Tuesday, February 16, 2021

The Constitution and FDIs

A good paper by my other former teacher at UP School of Economics (UPSE), also former Dean of the School and a National Scientist, Dr. Raul Fabella,

On the proposed lifting of the constitutional foreign ownership restrictions
Introspective  By Raul V. Fabella
February 14, 2021 | 5:59 pm 

He wrote there, 

"By itself alone, the lifting will not create a tsunami of inward foreign investment as often vehemently but gratuitously asserted. The reason is that attracting foreign investment is like attracting hotel clientele: clients are always comparing packages of offerings...

The problem of being bottom of mind as an FDI (foreign direct investment) destination in the region has many fathers — foremost among them being: the high cost of power, the high cost of logistics, the number of signatures required and time delays in applications, the uncertainty of the regulatory environment, the weakness in the judicial system and the unsettled peace and order — no question but these concerns come higher in the minds of investors than foreign ownership restrictions. These hurdles will not go away with the lifting."

I agree with Sir Raul there. Lifting FDI Consti restrictions is a necessary but not sufficient condition for more FDIs coming in. The main problem of PH bureaucracies and political class is not respecting the rule of law, having frequent double talk, changing rules midway. Sir Raul cited PIATCO fiasco in building NAIA 3. 

I know of two other sectors where FDIs are already allowed with little restrictions, up to 100% ownership but foreigners are still penalized.

1. Mining, Tampakan gold-copper FTAA project by SMI, $5.9B, the single biggest FDI in the country. The mining firm has passed or submitted most or all requirements by the national govt (DENR, BIR, SEC, etc) but LGU, Cotabato provincial govternment, upon the prodding of mostly Manila-based bright boys and girls planet saviors who are anti mining, killed the project because they won't allow open pit mining.

2. Drug price control, affecting mostly multinational pharma. Round 1 in Sept. 2009 under former President Gloria Arroyo and DOH Sec. Duque, round 2 in Feb. 2020 under President Duterte and DOH Sec Duque (again).

Plus electricity price control at WESM affecting gencos investing in peaking plants. Recently pork price control, etc.

If ever there will be charter change (cha-cha), I wish to see the new Constitution to be as short as possible, something like 10 pages maximum. No details like 60-40 max foreign equity investments in many sectors. All details should be done by legislation.

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