VIRTUAL REALITY: The Constitution is under siege

By Tony Lopez

THE 1987 Constitution is under siege. The reasons are economic, political and social.
Economic because in Asia, the Philippines has lagged in economic growth behind countries which were once poorer and didn’t even exist on earth during the mid-1960s.

Many areas of the economy are reserved for Filipinos who lack the capital and the technology in the herculean task of building the country’s physical infrastructure.

Modernizing the economy will require at least $5 billion in annual foreign direct investments. We don’t get that.
In a good year, FDI ranges between $2 billion and $3 billion. The year 2010 was exceptional. $7.85 billion in FDI was recorded, a record, and most of that came during the first half, and into guess what—beer.
Political because a President with awesome powers is not good if he or she is incompetent or corrupt or both. The political system has become corrupt beyond repair.

Estimates indicate up to 40 percent of the national budget is stolen. Nearly every institution has been corrupted—the police, the military, Congress, the Executive, and of course, the Judiciary. Even the Catholic Church has not been spared. Social because the disparity between the very rich and the very poor is scandalous and revolting. Officially, a fourth of the population is poor. Per surveys, up to half of the population say they are poor.

Wage earners shoulder up to 98 percent of total individual income tax collection. The very rich contributes just 2 percent.

Only 100 families control the politics and business of this country. Who or what is to blame for this massive failure in economic, political and social reformation? The Constitution, of course, if you believe analysts.
First, the Constitution, they say, is wordy. It is more than 26,000 words, and more than three times the length of the 1935 Constitution, which was a good charter, with 8,524 words.

The US Constitution has only 8,000 words and America became a superpower. Brevity thus is wisdom. It spells economic progress.

Second, the Constitution is too nationalistic. Many areas that should be open to foreigners are closed. Like telephony and media. But media and telephony have converged. Nowadays, you cannot distinguish between a TV set and a cellphone. Both carry the same functions.

Economist Dr. Bernardo Villegas recalls that in the 1950s, the Philippines was one of the most developed economies in Asia. Next to Japan. From 1950, things turned for the worst for the Philippines.
By 1973, Villeges notes, Korea and Taiwan were above us. By 1996, we were literally, “at the bottom.” BY 1996, the Philippines was “The Sick Man of Asia”.

Villegas says “we’re the worst” on the “Ease of Doing Business.” In FDI flows in 2010, “we are the least attractive among these Asian countries—China $100 billion, Indonesia $13 billion, India $37 billion, Malaysia $7 billion, the Philippines $1.8 billion. Vietnam, with per capita income that is lower than ours, attracted $7 billion.

True, the Philippine has had credit ratings upgrades—by Moody’s, Standard and Poor, Fitch and Japan Credit.

Villegas quotes a foreign observer from Singapore who says “physical prudence and good credit ratings are important, but the country needs to do more for sustainable growth.”

Restrictions and red tape

A World Bank study of 87 countries on investing across borders showed the Philippines imposed foreign equity ownership restrictions in more sectors than other countries.

The study also noted that it takes more than 17 to 80 days to establish the foreign-owned limited liability company in Manila, much slower than the average for East Asia and the Pacific.

Another problematic area was arbitration where it takes around 135 weeks to enforce an arbitration award. “This is a very independent outside assessment of what we are going to talk about,” says Villegas wryly.
Jose Almonte, a retired general and an intellectual, agrees that we should change our mindset on protectionism. He explains: “Our wealth can now be generated or created not within our borders but in cooperation with the nations all over the world. So, if we have to change the constitution, I think we have to reach the human mind.”

“What kind of constitution will we write? How can we take advantage of the work in terms of creating wealth in this country? What kind of constitution is that?”

Almonte says “we need to re-educate the entire nation on how we really plan to build this nation so that our politicians can react accordingly. “He suggests a few reforms that will trigger all of the reforms to change the entire system. (1) Let us live our core values. Who are we? Who is the Filipino? Can we answer that? If we cannot answer that it is because we never live up to what we think.”

“When President Estrada used his presidency for personal purpose, he degraded the entire nation for that matter. When President Gloria Macapagal-Arroyo, for instance, gave out symbolic contributions to Iraq, that’s all right, but for the purpose of protecting her politics, the world did not understand that. So, how did they look at us?”

Almonte warns that the Philippines is nearing the status of a failed state. That is what happened in the Middle East, he says. And the rulers were overthrown. “I think our situation is very serious,”Almonte says.
On the other hand, the Philippines has plenty of money:

Firstly, the economy is huge domestically—95 million people, the 12th largest consumer market on earth.
Secondly, Filipinos have plenty of money. Per capita GNI (Gross National Income) is $2,829—the highest ever in our history. Multiply that by 95 million and you have a $269 billion economy, the 44th largest among 192 countries.

Thirdly, Filipino expats remit at least $20 billion a year, equivalent to P860 billion, half of the government’s national budget and almost 10 percent of our GDP of more than P9 trillion. Most of the $20 billion is stranded—meaning it doesn’t go to productive uses. According to Bansan Choa of I-Remit, the $20 billion represents only a third of the actual annual earnings of Filipino expats.

Our OFWs make $60 billion a year—enough to pay our foreign debts—in one, single voucher. Petty cash, in other words.

Fourthly, the savings rate of Filipinos has exceeded 27 percent—that is, 27 percent of P9 trillion or P2.4 trillion, which is 40 percent more money than the government can assemble for its national budget.
Fifthly, the Philippine commercial banking system has P5 trillion in deposits. Only about P3 trillion has been ploughed back into the economy as loans.

Most of the remaining P2 trillion is parked, at the Bangko Sentral because a government IOU is better than any triple rated IOU of any Tomas, Dikyo and Harry.

Finally, the Philippines has $75 billion in reserves, more than enough to pay for our $60 billion foreign debts and pay for 11 months of imports.