MANILA - Manila's latest move to change the Philippines' 1987 charter, known
locally as "cha cha", is proving amid a strongly charged political debate
highly relevant to foreign investors. Foreign direct investment plunged 45% to
US$1.39 billion over the first three quarters of 2008, from $2.52 billion over
the same period in 2007. Many analysts fear foreign inflows could fall further
this year amid deteriorating global conditions.
The 1987 constitution, widely viewed as protectionist, contains anti-business
provisions that investors say should be scrapped to promote foreign capital
inflows and enable the Philippines to cope
better with the debilitating effects of the global financial and economic
crunch.
What riles foreign investors most is an equity rule that puts a 40% cap on
foreign investments in public utilities, mining, agriculture and other basic
industries. The constitution, last revised in 1987 when nationalist fervor
peaked following the overthrow of the dictatorship of then-president Ferdinand
Marcos, mandates a majority 60% Filipino ownership. This has not been strictly
followed, giving rise to a proliferation of technically illegal shareholding
structures.
Another provision foreigners want abolished concerns the charter's restrictions
on land ownership. No matter how big and capital-intensive their investments,
foreign investors are only permitted to lease alienable lands for 25 years,
with an option to renew for another 25 years. The land area in any case must
not exceed 1,000 hectares.
Filipino legislators, heeding calls from foreign investors, are pushing for
amendments to the charter in light of the current global financial and economic
upheavals. Leftist and nationalist groups fear the revisions will lead to
foreign domination of the economy.
Critics also say that debate on the economic aspects of the proposed changes
are a smokescreen for the real revisionist intent - extending President Gloria
Macapagal-Arroyo's tenure beyond 2010. Arroyo's six-year term expires on June
30, 2010, and she is barred under the constitution from seeking re-election.
Opposition politicians fret that Arroyo's overwhelming number of allies in
Congress, particularly in the House of Representatives, could easily clinch a
rider in charter amendments that would allow her to retain executive power
beyond the present term limits. They fear Congress could push the amendments in
the same way that they dumped the recent fourth impeachment suit lodged against
Arroyo.
Pundits say apprehension about the possible charter changes comes on the heels
of reports that Arroyo wants a shift in the country's form of government - from
a Western-style presidential to a federal, parliamentary system - to pave the
way for her becoming a prime minister.
Many sectors, including the business community, the Catholic Church and civil
society, favor revising the constitution with new provisions that would make
the economy globally competitive. But many say it should be done only after
Arroyo steps down from office.
In light of how Arroyo has managed to weather the various opposition plots
launched to oust her from power, ranging from coup attempts to impeachment
cases on graft and corruption charges, there are concerns that her camp's
political and legal maneuverings to amend the charter could have a hidden
agenda.
Arroyo, often accused of using money to buy loyalty, is in firm control of the
240-member Congress, the military, police and local government officials, who
have rallied behind her during times of political crisis. She has yet to issue
a categorical statement that she will not stay beyond 2010.
While there's a growing interest in changing the charter, there are doubts
whether Arroyo and her political allies have enough time to pull it off, given
the fast-approaching 2010 lapse of her official tenure.
Charter change, experts note, will necessarily be a tedious, time-consuming
process. That includes deciding the mode of pursuing it - either by convening
all elected members of the House and the Senate as a constituent assembly or by
electing new delegates for a constitutional convention. Under the law, any
charter change must also be put to a nationwide plebiscite.
Despite her detractors' criticisms of her political ambitions, Arroyo remains
well-regarded in the international business community. Credit-rating companies,
multilateral financial institutions such as the World Bank and the
International Monetary Fund and various global think-tanks have heaped praise
on her for applying bold yet prudent fiscal and monetary policies that have so
far enabled the Philippine economy to ward off the dire effects of the global
crisis.
Swiss investment bank UBS noted in a recent report that quick government action
had mitigated the falling price of assets on banks' balance sheets, although
"the risk of adverse economic impacts from capital flight remains".
Recognized as the only Philippine president with a doctorate in economics,
Arroyo is a strong advocate of investment-friendly policies, including the
lifting of the 60-40 equity ceiling on foreign investments included in the
current charter. Yet no matter how high her administration's economic reform
aims, partisan politics continue to blur the distinction between perception and
reality for badly needed charter change.
Al Labita has worked as a journalist for over 30 years, including as a
regional bureau chief and foreign editor for the Philippine News Agency. He has
also worked as a Manila correspondent for several major local publications and
wire agencies in Australia, Hong Kong, Malaysia, Singapore and the United
Kingdom.
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