A review of the Constitution’s economic provisions has fallen in priority for the Aquino administration, with a Palace official claiming the private sector was of the view that ownership limits were not a significant barrier to investments.
"Business groups have said the provisions are not yet an impediment to investing. They highlighted issues other than that as far as encouraging more investments was concerned, so it is not as much of a priority of the economic cluster given those views," Cabinet Secretary Jose Rene D. Almendras said in a chance interview last week.
Back in August, President Benigno S. C. Aquino III ordered a study on the merits and implications of revising the 1987 Constitution, with an eye toward opening up the country to more foreign investments.
The review remains unfinished, with economic managers still to conclude discussions with industry representatives.
Finance Secretary Cesar V. Purisima confirmed this in a separate interview last week, saying, "The study is still ongoing. There are still talks that have to be completed."
Mr. Almendras added, "As I understand, there are a lot of discussions that have to be done with business groups, that’s why it’s taking some time."
Ownership caps are primary focal points, particularly limits cited in articles 12, 14 and 16 of the Constitution.
Article 12 restricts "exploration, development and utilization of natural resources" to corporations at least 60% owned by Filipinos. The ownership of land and public utilities are also limited to Filipinos or firms at least 60% owned by Filipinos.
It also grants Congress the power to reserve "certain areas of investments" to corporations at least 60% owned by Filipinos "when the national interest dictates."
Article 14 imposes the same 60% ownership limit on educational institutions, other than those established by religious groups and mission boards. Congress is also allowed to require "increased Filipino equity participation."
Article 16, meanwhile, mandates that only corporations, cooperatives and associations wholly-owned and managed by Filipinos can own and manage mass media. The advertising industry is limited to corporations at least 70% owned by Filipinos. All executives and managing officers of these entities must be citizens of the Philippines.
Sought for comment, various industry representatives stressed that ownership limits remained one of the primary obstacles to investments.
"Ownership restrictions remain a substantial impediment to investments. The foreign direct investments (FDI) into the Philippines in comparison to competing neighbors speak a clear language," said Henry J. Schumacher, European Chamber of Commerce of the Philippines external affairs vice-president.
While the government wants to focus on other areas like improving the business environment or harmonizing regulations, Mr. Schumacher said these must done in tandem with constitutional amendments to boost the country’s competitiveness.
The review of the Constitution gains greater significance in light of a Supreme Court (SC) decision and subsequent rules issued by the Securities and Exchange Commission (SEC) on foreign ownership, said Ramon S. Isberto, spokesperson of Philippine Long Distance Telephone Co. (PLDT).
The SC ruled in October that the term "capital" used in the Constitution’s ownership limits on public utilities referred only to voting stocks and not to total outstanding shares. The decision stemmed from a case involving PLDT’s foreign ownership.
The SEC, in draft guidelines released in November, took the ruling one step further, mandating compliance not just for utilities but for all corporations engaged in activities specifically reserved, wholly or partly, to Filipinos by the Constitution.
"[T]hese changes will adversely impact on local capital markets and FDI. We are tightening up while the rest of emerging markets are opening up," Mr. Isberto pointed out.
According to latest International Monetary Fund data, the Philippines lured a total of $25.59 billion in FDI last year. It crept up from 2009 and 2010, when FDI amounted to $21.194 billion and $25.071 billion, respectively.
The country’s peers in the region, however, have done significantly better: Malaysia attracted $114.555 billion last year, while Thailand boasted of $146.12 billion. Indonesia likewise took in $185.804 billion, while Singapore was the best performer in the Association of Southeast Asian Nations with $617.922 billion. -- Diane Claire J. Jiao
Source: Business World; News; 25 December 2012