In early February, 64 members of the House Constitutional Amendments Committee adopted Resolution of Both Houses No. 2 (RBH 2). Penned by House Speaker Lord Allan Velasco in 2019, the resolution would allow Congress to ease the restrictive economic provisions that have, among other things, limited the inflow of foreign investments. 

Duterte-allied lawmakers aim to amend the relevant constitutional provisions, namely those found in Articles XII (on national patrimony), XIV (on education, science and technology, the arts, culture, and sports), and XVI (on general provisions in mass media and advertising). Under RBH 2, the phrase “unless otherwise provided by law” would be added to those provisions that limit foreign participation according to proportionate shares in capital. For example, the phrase would be added to Section 11, Article XII which limits foreign ownership of public utilities to 40 percent. In effect, this would let Congress pass laws that decrease or even remove the percent requirement provided by the Constitution. 

Nebulous Justifications

Charter change, colloquially termed “Cha-Cha,” refers to changes made to the 1987 Constitution. These changes are typically pursued through amendments to certain provisions of the Constitution.

The first attempt to amend the 1987 Constitution was under then President Fidel Ramos in 1997, just one year before the expiration of his term. The proposed amendments included a shift to a parliamentary system and the lifting of term limits of public officials. The proposal was met with public outrage and demonstrations, including a rally at Rizal Park estimated to have been attended by half a million people. 

The prevailing interpretation of the Constitution finds that changes may be introduced in three ways: a People’s Initiative, a Constitutional Convention, or a Constituent Assembly (see sidebar). Presently, legislators allied to President Rodrigo Duterte are pursuing the lattermost avenue. Once a Constituent Assembly is convened, amendments are passed upon a three-fourths vote of Congress’s members. Because the Constitution is silent on whether the House of Representatives and the Senate should vote jointly or separately, proponent lawmakers have asserted for the former. If both legislative chambers were to vote as a single unified body, the Senate would be heavily outnumbered by the House, where President Duterte’s allies have a supermajority.

With only a little over a year to go before the 2022 elections, there is speculation that lawmakers may be pursuing charter change to extend their terms. Critics of the renewed push fear that convening a Constituent Assembly under the current administration will leave the Constitution vulnerable to political amendments, such as those involving term extensions or a lifting of term limits. Though neither of these purposes was brought up in defending the current proposal for amending the Constitution, the proponents’ stated prospect of enticing more foreign investors through such a move nonetheless raises cause for alarm. 

According to Velasco, foreign investment plays a crucial role in the Philippine economy by supporting domestic jobs and the creation of physical and knowledge capital across a range of industries. Earlier this year, House Ways and Means Committee Chairperson Joey Salceda spoke before the House Constitutional Amendments Committee in support of RBH 2 and said that, under the Constitution’s current economic provisions, the country “has locked itself out of significant foreign investments, and therefore job creation.” 

The Philippines is among the world’s most restrictive countries to foreign direct investment (FDI) and holds the highest FDI restrictive index in the ASEAN region according to the Organisation for Economic Co-operation and Development’s 2018 FDI stimulus index. Salceda projected that if RBH 2 will be passed in 2021, the Philippines could expect a 0.55 percent increase in the country’s gross domestic product (GDP) and the creation of no less than 422,470 jobs. He also claimed that over a ten year-period, from 2021 to 2031, the country would enjoy an annual average increase of P330.45 billion in FDI, a 1.86 percent increase in GDP, and 660,897 new jobs.

Reading the Fine Print

RBH 2’s critics argue that amending the Constitution will neither mitigate joblessness nor alleviate the adverse economic effects of the pandemic. These goals, they say, will be better achieved through meaningful fiscal stimulus. 

“A large stimulus package closer in magnitude to the projected P1.74 trillion contraction in GDP in 2020 will immediately spur growth, raise employment, and improve the welfare of poor households compared to the distant and uncertain gains of merely speculated foreign investment years from now,” said Rosario de Guzman, head of research at IBON Foundation, to the House Constitutional Amendments Committee on January 14.

It is unclear how the amendments, which are slated for ratification alongside the May 2022 national elections, will be able to address the immediate effects of the pandemic. Despite the Constitution’s purported over-restrictiveness regarding foreign investment, FDI has experienced significant growth since the 1980s. From 1980 to 2019, FDI increased 7,000 percent in absolute amount and 24.1 percent as a share of GDP. The increase in foreign investment, however, has failed to translate into a deepening of the nation’s industrial base. 

Take for example the manufacturing industry, where FDI has accounted for 70 percent of the total approved manufacturing investments in the country over the last twenty years. Since 2010, semiconductors and other electronic products have comprised more than half of all commodity exports. Yet, despite significant growth in exports, the Philippines remains locked in low-yield, labor intensive segments of the electronics global production network, specifically semiconductor assemblage and packaging. 

The potential benefits of foreign investment should not be discounted. However, allowing for even greater levels of FDI without the proper policy safeguards and at this ill-advised moment will be inimical to the nation’s long-term development. 

Despite proponents’ claim that liberalization is necessary for the country to stay afloat on the world stage, global trends appear to suggest otherwise. Since the 2008 global economic crisis, several countries, such as the US, the UK, and Australia, have begun shifting towards more protectionist policies. The pandemic has only accelerated this trend. The United Nations, in its World Investment Report for 2020, projected that FDI in developing Asia, normally the growth engine of FDI worldwide, will decrease by 30 to 45 percent.

Aside from the salient constitutional provisions, the Foreign Investment Act provides additional guidance on foreign investment. It stipulates that foreign ownership in industries can go up to 100 percent, except those specified in the Foreign Investment Negative List, which outlines the permissible scope of foreign ownership. But the law has allowed industries to bypass the 60-40 rule since its inception in 1991. President Duterte issued its 11th iteration in 2018, allowing up to 100 percent foreign ownership in five industries, including internet businesses. 

Because foreign participation has already been widened and the 60-40 rule circumvented through various legislative measures such as the Foreign Investment Act, the Investors’ Lease Act, and the Special Economic Zone Act, it is suspect why constitutional reform is still being pushed as a necessity. 

Timing Is Everything

Opponents of charter change have also questioned its timing given the looming presidential elections. Political analysts have observed that, as far back as the 1935 Constitution, charter changes involving sincere economic reform were attempted during an administration’s first two years. But changes coinciding with a term’s end, as with the current push, have historically been motivated by a desire to extend the term. 

The resolution’s author, House Speaker Lord Allan Velasco, as well as its proponents, including Constitutional Amendments Committee Chair Alfredo Garbin Jr. have justified its timing with assurances that changes will involve only economic reforms.

Likewise, Senators Francis Tolentino and Ronaldo “Bato” dela Rosa filed their own versions of RBH 2 in the Senate in early December 2020. Their resolution explicitly states that the proposed amendments will be “limited to the provisions on democratic representation and the economic provisions of the Constitution.”

It is precisely the nebulousness of the phrase “democratic representation,” however, that has caused concern over the scope of possible changes. In response, proponents continue to stand by the sincerity of Velasco’s statements, maintaining that the 287-member majority coalition will follow the speaker in assuring only economic reforms will be done. 

On the other hand, Senate President Vicente Sotto III has been clear that President Duterte aims to use a Constituent Assembly as a means to purge the party-list system of leftist groups that have allegedly been infiltrated by communist insurgents. Sotto said of a meeting in Malacañang last December, “He [Duterte] merely said to look into the possibility of amending the Constitution, particularly the provision on the party-list system.” 

It seems, then, that the situation is without a silver lining. On one hand, the suspected political motives, if materialized, point to an erosion of democracy. On the other, even if those concerns prove needless, economic liberalization through charter change may likewise point to an equally troubling conclusion. ●