Saturday, April 01, 2006


March 31, 2006


Charter change (Cha-cha) proponents claim that Constitutional provisions restricting foreign participation in vital sectors and foreign ownership of land are outdated and that removing these would increase foreign investment inflow that would lead to the creation of more jobs.

But independent think-tank IBON Foundation disputes this claim.

According to IBON research head Sonny Africa, as of 2004 there was a cumulative $17.3 billion in Bangko Sentral-registered foreign equity investments. But despite the increase, unemployment has still steadily risen over the past decade to record highs. Average annual unemployment increased from 8.4% in 1990 to 11.2% in 2000 and to 11.4% last year.

Africa said that this is because for every handful of jobs foreign investments create, countless more jobs are lost through closures, layoffs and bankruptcies. Local establishments are forced to reduce its workforce or close shop due to the tight competition that foreign investors introduced in an increasingly liberalized economy.

Starting in 1995, when the country became a member of the World Trade Organization, the number of firms that have had to resort to permanent closures and retrenchments for economic reasons has steadily increased, reaching a high of 3,403 firms in 2002. From 1995 to 2004 some 21,076 firms closed or retrenched, affecting more than 600,000 workers.

Also, the considerable amount of investments in manufacturing has not resulted in any significant capital accumulation and technological development, which would create more jobs. Transnational corporations and their subcontractors here mainly engage in assembly and packaging for re-export while taking advantage of low interest rates, tax breaks and incentives, and hiring cheap and unorganized workforce.

This does not mean that foreign investments cannot contribute to economic development, says Africa. Foreign investment does have a role in the initial stages of the development of a country like the Philippines, but Africa stressed, external investments should be restricted and controlled to ensure that they benefit the local economy more than foreign corporate and local big business interests.

“The Philippines can benefit from foreign investments but only if this is allowed in under terms of mutual benefit. If the government has not had the political will to assert the nationalist economic provisions as they are, removing them completely through Cha-cha will only make an already bad situation intolerably worse,” Africa said. (end)

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