Charter change guarantees no economic takeoff—experts

By Likha C. Cuevas
Published on Page B2 of the July 17, 2006 issue of the Manila Times

A PROPOSAL to relax constitutional limits on ownership of land and select industries is no “sure-fire” way to increase foreign direct investments, according to experts.

“Changing the Constitution, liberalizing—or removing those [protectionist] provisions of the Constitution, as I’ve said before, is like somebody with a diarrhea and said the diarrhea will be fixed by changing toilet seat,” Solita C. Monsod, a former socioeconomic planning secretary, told participants of a forum organized by the Philippine Chamber of Commerce and Industry.

While data show an association between foreign investment and higher levels of income, these however “do not establish whether foreign investments cause higher income levels or higher income levels cause the foreign investment,” Monsod, an economics professor at the University of the Philippines, said.

In proving her point, the former Aquino Cabinet official cited expert opinion on China, whose economic growth came ahead of the inflow of foreign investments.

On the micro or project level, a majority of projects yielded positive effects on national income but one-third of studies show that “anywhere from 25 to 45 percent have deleterious effects. That means more FDI does not necessarily mean better [for the host country],” Monsod said.

She said studies show that FDI are small relative to total investments in the Asia-Pacific region with the exception of China and Singapore.

In the same forum, former senator Wigberto Tañada, lead convener of the nongovernment Fair Trade Alliance (FTA), said that the Philippines is already liberalized and open to foreign investments and legislation already provided for the entry of foreign investments in many local industries.

He also said that it was during the protectionist and nationalist period of the 1950s and 1960s that the country “experienced accelerated industrial growth” making the Philippines Asia’s fastest-growing economy second only to Japan.

Therefore, opening up the few remaining restricted resources and sectors in the country will not address poverty, he added.

Instead of altering the Constitution, he said the government should concentrate on addressing the factors that turn off investors, including corruption, bad infrastructure and political instability.

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