DoF, DEPDev back fresh House push for economic ‘Cha-cha’

By Kenneth Christiane L. Basilio, Reporter

THE PHILIPPINES’ finance and socioeconomic planning departments backed fresh moves to amend the 1987 Constitution, saying changes were needed to ease investment curbs to boost foreign capital in one of Southeast Asia’s most restrictive economies.

The government is seeking to attract more foreign investment by building on earlier economic reforms, and Charter change (Cha-cha) may help draw in capital amid shifting trade relations and growing protectionist trends in the global economy, a Department of Finance (DoF) official said on Wednesday.

“We’re at the stage where we want to encourage foreign investments through these liberalization reforms we’ve done in the past,” Undersecretary and Chief Economist Domini S. Velasquez told lawmakers at a House of Representatives hearing. “Unfortunately, we have not seen much of the fruits of these liberalization and incentive reforms just because of the uncertainty in the global environment.”

The Philippines is hard-pressed to attract foreign capital to boost jobs and funding for development projects.

Foreign direct investments (FDI) in Southeast Asia rose by less than a percent to $230 billion in 2023, the Association for Southeast Asian Nations (ASEAN) said in a 2024 report. Of the total, the Philippines drew in $9.5 billion, only better than Malaysia ($8.8 billion), Thailand ($4.5 billion), Cambodia ($4 billion), Myanmar ($2.2 billion) and Laos ($1.8 billion). Manila’s capital inflow ranked behind Singapore ($159.6 billion), Indonesia ($21.6 billion) and Vietnam ($18.5 billion).

Department of Economy, Planning and Development (DEPDev) Assistant Director Judith V. Gondra said that certain provisions of the 1987 Philippine Constitution were hampering foreign capital inflows, resulting in underdeveloped domestic industries.

“Those that restrict ownership, management, and control of certain enterprises and activities have contributed to low foreign investment, inflows and scarcity of major global enterprises in the country,” she told the same congressional hearing. “These economic restrictions, in turn, have led to limited access to economic and social opportunities and the proliferation of highly concentrated markets.”

The Constitution caps foreign ownership in key industries to 40%, requiring the remaining 60% to be held by Filipinos.

“The proposed amendments will also allow flexibility in the Constitution to respond to different political, economic, social, technological, legal, and environmental shocks accordingly and in a timely manner,” Ms. Gondra said.

Moves to amend the 38‑year‑old Constitution have been a recurring theme in Philippine politics, with lawmakers frequently pressing to liberalize provisions on public utilities, education, mass media and the exploitation of natural resources that they say restrict foreign investment.

But previous attempts have always faltered due to a lack of support from the public and the Senate, driven in part by concerns about political motives. Constitutional amendments have long been a divisive issue, with nearly every administration since the 1980s attempting to revise parts of the charter.

The House passed a resolution in 2023 supporting a constitutional convention, and a year later, pushed joint discussions on amendments by both chambers of Congress. A signature drive to support Cha-cha also fizzled amid allegations that lawmakers were behind the initiative.

Last year, congressmen brought debates to the full plenary, widely seen as the Marcos administration’s most aggressive push for constitutional amendments so far.

The House Constitutional Amendments Committee is currently reviewing several Cha-cha proposals, ranging from easing foreign ownership and strengthening territorial claims in the South China Sea to lowering the minimum age for President and Vice-President and clarifying impeachment rules.

Removing ownership caps to foreign investments would make the country more attractive to investors and streamline capital inflow into the country, Katarina Gabrielle V. Cosalan, Philippine Stock Exchange legal counsel, said in the same congressional hearing.

“The graft of authority to Congress to eliminate, or at least lessen by law, these barriers will pave the way in attracting more FDIs into the Philippines,” she said. “Openness to foreign ownership is a key criterion that investors look at when rating the quality of a market.”

But it would take more than simply opening the economy to investors to draw in sizable foreign capital, with broader reforms and stronger institutional support seen as necessary to boost inflows, Janice Utanes, DEPDev supervising economic development specialist, said.

“Lifting the foreign investment participation alone will not solve the country’s weak position in attracting strategic foreign equity, as it is one of the critical constraints that we need to address,” she said.

“There are a number of factors, such as a predictable investment environment, the market size, and the level and quality of infrastructure, peace and security, our tax regime and political institutions,” she added.