Bernardo M. Villegas
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Attracting FDIs for Poverty Eradication (Part 3)

          Article 12, Sec. 10 is the provision directly affecting  FDIs because it mandates Congress “to reserve to citizens of the Philippines or  to corporations or associations at least sixty percent of whose capital is owned by such citizens or such higher percentage as congress my prescribe, certain areas of investments.  The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.”  To allow Congress greater flexibility in determining the degree of foreign participation in Philippine business, the aforementioned article should be replaced by the following: “The State shall regulate and exercise authority over foreign investments within its jurisdiction and in accordance with its national goals and priorities.”  This phrasing leaves room for the State to disregard the “Filipino First” mandate if, as has been demonstrated in the Philippines, it merely redounds to the good of the monopolists and feudal lords who have taken control of the Philippine economy under the name of “nationalism.”  There are many situations in which a larger presence of foreign investors in strategic industries in the Philippines, especially those that need abundant long-term capital, may actually promote the good of the underprivileged, liberating them from the clutches of the Filipino elite.

         Article 12, Sec. 11 should be amended so that the main consideration is not the ownership structure but the quality of service that the public utility will render to the ultimate consumers.  The amended version reads as follows:  “No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to individual citizens of  the Philippines or to corporations or associations organized under the laws of the Philippines; nor that such franchise, certificate of authorization be exclusive in character or for a longer period than 50 years.  Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal when the common good so requires.  The State shall encourage equity participation by the general public.”  There is no equity restraint for foreigns and no mention of management being reserved only to Filipinos.  I hope to see the day when electric distribution companies, water utilities and transport corporations can be owned by businesses registered in the Philippines but with majority foreign ownership.  Such possibility will not only open some of the most capital-intensive sectors to much needed long-term capital but also to the best practices in management and technology from all over the world, to the benefit of the consuming masses.

         Article 14, Sec. 4, which has to do with educational institutions is also to be amended so that the prohibition against foreigners participating in the ownership of universities and other post-secondary educational institutions is removed.  This amendment becomes even more crucial in the light of the recent international report that the Philippines is at the bottom of rankings among countries all over the world in the proficiency in reading, mathematics and science of its student population.   This means that the State, whose primary responsibility it is to invest in basic education, will have to spend even higher percentages of its budget in improving the physical facilities of the public elementary and secondary schools and more importantly in upgrading significantly the quality of public school teachers.  There will be very limited public funds to invest in world-class universities and other post-secondary educational institutions.  One can hardly count on the profit-oriented tertiary educational institutions to lead in establishing universities that can match the quality of the National University of Singapore, Hong  Kong University of Science and Technology, Yonsei University, Tokyo University and other leading universities in the Asian region.  Foreign capital can supplement the very inadequate resources our private universities have to attain global standards of tertiary education.

Even already well-endowed Asian universities like those in Hong Kong and Singapore have embraced partnerships with the best universities and graduate schools in the world, such as Harvard, Chicago, Northwestern, INSEAD, Cambridge and Oxford.

         We should therefore amend Article 14, Sec. 4 to read as follows: “No educational institution shall be established exclusively for aliens and no group of aliens shall comprise more than one-third of the enrolment in any school.  The provisions of this subsection shall not apply to schools established for foreign diplomatic personnel and their dependents and unless otherwise provided by law of other foreign temporary residents.”  This amended version focuses on the intended beneficiaries of the provision who are the Filipino students and not on the ownership of the schools.  It would have the wholesome effect of preventing permanent residents from abroad from establishing educational ghettos and monopolizing scarce high-quality teachers by offering them higher salaries.  It reflects the right kind of patriotism by which the concern is for the consuming Filipino public rather than the nationality of the suppliers of the educational service.

         As this paper clearly indicates, focusing the charter change debate exclusively on the provisions referring to Foreign Direct Investments will already require much study, energy and effort on the part of the Senators that it would be wise  to eliminate all other amendments being proposed by the Lower House from the consideration of the Senate.  An exclusive focus on the economic provisions will also remove the accusation against the Lower House of trying to pull a fast one, a “sneaky, insidious and self-serving” legislation.

         I sincerely hope that both houses of Congress will be sufficiently concerned about attracting Foreign Direct Investments as a means of poverty eradication so that they can fast track the amendments proposed above, and only those amendments, through a joint session calling for a constituent assembly and voting separately, the most expedient and acceptable form of amending the Constitution.  They will then help President Duterte fulfil the promise he made at the beginning of his mandate to remove the restrictive provisions in the Constitution against FDIs.    For comments, my email address is bernardo.villegas@uap.asia.