“Instead of sending our labor force abroad, let us attract foreign investments and create jobs here in Philippines.”
This, according to House Ways and Means Chairperson and Albay 2nd District Rep. Joey Salceda, would be one of the benefits of amending the economic provisions of the Constitution––the intent of of Resolution of Both Houses (RBH) No. 2, which would then allow Congress to lift the economic restrictions that have limited the inflow of foreign investments.
“The Philippines is among the world’s most restrictive countries to foreign direct investment (FDI) according to the 2018 OECD (Organisation for Economic Co-operation and Development) FDI’s stimulus index,” Salceda said.
In 2018, the Philippines had a total FDI Index (OECD FDI Regulatory Restrictiveness Index) of 0.374, the most restrictive of all the countries it measured that year.
The country’s ASEAN neighbors had far more open economies, per the 2018 FDI Index. Singapore was the least restrictive, with a total FDI Index score of 0.048, followed by Cambodia (0.054), Myanmar (0.117), Vietnam (0.130), Brunei Darussalam (0.146), Lao People’s Democratic Republic (0.190), Malaysia (0.252), Thailand (0.268), and Indonesia (0.345).
The OECD FDI Index measures statutory restrictions on foreign direct investment across 22 economic sectors. It gauges the restrictiveness of a country’s FDI rules by looking at the four main types of restrictions on FDI: 1) Foreign equity limitations; 2) Discriminatory screening or approval mechanisms; 3) Restrictions on the employment of foreigners as key personnel and 4) Other operational restrictions, e.g. restrictions on branching and on capital repatriation or on land ownership by foreign-owend enterprises.
Restrictions are evaluated on a 0 (open) to 1 (closed) scale. The overall restrictiveness index is the average of sectoral scores.
In his presentation to the Committee on Constitutional Amendments, the solon explained that with the current economic provisions of the Constitution in place, the country “has locked itself out of significant foreign investments, and therefore job creation.”
“We have spent hundreds of bilions in pesos in foregone revenue for tax incentives, when we have not tried a simpler, cheaper solution: opening industries in need of foreign capital to foreign invesment through legislative action.”
Salceda––an economist voted by foreign fund managers in Asiamoney's annual survey as Best Analyst in 1995 and Best Economist for four consecutive years from 1993 to 1996––pointed out that RBH 2 “will have a more positive impact on the economy than CREATE.”
Using a dynamic stochastic general equilibrium (DSGE) model––a method in macroeconomics that attempts to explain economic phenomena, such as economic growth and business cycles, and the effects of economic policy through econometric models based on applied general equilibrium theory and microeconomic principles––Salceda quantified the impact of lifting the economic restrictions in the Constitution.
If RBH No. 2 is passed in 2021, Salceda projects that by 2022 an increase in FDI of 211.21 billion pesos, a 0.55% increase in the country’s gross domestic product, and the potential generation of 422,470 jobs.
Over a period of ten years, from 2021 to 2031, the veteran lawmaker expects an annual average increase of 330.45 billion pesos in FDI, 1.86% increase in GDP increase, and 660,897 new jobs.#
