Cha-Cha and the Economy: False Projections, Spurious Arguments

Wigberto E. Tañada, FTA Lead Convenor

With the limited time allowed for each speaker, let me directly share with you three major points on the issue at hand.

One, amending the Constitution to make it responsive to the development requirements of a country is the sovereign right of the people. However, the present charter-change initiative has become controversial not only because the process being used is infirm but also because it is not clear if such initiative is truly in response to the development needs of the people or if it is merely a grand design to promote the narrow self-serving agenda of some politicians.

In fact, some politicians and economists even, are making overblown claims on how the further liberalization – via the cha-cha process — of an already liberalized economy can rev it up and make it roar like those of China and our other neighboring countries. They argue that the shift in the political system, from the presidential to the parliamentary, and the deletion of the nationalist provisions of the existing Constitution will infuse dynamism in the economy, entice foreign investment to come in and make the Philippines the next Asian miracle. They even contend that the economic provisions found in the 1935, 1973 and the current 1987 constitutions were the main reasons for the deterioration of Philippine economy and its unattractiveness to foreign capital.

These politicians and economists are mixing up facts and fantasies.

Philippine economic records of the last six decades reveal a totally different picture. It was during the protectionist and nationalist decades of the l950s-l960s that the nation experienced accelerated industrial growth, making her the second fastest-growing economy in Asia, next only to Japan. In contrast, it was in the decades of the l980s-l990s, when our economic technocrats opened up the economy in a wholesale fashion, that the Philippines experienced industrial stagnation, agricultural decline and high rates of unemployment and underemployment. Of course, a major contributor to the crisis was the debt crisis, which can be traced to the reckless policy of depending mainly on foreign borrowings to ‘finance’ national development, a policy initiated by the economic managers of the l970s.

Two, it is a puzzle and a big disappointment as well how some of these economic managers say at this late stage that the country is poor and underdeveloped because it has not opened up the few remaining restricted sectors of the economy to full foreign control, specifically the ownership of land, the exploitation of natural resources, the exercise of the professions, and the operations of public utilities and media establishments. They are still spouting the same old mantra – liberalize and you will grow! But have we not liberalized the entire industrial sector and opened it up to full foreign ownership? Have we not liberalized the entire financial sector, making it one of the most open in Asia? Have we not liberalized the trade sector, exposing our domestic industry and domestic agriculture to the full brunt of foreign competition, most of which is subsidized foreign competition (e.g., subsidized American agricultural exports and Chinese industrial exports cheapened by an undervalued renminbi)? Have we not liberalized the agricultural sector, drastically reducing in the name of agricultural deregulation the support the government used to extend to small farmer development? Ang tanong ngayon, sa kabila ng pagbukas ng ating ekonomiya, nasaan na ang inaasam-asam nating foreign investment?

As a matter of fact, for the last decade, foreign investments have been flowing heavily not in liberalized Philippines (and for that matter, in liberalized Indonesia, Sri Lanka and Bangladesh) but in the protectionist China, Vietnam and India! This is so because foreign investments will go where the economy is on the uptick, fuelled by investments made not only by foreigners but also, and more importantly, by the locals.

And before China, Vietnam and India, you have the case of Japan, South Korea, Taiwan and even Singapore, where no less than the World Bank, in its 1993 Report on the ‘East Asian Miracle’, was forced to admit that these countries did not pursue the classic neo-liberal economics of choosing narrow export orientation and abandoning import substitution. The truth is that these successful countries have all been protecting and promoting both their domestic and export industries, and fostering value-adding linkages between and among these industries, with the overall view of building up domestic capacities, skills, know-how and agro-industrial base. These countries combined, creatively, both import substitution and export orientation in the overall context of building up domestic agro-industrial capacity and economic dynamism. It is not a question of either this or that. And they did it in a calibrated and deliberate manner.

Lastly, let us get real. Let us see what is going on in the rest of the world and see what their Constitutions say. For example, in the case of China, its economy remains highly regulated and even protected. Its Constitution states bluntly: “All land is owned by the people.” Which means even Chinese citizens can not buy land outright in China. It is export-oriented, yes, and it welcomes foreign investment, yes. But at the same time, it protects its domestic producers with tariff rates at least 3-5 times higher than those of the Philippines and with customs administration and procedures which make it difficult for foreign imports to come in (just like in Europe, America, Australia and Japan). It maintains a two-tiered currency system, which makes exports cheap but imports expensive (thus, Chinese goods are cheaper in Binondo than in Hong Kong or Beijing). It keeps acquiring technology, diversifying its economy and upgrading the skills of its work force, thus its upward and sustained growth and development. And no, it does not tinker with its Constitution just to accommodate the ambitions of some political cliques or the mad ideas of some liberalization economists.

Japan and Korea maintain very strict rules on land ownership. In Malaysia, foreigners can own a residential house and lot but not commercial, industrial and agricultural lands.

In Thailand, its Alien Business Law regulates foreign investment in natural resource exploitation and in areas reserved for the Thais such as agriculture, transportation and construction.

India and Vietnam also have restrictive policies on land and imports, and yet, these countries are growing much more rapidly than the liberalized Philippines and attracting more foreign investment.

Yes, there are Asian countries which have liberalized land ownership, natural resource exploitation and foreign entry into any area of the economy like Bangladesh, Indonesia, Nepal, Pakistan and Sri Lanka. But like the Philippines, these countries are at the bottom rungs of both the competition and investment ladders. Most of these countries also happen to have a parliamentary system, which our ‘bright boys’ in the executive and legislative branches claim is the ultimate solution to all our economic woes.

From the foregoing, it is abundantly clear that our some of our politicians and economic managers are making false projections of economic growth and development based on spurious arguments. They are trying to delete economic nationalism in the Constitution in order to complete the de-nationalization of an economy. Ang tanong ulit sa puntong ito: Para kanino at para saan ang Charter Change ngayon?

What we need is the political will to redress the imbalances and setbacks created by the unbridled and one-sided liberalization in the last two decades, which has eroded the country’s agro-industrial base. What we need is the political will and the national vision to develop a progressive, sustainable and modern economy effectively controlled by Filipinos, as mandated by the present Constitution.

———————————
Speech delivered to the Conference on “Implications of Liberalizing the Economic Provisions of the Constitution”, organized by the Philippine Chamber of Commerce and Industry (PCCI), held on July 14, 2006 at Westin Philippine Plaza, PICC Complex, Pasay City.

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  1. Here’s an article rebutting Tañada’s take on Cha-cha

    Adcom stalwart disputes Tañada take on Cha-Cha
    Published on Page A1 of the July 19, 2006 issue of the BusinessMirror

    Charter change advocacy Commision (AdCom) member Ma. Romela Bengzon on Tuesday said that former senator Wigberto Tañada should have been more careful in making a one-dimension digest of Asian economies and their respective constitutions because it is a gross distribution of facts and history.

    “Tañada’s argument (is) that countries which have liberalized economic provisions in their constitutions like Bangladesh, Indonesia, Nepal, Pakistan and Sri Langka have not taken off compared to regulated and protected economies of China, Japan or Korea. I’m awed that he was able to give a crash course on global economy in just five minutes while some people study it for four years.” Bengzon said.

    Bengzon pointed out that Tañada cannot draw a parallel between the Philippines and “pseudo-parliamentary” governments like Bangladesh, Sri Langka, Nepal or Pakistan because these countries are still struggling with the management of their political affairs begin with.

    According to Bengzon, invoking the state of the Philippines economy in the 1950s to 1960s when the nation experienced accelerated growth under the 1935 Constitution patently misleads the people into believing that there is nothing wrong in having a protectionist and restrictive economic provisions in the Charter.

    Bengzon noted that “Although protecting the interest of the Filipino people is the paramount concern, the sad reality is that the 1987 Constitution is extremely overprotecting the interest of big businesses and oligarchs,” noting that the provisions in the Charter actually strip the country of economic opportunities. She said Tañada forgot to distinguish a “restrictive clause” that is contained in a Constitution is hard to amend or revise from a “restrictive provision” that is contained in a law that can be changed anytime whenever the need arises.

    Tañada, lead convenor of the Fair Trade Allliance, had said in a speech before businessmen on Friday that the economic amendments proposed by Charter change advocates are not necessary, and will only further liberalize an already liberalized economy.

    “All the countries he mentioned have flexible economic provisions in their Constitutions. What AdCom is saying is this: Let the economic provision be written and executed in our laws – but not in the Constitution because it hampers our government in making sound economic policies that are receptive to global changes,” Bengzon explained, noting that Tañada forgot to mention that economic restrictions contained in the Constitution are more difficult to amend.

  2. Dave Diwa

    A letter to the editor by National Labor Union(NLU) President Dave Diwa rebutting Atty. Romela Bengzon.

    Protectionism is using state powers for common good
    Published on Page A7 of the July 26, 2006 issue of the BusinessMirror

    Charter change advocate Atty. Romela Bengzon has accused former Senator Wigberto E. Tañada of committing “gross distortion of facts and history” and of failing to spot the difference between a “restrictive clause” and a “restrictive provision” in constitutional lawmaking (Adcom stalwart disputes Tanada’s take on Cha-cha, BM, 7/19/06). Serious charges indeed, from one lawyer to another. Ka Bobby need not reply but Atty. Bengzon deserves a rebuttal.

    Taking issue with the former senator, Atty, Bengzon made the following arguments: (1) that it is wrong to compare the Philippines with Asian countries who have divested their constitutions of “restrictive economic provisions” and yet have remained poor like Bangladesh, Indonesia, Nepal, Pakistan and Sri Lanka; (2) that writing into the charter “protectionist and restrictive provisions” is bad; (3) that the 1987 Constitution is overly protective of “big business and the oligarchs”, and (4) that it is best to put the “economic provisions” in ordinary legislations which can be amended anytime than write them into the constitution itself which is difficult to change.

    The theory and the facts supporting these arguments can be compelling except that there is a higher order of truth and reality. That opening up the economy will lead to growth and prosperity is not necessarily true. The proof is the Philippines itself which has embraced liberalization since the Parity Agreement of 1946, giving the Americans the right to own lands, exploit our natural resources or put up sari-sari stores. More recent examples are Bangladesh, Sri Lanka, Nepal, Indonesia and Pakistan which all have opted to open up their economies with disastrous results. The truth of the matter is that it is the highly regulated and protected economies of China, Vietnam and North Korea that posted tremendous growth rates of 6% to 12% in the last two or three years. Our tariff structure is the lowest in the Asean region and yet investments have not come in nor our trade flows expanded as expected.

    The debate whether protectionism is good or bad depends on how much one would recognize its efficacy as a policy tool. The United Estates, the European Union and Japan are the most vociferous against protectionism but data will show that they are the most protectionist in the world today providing billions of dollars in subsidies to their farmers, workers and industrialists. Ka Bobby said that it was during the so-called protectionist and nationalist decades of the ‘50s and the ‘60s that the Philippines ranked second only to Japan in terms of economic prosperity. Protectionism, properly understood, is not simply a matter of erecting barriers to trade but of using the powers of the state for the common good and for capacity building.

    Has the “restrictive” 1987 Constitution stopped the multinationals from securing land, exploiting our natural resources or promoting business outsourcing? And yet, how come the expected flow of foreign investments did not materialize?

    That the Philippines cannot develop by surrendering its sovereign right to carve out its own destiny as a nation is what people like Ka Bobby has been telling our people for generations. It stems from a conviction that traces its roots from Andres Bonifacio, Apolinario Mabini, Claro M. Recto, Lorenzo Tañada and Renato Constantino. The question is not that we have not fully opened up our economy for we already did; the real issue is whether we care enough for our country and our people.

  3. can u tell me what charter change is all about?

  4. Ybonette Gonzales

    In response to REDEEMER’s question.

    Charter Change, from what I understand, is constitutional amendments – from Presidential to Parliamentary System. In addition, the number of chambers are changed – from bicameral to unicameral (two chambers to one chamber, the congress and the senate unite as one body) and from unitary system to federal system – that is from a single goverment that governs all sectors of the country(Unitary System) to different goverments alloted the authority and power on differents sectors of the country(Federal System). I also know that Charter Change can be done using two different methods: Constitutional Convention and Constituent Assembly although I don’t really know which one is proposed and which is not. I hope this gives you a bird’s eye view of the issue.

  5. I may consder myself as someone who has not gained enough knowledge regarding this charter-change. To be honest, I am only 15 years old, yet young as I may be, I am aware of this mess going on in our country. I’ve read many articles regarding the pros and cons of this cha-cha, however, none has yet convinced me into fully grasping a side or taking a side. This is because, meither are ensuring us of a better economy nor a better government.

    You all might think that young adults like me have no right to interfere with businesses such as these, but you are wrong. We have all the right to know what the heck is going on with our country. All of those big guys with authority should think that when we grow up, we are the ones who catch what they have started. So they better make a good start and clear up this issue. It’s actually a great shame in our country’s part that we have such an unstable government.

    We just want to have a transparent government wherein we can know what is “really” going on. We might lack knowledge to understand all those constitutions and stuff. But we have the right to know, since we are filipinos too.

    That’s all I want to say…and I hope this will be settled soon…and there’ll be world peace! ^0^

  6. thanks to Ybonette Gonzales for answering my question..

  7. *LiTTLe mHe*

    ei, einKs sO mUcH!! nOw i knOw whAt cHartEr cHanGe iS aLL abOut… yOu knOw wE have tHis pROjEct iN rEseaRch ‘eN tHis wEbsiTe iS reaLLy a gReat heLp fOr mHe!! einKyoU agAin…

  8. parasabansa..killimperialmanila

    from what i have understand, i guess chacha will help the country. Shifting from unitary to federal system will give a chance to other provinces to boost their economy. The problem today with the unitary system is that, only metro manila aka imperial manila is develop. Since it is the capital region, manila becomes the top priority of the government,which is unfair. Compare manila to the other provinces, see how behind are the other provinces. I guess thats also the reason why, filipinos from other parts of the country are keep on coming, students from the province try to study in manila because they don’t want to be left behind, job-seekers also come to manila because they think they would be able to get better jobs than farming. If we give more power to the local government officials, i guess it would be fair. Diffent sectors in the economy will be developed more(ex. tourism in the visayas, agriculture in central luzon and mindanao,fishing in mindanao,etc).People will also be encourage to pay taxes since they could see right away where their money is going. Filipinos will start not to go out of the country anymore because they can now see new hope in their provinces..
    IMPERIAL MANILA is very self centered…most of the people especially those who are rallying w/o understanding and analyzing chacha are only thinking of themselves..they think they are the only filipinos in the philippines and those other especially those who are not non-native tagalog speakers are inferior biengs..manila is not the only region in the philippines..there are alot more and alot of them have the potential of being a well developed one possibly more developed than manila…maybe thats the reason why alot of people from manila are opposing chacha..maybe they are afraid to know the truth that these “inferior beings” are better than they are…

  9. mark

    why are so many arguments on that/ i guess it will help the filipino people.

  10. I think that in this case we should not interrupt with big people. Before we state our comment we should be aware which is which and what the real issue is or else we pull down ourselves. Charter Change doesn’t merely states charter change. And in fact, political stability really depends on economic progress and military forces.

  11. It’s a shame what happened to Bangladesh. I hope the world steps up and helps them.

  12. gretchen

    are favor in favor or against the charter change?

  13. katm

    dictatorship is what we really need. but in the good sense, we need a dictator that will not abuse his or her power. (is this possible?) in these terms, citizens of our country would be obliged to follow rules and regulations. We need to support the government by any means. Because citizens of our country today abuses democracy and their freedom: people rally over every ruler who sits on the government, we never are satisfied. people do not give chance for these rulers to show their capacity to rule. what we need is unification, support, and discipline. i prefer dictatorship because we people are hard headed, that even simple damn rules we could not follow. We need a great force for us to tell what to do. but then, i am talking about idealism and utopia here. sadly, i think our country would not progress to the top unless both the government and the people coordinates.

  14. mistashia

    In my own opinion, we have no problem with regards to the present constitution. The real problem in here is the implementation & the people who are suppose to give the country a chance to progress, and not to find ways to steal the people’s money. Philippines is forsaken. But then again, we the youth, can make a change just as long as the minds of these young people wont get dilluted by toxic ideas from the powrful ones.

  15. rawr.

    Hey, i’m getting confused. I beleive that Charter Change is necessary. but when I’ve read all your comments, I’m having a hard time deciding on whether there should be a Charter Change or not.

  16. albert

    charter change is defined as as any political or related process pertaining to the amendment or revision of the present 1987 Constitution. For me, being a young public official( im the sk chairman of our brgy.) believed that amendment to our constitution is not necessary at this time. The government must focus on different issues such as the global financial crisis, ways in reducing transportation fare, etc. Most of all, the purpose of the govt in initiating a charter change is so candid that even an ordinary citizen know…that is to extend the term of the president…..and i could remember Dureza’s prayer: Bless the president with tolerance…..to lead this nation until 2010 AND KNOWS PERHAPS EVEN BEYOND!……

  17. Wonderful site, exactly where did you get the layout?




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