As debates on the adoption of Resolution of Both Houses Number 2 (RBH 2) get underway, House Ways and Means Chair and Albay 2nd District Rep. Joey Salceda said that approving proposals to amend the restrictive economic provisions of the Constitution will address the “staggering” cost of the country’s inability to open its doors to foreign investments.
In his sponsorship to change the 34-year-old Charter’s economic provisions, Salceda told the House plenary that the Philippines had the tightest foreign direct investment (FDI) restrictions, performing poorly in terms of accumulating FDI.
“In other words, we opened the fewest doors, so we were visited by the fewest opportunities,” Salceda, an economist, pointed out.
Comparing the country’s ability to attract FDI to the success of Vietnam, its neighbor in the 11-member Association of Southeast Asian Nations (ASEAN), Salceda said that since 1987 when the Constitution was approved, the Philippines’ share of the net FDI inflows in the region has declined.
“In 1996, a decade after the 1987 Constitution, we were still taking 5.1 percent of ASEAN’s FDIs. Now, we are just taking 4.4 percent, less than half that of Vietnam,” he lamented.
Aside from highlighting the inability of the country to bring in fresh foreign investors, Salceda also explained how keeping out foreign investment “spoiled” domestic market players.
“Shamefully, and once again, we are the most oligopolistic market in the region. The World Economic Outlook Global competitiveness index, from 2017 to 2018, shows that the Philippine market is dominated by the fewest business groups, among all economies in the region,” said the lawmaker.
Salceda also cited a World Bank paper which showed that “the fewer the competition, the less the incentive to make investments that improve the quality of services or the prices for consumers, or the efficiency of the business; why try hard, after all, if you have no competition from foreigners?”
In trying to be nationalistic with the Constitution, the former finance analyst explained, “we have ironically fattened our domestic oligopolies at the expense of the people.”
The lack of real foreign competition, Salceda added, leads to a vicious cycle of undisturbed oligopolies that possess what he described as “excessive domestic player market power.”
“This, in turn, lowers the need to invest in efficiency, pads the domestic players’ profits, and allows them to influence political decisions so that they can remain undisturbed by foreign competition,” he added.
The lawmaker from Bicol credited the House leadership, with Speaker Lord Allan Velasco at the helm, for authoring RBH 2 and pushing for its adoption, a move that can break this vicious cycle by removing restrictions on foreign investments.