MANILA — The proposal to amend the economic provisions of the Constitution to lessen restrictions for foreign investments shows that lawmakers still insist on an economic strategy that has clearly failed to develop the economy.
The newest push for Charter change (Cha-cha) supposedly seeks to revise the 1987 Constitution to give way for economic liberalization and attract more foreign investments. However according to research group IBON, foreign direct investment (FDI) has already been pouring into the Philippines over the last decades but with little to show in terms of overall economic development. This is because the fixation on attracting foreign investment has led to foregoing any long-term gains for the domestic economy.
The Ramos, Estrada and Arroyo administrations have given liberal privileges and generous incentives to FDI over the last two decades. The net result is that foreign investors have been able to make their profits but the supposed gains for economy and the people in terms of jobs, poverty reduction, industrialization and an advanced economy have not materialized.
In fact, increasing FDI has actually been accompanied by increasing unemployment, increasing labor export, falling real wages, shrinking domestic manufacturing and more volatile growth. The share of manufacturing in the economy has been steadily falling and, at 22.2% of gross domestic product (GDP) and 8.3% of employment in 2010, is already as small as in the 1950s or over half a century ago. There have also not been any real increases in domestic capital formation or in government revenues which have increasingly relied on regressive taxes on personal consumption.
The cumulative stock of FDI has increased twenty-seven-fold from US$914 million in 1980 to US$24.9 billion in 2010, increasing as a percentage of GDP from 2.8% to 13.2% over that same period. Annual inward FDI flows, in turn, increased from US$114 million in 1980 to US$1.71 billion in 2010. As a percentage of gross fixed capital formation, these flows rose from 1.3% in 1980 to a peak of 17.7% in 2006 before dropping to 8.3% in 2009 and further to 5.8% in 2010.
Foreign investments should supposedly help in building a strong productive economic base. However there is nothing to indicate that FDI has contributed to creating a strong domestic economy able to create jobs on a sustainable basis.
Changing the charter out of a fixation to attract foreign investment fails to learn lessons from the past and is going to be a step backward for Philippine development, IBON said.