The FEF pointed out well-capitalized foreign companies could help modernize and provide competition in strategic sectors of the economy like seaports, airports, telecommunications, shipping, and air transport.

“If well-capitalized world-class companies are allowed to own and operate public utilities like airports, seaports, shipping, and telecommunications beyond the present limit of 40 percent set by the Constitution, the quality and quantity of bidders for PPP (public-private partnerships) will dramatically improve. This can only auger well for PPP projects particularly in strategic infrastructure.”

The FEF also cited a national security benefit that would be provided by increasing FDIs. “The country will increase the economic interest of our friends and allies in the international community to maintain our territorial integrity and to uphold freedom of navigation in the West Philippine Sea.

“Then, our anti corruption drive will benefit from increased FDIs. Well-capitalized foreign companies that may be interested in investing here will come from countries that have an Anti-Foreign Corrupt Practices Act. This will improve the climate for transparency and good governance.”

Currently, the FEF pointed out, the present Constitution encourages “adverse selection,” which means that only foreign companies willing to circumvent the rules on foreign ownership invest in the Philippines. “It is a well-known fact that foreign companies already own and control media companies, telecoms, and power distribution companies, despite the Constitutional limitation on foreign ownership.”

 In any case, concerns some may have in the liberalization of foreign ownership restrictions in the Constitution could be brought up when Congress debates the appropriate legislation after the Constitutional amendment to include the phrase “unless provided by law” is passed.

But this economic reform cannot wait for the outcome of the debates on the political provisions, or be hostage to the public sentiment on the shift to federalism or a parliament. We urgently need to attract Increased FDIs to promote inclusive growth, reduce poverty, generate jobs, improve consumer welfare, enhance competition, modernize our strategic infrastructure, and strengthen our national security.

It is important for Congress to revisit the Belmonte proposal on how to fast track the amendment of the economic provisions. This is the only way we can meet those ambitious GDP growth targets of the Duterte administration and also give inclusive economic growth a chance to happen.



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