Good morning Mr Chairman. I would like to thank the Committee Chairman, Congressman Alfred Garbin, Jr., and the distinguished members of the House Committee on Constitutional Amendments, for giving us the opportunity to brief you on our agency’s position on the proposed Charter Change on the economic provisions of the 1987 Constitution.
The Department of Trade and Industry (DTI) has always been in favor of reasonably opening up the economy and liberalizing as many restrictions that hinder the continuous and fast growth of the economy.
While our economy has been recognized as the second fastest growing economy in Southeast Asia until the year 2019, right before the pandemic struck, with average growth of over 6% for 14 consecutive quarters, we also know that such growth rates could have even been much higher if we were able to remove basic restrictions as to foreign ownership of businesses in certain sectors stipulated in the constitution.
We therefore welcome the efforts, whether through a Charter Change or the enactment of laws, in removing these economic restrictions and any barrier that limit foreign participation in investments, and economic activities. Eliminating these barriers will certainly unleash the high growth potential of the Philippines, as it will facilitate the entry of more investments that will modernize our sectors, bring in technology & new capital flows, foreign exchange, improve cost efficiencies and generate jobs. There are also productivity gains that could arise from the diffusion of knowledge & technology from foreign investors to domestic companies & workers. FDI also play a vital role in deepening our participation in the global value chains of multinational enterprises.
At present, our Constitution poses several obstacles for the entry of foreign investments in some of our essential industries. For one, restrictions in the ownership and operation of public utilities stunts the technological development and modernization of the sector at the cost of losing much needed efficiencies and cost reduction in logistics.
The same is true on the practice of foreign professionals in the country. Not only do we not receive advanced professional services, but we likewise miss the opportunity to forge arrangements for skills and technology transfer of these high-level foreign professionals to our citizens. We also are not able to exercise reciprocity that would have given more employment opportunities for Filipino professionals to practice their professions abroad.
Similarly, the highly restrictive full Filipino ownership for mass media enterprises hampers the vital technological advancement in the industry. At this day and age, such policy also seems outdated with the millions of digital and online foreign mass media content that are already accessible real time to any Filipino connected online.
We definitely find merit on the initiatives to remove any provision restrictive to economic progress and we reiterate the statement we gave in other fora that we pose no objection to the review of economic provisions of our Constitution to address these barriers to investments.
We are just mindful of the current challenges brought about by the pandemic, including the nearing 2022 presidential elections that might affect the focus, nature and pace of the deliberations, but we leave that concern to the wisdom of our legislators.
We thus equally look with favor the ongoing legislative actions that will likewise open the restrictions, such as the modifications to the Retail Trade Liberalization Act and the New Public Service Act, if only to improve investment inflows in the country and equalize opportunities with our Asian neighbors.
Modifying the current Retail Trade Liberalization Act will boost foreign investments in the Philippine retail industry through amendments that lower the minimum paid-up capital requirement for foreign-owned businesses. This would give the country greater access to diverse consumer products, more competition among retailers, more retail market access and lower entry cost for MSME products and services, further technology and skills transfer, and additional jobs for Filipinos.
Meanwhile, liberalizing the present Public Service Act by refining or limiting what constitute a public utility may take certain industries out of the coverage of the Constitutional limitations on foreign ownership.
For example, should the Honorable legislators deem it proper to remove power generation, water infrastructures, irrigation facilities, sewerage systems, or telecom from the coverage of the Public Service Act, restrictions in these industries would be eased, and would allow for much needed productivity & competitiveness enhancements in various industries through foreign investments and technology flows.
Fortunately, the Corporate Recovery and Tax Incentives for Enterprises or CREATE Act is now at the bicameral stage of Congress. We would like to thank you, the members of both chambers of Congress, for helping us work towards modernizing the Philippines’ corporate tax and incentives system. We consider CREATE as a game-changer that will help the country’s economy recover much faster and stronger, with the immediate reduction of corporate income tax rates, and modernized set of performance-based, focused and timebound incentives along with the removal of nationality requirements & export-bias inherent in our current incentive system. This will certainly attract more foreign investments.
Indeed, we cannot overemphasize the importance of a major shift in mindset and economic policy direction. Hence, regardless of the medium by which the changes in the economic policies of the state are made, we implore this Honorable body to be mindful of the importance of timing given the urgent need to re-start and accelerate the economic growth of the Country.
Thank you very much.♦
Date of Release: 26 January 2021