Filipinos oppose foreign ownership of vital industries

Currently, politicians and their allies are trying to amend the Philippine constitution to allow 100 percent foreign ownership of and investment in vital industries in the country. On the basis of the Resolution of Both Houses (RBH) 6, lawmakers are trying to find ways to allow 100 percent foreign ownership of public utilities such as electricity and water, colleges and universities, and engagement in the advertising industry. The charter change initiative has already reached the senate, and deliberations on the proposal are expected to end in March.

Constitutional reform in the Philippines, commonly referred to as charter change or colloquially as cha-cha, involves the political and legal procedures required to modify the existing 1987 Constitution of the Philippines.

Supporters of the current cha-cha initiative – like their predecessors in previous attempts to amend the constitution – are making all manner of promises that removing the protectionist provisions will bring about economic progress. Judging from past experience, however, economists and business experts are highly skeptical of these promises being realized.

Protests against charter change. Photo credit: No to Charter Change Network

A forum to raise awareness about charter change. Photo credit: No to Charter Change Network

Mass entry of foreign investments: boon or bane?

President Ferdinand Marcos Jr. and his allies are advocating that foreign investments in the vital industries will bring many benefits for the economy and that this is the solution to the problems of a stagnant economy.

Foreign direct investment (FDI) occurs when an individual or business owns at least 10 percent of a company. When investors own less than 10 percent, the International Monetary Fund (IMF) defines it as part of a stock portfolio.  Although a 10 percent ownership in a company does not allow a controlling interest, it does allow influence over the company’s management, operations, and overall policies.

Congressional Representative Joey Salceda argued that a charter change will boost investors’ confidence and will be better for the economy. Former Finance Secretary Margarito Teves said the Philippines is the only country in the Association of Southeast Asian Nations (ASEAN) to have economic restrictions stated in the constitution and that allowing foreign ownership in vital industries “will generate jobs, improve profits, and create inclusive growth”.

However, there is no evidence that completely opening the doors to foreign investments will benefit the country. Additionally, since 2019, there was already a set of regulations to allow foreign ownership of land, property, and companies and these have been implemented without any need to amend the constitution.

Protests against charter change. Photo credit: Ina Silverio

The Public Service Act, Foreign Investment Act, Retail Trade Liberalization Act, Renewable Energy Development and the Regional Comprehensive Economic Partnership law allow the entry of foreign investments into agriculture, telecommunications, transportation, and other vital industries. 

However, no noticeable and tangible improvements were seen in the economy. In fact, before the COVID-19 pandemic ended, inflation rates in the early part of 2023 ballooned to 8.7 percent, the highest in the last 14 years. In February 2024, 30 percent of the poorest Filipino families were hit with five percent inflation rates and there was a 21.5 percent inflation rate for rice, a staple food.

Sonny Africa, executive director, IBON Foundation, an independent economic think-tank, said that because of the abovementioned laws, the Philippines is the most open economy in Asia. Vietnam, Thailand, Indonesia and Malaysia have an 80 percent limit to foreign ownership in their respective industries.

By the end of 2023, the Marcos Jr. administration allowed the entry of P766.97 billion (US$13.6 billion) in FDI, 455 percent more than FDI in 2022. The 2023 FDI represented 61 percent of all approved investments by the Department of Trade and Industry.

Protests against charter change. Photo credit: Ina Silverio

Africa said: “The country has actually been long open to foreign investments, why is it that we hardly see any economic progress, much less improvements in the lives of Filipinos. It is questionable that the government should consider that the country’s development is dependent on foreign investments instead of internal, local economic factors.”

Based on studies by IBON, the Philippine FDI was higher than those of Korea, Taiwan, and China during the period when their economies zoomed forward in the 1970s and 80s. However, the Filipino economic situation till now is not better than those of Korea, Taiwan and China.

Africa added: “Our ASEAN neighbors were able to develop their economies without relying on FDI. They focused on strengthening the local economy, and implemented reforms in their agriculture, making local production strong until it led to industrialization. If FDI were the key to progress, then how come the Philippines is lagging very far behind when we’ve been allowing FDI for decades?” 

Protests against charter change. Photo credit: Ina Silverio

Africa said the bone of contention does not lie with the entry of FDI per se, but the policy of the government to sell thousands of hectares of land area and all resources on it to foreign investors.

“We are not benefitting at all from the investments that keep coming in,” he said.

Africa pointed out that when Intel exited the Philippines after 35 years and Hanjin shipyard did the same after 12 years, it was seen that the Philippines did not develop any capacity to manufacture electronics or build ships.

“Instead of focusing on attracting foreign investors and selling off our resources to the highest bidder, we should be developing our own industries, improving our own capacities for manufacture and production. We have not benefited from the investments at all,” he said.

Protests against charter change. Photo credit: Ina Silverio

In an ideal scenario, countries that allow FDI should receive access to the latest financing tools, technology transfer, and operational practices from the all over the world, to help in building up the local industries’ resulting in efficiency and effectiveness.

Africa said: “This isn’t what happens in the Philippines. We are just left holding the empty bag when the foreign companies leave. No technology transfer takes place and we remain highly dependent on imports.”

The manufacturing sector is one of the most liberalized and open to foreign capital, but its contribution to the GDP has shrunk from 25 percent in 1990 to 17.6 percent in 2022, the smallest in 75 years. The beginning of 2022 also saw employment levels fell as manufacturing companies laid off workers and implemented freeze-hiring policies.

“Despite the hype that foreign investors will create more jobs, by the end of 2023 poor/borderline families grew to 22 million (eight out of 10 families). The number of households without savings rose to 19.2 million (seven of 10 families),” Africa said. “It did not help that foreign companies also were not regulated and were at liberty to just fire workers, criminalize unions, and ban collective bargaining.”

In other countries, the tide also turned against foreign investors. More and more countries have been locking down their economies because they have seen the damage that heavy reliance on FDI does. Since 2009, around 405 International Investment Agreements have been junked by over 60 countries.

There are also assertions that increased FDI, especially in developing countries like the Philippines, may lead to accelerated depletion of energy, forest, and mineral resources. Research by the Yale Environment Review in 2018 stated that FDI may inadvertently encourage unsustainable resource utilization, transforming developing nations into “essential nodes in expanding supply chains”.

Heightened resource depletion exacerbated ecological concerns, leading to increased pollution and waste. Environmentalists said this would bolster the “treadmill of production” theory, showing how the global economy’s continuous expansion causes resource depletion and environmental pollution. Consequently, developing countries bear the brunt of the consequences, while affluent nations sustain their elevated levels of consumption.

Protests against charter change. Photo credit: Ina Silverio

Consumers weigh in

Prof. Reggie Vallejos, University of the Philippines and spokesperson of consumers group SUKI Network, said the entry of more foreign investors will most likely lead to higher prices of basic commodities.

“There has never been a time when prices of local commodities and services have gone down because industries have been privatized and owned by foreigners. The pattern is always the opposite.”

There were studies that showed FDI could hinder domestic investment. Because of FDI, local companies lost interest in investing in their domestic products. Vallejos pointed out that allowing foreign ownership of schools and universities also has grave implications. Tuition and other fees would also likely be exorbitant.

At the grassroots level, ordinary consumers are expressing weariness over what they said is the government’s “useless campaign to amend the constitution” to bring in more investors.

Government employee John Lexis said the only intent of officials and those in the executive branch to amend the charter is to make laws more favorable to their own business interests.

“We can’t let them amend the law. The ones behind this campaign are actually the ones who are already abusing their powers and making money through their offices. I am against charter change, and I don’t think bringing in more foreign businesses will help us. We should develop our small and medium enterprises instead, give them all the support they need so they can grow and employ more Filipinos,” he said.

Factory worker Rafael Velasco is also against charter change and its declared motives. “I think this is a useless initiative. The government should be focusing on creating more jobs for Filipinos where they have job security, better benefits, and just wages. Prices of basic commodities are so high, and so are the rates of electricity and water. I think changing the constitution will favor only the politicians and not ordinary Filipinos,” he said.

Raymond Palatino, secretary general of the Bagong Alyansang Makabayan (BAYAN) alliance of grassroots organizations, sumed up the opposition to charter change by saying that letting foreigners dominate Philippine educational institutions, media, utilities and other basic needs including food, energy, and other resources, will violate the right of Filipinos to fundamental necessities. He said it would also threaten Filipinos’ rights to representation, safety, redress, education, information, and a healthy environment.

“If we let foreign entities take over and own our country’s resources and control how they will be utilized, what guarantees do we have that the welfare and interest of Filipinos will be addressed and protected? We are also worried that foreign-supplied and generated goods and services will flood the market, supplanting already neglected Filipino producers and consumers,” he said.

Protests against charter change. Photo credit: Ina Silverio

Defeat charter change

As the charter change proponents rushed to finalize their proposal, grassroots organizations are already gearing to defeat it.

Former supreme court justices, ex-government officials, bishops, and various cause-oriented groups and people’s organizations launched the “No to Chacha Network”. They have held public information and education drives and mass actions, and have filed legal actions to prevent the amending of the 1987 Constitution. The Network leaders also said there are more urgent problems the government should be focusing on.

“Rather than pursue their self-serving agenda, we urge our country’s leaders to focus on things that really matter to Filipinos – increasing wages and livelihoods, reducing prices of food and basic utilities, improving government and social services, reducing red tape and corruption, upholding human rights, justice and peace, protecting our sovereign rights in the West Philippine Sea, caring for the environment, ensuring free and credible elections. These are things that can and should be done without having to amend the Constitution,” they said in a joint statement.

Top photo credit: nemchinowa

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