One knows that the economy of The Philippines is doing well when even those attempting to write an anti-Duterte/anti-Philippines news item end up listing President Rodrigo Duterte’s major economic achievements. In an attempted hit-piece in the European magazine Money Weekly, an individual known as Marina Gerner actually wrote about Duterte’s main economic achievements including increased spending on domestic investment and the related ‘Build, Build, Build’ initiative. Duterte’s tax reform and his increased efficiency in tax collecting were also highlighted as areas of success. So while the piece correctly litanies Duterte’s achievements, the author postulates that some foreign investors might be scared off of bringing their capital to The Philippines because Duterte may exceed his single six year term as President – a rumour consistently spread by Duterte’s increasingly irrelevant opposition in spite of the fact that the President has offered to step down early so long as he is able to create a federal system in the country prior to the year 2022.
In reality, even under present conditions, US News and World Report ranked The Philippines as the world’s top investment destination. If anything, foreign investors would prefer Duterte to stay in power beyond 2022 as it has been under Duterte that foreign investment in the country has increased and investor confidence has reached new heights. In general, foreign investors look for political stability in markets where they seek to invest their capital. Where that stability comes from is typically irrelevant to most mature and rational business minded people and in any case, Duterte is seen as a man firmly in charge of his country’s destiny with a clearer mandate for genuine reform than any of his recent predecessors.
The Philippines does however have a problem when it comes to attracting the right kind of foreign investment and it has nothing to do with Duterte. On the contrary, this problem is derived from clauses in the 1987 Constitution of The Philippines which prohibit non-Filipinos from owning more than 40% in a company or property in The Philippines. The so-called 60-40 rule restricting foreign direct investment (FDI) which was intended as a protectionist measure to prevent too much foreign speculation in the domestic market has resulted in the country lagging behind many of its fellow ASEAN partners including Singapore, Malaysia and Vietnam.
Singapore in particular was an early pioneer in courting copious amounts of foreign investment which helped the country’s founder Lee Kuan Yew to transform a backward swampland into one of the leading economies and most safe and peaceful societies in the modern world. China’s opening up of its economy which began in 1978 under the reforms of Deng Xiaoping is currently being celebrated throughout China as 2018 marks the 40th anniversary of a reformist drive that helped China to reduce poverty rates from a staggering 88% in the early 1980s to just under 2% today while the country looks to eliminate poverty completely in under two years.
As China looks to open up its markets further to both direct capital investment and trade from both developing and developing economies, Beijing’s leaders have proved that confidence in one’s domestic strengths and optimism in a more inter-connected future go hand in hand as an increasingly open China is set to shortly become the world’s overall leading economy – overtaking the neo-protectionist United States.
While Duterte’s reforms have encouraged both individual investment from throughout the world while attracting further investment from China, South Korea and Japan, if The Philippines is to truly become economically self-sufficient, it must unleash the creative genius of both local entrepreneurs and foreign investors and utilise this to maximum effect just as Lee Kuan Yew did in Singapore and as the current Malaysian Premier Mahathir Mohammad began doing in the 1980s during his first history making period in power. Ironically, the importance of trashing the 60-40 rule was even once picked up by the stridently anti-Duterte publication Rappler which in 2012, prior to the arrival of ‘Duterte Derangement Syndrome‘ actually ran a piece sympathetic to reforming the 60-40 clause of the 1987 Constitution that Liberal publications today rally around as if it were The Bible. In reality the only thing the 60-40 rule has done is to make the domestic economy overly reliant on a small and corrupt class of business oligarchs who would be instantly swept away is serious foreign investors were allowed to do in The Philippines what they were able to do in Singapore.
Logic dictates that a foreign investor looking to inject significant amounts of cash into a growing economy is not going to want anything less than a 50% stake in his or her investment. In reality, the more serious the investor, the more likely such a person is to want a share that vastly exceeds 50%. And yet by prohibiting those looking to inject FDI into the Philippine economy from having control over their own investment, the 1987 Constitution is automatically frightening away fresh investments into the economy and thus prohibiting a 1970s style Singaporean economic revolution or a 1980s style Malaysian economic revolution from occurring in The Philippines.
When the economic conditions are suitable, investors will come to nations in the midst of civil conflict, nations run by actual dictators and nations with severe sectarian problems. If any Filipino actually believes that the democratically elected, reform minded and highly popular Duterte is frightening any foreign investors except those interested in the black market rather than clean money, they are clearly deluding themselves.
The 60-40 FDI rule is the only thing prohibiting The Philippines from transforming itself into a place where meaningful foreign investment is able to change the economic reality of the nation and in so doing transform the material condition of the people. There is a clear reason why Singapore, China, Malaysia and Vietnam continue to move forward as The Philippine economy while growing, nevertheless remains in need of a fresh start. This fresh start that people today and future generations require can only come from casting out the obsolete 1987 Constitution and creating a new reality that says plainly and clearly that The Philippines is open to virtually unlimited amounts of FDI.
To put it simply, by eliminating the 60-40 clause, The Philippines will be sending a message to the world that the country is open for business.