SOCIOECONOMIC planners warned Congress that failure to pass pending reform legislation will likely stall the opening up of the economy, adding that without such laws, it may not be possible to expand foreign investment to more industries.
If passed, pending legislation amending the Public Service Act, the Retail Trade Liberalization Act, and the Foreign Investments Act will allow for a more permissive Foreign Investment Negative List (FINL), the document which outlines industries foreign investors are allowed to participate in, according to National Economic and Development Authority (NEDA) Undersecretary Rosemarie G. Edillon.
Speaking before the House Committee on Constitutional Amendments Tuesday, Ms. Edillon said legislative action is needed because NEDA has “exhausted” all possible action at the executive level to open up the economy.
“We really need the legislation to be able to come up with a more liberalized Foreign Investment Negative List,” she said.
She added that the pending reform bills will work “hand-in-hand” with the tax-reduction bill known as CREATE.
The proposed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which is currently being tackled by the bicameral conference committee, reduces corporate tax rates while rationalizing the incentives regime.
Originally a purely tax reform measure, CREATE has since been repositioned as an economic relief bill to help businesses recover from the pandemic.
“We should also know that these amendments actually complement the CREATE bill and the other reforms that have already been done with respect to the ease of doing business,” she said.
Members of the Cabinet’s economic team appeared before the committee Tuesday in the context of moves to amend the Constitution, to weigh in on whether charter change could play a role in effecting the proposed reforms.
“If there are things that we can do to open up the economy through administrative measures, we must implement them,” Finance Secretary Carlos G. Dominguez III said at the committee hearing. “If there are areas that we can liberalize by amending our existing laws then let’s do that.”
Trade Secretary Ramon M. Lopez said the timing of the campaign to amend the Constitution could be problematic because of the approach of the 2022 elections.
“We are just mindful (that) the current challenges, including the nearing 2022 presidential elections, might affect the focus of the deliberations, but we leave those concerns to the wisdom of the legislators.”
Also at the hearing, the Joint Foreign Chambers (JFC) of the Philippines said it supports Constitutional amendments. However, the JFC’s John D. Forbes, Senior Adviser with the American Chamber of Commerce, said it may take “several Congresses” to complete the desired reforms.
“We recommend the immediate enactment of other laws that provide new (foreign direct investment) opportunities… and programs that increase competitiveness to surpass FDI levels achieved by our neighbors,” he said.
The JFC said Philippine FDI as a share of gross domestic product averaged 1.6% a year between 2010 and 2019, the worst performance within the Philippines’ regional economic peer group, which includes Indonesia, Malaysia, Thailand, and Vietnam.
Economist Bernardo Villegas, a member of the commission that drafted the 1987 Constitution, told the panel that the pending legislation could be subject to challenge without actual amendments to the charter.
“I think there will be a lot of constitutional challenges… I don’t think it will be that easy to allow foreign ownership in public utilities,” he said at the hearing.
“We have to act right now with regard to the economic provisions” of the Constitution, he added. — Gillian M. Cortez