If The Philippines Had a Pro-FDI Constitution – Mike Pompeo Would Have Had More Than Empty Words to Offer

Philippine President Rodrigo Duterte has skilfully ushered in a new non-aligned foreign policy that has allowed the country to renew historic ties with China in the modern era, leave old disputes with Malaysia in the past, become a leading light in ASEAN, whilst also gradually developing new ties with countries as diverse as Russia, India and Turkey. At the same time, Duterte’s arms length but still warm relationship with the Trump administration, has helped to define the post-2016 Philippine-US relationship as one that remains friendly, even if it is not particularly dynamic.

Against this background, when US Secretary of State Mike Pompeo briefly visited Manila after the conclusion of the Kim-Trump summit in Hanoi, he stated that in the event of a Chinese attack against Philippine maritime assets, the US would be duty bound to come to the defence of The Philippines. Whilst this sounds like a bold statement, it is effectively meaningless in the real world.

First of all, China is in the early stages of cooperating with The Philippines on the mutual exploitation of South China Sea resources as per an agreement made between Duterte and the Chinese government. Secondly, while the US is happy to goad and provoke China in the South China Sea and East China Sea, the US is not going to directly engage in combat against Chinese forces. For all of their many disputes (some of which may be shortly resolved), China and the US form the world’s most lucrative trading partnership and both sides know that a major battle, let alone a war, would be very bad for business.

Pompeo’s remarks, whilst somewhat insulting to China (because they distort China’s regional development goals), were actually harmless to the point of being a ‘non-statement’. By saying that the US will defend The Philippines if a military conflict breaks out with China is like a mother telling her child that “if the monster under your bed attacks you – I shall destroy the monster”. Of course, the mother knows full well that there is no such thing as a bed monster, but she’ll say what she needs to say to alleviate childish fears.

In this sense, the modern state of Philippine-US relations are rather mundane. Apart from still trying to sell The Philippines heavily used military equipment whilst the Trump administration defies America’s own liberal elite in rhetorically supporting Duterte’s effective drug war, one must ask: what else is actually going on between America and The Philippines in 2019?

The sad answer (when one strips back the veneer of cultural connectivity) is not much. And yet, if The Philippines had a modern constitution that allowed foreign investors to have a controlling interest (upwards of 100%) in their investments in The Philippines, one would see many more American entrepreneurs and other major global investors pour job creating and infrastructure improving cash into The Philippine economy.  As a country located in the economic dynamic ASEAN bloc, as a country with a workforce eager for new job opportunities and as a country where English is an official, widely spoken and universally understood language, American investors looking for investment opportunities in Asia would under the right circumstances, come running to The Philippines.

This is where The Philippines has really missed the boat. While politicians and pundits continue to scream long outdated Cold War rhetoric at one another regarding the relationship between the Philippine government and American military – the real issue should be about expanding Philippine relations with America’s dynamic¬†private sector, along with the dynamic business sectors of multiple nations around the world.

To be sure, President Duterte has stretched the current flawed constitution to its limits in welcoming more foreign direct investment (FDI) to the country, but until archaic anti-FDI clauses in the 1987 Constitution are removed (including and especially the notorious 60/40 rule), The Philippines will at best remain a place that attracts investors who want a safe return rather than a substantial return. The kinds of non risk averse entrepreneurs who turned Hong Kong, Singapore and later Mainland China into economic dynamos, will simply not come to The Philippines unless the regulatory environment becomes more aligned with other Asian economies that have a pro-FDI legal framework in place.

In an age where both China and the US realise that direct military confrontation in Asia would be incredibly unwise, the reality is that investors from the world’s two largest economies would both be interested in investing more deeply in the Philippine economy, so long as the investment was welcomed in an efficient and holistic manner. Complex regulations and anti-FDI restrictions clearly make both Chinese and American investors think twice before entering the Philippine economy.¬† At a time when Ethiopia is seeing its national fortunes transformed due to the reforms of a pro-FDI Prime Minister and when even Cuba has adopted a new pro-FDI constitution, there is no reason why The Philippines should cling on to a closed and over-regulated economic model that has more in common with dictatorships than modern outward looking nations.

And here is the irony, while neither the Chinese President nor American President think that the democratically elected and consistently popular Rodrigo Duterte is a “dictator” in the way that international liberals do, the only thing that remains dictatorial about The Philippines are restrictions on economic liberty and openness. These restrictions continue to hold the country back when compared with its ASEAN partners as well as other fast growing economies throughout the world. The time for change cannot be put off any longer.

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