- NOTE: This blog article was first published on my old site on Oct. 10, 2010.
What’s the real cause of low level of foreign direct investment (FDI) in the Philippines? Who or what is to blame? Is it the 60-40 ownership restriction and other constitutional limitations on foreign investors?
A number of people in the government, like Sen. Juan Ponce Enrile and Feliciano Belmonte, recently talked about economic issues as the reason why we need to revise the 1987 Charter, although they didn’t categorically cite the main reason behind poor foreign investment in the country. This simply shows that some of our government officials now understand the impact of the charter’s arbitrary, anti-economic freedom economic provisions on our economy.
Foreign Affairs Secretary Albert del Rosario, for his part, believes the real culprit is our ‘restrictive’ business climate.
Citing a provision in the Constitution restricting foreign ownership of companies to 40%, del Rosario said: “The Philippines is constrained by Constitutional and statutory economic restrictions on foreign ownership and has maintained a conservatively open investment milieu.”
He added that there “may be a need to evaluate existing statutory economic parameters as the Philippines further redefines its international economic policy.”
Who would disagree with that view? Well, the statist UP economists, of course!
One thing to blame is ‘bad experience’, said former University of the Philippines Economics Dean Raul Fabella. Not restriction on foreign ownership, but bad experience– that’s the main reason, according to this UP academic, why foreign investors are afraid or simply don’t want to invest in the country.
What’s the actual basis for his view? Fabella simply cited the Ninoy Aquino International Airport (NAIA) Terminal 3 case as the main culprit. This project that took place during the term of former president and now congresswoman Gloria Macapagal-Arroyo is mired in corruption allegations, including legal and financial disputes. Fabella said this case is the “biggest black eye” that mars the country’s reputation as a potential place for foreign investment.
What about legal restrictions on foreign investors? The former UP economics dean said the only bad thing about it is that a foreign investor simply had to acquire a dummy to run his business.
Does that mean Fabella sees nothing wrong with our restrictive rules against foreign investors? I’d like to know.
“The biggest obstacle to foreign investments is Terminal 3 of NAIA. That’s really the biggest black eye of FDIs in the country. My own feeling is the root cause of the NAIA 3 problem is because a foreigner had to get a dummy in order to play the game.”
Now I was asked by a Facebook friend to comment on Fabella’s statement. Here’s his question:
I read your blog about that former dean of UP schools of Economics (Arsenio Balisacan), who is now NEDA chief, who claimed that the rampant poverty in the Philippines is caused by overpopulation, which can only be solved by his Malthusian-policy.
Are UP elitists blind? Because, you know, they are just doing the same thing over again and expecting different results. If these people become computer programmers, they would likely be stuck in a simple logical/syntactical error.
Here’s my reply.
Now let’s be careful in critiquing these UP intellectuals (not because of the temporarily halted Cybercrime Law), but because they simply don’t like being criticized by non-UP creatures like us.
Fabella said: “The biggest obstacle to foreign investments is Terminal 3 of NAIA. That’s really the biggest black eye of FDIs in the country. My own feeling is the root cause of the NAIA 3 problem is because a foreigner had to get a dummy in order to play the game.”
I don’t think he understands this economic issue very clearly and properly. And this is why we must be very clear in presenting our points and arguments against this ‘restriction’ issue. It’s not just the ownership restrictions on foreigners that we’re up against, because it is just one of the logical, natural offshoots or consequences of our Welfare State politics; what we’re actually up against is the Big Government idea.
Fabella talks about the aborted Terminal 3-Piatco deal that largely benefited corrupt officials under the Arroyo regime. I find it really funny that Fabella, a former dean of UP School of Economics, failed to grasp the real issue behind that corrupt deal that left a German builder (Fraport) of NAIA Terminal 3 uncompensated. Of course that issue is not about ownership restrictions against foreigners. That issue is simply about government corruption, which is just one reason why foreigners are afraid to invest in the Philippines.
In fact, German Chancellor Angela Merkel sent a letter to Arroyo wherein she expressed her impatience with the long delay to repay the German builder that had built at least 97 percent of Terminal 3. In other words, this issue shows the unwillingness of our government to fulfill its contractual obligation with a foreign company simply because the project was marred with corruption and cases of bribery. This is why the government shouldn’t get involved in proprietorial, business transactions in the first place.
Also, this is just one of the issues that exposed disgusting cases of corruption and cronyism under the Arroyo regime. Other corruption and bribery cases that plagued the Arroyo government include the NBN-ZTE deal and the fertilizer scam that required the government and its agents to enter into contracts and transactions with foreign and local companies.
Thus, I think Fabella simply missed the point. Protectionism, cronyism, more regulations, and public-private “partnership corruption”, which should be properly called FASCISM, are simply the logical result of our Big Government politics sanctioned by the 1987 Constitution.
What’s the implication of Fabella’s statement?
Perhaps he simply believes we need to keep our current protectionist policies because they don’t actually impact FDI in the country.
Are these UP intellectuals blind? I simply think it’s their Marxist, or even semi-leftist, ideology that prevents them from knowing the truth. As some people say, ideology trumps logic and economics.
Again, this is why we must clarify our argument against protectionism. And this is why the so-called economic and political advocacy of the inCorrect group of Orion simply missed the point. They simply focus on protectionism and other so-called economic problems. The most important thing is to focus on the root cause of these issues: BIG GOVERNMENT or WELFARE STATISM. That’s the root of all evils and problems in this country. Protectionism is just one of the active agents of RP’s big government.
The best answer to these statist intellectuals is: IT’S BIG GOVERNMENT, STUPID!
This simply proves that the country’s so-called intellectuals are the biggest enemy of economic freedom and laissez-faire capitalism.
ADDENDUM (from a previous post):
If you try to scan a number of economic studies about “protectionism”, you’d discover that most of these studies suffer from ‘definitional’ and conceptual issues. For instance, some studies show a very limited definition of protectionism. Based on its standard definition, protectionism can ‘only’ be implemented through the following protectionist policies: tariffs, import quotas, anti-dummy legislation, administrative barriers, direct and export subsidies, exchange rate manipulation, international patent system. I assume that many studies on protectionism relied on this very limited definition of protectionism to reach their findings and conclusions. Using that particular definition or methodology, researchers might conclude that the Philippines is more economically free and open than other Asian countries even though it arbitrarily imposes foreign ownership restrictions.
What could be more protectionist than foreign ownership limitations? I have not seen a single Philippine study that looked into the pernicious economic effects of the constitutional foreign ownership restrictions on our domestic economy as a whole. Perhaps this is the reason why Winnie Monsod and the rest of the country’s pseudo-intellectuals reject the idea of fully opening our economy to foreign investors. Anyone who attempts to study the impact of protectionism on the Philippine economy should try to properly ‘redefine’ the concept of protectionism. Protectionism is just a form of economic regulation… and foreign ownership limitation and other anti-foreign business legislation should be included in the conceptual definition of protectionism. However, what is draining our economy is not just protectionism, but also welfare politics and regulations. Consider the writ of kalikasan, anti-business labor law, environmentalist policies, and PNOY’s up-and-coming universal health care program. For even if we try to open our economy to foreign investors, the existing regulations and others to come would discourage businesses, both foreign and local.
Enrile, Belmonte and a few politicians and ideologues talk about fully (???) opening our economy to foreign investors? Great idea. Yes, we open our economy to foreign investors and then MURDER and/or SUFFOCATE them all with our ‘gas chamber’ welfare system politics… Isn’t that a nice idea! But I don’t think businessmen and investors are stupid.
A commenter named Alfonso Roces posted the following comment:
I agree that we should scrap the 60/40 agree law yet what I disagree about is that you so arrogantly dismiss many UP Economics professors or in other words, simply generalize them as Marxist philosophers and you end up calling them stupid sometimes (It’s obvious you’re against everyone that has something to do with UP). The truth is actually the UPSE is actually very anti-communist and some professors’ views range from Keynesian to a free market but no UPSE professor ever goes out ever in support of Marx. Generalizing the whole UPSE as a whole as leftist or Marxist, is just really fallacious and ignorant. I am generally pro-free market but I don’t add an Ad Hominem dissing a whole group of people just because they belong to a certain school in my arguments.
I gave the following response:
Well, I think you’re entitled to your own opinion, but I think you’re wrong. A friend of mine, Nonoy Oplas, is a UP economist. He’s a UP product. But you should understand that almost all of your Econ deans are statists or Marxists. Have you read Arsenio Balicasan’s papers? How did that guy become dean of UP school of econ in the first place? He wrote a number of studies that seem to disregard the impact of our Constitution on the economy.
I believe that UP must either be abolished or privatized. It has long become the breeding ground of communism in the country. I don’t recognize the contribution of UP to our economy and country. I think it is a big liability, economically and socially. I think it’s the BIGGEST PARASITE in our educational sector.
Plus, I don’t think all of them are Marxists. But a lot of them are statists. For example, I think Winnie Monsod is a Keynesian economist who doesn’t understand the concept of flat tax.
“Generalizing the whole UPSE as a whole as leftist or Marxist, is just really fallacious and ignorant.”
Do not confuse your opinion with MY opinion. If that’s how you’ve evaluated my views on UP, I think I’m not responsible for it.
I oppose the existence of UP because I am for privatization and free market system. I believe UP must be privatized because it’s becoming an institutional parasite and a breeding ground of communism. I think I made my view on this issue pretty clear. I you think that I hate all UP products because of my view, then so be it. MAKE THE MOST OF IT.
HOW SOME UP PARASITES THINK
– AGAIN, make the most of it!!!