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Uncle Sam to Pinas: ‘Scrap Protectionism!’

August 14, 2011
Philippine poverty is man-made. It's the ultimate result of the statist dream of our intellectuals.

Philippine poverty is man-made. It's the ultimate result of the statist dream of our intellectuals.

The primary beneficiaries of protectionism and regulations of foreign investment are not the middle class and poor Filipinos, but the old rich or oligarchs and those who possess and maintain political connections.

The world’s superpower nation is now trying to convince the Philippine government to scrap its protectionist policies in order to allow foreign companies to invest and establish business in the country. We all know that the 1987 Constitution, which was enacted during the term of President Noynoy Aquino’s mother, totally bars foreign equity in the mass media except recording, nor in any of the licensed professions including law, medicine, accounting, engineering, environmental planning, interior design, teaching, and architecture, law, librarianship, marine desk officer, master plumbing, sugar technology, social work, teaching, among others.

The Charter, however, partially bars foreign ownership (25 percent foreign equity) in private recruitment, whether for local or overseas employment, and contracts for the construction and repair of locally-funded works (though with important exceptions for infrastructure/development projects, and those built with foreign aid). The Charter allows only up to 30% in ad agencies; only up to 40% in natural resource extraction projects (though the president can authorize up to 100%), ownership of private lands, ownership of condominiums, educational institutions, public utilities, commercial deep sea fishing, government procurement contracts, adjustment companies, and rice and corn processing (with at least 60% divestment to Filipino citizens required after 30 years of operation); and only up to 60% in financial and investment houses. Also, foreign ownership is restricted to 40% in manufacture of firearms, ammunition, explosives, military ordnance, dangerous drugs, saunas, steambaths, massage parlors, all forms of gambling, local businesses not engaged in exporting with paid-in capital of less than $200,000 and local businesses that involve advanced technology or employ at least 50 persons with paid-in capital of less than $100,000.

This draconian protectionism in the New Constitution is the very reason why the country’s economy is an epic failure, why we have unemployment and more taxes and higher tax rates, and why more and more Filipinos are forced to work abroad. It is also the reason why we have few oligarchs who benefit from the system, high prices of commodities and services, poor quality of telecom and media services, among others. The primary beneficiaries of protectionism and regulations of foreign investment are not the middle class and poor Filipinos, but the old rich or oligarchs and those who possess and maintain political connections.

The proposal (made by Sen. Juan Ponce Enrile and other lawmakers) to focus on the Charter’s economic provisions is good enough. Let’s scrap the 60-40 protectionism and other statist economic policies. However, it should have been better or best if they also had the guts to scrap the Charter’s many entitlement programs, pork barrel, party-list system, among others.

Let’s root out the very source BIG GOVERNMENT and STATISM: the evil concept of WELFARE RIGHTS, and this is what FAKE advocates of capitalism don’t understand. There is no such right to education, health care, RH care, transport, welfare, etc.

Also, it’s good to know that our lawmakers just ignored the shitty parliamentary proposal made by some clueless, politically naive pseudo-intellectuals and politicians . Still, there’s no doubt that Filipinos want to VOTE FOR THEIR OWN PRESIDENT and not just some MPs who could be easily BRIBED knowing the shameless nature/behavior of our politicians.

Article XII of the Constitution on National Economy and Patrimony is the reason why the Philippines is poor. In effect, this Article seeks to establish a semi-closed or quasi-planned economy, barring foreign investors from owning and operating any venture or business in the country without the participation of the national government or that at least 60-percent ownership of which is held by Filipinos. This provision, in effect, establishes economic fascism, wherein only those who maintain political connections, curry favor with people in high places, or occasion expenses in Malacanang Palace and the corridors of power could ever corner the country’s economic wealth. This system breeds corruption and bribery, which is what is happening today. Alas, this provision alone is one of the disgraceful and unspeakable breaches of capitalism.

There are two important factors that our lawmakers and politicians should consider in changing the Constitution, namely, the proper role of government and the proper concept of rights.

What then is the proper function of government? Since the government holds a monopoly on the use of force, its only proper function is to protect individual rights. We need courts to protect our property and contracts from breach or fraud by others, and to settle disputes by rational rules, according to objective law. We need the police to protect us from criminals and rights-violators. And we need the army to protect us against rebellion or foreign invaders. It’s not the role of government to provide the people with their basic needs. Proper understanding of economics tells us that the government is not a productive agency. It can only acquire wealth through taxation.

Second, it’s very important to know and understand the proper concept of rights. A “right” pertains only to action—specifically, to freedom of action. That in order for man to act freely and independently, he must have freedom from physical compulsion, coercion or interference by other men. However, our Constitution offers a distorted, perverted concept of rights as it warrants the people’s right to “something” that others produced or made possible through their personal, independent efforts. Does a right mean we are entitled to government welfare programs and services? If that’s the case, that means that we are entitled to the fruits of the productive labor of others through a state-imposed “redistribution of wealth.” (Click HERE for fuller discussion about this issue).

As to the concept of rights, I stated in a previous blog the following:

However, in the Philippines there is a distorted, perverted concept of a “right”, which was incorporated in all its written charters, particularly the 1987 Constitution, and this distortion and perversion is now causing man-made calamities and corruption in the government sector. The New Constitution is a blatant departure from the American Constitution on which the former was based. Instead of primarily guaranteeing people’s freedom of action, the types of rights, which are in reality and in truth “anti-rights”, in the post-Marcosian charter also warrant the people’s right to “something” that others produced or made possible through their personal, independent efforts.

This most evil concept of a “right” embraced by the fundamental law of the land is a flagrant breach of natural law. The 1987 Constitution, which is follows the Universal Declaration of Human Rights, guarantees the following perverted, distorted rights:

  • Right to full employment and equality of employment opportunities for all.
  • Right to land (to be realized and implemented through agrarian reform program).
  • Right of farmers, and landowners, as well as cooperatives, and other independent farmers to participate in the planning, organization, and management of the agrarian reform program.
  • Right to agricultural support and other state-funded services.
  • Right of subsistence and community fishermen to the preferential use of the communal and fishing resources.
  • Right to affordable and decent housing and basic services.
  • Right to affordable health and free medical care for paupers.
  • Right of working women to safe and healthful working conditions.
  • Right of independent people’s organizations to state protection.
  • Right of all citizens to quality and accessible education at all levels.
  • Right of every family to a family living wage and income.

These monstrous types of a “right” are the very reason why this country is now moving toward economic disaster and dictatorship. These twisted rights or anti-rights enforce obligation on other people. A right to education means that the state or the government must force other people to provide it. A right to health care or even reproductive health care means the government must employ the use of force to compel other people (e.g. businessmen and health care providers) to provide health care at the point of gun. A right to full employment and equality of employment opportunities for all means that the government must sacrifice or immolate the creators of wealth in the name of the greater good. A right to land reform program means that the government must disregard the property rights of successful individuals.

Now here’s an excerpt of a news report about America’s position on the charter change issue:

WASHINGTON D.C. – The United States is pressing for charter change to allow foreign companies to build majority stakes in companies that are currently barred by the 1987 Philippine Constitution, America’s top envoy in Manila said here last Thursday.

US Ambassador to the Philippines Harry K. Thomas Jr. disclosed that Philippine Finance Secretary Cesar Purisima will meet with US Trade Representative Ron Kirk in Washington next month to discuss the Philippines’ desire to join the Trans-Pacific Partnership (TPP), an Asia-Pacific trade organization that could vastly expand Philippine markets, create jobs and reduce poverty.

President Aquino sought US support for joining the TPP during his US visit last year. “Envisioned as a platform for economic integration across the region, the TPP countries would be in a best place to become the region’s leading hub for trade, investment and growth,” he told the Council for Foreign Relations in New York.

The TPP aims to eliminate tariffs among participating countries – Australia, Brunei, Chile, New Zealand, Peru, Singapore, Vietnam and the US – by 2015.

“The head of the USTR, Ambassador Kirk, pledged to have his team come out to the Philippines 4 times a year. They’ve already been there 3 times,” Thomas said, “Secretary Purisima will come here in September and sit down with Ambassador Kirk and his staff to go chapter and verse for everything the Philippines needs to do to establish a trade and framework agreement and eventually be part of the Trans-Pacific Partnership.”

“They have to change laws, issue executive orders and frankly, introduce amendments to the Constitution,” Thomas declared at a forum on Philippine-US relations organized by the Washington-based Asia Society last Thursday.

“Our priorities in the Philippines are basically the same as the priorities of the Philippine government,” he assured.

He equated the inability of foreign companies to gain a majority stake in the Philippines to the other ills that fuel widespread poverty – corruption and the rule of law. “For the Philippines, we have known what the constraints to economic growth have been…why the Philippines is 9th of 11 countries (in the Southeast Asian region) in foreign direct investments,” Thomas said.

“We are very pleased to see the Chief Justice of the Supreme Court and also the Speaker of the House now open to changing parts of the Constitution on the economic side,” he added.

10 Comments leave one →
  1. ayayay permalink
    August 16, 2011 3:38

    I know there is an immediate need to scrap protectionism, but coming from Uncle Sam? Come on! Them with their subsidized farmers and their increased tariff on Chinese tires, among many other things.

  2. Siquijor permalink
    January 12, 2012 3:38

    Yes, that’s right. ‘Protectionist’ declarations must be abolished in our 1987 Constitution. We’ll be left behind in economic prosperity and soak to the quagmire of poverty forever if there’s no action done by our economic policy makers. The concept of free-trade, free enterprise must prevail. It might be that our government focused on tourism through Department of Tourism’s mission to attract foreigners to visit our country but this is NOT enough for millions of Filipinos who are jobless or those who have jobs but unable to look for BETTER jobs due to LACK of competition between firms and businesses looking for employees. In short, the more investors we have in our country either foreign or domestic, the more abundance of jobs here in our country. The more we can choose jobs, the more we are happy. The more we are happy, the more we are productive. The more we are productive, the more we can produce goods and services. The more we can produce goods and services, the more we are compensated. The more we are compensated, the more we can accumulate capital through savings. The more we can accumulate capital, the more we can invest. The more you can invest, the more you can create jobs. We don’t need the accumulation of OFWs to go abroad to look for jobs. All we really need is to open-up the economic policies that are being congested and suffocated by the laws and regulations derived from our 1987 Constitution. This is the real bottleneck.

    I would like to take Taiwan as an example of benefiting foreign direct investment (FDI) in their technology industry (PC and IT). Through FDI, they’ve achieved substantial economic prosperity on their very own Silicon Valley called Hsinchu (read this PDF file for more info) http://www.economia.unimore.it/convegni_seminari/CG_sept03/Papers/Plenary%20Sessions/Saxenian.pdf. Taiwan was considered a third-world country before just like our situation today. We only really need to embrace economic freedom and liberate the country to prosper. Here are also the elements of their success (for anyone who are interested) http://www.gio.gov.tw/info/taiwan-story/economy/eframe/frame3.htm which are very Austrian Economics in tradition. Taiwan’s economic miracle is not a fairy tale, it’s real. Economics precedes politics.

  3. July 16, 2012 3:38

    LMAO! Weren’t the Americans during post-war rebuilding the ones insisting the government to embrace protectionism at all costs?

  4. March 24, 2014 3:38

    I have a notable analytical eye with regard to detail and
    can foresee issues prior to they will take place.

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