he global economy is facing
a meltdown, with the Philippines sure to be dragged down by a deep and long
recession in its major trading partners and sources of credit and investments.
So what kind of response to the looming turbulence is the leadership
contemplating? Charter change, for chrissake.
In a roundtable discussion with the business community last
week, Gloria Arroyo said the country has already exhausted the potential of the
liberalization programs put in place. The country has already liberalized trade
and investment. The momentum, however, is getting stalled by constitutional
limitations on foreign investments, she said. Ergo, the solution is Charter
change which fortuitously is being pressed anew by the House, she said.
We have no problem with lifting constitutional restrictions
on the way foreigners do business in the country. But why put the issue on top
of the national agenda when the immediate concerns are the stability of the
local financial system, continued availability of foreign credit and flow of
investments, and ensuring markets for our exports?
The constitutional limitations on foreign business are a
well-worn bogey. There is a already clutch of laws that practically makes the
limitations dead-letter provisions.
Let’s take the ban on foreign ownership of land. There is a
law allowing foreign businesses to enter into lease agreements for land for a
maximum of 50 years, extendible for another 25 years. That’s a total of 75
years, which from the standpoint of business is as good as an eternity.
Then there’s the ban on extraction of natural resources and
on owning of public utilities. The natural resources that attract foreign
business are basically minerals. This limitation is already addressed by the
Financial and Technical Assistance Agreement scheme which allows 100 percent
foreign-owned corporations to engage in mining just in case they could not
secure local partners to meet the 60-40 nationality requirement.
On public utilities, there are no clear-cut ways by which
foreigners can "skirt" the 60-40 rule. Here perhaps is where the constitutional
limitation continues to be a drag on business, although with the abandonment of
the "grandfather rule," some of the biggest local utilities are already
beneficially majority owned by foreigners.
(The "grandfather rule" is used to apply when, say,
corporation A is owned 40 percent by foreign company B and 60 percent by
Filipino company C. Under Philippines laws, up to 40 percent of C can be foreign
owned but it is still considered a Filipino corporation. In this case, the real
foreign ownership in A is 40 percent through B and 24 percent through C,
representing 40 percent of 60 percent, for a total of 64 percent).
So why the rush to change the 1987 Constitution? It has nothing to do with
liberalizing business. It has everything to do with Gloria’s obsession to extend
her stay.
