‘Constitutional, legal & regulatory impediments.’ (Part IV) -Enrile-Belmonte constitutional initiative

A recent Supreme Court decision bearing its judgment on what constitutes capital in the 60-40 Filipino to foreign equity rule concerning foreign investments inspires further commentary on the restrictive economic provisions in the constitution.

The ruling itself appears too esoteric to be of wide public interest. But it has both direct and indirect far-reaching impact on the economy and the way Filipinos can entertain foreign capital presence.

“Simple is beautiful.” The simplicity and lack of complex economic provisions of the political constitutions of other countries show that “less is more.” Simple political constitutions are better than those cluttered with economic details such as ours. In public communications lectures, the KISS principle is often invoked: Keep it simple, stupid. Translated more politely, it says, Simple is beautiful. And it works.

The many restrictive economic provisions in the Philippine constitution have made us unproductively busy. Other nations that have written simple constitutions for themselves attend to the problems of progress by looking for ways to allow more foreign participation so as accelerate the reality of economic progress. And so they deploy their human resources to deal with that grand issue.

Sadly in our case for many decades now, we devote the time of our best minds to unravel the problems of defining economic limitations, restrictions and oftentimes prohibitions so that we can put foreign direct investments in its confined proper place. All nations regulate foreign direct investments. In our case, we take our mission to protect ourselves with a passion. The complex constitution that we have devised requires us to protect ourselves from being taken advantage of by others.

“We exhaust our best minds in less productive work.” Other countries do not worry about the same concerns that we have. The laws passed by parliament can do the job. Without the minutiae of constitutional laws, their citizens are able to solve and adapt to problems quickly without having to burden their Supreme Court.

In our case, we spend too much time dealing with economic issues as a constitutional point in the law. Constitutional provisions are hard to amend. Since their focus is constitutional, the verdicts on them give an aura of finality as to the decisions on the issues. Thus, the stakes are often very high. The prize of victory or the cost of defeat is high. An outcome of this is that the major stakeholders in the process often tend to involve very powerful political and economic interests.

To complicate things further, the restrictive provisions have produced a huge industry that tries to facilitate many legal ways by which the prohibitions in the constitution could be side-tracked. There are loopholes to devise and various “alternative” contract arrangements to prepare and manage. In short, there is a lot of unproductive activity that substitutes for work.

In fact, there are many arrangements that are in the nature of legal dummies for the actual investors – procedures that are perfectly legal – but which only add to the cost of doing business and which reduce the amount of economic efficiencies that enterprises could gain by locating within the country. In these industries, new stake holders are created composed of individual businesses that establish their network of gains from acting as dummies in support of foreign investors. These are service industries simply add layers of costs of doing business.

Such a system produces winners. Those winners claim the resources and expand on their economic spheres often through a monopolistic stranglehold on the privileges that are awarded to them as dispensation of the decision.

The economic restrictions impose a cost to the nation in filling it with litigious business problems. The courts are filled with cases involving these problems. The most important among them end up at the grand door steps of the Supreme Court. Sometimes, this happens like an express train delivered them.

At this level of the legal conflict, when the Supreme Court gets involved, the best minds of the country get waylaid to assist in finding a final resolution to the legal issues. In this way, the country saps its best legal and economic minds to work on issues that other countries do not worry much about. In those countries, their legal minds are able to do other productive things, such as preparing and supervising the preparation of proper contracts and, more important, generating new ideas.

In other countries, their high courts have more time to deal with other important legal issues. Their dockets do not get bogged down because, as always, constitutional issues do not take a great toll on the time of the court. With no economic restrictions in the constitution, much of that workload would be taken off the court’s time. They can proceed with other matters of equally great consequence for the nation.

Our country tends to devote too much important time and resources to deal with such questions that other countries save for more productive economic endeavors. In many instances in the past, those restrictive provisions have blocked beneficial directions in economic development for the country.

The mandate of the Supreme Court calls upon it to rule on these provisions. By affirming them or clarifying these legal questions, the high court defines more clearly for us what the constitution had meant or had intended. Even when the rulings are clearly disadvantageous or misplaced in the modern world in which we live, it is almost impossible to amend these rules because of the difficulty of changing the constitution. In other countries, since such rules do not appear in their superior law, such matters if they were part of economic policy were as easy to amend as other laws can be legislated.

“Outcomes summarized.” So the end results for us as an economy we get the following:

• Though we wanted to attract foreign investments, we often ended up losing them to our neighbors that have more attractive incentives and investment frameworks;

• We have failed to optimize the nation’s earnings from natural resources because of restrictions that have prevented good projects from proceeding;

• Our agricultural industries have not developed fast enough because of lack of participation of foreign capital in this field, including in land use;

• Our tourism industries have not advanced sufficiently because restrictions in land use and other related touristic activities have discouraged big international players who invest and bring it tourists from their countries.

• Many of our workers who cannot find satisfactory employment at home look for work abroad.

Ironically, for all the best intentions of these restrictive economic provisions the main loser is the nation as a whole. –Gerardo P. Sicat (The Philippine Star)

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