Bylaw change boosts PH – DEUV

Constitutional amendments to improve the investment climate will have a positive impact on Philippine economic growth, according to a new report from Fitch Solutions.

“While this process is just beginning, any business-friendly changes in the business environment in the Philippines will pose risks to our long-term growth outlook in the Philippines and investment in particular,” Fitch said in a released comment. on Tuesday

He noted that the removal of restrictions on foreign direct investment (FDI), in particular, could lead to an increase in total investment in the coming years.

“Historically, fixed capital formation has accounted for an average of about 23 percent of GDP (gross domestic product)” over the past 17 years, notes Fitch Solutions, “and changes in legislation could increase this ratio by several percentage points in the long term. . .”

“So it will also pose risks to our average real GDP growth. [forecast] by 6.6% over the next decade,” or from 2023 to 2032, he added.

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Fitch Solutions’ comment came as the House of Representatives approved a constitutional convention to propose amendments to the 1987 Constitution on Monday.

“Currently, it appears that legislators have primarily focused on amending several economic provisions of the Constitution to improve the Philippines’ global competitiveness, especially in the area of ​​restrictions on foreign direct investment,” it noted.

“It is important that this does not limit the limit or type of amendments that can be made.”

Fitch Solutions noted that lawmakers overwhelmingly approved the proposal, with 301 out of 314 votes in favor, and then the Senate must decide on the measure.

“The investment environment in the Philippines for foreigners has historically been challenging due to restrictive regulations,” he said.

Among other things, the 1987 Constitution limits foreign participation in certain enterprises to 40 percent.

“These issues are also reflected in the OECD FDI Regulatory Restrictions Index, which showed the Philippines ranked third out of 84 countries in 2020,” Fitch Solutions added.

However, he noted that the reforms introduced by the previous Duterte administration have spurred FDI inflows, which are estimated to have risen to 30 percent of GDP as of 2021 after declining in the previous three years.

The current Marcos government is reportedly actively attracting foreign investors, and the proposed creation of a $4.9 billion sovereign wealth fund “will also help boost domestic investment.”

“We expect the administration to continue to pursue investment reforms in the coming quarters, especially as the president reaffirmed his ambitious plans to make the Philippines a prime destination for foreign investors,” Fitch Solutions said in a statement.

President Ferdinand Marcos Jr. said changing the bylaws was not a priority for his administration last month, telling reporters that current goals can be achieved within the current framework.

Previous attempts to amend the 1987 Constitution failed due to public opposition, especially fears that legislators want to change their term limits.

The Duterte administration prioritized changing the bylaws and moving to a federal form of government, but the House and Senate could not agree on how to draft the amendments.

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