J. Albert Gamboa l February 10, 2023 l Business World
VIETNAM has overtaken the Philippines in terms of gross domestic product (GDP) per capita. The latest national accounts data from the World Bank (WB) showed that our GDP per capita of $3,460.50 trailed behind Vietnam’s $3,756.50 as of end-2021. Even earlier in 2020, the International Monetary Fund announced that Vietnam’s GDP per capita had already surpassed ours in the midst of the pandemic.
How did a socialist economy that had undergone a civil war for almost two decades manage to outperform an early player in the development game like ours? One indicator is the level of foreign direct investments (FDIs) that flowed into both countries over the past 12 years. According to records from 2010 to 2019, Vietnam attracted $112 billion worth of FDIs or almost double the $57 billion generated by the Philippines. In 2021 alone, Vietnam bagged 50% more FDIs amounting to $15.7 billion compared to that of the Philippines at $10.5 billion.
And to think that we had a 30-year head start over this latecomer and war-torn nation whose population is 98.5 million today versus our 115 million. During the 1950s, the Philippines had the second-largest economy in Asia next to Japan, and we were Number One in Southeast Asia at that time. Singapore, Malaysia, Thailand, and Indonesia had backward economies then, but look where they are now.
Singapore became the leading investor in the Philippines in 2021, with investments amounting to P80.2 billion or 41.7% of the total value of FDIs that year, based on statistics from Germany-headquartered Statista. It was followed by the Netherlands, Japan, United Kingdom, United States, South Korea, China, Cayman Islands, and Taiwan.
President Ferdinand R. Marcos, Jr. has embarked on a working visit to Japan this week, reflecting his policy of maintaining friendly relations with all countries that are open to expanding economic cooperation and two-way trade. Former Senate President Franklin M. Drilon, an opposition stalwart, praised Mr. Marcos for projecting an independent foreign policy and pivoting away from the previous administration’s acquiescence to China.
This is in line with Article 2 Section 7 of the 1987 Philippine Constitution that states: “The State shall pursue an independent foreign policy. In its relations with other states, the paramount consideration shall be national sovereignty, territorial integrity, national interest, and the right to self-determination.” Before he left for Tokyo two days ago, Mr. Marcos led the celebration of Philippine Constitution Day in Malacañang and committed to “make sure that the spirit of the Constitution prevails over its letter.”
The next important step is to fully open the country’s doors to foreign investors as the key to a more robust economy. This can be achieved by amending the economic provisions of the Constitution that restrict foreign ownership of land and several sectors that are reserved for Filipino citizens and Filipino-owned corporations.
Before he stepped down from office in June 2022, then President Rodrigo R. Duterte signed an executive order updating the Board of Investment’s negative list consisting of areas where foreign ownership is limited or barred. These include the practice of the legal profession; mass media; small-scale mining; operation of private security agencies; the use of marine resources in archipelagic waters; and small-scale use of natural resources in rivers, lakes, bays and lagoons — all of which are exclusively for locals.
Foreigners are allowed to engage in particular industries with an equity ranging from 20% to 40%, such as infrastructure projects, educational institutions, advertising, private recruitment, exploration of natural resources, production of rice and corn, private radio communications networks, operation of public utilities, ownership of condominium units, and operation of deep-sea commercial fishing vessels.
Former National Security Adviser Clarita Carlos was the resource speaker at the public hearing conducted by the House of Representatives committee on constitutional amendments this week. She expressed her hope that the Constitution be amended soon, especially the restrictive economic provisions. Her sentiments were echoed by National Economic and Development Authority (NEDA) Director-General Arsenio M. Balisacan, who has served as Economic Planning Secretary and NEDA chief under Presidents Benigno S.C. Aquino III and Marcos, Jr.
If foreign investors are allowed to own up to at least 60% of Philippine companies, it can trigger the massive entry of foreign capital and help spur economic recovery from the aggravation brought about by more than two years of pandemic-induced lockdowns. This would enable our country to catch up with its more advanced neighbors and let Manila reclaim its position as the premier Southeast Asian business hub.
The opinion expressed herein does not necessarily reflect the views of these institutions and Business World.
*** J. Albert Gamboa is the chief finance officer of Asian Center for Legal Excellence and vice-chair of the FINEX Ethics Committee. #FinexPhils www.finex.org.ph