RBH 7 to benefit only foreign investments, says think tank

The Manila Times

RBH 7 to benefit only foreign investments, says think tank  Economic think tank IBON Foundation Executive Director Jose Enrique 'Sonny' Africa says that RBH 7, which seeks to ease restrictions on foreign ownership in several sectors, is geared to benefit only foreign investments. Africa stresses that the government should instead develop local industries and protect local interests.   Video and Interview by Ezrah Raya  Subscribe to The Manila Times Channel - https://tmt.ph/YTSubscribe   Visit our website at https://www.manilatimes.net     Follow us:  Facebook - https://tmt.ph/facebook   Instagram - https://tmt.ph/instagram   Twitter - https://tmt.ph/twitter   DailyMotion - https://tmt.ph/dailymotion     Subscribe to our Digital Edition - https://tmt.ph/digital     Check out our Podcasts:  Spotify - https://tmt.ph/spotify   Apple Podcasts - https://tmt.ph/applepodcasts   Amazon Music - https://tmt.ph/amazonmusic   Deezer: https://tmt.ph/deezer  Tune In: https://tmt.ph/tunein  #themanilatimes  #philippines #foreigninvestment  #economy

Transcript

00:00 I'm Ezra Araya and this is the Manila Times.

00:04 Economic Cha-Cha or Charter Change is expected to be approved at the lower house session

00:09 later today.

00:10 Resolution of both houses or RBH No. 7 proposes to amend restrictions on three economic provisions

00:17 of the 1987 Constitution on education, public utilities and advertising sectors.

00:24 Meanwhile, the Senate's RBH No. 6 is still at a subcommittee level.

00:29 World Economic Forum President Borges Brende backs the reforms on foreign ownership limits

00:34 in the Philippine Constitution.

00:36 The authors of the bill, RBH No. 7, House leaders, recently called for the nation's

00:41 economic policies to be reframed under the demands of the increasingly globalized age.

00:47 However, several lawmakers and groups oppose amending the Constitution.

00:53 Here to share his insights is Economic Think Tank, Yvonne Foundation's Executive Director,

00:59 Jose Enrique "Sunny" Africa.

01:02 Welcome to the Manila Times, Sir Sunny.

01:04 Yes, Sir Sunny, you have voiced strong opposition against amending the Constitution.

01:09 So some lawmakers would say it's regressive and ultra conservative to oppose these economic

01:14 provisions.

01:16 So what are the possible downfalls and why are you against RBH No. 7 and RBH No. 6?

01:22 Well, fundamentally, we don't really believe there are any strong arguments for economic

01:28 structure, as the proponents claim.

01:31 We did attend the Senate hearings and the House of Representatives hearings, and I think

01:37 anyone who looks at the facts will be unconvinced.

01:40 There's been a lot of misinformation, disinformation, a lot of logical fallacies and wrong argumentation.

01:48 But unfortunately, I think the House had decided on RBH No. 7 as soon as it was filed.

01:53 I think it's irrelevant to them that none of the economic chacha arguments hold water.

01:57 They went through the motions of deliberating the measure.

02:00 I think it's a trojan horse for perhaps some other political antagonists.

02:05 Yes, Sir.

02:06 So the codes RBH No. 7, as it says, it seeks to amend restrictions, economic restrictions

02:13 on education, public utilities, and the advertising sector.

02:19 So do you think this would help the Philippines more?

02:22 There's a fundamental problem with the thinking.

02:25 Their premise is that the Philippine economy is closed to foreign investment, and they

02:29 fixate on the 87 Constitution as supposedly restrictive to foreign investment.

02:34 But the fundamental error there is that it's not just the Constitution that defines openness,

02:39 but also all the laws prevailing in the country.

02:41 And taken all together, categorically, the Philippines is already among the most open

02:46 economies to foreign investment in the region.

02:49 Not just the Constitution, but look at all the various laws that have been passed since

02:53 the 87 Constitution was promulgated in 1987.

02:59 So we have the laws allowing entry of foreign banks, laws on utility liberalization, laws

03:04 amending the Foreign Investment Act.

03:06 Of course, most recently, the law amending the Public Services Act.

03:09 If you take it all together, categorically, the Philippines is much more open to foreign

03:14 investment in many key sectors than Indonesia, Vietnam, Malaysia, Thailand, actually even

03:21 China.

03:22 So I think if the premise is that we need to open up because we're closed, the fact

03:27 is looking beyond the Constitution, which is a very narrow way of thinking, we actually

03:32 are very open.

03:33 And I think we also want to stress the fact that a lot of arguments are about we're supposed

03:40 to be more flexible, more open.

03:43 The bottom line is, do we need the foreign investment restrictions or not?

03:48 I think we do.

03:49 The fact that countries like Indonesia, Vietnam, Thailand, Malaysia have stronger restrictions

03:55 on foreign investment in their utilities, in telecommunications, in the power sector,

04:00 in transport, the fact that countries like Vietnam actually completely close off not

04:05 just the foreign investment, but to private investment, for instance, in the distribution

04:09 of transmission of electricity with a monopoly of bi-state enterprise, it just, I think,

04:15 affirms the question is not about flexibility.

04:18 The question is, do we need the restrictions or not?

04:21 If other countries to this day feel they need restrictions, even if it's not in their Constitution,

04:27 they have laws enforcing the restrictions.

04:30 So that's the problem.

04:32 It's not lack of openness that's our problem.

04:34 The problem is we're not developing domestic capacity in these sectors like other countries

04:40 in the region are doing.

04:41 So we completely disagree with the idea that the Philippines is closed.

04:46 The Philippines is categorically not closed.

04:49 There's often a reference to an OECD study.

04:52 It's outdated.

04:53 The OECD study was made in 2020.

04:54 It's actually going to be discontinued, I think, this month.

04:55 The OECD will be discontinuing that study.

05:03 So any reference to a so-called OECD, FBI Restrictedness Index, is irrelevant.

05:09 And actually, it's deceitful because that does not reflect the current openness of the

05:14 Philippine economy.

05:15 So from what you're saying, there's no need to amend the Constitution as you're for developing

05:22 the domestic capacity of the country.

05:25 So President Bongbong Marcos, go ahead.

05:26 Actually, I think it's an important point.

05:30 We have to stress it's not the lack of foreign investment that is a problem in terms of our

05:35 economic development.

05:36 If anything, it's that fixation on foreign investment that's a problem.

05:40 Because if other countries feel the need to regulate foreign investment to develop their

05:45 domestic utilities, domestic manufacturing, that points to where we should be going.

05:51 So there's a misinterpretation of what countries like Vietnam, Thailand, Malaysia, and Indonesia

05:56 are doing.

05:57 The misinterpretation is that it's their openness of foreign investment that is supposed to

06:01 make them develop.

06:02 That's untrue.

06:03 It's the fact that they regulate foreign investment to contribute local technologies, to develop

06:09 local technologies, to develop a domestic market, to develop their domestic capacities.

06:14 That is the reason for their much more advanced development.

06:17 If you don't get rid of this fetish of foreign investment as if just because it's here, it

06:22 will develop us.

06:23 If you don't get rid of that fetish, we are going to be pursuing economic policy in the

06:27 wrong direction.

06:28 I think we really do want to stress a good case in point is manufacturing.

06:34 Manufacturing is 100% open to foreign investment apart from some very marginal nominal restrictions

06:40 in sapag puto, nuclear, chemical, biological weapons, things like that.

06:46 Philippine manufacturing is 100% open to foreign investment, but despite that 100% foreign

06:51 openness, Philippine manufacturing in 2023 has fallen to a smaller share of the economy

06:58 than in 1949.

07:00 Philippine manufacturing as a share of the economy is at its smallest in 75 years despite

07:05 being 100% open to foreign investment.

07:07 I think that points to how it's not foreign investment per se that's important.

07:12 It's an aptitude to develop domestic industry.

07:14 And the 1987 constitution is very strong in asserting industrialization.

07:20 Sir President Bom Bom Marcos have done a lot of traveling, as we all know.

07:24 So just recently he's at the World Economic Forum, so precisely to promote foreign direct

07:30 investments.

07:31 So I think his goal is to increase money that's coming in the economy.

07:35 So the amendments would actually back these FTIs.

07:40 Is that correct?

07:42 That's a bit weird because they were very selective in choosing the economic measures

07:49 to open up.

07:50 The constitution only actually has about nine provisions on foreign investment restrictions.

07:55 They chose three, I think, now the most uncontroversial because they wanted to get a charter change

08:01 process going.

08:02 It's not really fundamentally about economic charter change.

08:06 To be clear, the remaining utilities that are not yet open, education institutions and

08:13 advertising, altogether by our estimate, that's only about 6% of the domestic economy.

08:19 It's a very, very small portion of the economy that will still be opened up.

08:24 But these three measures, even if they are created, they will not be the decisive factor

08:31 in attracting foreign investment.

08:33 Because foreign investment has other considerations.

08:35 I mean, any foreign businessman will always say, it's a matter of principle, they prefer

08:40 openness to not.

08:42 But in practice, in the real world, there are much bigger considerations preventing

08:46 their profitable location in the Philippines, for infrastructure, corruption, including

08:52 meddling lawmakers in terms of franchises, in terms of all the other regulatory considerations

08:59 for infrastructure, and a whole host of other things.

09:02 So constitutional restrictions on foreign investment, in reality, if businessmen or

09:09 foreign businessmen, to be honest, they are not fundamental in their consideration.

09:13 And again, we refer to the experience of other countries in the region with much higher levels

09:18 of foreign investment.

09:19 They're much more closed, not by the constitution, but by ordinary law.

09:24 But it doesn't matter.

09:25 The point is they are closed.

09:27 They attract more investment because they tackle the other factors to make themselves

09:33 attractive investment destinations.

09:35 Not that we agree that it's all about being attractive.

09:38 We think there are more fundamental policy measures for developing Philippine industry

09:43 need to be taken.

09:44 But even that argument, that's a dead end argument for us.

09:49 Sir Sonny, I'm going back to what you said earlier.

09:53 So you called the economic amendments to the 1987 constitution a Trojan horse.

09:59 How so?

10:00 We think it's a Trojan horse because if you look at the behavior of at least the House

10:08 of Representatives, they're not actually paying attention to the fundamentals, the

10:13 facts of the matter regarding economic chances.

10:16 We seem to have decided early on that they will pass our page 7.

10:20 It's also on the back of a previous people's initiative driven apparently by many representatives.

10:29 So we think it's a Trojan horse because the real agenda seems to be to open up the Philippine

10:33 constitution to provisions.

10:35 I think this is a stratagem to try to get some clarity on how exactly current politicians

10:43 in power can manipulate the constitution to their self-interest, like extending to stay

10:48 in power.

10:49 But it's a legal stratagem I think that should be tested.

10:52 Of course, with maybe a Supreme Court decision, maybe through a plebiscite.

10:56 But in the end, if they're using economic arguments to push for economic cha-cha, none

11:01 of these economic arguments really hold water.

11:04 I think the facts are very clear in that regard.

11:09 So you're more suspicious about amending the constitution in a way that it's designed to

11:15 keep the people, the current people in power in their positions?

11:20 Very much so, because constitutions are always a product of their times.

11:25 Constitutions are always a product of the political system prevailing.

11:29 If you recall, the 87 constitution came after the ouster of the Marcos dictatorship.

11:35 That's why it has very strong provisions on controlling the state of politicians in power.

11:41 It has very strong provisions on human rights.

11:44 It also has very strong provisions on developing the Philippine economy and industrializing

11:49 it.

11:50 Actually learning from the experience of countries in the 1970s and 1980s that were protecting

11:55 their own domestic economies, like South Korea, like Taiwan, to some degree even China.

12:00 So I think the wisdom of the 87 constitution was because it was a product of its time,

12:05 with a very strong anti-dictatorship struggle, with a very strong sense of economic nationalism.

12:10 Unfortunately, right now, those conditions are not prevailing.

12:14 We have a political system where disinformation and populism are still rampant.

12:19 We have a political system where voters are seen very cynically as mere voters, not as

12:24 constituents in a public polity.

12:27 I think those aren't the real conditions where we can expect a good constitution reflecting

12:32 the real aspirations of the people.

12:36 So sir, what you're saying is there's no need for an economic amendment to the constitution,

12:41 is that correct?

12:42 Yeah, I mean, categorically, if Congress in its heart of hearts really wanted to develop

12:48 the Philippine economy, if they really wanted to improve the plight of ordinary Filipinos,

12:53 where 7 out of 10 Filipinos are poor or borderline poor or don't even have any savings, we don't

12:59 need constitutional change for that.

13:01 There are huge powers being executed right now to expand social services, to expand emergency

13:08 cash assistance, to even develop the Philippine industry.

13:12 If anything, the Philippine constitution gives the legal basis for developing the Philippine

13:17 industry by asserting Philippine control over the local economy, by enabling regulation,

13:23 strong regulation of foreign investors to come here, so that when they come here, they're

13:27 not just here taking advantage of our cheap, productive labor or natural resources or a

13:32 bit of a tiny domestic market.

13:35 They're here actually contributing to developing Philippine industrial capacity.

13:38 In other countries, it's something we do want to stress, other countries use foreign investment

13:44 restrictions to be able to get some leverage over foreign investors locating there to develop

13:51 local technology, to increase local employment, to make sure that there is some improvement

13:56 in domestic industrial capacity, not just being mere addresses for foreign manufacturers

14:02 basing in their countries.

14:04 So sir, to be clear, Ibon Foundation is advocating for developing domestic capacity against foreign

14:11 investment.

14:12 Our main point is, we have the Philippine government has to adopt a posture of developing

14:20 Philippine industrial capacity and any foreign investment that is allowed in should be regulated

14:26 to contribute to developing that Philippine industrial capacity.

14:29 A whole host of measures include technology transfer, local import, local manpower requirements.

14:37 I think these things will not happen without the leverage that the constitutional restrictions

14:43 actually give us right now.

14:45 Okay, thank you sir.

14:47 Sir Sonny Ibon Foundation's Executive Director.

14:50 Thank you so much for your time.

14:51 Thanks, Ezra.

14:52 Anytime.

14:52 Thanks, Ezra.

14:53 Anytime.

14:54 Anytime.

14:55 Anytime.

15:00 Anytime.

15:01 Anytime.

15:01 (beep)

15:02 [BLANK_AUDIO]

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