HR 737: The new Parity Amendment

On 20 August 2008, House Speaker Prospero Nograles filed House Resolution No. 737, pushing for amendments in the Constitution’s economic provisions, specifically Sections 2 and 3, Article XII (National Economy and Patrimony).

HR 737 is one among the 30 measures now pending in the House of Representatives that seek to amend or revise the Constitution. While HR 737 focuses in amending the Constitution’s economic provisions, other proposals seek to change either the government structure (from presidential to parliamentary or federal form), or the political aspect (term limits of elective positions).

Barking on the wrong tree

Focusing on amending Sections 2 and 3, Article XII (National Economy and Patrimony) of the Constitution, HR 737 places centrality on foreign investments as the driver of economic growth. Thus, the resolution wants to allow 100% foreign-owned corporations to explore and develop natural resources, and also to allow foreign investments 100% land ownership. In short, HR 737 aims to revive the old Parity Amendment in the 1935 Constitution.

Under the present Constitution, only Filipino-owned or 60% Filipino-owned corporations can own lands, and develop and utilize the country’s natural resources.

The assumption made by HR 737, however, is misplaced considering the real and tangible effects of the global financial crisis to the domestic economy. Focusing on foreign investments without the necessary impetus to strengthen local investments will only make the country more vulnerable to external shocks.

Recently, US-based Intel Corporation announced that it will close down its Philippine plant in Cavite – laying off 1,800 employees by April 2009, and affecting some 36,000 jobs from allied services. Intel Philippines accounts for US$5 billion of the US$31 billion in total electronic exports in 2007. Another major foreign electronics investor, Texas Instruments, reportedly dismissed 392 workers at its Baguio City plant.

There are also reports that other foreign-owned manufacturing companies operating in the country will be retrenching employees, if not totally shutting down.

The Asian Development Bank reported in January 2005 that several factors contribute to the loss of investor confidence in the Philippines, and none of them include land ownership. Major factors affecting loss of investor confidence include macroeconomic instability, corruption, electricity rates, tax administration, uncertainty of economic and regulatory policies, and law and order.

Test case for the Supreme Court

Aside from the substantive concerns of allowing foreigners 100% land ownership, there are also procedural issues that need to be resolved in amending the Constitution.

The Constitution can be amended or revised through three modes: (1) Congress convened as a Constituent Assembly, (2) a Constitutional Convention, and (3) People’s Initiative.

On 04 February 2009, the House Committee on Constitutional Amendments passed HR 737 on an 11-4 vote. There are also reports that lawmakers plan to submit HR 737 in the same process as passing a regular legislative measure.

The other measures now pending in the House wants to amend or revise the Constitution either through the Constituent Assembly or a Constitutional Convention.

HR 737 will be a test case for amending the Constitution via Constituent Assembly because there is no precedent for it. The Constitution is silent on the process by which Congress should amend or revise the Charter, or whether it should declare itself first as a Constituent Assembly before it can amend the Charter.

There is also no rule or procedure on how Congress should treat any measure pertaining to Constitutional amendments or revisions – whether amendments or revisions should undergo the regular process of a bill, or should a special process be enacted for such.

If the House of Representatives insists on treating HR 737 as a regular measure that should undergo the normal process of a bill, then a justiciable issue arises and the procedure can be challenged in the Supreme Court.

However the Supreme Court decides, considering its composition, is still everybody’s guess.

Cha-cha is not the solution

The primary issue at hand is not land ownership but the stability of the country’s legal regime, specifically respecting contractual obligations. The push for land ownership by foreign investors is contemplated only because the changing rules and jurisprudence present instability in enforcing obligations under long-term lease contracts. Thus, only through absolute land ownership, where the owner holds the actual title, will shield foreign investments from this instability.

If the intention is to woo foreign investments to the country, it would be better if Congress focuses on stabilizing the country’s regulatory regime, strengthening public institutions and stamping out corruption, instead of focusing on the politically controversial and unnecessarily divisive Charter change.

It is also imperative for Congress to enact measures to strengthen national industries and promote domestic entrepreneurship as drivers of economic growth. A development paradigm based on "national industries" will not solve the boom-bust market cycle because in an interconnected global community, no one is isolated. But a strong industrial backbone based on domestic strength will ensure that the country is protected from the ravaging effects of an all-out financial crash somewhere else in the world.

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