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Palace wants Charter’s economic provisions changed

[ Manila Bulletin Online ] September 12, 2008

With most lawmakers remaining cool to the idea of a shift to a federal form of government, Malacañang is reviving the proposal to amend economic provisions, including foreign ownership of commercial land, in the 1987 Constitution to boost investments in the country.

Trade Secretary Peter Favila said yesterday the government will also carry out other measures to make the Philippines an easier place to do business in, such as cutting by half the procedures of starting a business and lowering electricity rates.

Favila made the remarks after the Philippines fell behind most Asian countries in rankings for ease of doing business in a study by the World Bank and International Finance Corp.

The country slipped to 140th from 136th in a ranking of 181 countries by a World Bank and IFC report on business startups. The report covered three areas of regulation: starting a business, dealing with licenses, and registering property.

In a Palace news conference, Favila said the Constitution remains unfriendly to foreign investments, restricts the government from engaging "freely" in business ventures, and hampers economic growth.

"A change in the Constitution especially on the economic provisions will enhance our competitiveness. The dynamics of the market have shown even just around the region that it’s always in the areas of economic limitations which are a major concern among investors," he said.

"For us to be able to engage freely in any negotiations, we have to prepare ourselves and that can only be done so by amending such economic provisions," Favila said.

He said lawmakers should prioritize liberalizing the foreign investment regime but this should not extend to vital public utilities such as water and telecommunications.

Under the Constitution, foreigners should have a local partner who should own 60 percent of the property.

Despite a constitutional ban on full foreign land ownership, Favila said the government has already implemented its Long Lease Act which allows foreign businessmen to have a leasehold of 50 years, which could be extended for another 25 years. "That’s close to saying you have 100 percent control of the land you are using," he said.

The two houses of Congress are tackling proposals for a shift to a federal form of government in a bid to spur economic development in the countryside. But many senators said federalism should be taken up only after the 2010 elections.

Following the country’s dismal performance in enticing businessmen, Favila said President Arroyo will convene a meeting of the National Competitiveness Council with representatives from the private sector on Monday in the Palace. He said the President would review initiatives taken by the council including "what our timelines, where are we lagging and progressing."

Favila said the government considers "constructive" the study made by World Bank and IFC on the difficulties of doing business in the Philippines although he said the study only covered Metro Manila and not the entire country.

He said the administration is determined to reduce the number of days of processing business permits in the country to encourage more investors. "If there are 15 steps or signatures, (we will) bring it down to 7 or 8. Once you see that, then we will attempt to bring it down further," he said.

In business ventures proposed before the Board of Investments and Philippine Economic Zone Authority (PEZA), he said the trade department has brought down the number of days for processing of permits from 20 to one.

To improve the business climate, Favila said the government remains committed to lowering electricity rates especially for companies operating outside special economic zones.

He said government is studying options to get the National Power Corporation to provide subsidy and the establishment of a R1 billion- industry competitiveness fund sourced from value added tax revenues to cover the power adjustments for non-PEZA enterprises.

Favila said the executive department also appreciates the congressional approval of a bill seeking to establish a centralized system for credit history monitoring.

He said the President is expected to sign the law very soon.

He added that the administration will push for other economic legislations, including a consumer bill of rights, to improve the competitiveness of the country.

Favila acknowledged that the country’s poor business climate as highlighted by the World Bank and IFC was partly caused by an archaic local government code, which he claimed was "no longer in sync" with national programs on competitiveness.

He noted that some local government units have already instituted measures to ease the cost of doing business in their jurisdictions.

Favila expressed hopes that the World Bank and IFC would cover areas outside Metro Manila, saying there are other cities and provinces that have improved business atmosphere.

At the first half of 2008, the investments in the country has reached R281 billion, up by 115 percent from last year’s investment flow despite the high oil and food prices.

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