Economic Charter Change: Examining the Pros and Cons

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The Philippine House of Representatives commenced plenary debates on possible amendments to the economic provisions of the Philippine Constitution in late August 2014. The charter change proposal envisions adding the phrase “as may be provided by law” to at least 7 sections of the Constitution. This would allow Congress to pass enabling laws that would relax restrictions on foreign ownership in order to boost foreign investments. This policy brief provides an update on the economic charter change (or “Economic Cha-Cha”) discussions and reviews the international and national empirical evidence surrounding this issue. It finds evidence that lifting foreign investment restrictions could improve FDI inflows into the Philippines, particularly in the areas restricted in the Philippine Constitution (e.g. mining, utilities, mass media, and education). At least one international study suggests that efforts to remove ownership restrictions could help boost net FDI inflows by up to 78%. Nevertheless, such an effort should ideally be part of a broader drive to improve on the other factors that investors report are deterring their expansion in the Philippines — including, for example, affordable and stable energy and better transport infrastructure. Economic Cha-Cha opens the door to establish a stronger platform for promoting stronger investments and a more inclusive economic development.