Kezo Andre Javier

Since the latter part of 2023, there has been an active effort from various entities – both from the government and civil society – to push for key amendments to the 1987 Constitution. From discussions on a constitutional convention to the launch of a people’s initiative campaign, it is undeniable that there is a heightened interest in making the charter change work this time. And just this March, the House of Representatives passed a measure to amend the economic provisions of the Constitution. While the government brands this cha-cha as crucial to unlocking the maximum potential of the economy, it may not be the impactful ingredient it is presented to be.

The Lower House approved on third and final reading the Resolution of Both Houses No. 7, which will relax the constitutional restrictions on foreign ownership in certain sectors. Once ratified, RBH7 will add only five words – “unless otherwise provided by law” – to charter provisions that limit the ownership of public utilities as well as education and advertising firms to Filipinos.

This means that the cha-cha resolution does not automatically lift the foreign ownership restrictions in the said sectors since the Congress would still need to pass an enabling law to the effect. However, the question remains whether there is truly a need to open up the economy with this measure – and there is strong evidence proving otherwise.

Endangering National Interests

Under the current 1987 Constitution, foreign ownership of public utilities and educational institutions is limited to a maximum of 40 percent, while the advertising sector has a 30 percent restriction. These provisions were imposed to protect national interests from being influenced by foreign entities while making sure that local businesses are being promoted. And even with the present limitations, there are threats to the nation’s integrity due to foreign shares in Philippine public utility firms.

Just last year, it was reported that the State Grid Corporation of China owns 40 percent of the stakes at the National Grid Corporation of the Philippines (NGCP), which manages the transmission of electrical power in the country. Because of this, there have been concerns that China can influence how the NGCP will operate and that it may even have the opportunity to shut down the Philippine grid.

Although the Chinese government gave assurance that the divesting company only aims for mutual benefits, it is still alarming that Philippines’ power transmission may be controlled by the Chinese, especially with the ongoing tensions in the West Philippine Sea. If our national interest is already compromised with restrictions on foreign ownership, one can only imagine how much worse it will be when we fully lift these limitations.

Not a Panacea

Through the years, there has been a huge uptick in net inflows of foreign direct investments (FDI) in the Philippines. From USD 1.07 billion in 2010, the net inflows of FDIs ballooned to as high as USD 11.98 billion in 2021. This rise has been credited for the good performance of the economy, which propelled the Philippines from being the sick man to the rising tiger of Asia. With this, it is clear that the government would want to maintain this strong performance by attracting more investments into the country.

As part of the efforts to achieve this goal, President Ferdinand Marcos Jr. went on multiple foreign trips to talk to potential investors. From these visits, the government says Marcos Jr. was able to secure more than PHP 4 trillion in investment pledges. However, only PHP 11.4 billion of these commitments were actualized, which means that a huge chunk remains as mere promises. If potential investors are holding back from actually putting their money in the Philippines, there must be something that is stopping them – and it goes far beyond the constitutional restrictions.

According to former National Economic Development Authority (NEDA) Secretary Cielito Habito, the Constitution is not the one to blame for the investments not coming through. Instead, the quality of governance is the primary determinant of whether investors will push through with their venture. This means that investors care less about the foreign restrictions on ownership and more about the corruption and red tape that plague the government.

This observation is consistent with the discussion paper from the University of the Philippines School of Economics (UPSE), which underplays the significance of lifting the ownership restrictions in the Constitution. According to the UPSE professors, the economic cha-cha will not produce that much of an effect on FDIs than improvements in the “ease of doing business, physical infrastructure, and perceived corruption.”

In fact, the Philippines ranked 115th out of 180 countries in the 2023 Corruption Perceptions Index. With this kind of reputation, it will not matter whether we open our economy to the world, because if foreign investors cast doubts on the integrity of our government, the Philippines will continue to become an unlikely destination for FDIs.

The Constitution is the highest law of the land, and every provision enshrined in the charter were meticulously formulated and duly ratified by the Filipino people. It is not a perfect document, which is why the framers left options for it to be amended, especially with the increasingly globalized world. However, changing the charter must not be at the expense of neglecting other social issues that require attention. The debate on the necessity of cha-cha may go on, but it should not be treated as an urgent need that would only mislead the people from what is important – addressing inflation, poverty, and a lot more.