Solve poverty, power issues first — legal experts
CONSTITUTIONAL specialists yesterday told senators amending the restrictive economic provisions of the 1987 Constitution will not solve the economic challenges currently troubling the government.
Former Supreme Court Associate Justice Antonio Carpio and 1987 constitutional convention members Bernardo Villegas and Rene Sarmiento made the common position during the second hearing of the sub-panel of the Committee on Constitutional Amendments and Revision of Codes on the proposed Resolution of Both Houses (RBH) No. 6.
Monday’s hearing focused on the proposal to liberalize the constitutional provision on public utility ownership.
Carpio said amending the economic provisions of the Charter is not needed since the country already has “one the most liberal foreign investment laws” in the Southeast Asia region and the whole of Asia.
“The proponents of the present people’s initiative blamed the restrictive provisions of the Constitution for the low foreign direct investments, the high unemployment and slow economic growth of our country. These are all false reasons,” he said.
He said the “real problems” besetting the country’s foreign direct investments are high electricity rates, bureaucratic regulations, and the lack of infrastructures.
“We have the highest power rate in ASEAN and the second in Asia, next to Japan. In manufacturing, energy accounts for at least 30 percent of your cost. And if you locate your plants here in the Philippines, you cannot compete with your competitor in Vietnam because they have lower power rates,” he said.
“We have to address the real causes. The real cause is not the Constitution. Nobody cares. The President has been going around abroad and has been saying ‘I have secured almost 500 billion pesos in foreign investments’ and not one of those foreigners who plan to invest here required an amendment of our Constitution,” Carpio stressed.
For his part, Villegas said there is no need for Congress to revise the Charter’s economic provisions “at this time” because what needs to be immediately resolved is the 21 percent poverty incidence rate.
“Right now, we should have a single-minded focus on the scandal that we have 21 percent of our population in dehumanizing poverty. That’s a scandal because all of our neighbors in Southeast Asia have single digit poverty incidents,” Villegas said.
He also said the government should focus in increasing agricultural production by at least three percent per year as what is being done in Thailand.
He added the government should likewise save money so it can invest in infrastructures.
“We save only 10 percent of our GNP (gross national product). Do you know that the average among our neighbors (is) anywhere from 25 to 35 percent? Actually, China saves more than 35 percent of their GDP (gross domestic product). Therefore, we have very little capital to invest in long-term infrastructures and other essential projects,” he said.
He added amending the advertising and education provisions of the Constitution will have no effect on the economy.
“They are not capital intensive, and they will not impact on poverty as infrastructure… So, it’s clear that it is not time to have an amendment of the Constitution,” he stressed.
Like Carpio, Villegas said that from all the “roadshows” that he has been conducting abroad, “my feedback is those who want to invest in agriculture here do not require land ownership.”
On the other hand, Sarmiento told senators he has reservations about introducing amendments to the Charter since doing so “can start up a prairie fire.”
Sarmiento said what needs to be solved right now are more pressing issues, like the country’s “politicized bureaucracy,” which he said has down slowed foreign direct investments.
“Moreover, and equally important, your honors, for the country’s economy to soar high is to unlock the immense human potential and possibilities of Filipinos, their greatness, by further fleshing out the social justice and human rights provisions in the 1987 Constitution,” he also said.
Sarmiento expressed concern that revising the Constitution can open the gates to more amendments such as those concerning “political, judicial, social justice, and human rights provisions.”
As an example, he said that when the US Constitution was approved in 1787, after the first 10 amendments were ratified, more than 11,000 amendments were proposed “though only 27 had been ratified,” which include political tradition, human rights, and economic issues.
He also said that the Constitution of India, when ratified in 1949, already had 306 amendments as of September 2020.
“A spark that is the revision of economic provisions can start a prairie fire of more amendments in the future,” he warned.
FOREIGN OWNERSHIP
Carpio pointed out that the Philippines, without amending the 37-year-old Charter, has already passed and amended several measures to open the economy to 100 percent foreign ownership, including the Public Services Act, Trade Liberalization Act, and Foreign Direct Investments Act.
“There appears to be (a) lack of understanding by our national leaders of the extent of foreign ownership under the law of businesses in our country,” he said.
He noted that “the recently amended Public Services Act reclassified businesses as public services open to 100 percent ownership,” while renewable energy like solar and wind; airports, seaports, and land transportation; and telecommunications were also opened 100 percent to foreign ownership “subject, of course, to reasonable minimum requirements or capital.”
He said the generation of renewable energy has also been opened to 100 percent foreign ownership by a mere circular issued by the Department of Energy (DOE) that amended the implementing rules and regulations of Republic Act No. 9513 which covers the industry.
“In an interview, President Marcos Jr. declared that he wants to open the economy to foreign investments, and I quote, ‘except in critical areas such as power generation.’ (But) Power generation from all — coal, oil, and gas — has been opened to 100 percent foreign ownership for the longest time. The Supreme Court has also allowed 100 percent foreign ownership of power generation from dams and hydro power plants,” Carpio said.
He added the President has also allowed, “through mere implementing guidelines” issued by the Department of Justice (DOJ) and the DOE, foreign ownership of power generation from solar and wind “which are, as our natural resources under the Constitution, owned by the State.”
Carpio also said the country now has relaxed foreign direct investment policies as compared to China and Vietnam, which only allow 49 percent foreign ownership of telecommunications.
On land ownership, he said Indonesia and Thailand do not allow foreigners to own lands as “they can only acquire a leasehold.”
“So, we are better because we allow a corporation 40 percent owned by foreigners to own land. And frankly, land ownership is not a certain requirement for investors to invest in our country,” he added.
On bureaucratic regulation, Carpio said the numerous permits required by various government agencies and local government units are the real burdens to foreign investors, unlike in Vietnam and China where “you go to only one office and you get all your permits.”
He added the country lacks basic infrastructures like seaports, airports, and transport terminals which are also factors for the low foreign direct investments.
‘OPEN FOR BUSINESS’
Senators said the Philippines is already open for business even without amending certain restrictive economic provisions of the Constitution.
Sen. Grace Poe said Cha-cha proponents should be careful in tinkering with the Constitution as it would “open a can of worms” as she debunked arguments that the country’s economy is close to foreign investors.
“We have made great strides in the past years liberalizing our economy without compromising our national security or leaving behind Filipino businesses,” Poe said, adding: “Kailangan pa ba natin ng Cha-cha para sabihin that we’re open for business? Sabi nila sarado ang ating ekonomiya, pero ang totoo, bukas naman tayo sa foreign investors (Do we really need Cha-cha to tell the world that we’re open for business? They are saying that our economy is closed but the truth, is we are open to foreign investors).”
She said the amended Public Services Act was enacted to “to encourage new players in sectors like telecommunications, which truly need expanded competition to improve service and lower prices,” and cited the example of Starlink’s entry into the telecommunications industry following the passage of the PSA amendment.
Poe also emphasized the need to maintain Filipino control over essential utilities while welcoming foreign investments.
Poe also said there is a need to protect national security and interests, including reciprocity requirements for critical industries and restrictions on foreign government-owned corporations from investing in public utilities and critical infrastructure.
“Samakatwid, bukas na ang ating ekonomiya (Therefore, our economy is open). We have done so, as said by our esteemed statesman, former Senator Frank Drilon, without violating or amending the Constitution. Hindi natin kinailangan mag-con-con, con-ass, o ‘pekeng’ initiative (We do not need a constitutional convention, constitutional assembly, or that fake [people’s] initiative),” Poe said.
She said that RBH No. 6, as it stands now, proposes opening of all public utilities to foreign ownership, investments, and management without the constitutional protection grounded on security and domestic interests.
Senate deputy minority leader Risa Hontiveros recalled the careful discussions during the PSA enactment, especially regarding protecting vital utilities from foreign ownership, citing potential national security risks from foreign control.
Hontiveros cautioned against the potential risks posed by future congresses giving away control of these utilities, including to state-owned foreign companies, which could threaten national security.
Referring to past issues like Mandarin manuals found in the National Grid Corporation of the Philippines, she emphasized the importance of Filipino ownership of critical infrastructure.
She also raised concerns about the root causes of economic challenges, questioning whether they stem from a lack of foreign investments or “unaddressed monopolistic behavior among domestic companies.”
Sen. Joseph Victor Ejercito said that the thorough scrutiny applied by the Senate during the discussions on the amended PSA has ensured that the legislation would benefit the Filipino people by enhancing utilities and infrastructure.
“We want to set the tone on what we want to find out. The (PSA) was really scrutinized by the Senate and made sure that it would be for the benefit of the Filipino people to improve our utilities and other infrastructure and others,” Ejercito said.
He also said the passage of the Public-Private Partnership Code, which aims to enhance services, infrastructure, energy, and utilities, indicate that these measures should be first given the opportunity to produce results before considering constitutional amendments.
“I think we just have to give these measures the chance to be realized. Is Charter change really needed at this point now that these two legislations were already passed, which are intended to improve our utilities and others?” he said.
He likewise cautioned against rushing constitutional amendments because of its complexity and the irreversible nature of such changes.
PRO CHA-CHA
Julian Payne, president of the Canadian Chamber of Commerce in the Philippines and representative of the Joint Foreign Chambers of Commerce, said they support easing the restrictive economic provisions of the Constitution to increase foreign direct investments to the Philippines.
“The Joint Foreign Chambers of Commerce supports the easing of restrictions on foreign direct investments wherever this is possible. And I’ll make a caveat at the moment. We are of the opinion that the removal of economic restrictions would facilitate increased foreign direct investments in sectors where such investment is currently restricted,” Payne said.
Payne, however, said that in other countries, easing economic provisions is done through legislation, and not through amendments to the Constitution.
“The advantage of using legislation or Executive action is that these forms of regulations, both the legislature and the Executive can quickly adjust to changing business conditions in the international environment, whether this is required by changes in technology, treaties, or just new opportunities for business,” Payne said.
He also noted that Congress has already amended the Public Services Act, the Foreign Investment Act, among others to ease the restrictive restrictions.
He said that inserting the phrase “unless otherwise provided by law” in the Constitution will provide Congress the “power to adjust restrictions as it deems necessary.”
“The conditions have changed, and they will change faster and faster as we move forward. I think it’s imperative that the committee consider which is the most appropriate body to adjust to and propose restrictions whether they be 100 percent, 60-40, or zero,” he said.
SURVEY
Meanwhile, an impromptu survey of government agencies showed that eight of 10 them are in favor of amending the economic provisions of the Charter.
Sen. Ronald dela Rosa, during the same hearing, asked the representatives of the government agencies to raise their hands if they are in favor of amending the Constitution.
Dela Rosa conducted a quick survey to know of their stand as he came in late for the hearing.
“I’m late, hindi ko narinig lahat ng mga position ng mga ahensiyang nandito (I’m late, I did not hear the positions of the agencies present here today). I just would like to get the recapitulation of their positions,” Dela Rosa said.
The eight agencies in favor of changing the Charter were the Department of Finance, Securities and Exchange Commission, the National Economic and Development Authority, Philippine Competition Commission, National Security Council, Department of Trade and Industry, Philippine Economic Zone Authority, and the Department of Information and Communications Technology.
