‘Three ASEAN neighbors and their constitutions’ – (Part VI) – Enrile-Belmonte initiative

Let us examine more specifically the political constitutions of three of our closest neighbors in ASEAN: Indonesia, Malaysia, and Thailand. These economies have managed impressive economic performance over time.

“Investment incentives laws and constitutions.” Do these three neighbors have constitutional provisions that define and restrict the participation of foreign capital in their economic activities? No, they do not! Do they have specific laws seeking to define the limits and control of foreign capital in their economy? Yes, of course, they do! Their governments passed laws and investment regulations that delimited the role of foreign capital within the economy.

These neighbors launched their respective industrialization programs about one decade after ours. They looked up to our experience – up to a point. When they enacted their investment incentives laws, they imitated how we structured our laws. As they did not have the economic restrictions that our constitution imposed upon us, their provisions for attraction were more generous and positive if not much more imaginative.

“Indonesia’s 1945 constitution.” This constitution was written for Indonesia prior to independence and it served to guide the young republic in its early years. Then came a period of time when another provisional constitution replaced it. When Suharto took political power in the 1960s, he found the simple 1945 constitution to his liking. He made it the country’s law of the land throughout his long period of political rule.

The constitution made general statements about the country’s political principles. The only economic provisions that could be read into it is on that which said that the major means of production are to be controlled by the state and that state had a role to take care of the poor. Such provision practically gave the government the license to undertake economic policy as it saw fit.

After the fall of Suharto, attempts were made to amend the Indonesian constitution to introduce political amendments. The changes were designed to improve the provisions to enhance democratic institutions. But the 1945 constitution stays essentially intact. And the amendments did not add any constraining provision regarding the economy.

“Malaysia’s constitution.” The political constitution of Malaysia is a very simple political statement about the structure of the Malaysian federation. It lays out the political structure of the Malaysian state. It is a monarchy with the head of state alternating among the federal states of Malaysia.

It is a very brief constitution. There are no economic provisions. The social contract between the government and the people is defined by the statement of the fundamental liberties of the people. This is like the bill of rights. The closest provisions related to economic issues pertain to private property but was more a statement of freedom from unjust expropriation. The Malaysian constitution is elegantly written in simple English.

“Thailand’s constitution.” Thailand’s constitutional history is probably the most volatile in the world. This can be said judging from the number of constitutions (17 of them since 1932) that have been adopted to define Thailand’s government. Military coups of the government are the dominant scenario of Thai political life, each coup bringing with it a new version of the constitution. The country’s political system is a monarchy that is run by a parliament that is subservient to the military.

One thing is common in Thailand’s many constitutions. They did not contain economic provisions. The changes in the political constitutions meandered between different provisions of the political structure of the state and the balancing of political forces within society. Such changes often involved moves between unicameral to bicameral legislative bodies and by the changing proportions of elected to appointive members of parliament.

Without any directions on how the constitution meant to govern the economy, Thailand ‘s various governments addressed the economic problems of the country as they saw fit. The guidance of the economy was fluid and less contentious than the politics of the nation. As a result, agriculture, industry, and the services industry developed smoothly over time.

“Impressive development across the decades despite volatile external economic and political challenges.” All three countries have grown impressively over the last three decades – since the 1970s. Our growth achievements were at par with these countries until the 1980s when they all made permanent gains ahead of us. Each economy weathered the financial crisis of 1997 through the appropriate adjustments adopted by each government.

During the energy crisis of the 1970s, Indonesia and Malaysia were energy surplus countries while we suffered a serious energy shock. They had a prolonged economic boom compared to our choppy growth. Energy explorations of previous years undertaken by foreign companies made them discover their energy resources. Thailand had few energy resources but discovered substantial natural gas during the 1980s, again through successful explorations by foreign companies.

During the 1980s to the present, these countries managed to experience large infusions of foreign capital into their economies. At first this was through natural resources using investments in minerals and land but later also through expansion of manufacturing investments. Also, their public utilities and public infrastructure managed to attract enormous foreign financing to finance their expansions.

The automobile industry has become an important sector of industry in these economies. We were the country that tried to initiate the automotive industry regional complementation program. By the generous policies of Thailand to the automakers – both in permitting fully owned investments in the car manufacturing industries, Thailand has become the center of the automobile industry in the ASEAN.

All three countries have very successful tourism industries. Unlike us, they were not hampered by serious protectionist features of our tourism program in the Philippines. Their policies regarding the participation of foreign capital made possible land developments, hotel investments, and liberal air transport policies that made the foreign tourism sector grow well.

These economies have been impressive over time but they also had unique problems of their own that sometimes questioned their possible success. Indonesia certainly had much more difficult problems compared to that of Malaysia or of Thailand. For one, the population pressure in Indonesia was more intense. Other dissimilarities stemmed from different economic policies pertaining to industrial and agricultural development.

Initially, Indonesia saw its prospects differently. It also saw its huge population level as the basis for a large domestic industrial market. For years it was the most protectionist among the ASEAN countries. In many respects it was more protectionist than the industrial regime that was developing in the Philippines.

Then in the mid-1980s, Indonesia gradually opened its economy much more – especially in industry. It reformed its major industrial monopolies, allowed greater trade and industrial openness. Macroeconomic, trade and industrial reforms during the 1980s improved its industrial prospects and agricultural prospects immensely.

My e-mail is: gpsicat@gmail.com. Visit this site for more information, feedback and commentary: http://econ.upd.edu.ph/gpsicat/. –Gerardo P. Sicat (The Philippine Star)