The Charter Change Challenge

Posted by BongV on Feb 6, 2013

The Philippines can’t run nor can it hide from the fact that foreign direct investments (FDI) have led to economic development in its ASEAN neighbors – as well as Brazil, Russia, India, and China. And in case you don’t know, the United States is still the number one destination of FDI.

The central stumbling block to the entry of FDI in the Philippines continues to be the Philippine Constitution. Even if the Philippines has upgraded infrastructure, a functional financial market, streamlined registration processes – if Philippine rules keep foregn investors on a very tight leash, the country will lose these investors to countries where investors have freer rein.
The impact of FDI on creating jobs, reducing poverty, and increasing prosperity to a wider section of the populace the world over is very well documented.

Peace and Prosperity. Mural by Elihu Vedder. Lobby to Main Reading Room, Library of Congress Thomas Jefferson Building, Washington, D.C. Main figure is seated atop a pedestal saying “PEACE–PROSPERITY”. Artist’s signature is “ELIHU VEDDER / 1896″.

And yet, the Philippines remains stuck in a restrictive constitution that has failed to deliver the promises of a better life for Filipinos after removing Marcos from power. Apparently the message that a change of leadership from military-centric to civilian authority without changing the restrictive economic policies does not lead to a change in economic outcomes has been lost to Filipinos. In other words, meet the new boss, same as the old boss.

The Balance of Forces

Instead of removing the restrictive policies, the Filipinos have chosen instead to just complain about the lack of jobs, the pervasive poverty, the corruption which is an offshoot of government regulations. The million dollar question is WHY hasn’t the charter change advocacy gained traction?
The answer can be found in the balance of forces.
Protectionist/Nationalist
As a country that is still emerging from the anti-colonial struggles that came after the second world war, the Philippine political landscape has been dominated by nationalists and the so-called progressives aka leftists. It is therefore not surprising that the opposition to economic liberalization has been positioned as a “war against foreign economic interests”.
Since the inception of the Philippine state from the clutches of Spanish colonialism, the country has been a welfare state – first by the Americans, and more recently by the local mestizo elite. Most of the needs of the general populace has been dispensed through the pork barrel. Jobs were available either in state agencies or in companies that had deep connections with the state. Filipino companies also received huge subsidies – coconut, sugar, rice, poultry and livestock. Filipino firms are also protected from foreign competition – as if all foreign companies practice “unfair competition”.
The source of resistance to economic liberalization comes from the following forces:
1. Opposition from economic vested interests. The Filipino businesses who have benefitted from protection will be the number one opposition to opening the economy because it will introduce competitors which can erode their market share and bottom line.
2. Opposition from political vested interests. The Filipino politicians who have an interest in welfare-centric programs – dole-outs, subsidies are threatened by their diminished influence when their political base no longer needs welfare due to a more prosperous standard of living. There’s also the revenues they generate on the side from awarding of government projects to their cronies.
3. Opposition from beneficiaries. The Filipino citizens who have benefited from the the economic and political vested interests fear that opening the economy will cost them their jobs and priviledges. They believe that if foreign companies come in, the Filipino companies they work for will go bust – and they will become jobless (they have not considered that their current employer’s competitors will be glad to hire them).
4. A large number of fence-sitters. These are the people who know that something is wrong – but can’t seem to pinpoint the cause of the problems and therefore remain uncomitted to a course of action. This also includes the greater populace who have received more misinformation from the anti-charter change groups – but take the information with a grain of salt.
Pro-Liberalization
Liberal economics is relatively new in the Philippines because for sometime anything foreign was viewed by the masses with suspicion. This attitude has changed through the years as more Filipinos became exposed to foreign employment overseas, ironically due to Philippine protectionism which allowed Filipino businesses to get away with underemployment – and its now obvious inability to absorb the excess human resources in a productive manner.
Incumbent supported groups. Previous charter change advocacies were jump started by government incumbents, namely Estrada, Ramos, and Macapagal. The advocacy groups during this time were therefore rendered suspect – and their credibility highly questionable. The members of the grassroots organizations supported the advocacy mainly due to the personalities leading the efforts – were also dispensing government funds provided by incumbents. The motivation wasn’t ideological and the supporters of said efforts weren’t intellectually equipped to debate the merits of economic liberalization. For short, the grassroots were warm bodies, just like the hakot crowd mustered by the progressives.
Each initiative was scuttled because of fears that the incumbents would extend their terms and a repeat of the Marcos experience would happen. The grassroots who opposed charter change did so on the basis of their opposition to the removal of term limits of the incumbent president – they did not oppose on the basis that removing the economic restrictions was unacceptable.
Fiscal conservatives/Classic Liberals/LibertariansWith the entry of the protectionist Aquino camp, the pro-liberalization groups which were supported by previous incumbents slowly faded from the scene.
A new group of pro-liberalization advocates have emerged. It is a grouping that is no longer saddled by the political baggage of an incumbent administration wanting to extend term limits. The number of grassroots supporters of open markets despite being relatively few in the Philippines, at the moment, appear to be an emerging conservative movement, one that stands for free markets, minimal government, minimal regulations, and minimal taxes.
This grouping does not have clear organization lines at this point. They are however very active in evangelizing the need for an open economy via social media – mostly in Facebook and blog sites. They have yet to converge into a conservative social phenomenon like the Tea Party. What distinguishes this group from the earlier advocacies is the ideological foundation inspired by the likes of Adam Smith, Thomas Jefferson, Fredrich Bastiat, Milton Friedman, Ludwig von Mises, Murray Rothbard, Ayn Rand – and the libertarian Ron Paul.

The Evolving Landscape

Obviously the protectionists have the upper-hand, have the machinery, and have the deep pockets by virtue of being the incumbent meme and have a wide political base built on political patronage.
To the anti-charter change or more specifically the anti-economic liberalization or the protectionist bloc – anything that prevents amending the charter is good. The obvious distrust of government provided an opening for the anti-charter change forces to introduce the poison pill of term limits. If the opposition didn’t have to discuss the economic merits – it worked even better because the premises of protectionism wouldn’t be placed under microscopic scrutiny.
However, the economic realities of joblessness, hunger, and poverty are cracking the monolith of Philippine protectionism. The Filipino economic policies have not lived up to the promise of a better life for Filipinos – and there is a national debate on how to move forward.
The independent private international institutions which keep track of economic freedom, ease of doing business, prosperity also provide third party verification on how well the restrictive Philippine economy is doing or how badly it is failing.
The Internet has also provided more information on the impact of economic policies on different countries and how they achieved success or failure, Filipinos now have an alternative source of information than the crony Philippine media.
The pro-liberalization camp has its work cut out for it – if it can get its act together and craft a coherent program of action which builds on a series of successes that lead to the removal of the 60/40 provisions from the constitution and subsequently, repealing the statutes which implemented the economic restrictions.

State of the Pro-Liberalization Advocacy

The Enrile-Belmonte initiative to repeal the 60/40 provisions was a step in the right direction, albeit it’s not enough due to the non-inclusion of the education market (smacks of the sectarian schools lobby).
Unfortunately the initiative was placed in the backburner when more popular issues like the RH Law and the Sin Tax came in the forefront. Enrile and Belmonte were also stopped dead in their tracks by the overt lack of support from Noynoy Aquino. The lack of support will mean that government resources will not be made available to support the initiative.
Meanwhile the clamor is growing from the business community – from the Foreign Chambers of Commerce, from Aquino’s cabinet in light of the 2015 economic integration set by Asean Economic Community and being left out in the Trans-Pacific Partnership, and from personalities like Peter Wallace, Gerardo Sicat, Bobby Tiglao , and Bernie Villegas among others.

What can be done?

Achieving the end game – repealing the restrictive economic provisions will not be a walk in the park. In fact, repealing the restrictive provisions is just the beginning because there still awaits a forest of protectionist statutes that need to be repealed.
The protectionist camp will apply a full court press and will throw as many obstacles as they can to prevent a repeal of the provisions. This could be done indirectly – by throwing more popular issues up front so that the initiative goes into the back burner. This can also be done directly by way of grassroots organizations, mass media, and political lobbying.
The challenge to the pro-liberalization camp therefore is to step up in its efforts in the following aspects:
Organizational. There is a need for the various groups who are for economic liberalization to come together and discuss what they can bring to the table – resources, contacts in Congress, contacts in the grassroots. This also means nurturing the various individuals to form a cohesive organizational unit which can undertake information dissemination and participate in political representation.
Information Dissemination. There is a need to bring the FAQs, concepts, and value propositions in cyberspace to the real world – the mass media and direct to the masses. This means increasing the distribution of pamphlets, brochures, handouts – any form of printed materials that can be understood by the grassroots. This will take place simultaneously with efforts conducted on the Internet.
Political Representation. There is a need to identify political candidates who are supportive of economic liberalization and support their electoral campaigns by way of campaign donations or volunteering. There is also a need to make the case for economic liberalization among incumbent members of Congress with the premise that “good economics is good politics”.
Fund raising. There is a need to raise funds to support the production and distribution of information materials and the conduct of townhall meetings. Funding sources can come from income generating activities – concert/dinner-dance for a cause/merchandise sales; and/or from donations.
The charter change movement still has a long way to go – cyberspace is just the beginning, the fun begins when the proverbial rubber hits the road – who, where, when?

http://antipinoy.com/the-charter-change-challenge/