PH badly needs key economic reforms
The Philippines may not realize it immediately, but it cannot compete under a free regional trade regime, or in a single market called the Asean economic community.
Philippine lawmakers and President Benigno Aquino III have ignored economic reforms that can make it at par with the advanced economies of the Associ----------ation of Southeast Asian Nations. The local business community believes reforms must be done ASAP to prepare the Philippines for the AEC.
Economist Gerardo Sicat, a former director-general of the National Economic and Development Authority and ex-World Bank senior executive in-charge of its Public Economics Group, said the Philippines could be one of the least prepared for the regional free trade.
“Those countries with the freest and most flexible policy mechanisms will gain the most, while those burdened with domestic restrictions will be slowed down by those restrictions since they could prevent or cause investments from happening,” said Sicat in one of his papers.
The former top economist said the Philippines has not acted on “the most difficult reforms” it needs to capitalize on the free trade regime that will usher under the AEC.
“From personal observation, the most difficult reforms to undertake are often the last to be adopted,” Sicat said in an opinion essay. “I see that the main reforms we have to deal with [for instance, revisions of Constitutional economic provisions, labor market reforms, and investments in critical infrastructure] are stuck in Congress, in our own resistance, within the impasse of bureaucratic processes, and in the politics of wait—and—see.”
The Philippines, for instance, has lagged way behind its Asean neighbors—Singapore, Thailand, Malaysia and Indonesia—in the race for foreign direct investments, and is even having much difficulty keeping up with erstwhile tail-ender Vietnam.
The Philippine Business Group-Joint Foreign Chambers, whose members include 18 of the biggest and most active local and foreign business organizations in the country, has long urged the government to enact economic reforms to advance the Philippine economy.
In a May 15 letter to President Aquino ahead of his final State of the Nation Address, the PBG-JFC listed eight proposals that require prompt executive action and seven more needing swift congressional approval to cash in on the “unprecedented improvements in competitiveness, attractiveness to investment, and overall boost in the Philippine image in the eyes of the international community.”
PBG-JFC’s proposals for Palace action, including the formation of a public-private energy council to solve the power crisis, reducing the Foreign Investment Negative List of industries where foreign participation is limited, and speeding up the implementation of critical infrastructure projects, are designed to ensure massive job generation, facilitate trade and boost competitiveness.
The business grouping highlighted the importance of Resolution of Both Houses No. 1, or RBH 1, authored by Speaker Feliciano Belmonte Jr., whose congressional approval “will encourage greater foreign investment as well as prepare the country for high-level plurilateral agreements, such trade as the Trans-Pacific Partnership.”
TPP is the centerpiece of the US trade agenda of the Obama administration.
“The Philippines possesses immense untapped potential that will be unleashed with the proper environment and policies in place,” said PBG-JFC in its latest letter to President Aquino. “It is our common position that the enactment and implementation of the above measures will accelerate the country toward the progressive nation we all aspire to become.”
Belmonte’s RBH 1 seeks to lift the 60-40 rule—the constitutional proviso requiring Filipinos to own at least 60 percent of local businesses and for their foreign partners to own a maximum of 40 percent—in the 1987 Charter.
The House failed to pass RBH 1 before Congress adjourned in June 12, but there is enough time for lawmakers to clear it in the third and final regular session. They have seven working months to pass the crucial bill from the time both chambers open in July until they close in February 2016 in time for the national elections campaign period.
With the fast-approaching deadline for the creation of the AEC by end-2015, Philippines Inc. president Antonio Lopa called on the Aquino administration to support the calls to amend the economic provision of the 1987 Constitution.
“By relaxing the limitations on foreign ownership, the Philippines will not only be able to participate in the TPP, but it will also be able to maximize its benefit from the Asean integration, and create much needed jobs for the Filipino people,” Lopa said.
“To realize inclusive growth, the country needs to further accelerate the velocity of growth by instituting a more open policy regime that nurtures a globally competitive investment climate that must be sustained beyond political timelines,” he said.