More economic liberalization via Cha-cha is anti-people and anti-development

Nationalists and anti-liberalization advocates must expose the deception that increased liberalization through Cha-cha will create more jobs and address poverty. (Photo from sulekha.com)

First published by The Philippine Online Chronicles

On Thursday (Sep. 29), the leaders of the House of Representatives (HOR) and the Senate announced that they have agreed in principle to adopt a bicameral constituent assembly as a mode of changing the 1987 Constitution. Senate President Juan Ponce Enrile and House Speaker Feliciano Belmonte made the announcement at the conclusion of their legislative summit.

Without Aquino’s consent?

Malacañang was quick to distance itself from the latest campaign to push for Charter change (Cha-cha). Secretary Butch Abad of the Department of Budget and Management (DBM) was quoted as saying that President Benigno S. Aquino III remains firm on his position that Cha-cha is not a priority of his administration.

But the active role that Senator Franklin Drilon, a prominent member of the President’s Liberal Party, is playing in the current Cha-cha initiative could not be without the approval, or at least prior knowledge, of Aquino and the ruling party’s leadership. It was Drilon who proposed during the lawmakers’ summit that the House and the Senate use the legislative process and lawmaking procedure in amending the Constitution.

As Drilon explained, each chamber will deliberate separately on Cha-cha proposals like an ordinary bill and then “exercise constituent function through a bicameral assembly.” But unlike a regular bill, the proposed amendments will be submitted not to the President but to the people for ratification.

Contentious issue

Cha-cha has always been a contentious issue since former President Fidel Ramos first pushed for it in 1997. Various sectors had massively mobilized against past attempts to tinker with the Constitution due to persistent fears that the incumbent Chief Executive and his allies in Congress have ulterior political motives. From Ramos to Joseph Estrada, and most especially under Gloria Arroyo, Cha-cha was widely perceived as a ploy to perpetuate the incumbent to power.

For Cha-cha advocates, the perfect time to push for constitutional amendments is now when the current President enjoys high trust ratings and is widely seen as uninterested in prolonging his stay as a leader. In fact, Drilon’s proposal is unoriginal. The process of amending the Constitution through the regular process of the legislature in enacting a law was first espoused by former House Speaker Prospero Nograles.

Like Drilon, Nograles also said that only specific economic provisions of the Constitution will be amended through this process. Despite such assurance, the scheme did not prosper because of the widespread distrust in Arroyo and her allies including Nograles. Drilon and the Cha-cha proponents are hoping that this time around, the public reception will be different.

Expose the deception

The political landscape may have changed and created a favorable condition for those advocating for Cha-cha, which include not only the politicians who want to consolidate their power and preserve their political dynasties but also the big business groups in the US and Europe who have long been pushing for more liberalization of the economy.

Thus, there is a looming serious challenge for nationalists and anti-liberalization advocates to persistently expose the deception being peddled by Cha-cha advocates that increased liberalization through constitutional reforms will bring in more foreign investments and create more jobs, and thus address the country’s backwardness and worsening poverty.

At present, arguments for further economic liberalization via Cha-cha are being articulated by Rep. Loreto Ocampos (Misamis Occidental, 2nd district), who chairs the House committee on constitutional amendments. Ocampos has merely revived the very same proposals that previous Cha-cha attempts had already proposed.

These are: (1) Removing the 60 – 40% equity limitations; (2) Removing exclusive control and management by Filipinos in companies with foreign equity; (3) Expanding the role of foreign investors in exploration, development, and utilization of natural resources; (4) Allowing foreign ownership of industrial lands; (5) Liberalizing media by allowing foreign investments; (6) Liberalizing the practice of profession by allowing foreigners to practice their profession in accordance with the principle of reciprocity; (7) Liberalizing investments in educational institutions by allowing foreign investment in tertiary education; and (8) Extending the 25 + 25 land lease agreement.

According to Ocampos, amending the economic provisions of the Constitution has two main objectives: (1) To open up the economy to attract foreign direct investments and (2) To make the economic policies more flexible to meet the ever changing dynamics of domestic and foreign economic environment.

Oblivious to lessons of global crisis

Such arguments are oblivious to the lessons of the raging global financial and economic crisis and to the lessons of the past three decades of intense liberalization of the economy. The global crisis and the country’s experience under neoliberal globalization have affirmed the need to develop a self-reliant economy instead of depending too much on external drivers of growth including unbridled foreign investment. Since the financial meltdown in 2008, foreign direct investment (FDI) has been declining by almost 16% a year, contributing to the significant slowdown in the expansion of the gross domestic product (GDP).

Despite the supposed constitutional restrictions on foreign capital, actual policies especially since the globalization frenzy of the 1990s have created an environment very favorable to the influx of FDI in the domestic economy. But the economy has not only failed to develop but became even worse, with poverty and joblessness today at their most intense.

Policy makers must disabuse themselves of the notion that more FDI means less poverty and more development. FDI and foreign investors have no altruistic, humanitarian goals to help the poor and whatever development gain is merely secondary to profits generated by their investment. As such, unregulated FDI can be merciless, draining host economies of their resources and destroying local industries and productive forces like what the country has been undergoing for decades.

Destruction of jobs, assault on labor

It is true that FDI may generate some employment. However, if left unrestricted, it could have a negative impact on net job creation in the long run as local businesses and industries are forced to either close shop because of undue foreign competition or reduce their workforce in order to survive. Even when new openings in the economy are made available to foreign investors through Cha-cha, it still does not guarantee that they will start to redirect their capital here from our neighbors in the region.

What determines foreign investor appetite is still the cheapness of labor power and docility of the workforce. Thus, we should not be surprised when constitutional provisions (although violated repeatedly) that provide social protection to Filipino workers will be dismantled as well once the Constitution is opened up for revisions to complement the increased liberalization of the economy. Consequently, Cha-cha will further legitimize and promote the already rampant contractualization and other forms of labor flexibilization as well as further depression of wages such as in export processing zones (EPZs) where there is a very high concentration of FDI. Under these circumstances, FDI negates the prospects of sustainable, secure, and quality job creation in the country.

Total surrender of sovereignty, patrimony

The existing constitutional restrictions on certain economic activities – despite the overall weakness of the Constitution and repeated violations by the powers-that-be of its protectionist provisions – must not be given up and instead be used to safeguard whatever little is left of the country’s sovereignty and patrimony, which have been seriously undermined by past neoliberal policies.

A case in point is public utility like the provision of water supply and sanitation, distribution of electricity, mass transportation and communication. The 60 – 40 restriction were put in place precisely because of the recognition that these sectors play a key role not only in ensuring that the people live decently but also in promoting national development and building industrialization.

In fact, such crucial role should have made all public utilities in the country controlled and owned by the state but because of privatization, ownership and control have been transferred to profit-seeking private corporations with disastrous results for the people. This situation is surely to aggravate when foreign companies are allowed to fully own public utilities in the country.

Whenever their profits are threatened, private foreign companies will readily compromise the national interest and general welfare to protect its commercial viability. One example is French company Suez, which used to control Maynilad Water Services Inc., a private water concessionaire that the Arroyo administration still bailed out in 2004 after a long dispute arising from a rate hike petition.

Intensified plunder of natural resources

Meanwhile, the proposal to allow foreign ownership of lands, lengthen the duration of land lease deals, and expand the role of foreign investors in exploration, development, and utilization of natural resources in the country will further legitimize and heighten the exploitation and plunder by foreign corporations of the country’s rich resources.

While actual experience shows that the Constitution has not effectively restricted full foreign control over the country’s strategic natural resources like minerals (through the Philippine Mining Act of 1995) and petroleum (through Oil Exploration and Development Act of 1972), dismantling the stated restriction makes the current situation much worse. The country has no shortage of experience showing how the Philippines and the people have been disadvantaged such as the case of the Malampaya natural gas project, which is under the control of global oil giants Shell and Chevron. More importantly, in a situation where a great majority of Filipino farmers are landless, allowing foreigners to own lands in the country is blatantly unjust and immoral.

Undermining self-reliant, independent economy

Globalization and its objective of creating more opportunities for First World capital to maximize the exploitation and plunder of the economies of poor countries are incompatible with the thrust towards building a self-reliant and independent national economy. While international economic relations are important to national development, it can only play an effective and beneficial role if indispensable pre-requisites are met to achieve a truly healthy foreign trade and investment relation, including first and foremost the establishment of a vibrant domestic economy that could stand on its own.

Historically, no country has achieved industrialization without ensuring the protection of its domestic economic sectors and reserving specific economic activities to its own people, which not only continues but in the light of the global crisis has even gained momentum.

A gross untruth

By itself, FDI is not bad and can actually contribute to overall economic development and industrialization. But it can only play a positive role in the economy if FDI attraction is designed in a manner that answers specific requirements or needs of the domestic economy. Unfortunately, this has not been the case in the Philippines. The economy itself is being designed to meet the needs of foreign capital such as the country’s experience with the privatization of public utilities and infrastructure development and liberalization of agriculture, mining, retail trade, etc. in the past three decades.

Finally, the structural flaws inherent in the current social system dominated by elite and foreign interests are the ones behind the country’s perpetual backwardness and worsening economic problems that have long been emasculating our economic development and impoverishing our people. That these problems will be corrected once Cha-cha is implemented is a gross untruth and only intends to mislead the people in addressing the roots of our deteriorating backwardness and poverty. #

Advertisements

2 thoughts on “More economic liberalization via Cha-cha is anti-people and anti-development”

  1. There are so many errors of logic here. Let me address a few:

    Point 1:
    You say “Such arguments are oblivious to the lessons of the raging global financial and economic crisis and to the lessons of the past three decades of intense liberalization of the economy. The global crisis and the country’s experience under neoliberal globalization have affirmed the need to develop a self-reliant economy instead of depending too much on external drivers of growth including unbridled foreign investment. Since the financial meltdown in 2008, foreign direct investment (FDI) has been declining by almost 16% a year, contributing to the significant slowdown in the expansion of the gross domestic product (GDP).”

    There has been no “intense liberalization of the economy” with regards to FDI. The 1987 Constitution continued to be in force in the past three decades. Would you please point out instances of “intense liberalization of the economy” with regards to FDI in the past three decades?

    You don’t seem to understand that trade benefits both sides. Self reliance is good only when you have enemies all around you, but as an economic policy in times of peace, it is nothing but a policy for self-flagellation. Even in a global crisis, an isolationist policy can be bad for the country.

    Point 2:
    You say “Despite the supposed constitutional restrictions on foreign capital, actual policies especially since the globalization frenzy of the 1990s have created an environment very favorable to the influx of FDI in the domestic economy. But the economy has not only failed to develop but became even worse, with poverty and joblessness today at their most intense.”

    How can policies alone overcome what is written in the 1987 Constitution? While it is true that FVR did try to liberalize the economy, he himself realized that policy alone can only do so much. No, the economy benefitted from what FVR did. It did not become worse. Our economic condition has deteriorated since FVR stepped down precisely because succeeding Presidents have not been as effective as he was in liberalizing. One measure of FVR’s effectiveness is the country’s economic freedom score during his term: it rose to 7.1 in 1995, it only came back to that level again in 2005, and in 2009 it went down to 6.5. (See http://www.freetheworld.com) We were economically much better under FVR.

    Point 3:
    You say: “Policy makers must disabuse themselves of the notion that more FDI means less poverty and more development. FDI and foreign investors have no altruistic, humanitarian goals to help the poor and whatever development gain is merely secondary to profits generated by their investment. As such, unregulated FDI can be merciless, draining host economies of their resources and destroying local industries and productive forces like what the country has been undergoing for decades.”

    Yes, more FDI does mean less poverty and more development. And yes, corporate investors are non-altruistic, and rightly so. However, “unregulated FDI” is not as “merciless” as you paint it to be. I was just discussing exactly this point with another person who have similar views as you have. He was saying that people in China who work in factories that make Apple’s iPhone are like “serfs and slaves”, and that Apple is “exploiting” them. What a perverted view! I asked him whether people in Pinas who are desperately looking for a job are better off than those people in China who have accepted a job making iPhones. He did not answer my question.

    Socialists look at the labor price disparity between, say Singapore and PInas, and conclude that any corporation from Singapore that outsources manufacturing in Pinas must be exploiting Pinoys. By this kind of logic, Pinoys should demand as high a salary as workers in Singapore with similar skills. Of course, this removes the price advantage of labor in Pinas, and so that corporation would rather not outsource in Pinas. In essence, demanding pay on par with workers in Singapore is like demanding to sell water near a river at desert prices. It is only natural and logical that the price per gallon of water is higher in the middle of a desert compared to the price of the same quantity water near a river.

    Rather than bemoan the labor price in Pinas, we should examine why it is so low. The answer is elementary economics: the demand for labor is very low compared to the supply, or too many people looking for a job while the number of open jobs are much less. What do we do to fix the demand side? Your answer is “self-reliance”. Kim Jong-il has caused too much suffering among his own people with his policy of “self-reliance”, and we are driving labor away from our country as a result of the same policy. It’s time to change.

  2. Arnold, you argue thus: “By itself, FDI is not bad and can actually contribute to overall economic development and industrialization. But it can only play a positive role in the economy if FDI attraction is designed in a manner that answers specific requirements or needs of the domestic economy.”

    So, what actually is your beef against FDI when you yourself assert that the same is not bad and can actually contribute to overall economic development and industrialization? Well, you qualify your assertion by pointing out the need to design an FDI attraction structure that answers specific “needs of the domestic economy.” Yes, by all means, we should design such an FDI attraction structure, and the prerequisite primordial redesigning has to start with constitutional reforms, i.e., economic liberalization, shift to parliamentarianism, and federalization.

    The problem, however, is that you insist upon the historically demonstrated and empirically proven futility of your autarkic paradigm where your design parameters are utterly, unrealistically, and hopelessly delimited to the “needs of the domestic economy.” This autarkic paradigm is practically nonexistent in the world of reality, save perhaps in the cretinistic cerebral crevices of a few remaining yet at times still noisy pseudo-nationalists which, of course, we hope you aren’t actually that, Arnold.

    What are your real-world models? China? Vietnam? Aren’t they attracting more FDIs that we pitifully do? Or, is it Venezuela? Well, wait what will surely happen to Venezuela when her oil wells finally run dry!

    Anyway, the globe, thanks to modern technologies, is now one irreversible integrated economic unity, at least for now. Any country that, out of sheer insanity and/or bloated national super-ego, seeks to disengage itself from this unity by means of your autarkic paradigm–and thus impose upon itself the vestigial infirmity and inutility of a cocoon, so to speak–is that country that seeks to regress into a self-destruct mode.

    Finally, you conclude, thus: “the structural flaws inherent in the current social system dominated by elite and foreign interests are the ones behind the country’s perpetual backwardness and worsening economic problems.” Fine, well stated, Arnold, but that is precisely the point: we need, as soon as possible, to fix such “structural flaws inherent in the current social system”. What exactly do you propose to reform these flaws, apart from your autarkic suggestion? A Venezuelan model? Please expressly say it, so that the issues can be joined for further, hopefully, empirically-based discussions!

What do you think?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s