THE SPIRIT THAT VIVIFIETH?

The Constitutionality of Opening up of ICT Industry to Foreign Investors

By: Deborah B. Palacio

“The constitution must grow with the society it seeks to re-structure and march apace with
the progress of the race, drawing from the vicissitudes of history and dynamism and vitality that will
keep it far from becoming a petrified rule, a pulsing living law attuned to the heartbeat of the
nation.”1
-Justice Isagani Cruz

The Lasting Status Quo

Since 1935, the provisions of the Philippine Constitution on national economy and
patrimony have been restrictive and uncompromising. One of which is the requirement that only
corporations owned and controlled by sixty percent Filipino capital would be allowed to participate
in important sectors as that of the ownership of public utilities and the exploitation of natural
resources.2

Essentially, the framers of the Constitution are of one mind – to restrict foreign capital in
specific areas of the economy so as to allocate the benefits of progress to Filipinos. The debate that
dominated the final decision of the topic was in relation to the degree of control by Filipinos. The
sixty percent degree of corporate control for Filipino was a compromise between those who favored
a more restrictive provision and those who favored a lower level of restriction. This stemmed from a
belief that foreign capital competed with domestic capital and that in such competition domestic
capital would need state protection to survive.3

This is the spirit behind the economic protectionist provisions of our Constitution which we
have been trying to preserve for the welfare of the Filipinos. However, in this age of globalization,
information, communication and rampant technological change, do these provisions still reflect the
ideals and aspirations of the people?

ICT’s Rising Necessity

The ICT Revolution, most specifically the Internet, has altered the ways people around the
world communicate, live, learn, play and work. We are drowning in a flood of data, with ICT
providing us means to transmit and exchange data in the form of sound, text, visual images, signals
or any other form or any combination of those forms through the use of digital technology. ICT has

1
Isagani Cruz, “Quintessential Constitution”, Philippine Political Law (Manila: Central Lawbook Publishing Co.
1984).
2
Gerardo Sicat, “Legal and Constitutional Disputes and the Philippine Economy”, Philippine Law Journal, vol82,
2007. Available from
<http://lynchlibrary.pssc.org.ph:8081/bitstream/handle/0/1331/Legal%20and%20Constitutional%20Disputes%20a
nd%20the%20Philippine%20Economy.pdf?sequence=1>, Accessed on December 2016.
3
E. de Dios, “Nationalism and the strong state in the 1935 Philippine Constitution, 39 THE PHILIPPINE REVIEW
ECONOMICS, no.1 June 2002. Available from < http://pre.econ.upd.edu.ph/index.php/pre/article/view/53>,
Accessed on December 2016.
resulted in revolutionizing the way people communicate and for governments and firms to interact
and conduct business.4

In November 2014, the International Telecommunication Union, a specialized agency of the

United Nations for ICT, released its “Measuring the Information Society Report 2014” which
contains an ICT Development Index (IDI) in the years 2012 and 2013 for 166 countries. The ITU
showed that in 2013, the Philippines practically maintained its rank (103rd place from 102nd in 2012)
despite advances in the areas of access and use of ICT. Of the 10 members of the ASEAN, the
Philippines consistently ranked 6th since 2010. The relatively weak uptake of ICT services in the
country, aside from inadequate ICT infrastructure, can be attributed to relative high cost associated
with it. Laws relating to ICTs in the country are sadly not keeping up with what the present market
requires to fully leverage ICT.5

There is a clear need for both the executive and legislative branches to address the lack of
ICT legislation. With the Philippines getting the attention in the world as one of Asia’s fastest
growing economies, the presence of a reliable, accessible and affordable ICT infrastructure is
necessary for our participation in the information economy. Without it, the Philippines will once
again face the prospect of being marginalized in the global economy. With it, we stand the chance of
becoming a cyber-tiger in the new economy.6

The Thrust to Trust Foreign Control

According to Philippine Statistics Authority, approved investments of foreign and Filipino

nationals in ICT generated 23,413 jobs in 2016, higher by 61.6% of the jobs generated last 2015.
Projected employment from ICT industry accounted for 39.5% of total jobs from the investment
projects of foreign and Filipino nationals approved in the first quarter of 2016.7

The research manager of IDC Asia/ Pacific, Mrs. Karen Regodon-Garcia, said:

“For foreign investors looking to set up businesses in the country, the cost of the
Internet services can be a factor to consider, although they are unlikely to decide against
investing in the country just because of it. Other factors such as manpower availability, labor
cost, government regulations, political stability, security, and cost of raw materials (for
manufacturing firms) would usually still take precedence over the cost of the Internet in an
investment decision.”8

4
J.R. Albert and R.E. Gaspar, “What do ICT stats say about the Philippines?” Rappler.com, April 22, 2015. Available
from < http://www.rappler.com/thought-leaders/90584-ict-statistics-philippines>, Accessed on December 2016.
5
Ibid.
6
Ibid.
7
Foreign Investments, Philippine Statistics Authority (Quezon City: Three Cyberpod Centris, 2016) p. 12.
8
“PHL needs to step up investment in ICT: IDC.” Business World Online, September 2015. Accessed December
2016. Available from < http://www.bworldonline.com/content.php?section=Technology&title=phl-needs-to-step-
up-investment-in-ict-idc&id=114863>.
 IDC said one of the main reasons the cost of the Internet in the country remains high is
because there are only two major players. A market disruption would help resolve the issue, it
added.9

Moreover IDC stated:

“The efforts of the government, with the help of the private sector, in championing
the country’s campaign to improve availability, quality, and affordability, of Internet services
would be the key. This includes finally putting in place a comprehensive national broadband
program that would not only interconnect government agencies but more importantly prove
the government’s commitment to an improved connectivity in the country.”10

The Philippines is ranked among Asia’s slowest and most intermittent in terms of mobile
internet and voice services. Investors have complained often of regulations that can restrict foreign
investment in various areas, among them telecoms and utilities.11

Practicability of the Thrust

In response to the necessity of boosting our ICT industry, President Duterte said:

“The only way to make this country move faster to benefit the poor is really to open
up the communications, the airwaves, and the entire energy sector. My decision is to open
the Philippine economy to other players – to open up the information and communications
technology industry to new players in order to promote competitiveness and improve quality
of service.” 12

His comments suggest that he intends to follow through on threats to stamp out
protectionism, having warned the telco duopoly of PLDT and Globe Telecom to shape up, or face
new competition. To realize his plans, the Duterte administration wants to amend the Constitution’s
economic protectionist provisions that limit 40% foreign ownership of public utilities through a
constituent assembly.13

Multilateral institutions have long been advising the Philippine government to revisit the
foreign investment restrictions enshrined in the 1987 Constitution. Most business leaders, especially
from the Joint Foreign Chambers and Filipino businessmen, welcomed such move, and their
thoughts boils down to the fact that, ‘in today’s globalized situation if we do not adapt, then we will
be left behind.’14

9
Ibid.
10
Ibid.
11
Frinston Lim, “Digong opens up 3 sectors to foreign investors.” Inquirer.net. November 25, 2016. Accessed
December 2016. Available from < https://business.inquirer.net/220139/digong-opens-3-sectors-foreign-
investors>.
12
Ibid.
13
Ibid.
14
Ben de Vera, “Charter change plan draw cheers, jeers.” Inquirer.net. July 20, 2016. Accessed December 2016.
Available from < https://business.inquirer.net/212115/charter-change-plan-draws-cheers-jeers>.
 Whether we are to stick to the ideals of the people during the framing of the past to present
Constitutions or not, is not the issue anymore. That which will improve the economic life of the
Filipinos and that which will bring food to the table of our marginalized brothers and sisters
(through job generation) is what should be considered as the spirit of the Constitution’s economic
provisions – the spirit that vivifieth.