THE Philippines needs to amend the economic provisions of its Constitution in order to seize the investment opportunities offered by next year’s ASEAN Economic Community (AEC).
"The country needs to be competitive in order to take advantage of the growing marketplace of opportunities, especially for small and medium enterprises (SME)," said author Claudette Malana in the latest Economic Issue of the Day release of the Philippine Institute for Development Studies (PIDS).
Under the AEC, Malana said market access opportunities for Filipino firms can expand as they can sell to 600 million people in the booming region and own majority of their ASEAN operations.
"This also means giving the same opportunity to ASEAN investors," it noted.
Citing another study, the PIDS paper said ASEAN companies, Filipino firms included, can own 100 percent of companies in other ASEAN countries and should be able to own at least 70 percent of services companies under an integrated regional market.
Manala said while the Philippines continues to show strong potential for further growth, the economy is also characterized by Constitutional restrictions.
These include limits to foreign equity in the exploration, development and utilization of natural resources; public utilities; build-operate-transfer projects; operation of deep-sea commercial vessels; and others.
"To sustain the growth of the Philippine economy, these restrictions need to be examined and amended, as they have constrained foreign direct investments (FDIs)," she said.
Manala said the regional experience indicates that where countries have relaxed restrictions, FDIs have increased, providing significant economic benefits to the receiving country.
Moreover, she said countries that have relaxed foreign ownership restrictions have enhanced their competitiveness and achieved a higher trajectory of economic growth.
"For the country to catch up and compete with its neighbors in the high-growth regions of East Asia and Southeast Asia, it is crucial to amend the economic provisions that have caused binding constraints to the growth and productivity of the economy," she added. PHILEXPORT//
