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Monday, July 23, 2012

Charter Change (Cha-Cha) Philippines is pushed!

In justifying his reluctance to amend the economic provisions of the Constitution, President Aquino reportedly asked, "we grew 6.4% in the first quarter, why is there a need to change the Constitution?"

The reason, Mr. President, is staring at you in the face over Scarborough Shoal: China. I was hoping that the warships of China would do for the Philippine government what Commodore Perry's American steel gunboats, the "black ships", did to Japan in 1853. The realization that they were behind the West prompted Japan's modernizing elite to overthrow their feudal system during the Meiji restoration and modernize the country's economy and institutions. Not to mention, the presence of an external threat also prompted South Korea and Taiwan to curb the abuses and rent-seeking of their respective elites in order to force-march their industrialization.

China has been growing at double digit rates (and not just 6.4% in one quarter) for nearly 30 years on the back of huge foreign investments. It has grown mighty sinews and has caused the sense of triumphalism and regional hegemonism today that threaten the Philippines and neighboring countries.

And the 6.4% one quarter growth that President Aquino is bragging about? For one thing, there's a base effect because last year's first quarter was anemic from the slowdown in government spending. For another, but the more important thing, it's almost all consumption-driven growth, as it has been the past several years. Therefore, the government had nothing to do with that growth, no matter how much politicians would want to take credit for it.

Our consumption-driven growth is being fueled by the remittances of our army of Overseas Filipino Workers, who had to find jobs abroad because there are not enough jobs here. It's therefore a sign of economic weakness, and not strength. Certainly, it's not a reason to be complacent and adopt a business as usual attitude.

We need investment-driven growth because only an investment-driven growth will enable us to grow productive capacity, improve competitiveness, and reach a level of growth high enough to grow jobs, reduce poverty, and build sinews into the economy. Our investment to gross domestic product (GDP) ratio is about 15% today. According to the Philippine Institute of Development Studies, "the investment-to-GDP ratio should surpass 25% for an extended period of time for it to achieve sustained economic growth."

The first thing we have to do is to let foreign investors know that they are welcome. However, our Constitution says they aren't. We are the only country in Asia where our basic law expressly states that foreign investors aren't welcome in mass media and advertising, public utilities, educational institutions, land ownership, and exploitation of natural resources.

Well, there are those who say that there are ways around these Constitutional prohibitions, such as a 75-year lease on lands, the use of dummies, and multiple layering of holding companies. That's true but it results in adverse selection, attracting the wrong kind of foreign investors who are willing to make a mockery of our laws. Moreover, even if there are foreign companies who are able to do business here, there are high transaction costs, and they may depart for emerging countries like Myanmar, Vietnam, and Sri Lanka.

Technology and globalization have also rendered those Constitutional prohibitions meaningless. In the age of the Internet, satellite television and social media, Filipinos are consuming their media content from sources all over. We can listen to a radio, watch movies, and read newspapers without even going through a "Filipino-controlled" media outfit. Moreover, people can even attend lectures and get a degree from a foreign university online. Therefore, these Constitutional prohibitions are such anachronisms and must be removed.

True, there are other reasons, such as poor infrastructure, corruption, restrictive labor laws, red tape and unstable policies why investors aren't coming here, but that's no excuse not to lift these Constitutional restrictions.

In fact, according to former Socioeconomic Planning Secretary Dr. Gerry Sicat, "The advantages offered by the TPP (Trans Pacific Partnership) within the Asia-Pacific network of economic cooperation in trade could be lost by default without constitutional amendments." Countries like Vietnam, which is a member of the TPP, will have an advantage over us in trade with the US and Canada unless we amend our Constitution and remove the discrimination against foreign investors.

Lifting the economic restrictions on foreign investment in public utilities and mass media will also improve competition and consumer welfare in those areas. According to Alexander Bocchi, a World Bank economist, and the Philippine Institute of Development Studies, a key reason for low investment (and not just foreign investment) in general is the presence of monopolies in key industries. Having an anti-trust law is not enough; we have to encourage the entry of new players, especially foreign players with access to large amounts of capital, to come in and provide competition in strategic areas.

If there are reasons to restrict foreign ownership because of national security or other considerations, then such restrictions should be legislated, rather than embedded in stone in the country's fundamental law. We have an anachronistic Constitution that's so hard to change because of the lack of trust in our political culture, and it's weighing us down in a fast-changing world.

President Aquino should junk the outmoded thinking of protecting the rent-seeking Filipino elite, which has the perverse effect of forcing our compatriots to go abroad to find jobs in foreign companies. If he wants the Philippines to be able to stand up to China, he should strengthen the state, modernize our political and economic institutions, and transform our consumption-driven growth to an investment-driven one. He should support the amendment to the Constitution now.

Business World Online By: alixto V. Chikiamco is a Board Member of the Institute for Development and Econometric Analysis (IDEA).

For comments and inquiries, please e-mail us at idea.introspective@gmail.com. To know more about IDEA, please visit www.idea.org.ph.

Boracay grabs 3 major Prizes at Travel+Leisure awards in New York


Discovery Shores Boracay was voted Asia's Top Hotel . Spa at the Travel+Leisure Magazine's World's Best . Awards 2012.

  1. World's Best Overall Island
  2. Asia's Top Island
  3. Asia's Top Hotel Spa

The Philippines walked away with three major awards at the Travel+Leisure Magazine's World's Best Awards 2012 held at the newly opened Conrad Flagship Hotel in New York on July 19, 2012.

Chosen by readers of the travel publication, this year's awardees included Boracay Island, which was voted World's Best Overall Island and Asia's Top Island.

One of the top hotels in the island, Discovery Shores, Boracay, meanwhile, was voted Asia's Top Hotel Spa.



The winners were announced earlier by the magazine's editor Nilou Motamed on the US morning TV show, "Today," on July 6, 2012.

Vernie Velarde-Morales, tourism representative of the Department of Tourism (DOT) office in Chicago and concurrent officer-in-charge of the DOT office in New York, and Abigail Yap, the wife of Malay Mayor John Yap received the awards in behalf of Boracay.

Discovery Shores general manager Jose C. Parreño accepted the award for the hotel

The awarding ceremony was also attended by Deputy Consul General Theresa Dizon-de Vega, Filipino Reporter publisher Bert Pelayo, Fairways and Blue Waters Resort, Boracay chairman Wilbur Chan, Discover Suites resident manager David Pardo de Ayala, and Filipino-American entrepreneur and former President of the Aklan Association in the US Northeast Ray Rogan.

Filipino-American special projects editor of Travel+Leisure Irene Edwards was also at the event.

The awards were handed out by Travel+Leisure Magazine editor-in-chief Nancy Novogrod and the magazine's vice president and publisher Jean-Paul Kyrillos

Other major winners included Red Mountain Resort, Ivins, Utah (Top Destination Spa), Singita Grumeti Reserves, Serengeti National Park, Tanzania (Top Hotel), Bangkok (Top City), Singapore Airlines (Top International Airline), and Virgin America (Top Domestic Airline).

The World's Best Awards, now on its 17th year, is an annual tribute to the world destinations, hotels, resorts, tour operators, cruise lines, airlines, and other major tourist services which have been voted by readers of the magazine as being the best in the world.

According to Novogrod, for the 2012 awards, an unprecedented number of the magazine's readers cast their votes for their favorite travel destinations.

She also said the awards for Boracay and Discovery Shores were both well-deserved and speak volumes about the lasting positive impressions made by these Philippine destinations.

Discovery Shores also ranked No. 5 on the list of top 100 hotels in the world and No. 2 among the top resorts in Asia.

"This is an affirmation of our unwavering commitment to giving our guests unmatched service standards complemented by our dedicated staff and our world-class facilities," Parreño said in a statement.

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