Introspective
By Calixto V. Chikiamco
Not many people may realize it, but there has been a bountiful harvest of legislation from the 17th Congress. Both Houses of Congress have produced significant economic and socially progressive legislation since signed into law by President Duterte. Credit no doubt goes to House Speaker Gloria Macapagal-Arroyo and Senate President Tito Sotto, both legislative veterans who know how to make their respective chambers productive.
While many recently passed laws are good, a few belong to the “good intentions but unforeseen consequences” category. An example of the latter is the 105-day Maternity Leave Law. It will saddle private employers and the Social Security System with paying for the benefits provided in that law, an unnecessary added financial burden for SMEs (Small and Medium-sized Enterprises). The irony of the law is that while it may seem pro-women, the consequence may be that companies will hire fewer women given prospectively higher financial costs of female employees going on maternity leaves.
Another recent law that effectively taxes labor-intensive firms is the law declaring December 8, or the Feast of the Immaculate Concepcion for Catholics, a special non-working holiday. The Philippines already has the most non-working holidays in Asia and adding another holiday is an onerous burden to labor-intensive firms because they have to pay 130% of basic salaries if employees go to work. Besides, where does it stop? Another holiday for Iglesia ni Kristo? How about for Seventh Day Adventists? Or the Aglipayans? These other religions can cry religious discrimination.
Another very bad law is the Free Tertiary Education Act. The Act subsidizes both rich and poor students alike since the subsidy is given to the SUC (State University or College) and not to the student.
However, there are excellent, if not good, laws which emanated from the 17th Congress. The hugely important law is the Rice Tariffication Act. It’s a hugely pro-poor and pro-development law. It’s also momentous since the dismantling of the National Food Authority’s legal monopoly on rice importation has been attempted by reformists for years, but never accomplished in previous congresses until now. It’s hugely pro-poor because it will lower and stabilize the price of the poor’s main staple, rice, and effectively increase their real incomes. It’s hugely pro-development because wage demands from labor will be tempered by the lower price of rice, making our companies more cost competitive. Moreover, the huge chunk of the agriculture budget going into rice in pursuit of a foolish rice self-sufficiency policy can now be channeled into higher value crops.
The other hugely important law, but in the political sphere, is the Bangsamoro Organic Law (BOL). Like the Rice Tariffication Act, the BOL has been years in the making, repeatedly foiled in its various previous versions. Finally, bucking history, the 17th Congress passed it. The BOL will give more meaningful autonomy to the Bangsamoro region and lay the foundation for peace and development in the strife-torn area. And for those who are fans of the parliamentary system, the BOL will provide a real experiment as it provides for a party-based parliamentary system in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM).
Agriculture, which is the country’s laggard sector, just got a big boost with the passage of the Agriculture Free Patent Act (RA 11231). It removes Commonwealth-era restrictions that prevent an estimated 2.5 million agricultural patents from being bankable. For the first time, corporations, not just individuals, will also be allowed to buy agricultural patents, paving the way for corporations to invest in the countryside.
Among the legislative cornucopia of the 17th Congress is pro-business legislation. One is the Ease of Doing Business Act, which aims to cut bureaucratic red tape and eliminate corrupt practices. The law mandates that processing time for transactions with government and government corporations is three working days for simple transactions, seven working days for complex transactions, and twenty working days for highly technical ones, with corresponding penalties for bureaucrats if government mandates aren’t followed.
In this spirit of cutting down on red tape is EVOSS or Energy Virtual One Stop Shop Law. Under EVOSS, prospective energy investors can get their permits through an online platform. It aims to cut down on the hassle and time needed to get permits for energy projects.
Another law which should be helpful to SMEs is the Personal Security Property Act (RA 11057). The law aims to enable SMEs to use non-real estate assets (inventory, equipment, and other personal property) as collateral for bank loans by strengthening the legal framework for secured transactions. For movable collateral, the law establishes an electronic centralized registry under the Land Registration Authority.
The Revised Corporation Code should also be a boon to SMEs. It provides for One Person Corporations. The old law required five incorporators with a minimum capital stock. It gives more flexibility for entrepreneurs, who can make sole decisions and who don’t have to rope in five friends to be incorporators and board members.
There are also a number of socially progressive legislation. A superb law that will yield high economic and social returns is the First 1,000 Day Law (RA 11148) authored by Senator Grace Poe. It seeks to provide health and nutrition services to the first 1,000 days of a child’s development. The law provides for nutrition programs for babies and their mothers up to two years of age. It aims to reduce the number of stunted (3.5 million) and malnourished children with nutrition services and health programs for babies and pregnant women.
Another huge health measure is the Universal Health Care Law. It intends to enroll every Filipino into the National Health Insurance Program. The law is ambitious and expensive (about PHP 257 billion). The government should be prudent in implementing it, lest it blow a hole in the budget. However, properly implemented, it can lead to cost-effective health care with emphasis on disease prevention and community-based health care. It can also lead to innovations if the primary implementor, Philhealth, uses various modes of PPP (Private Public Partnership) in implementing various parts of the law.
The Mental Health Care Act (RA 11036) is also another landmark health measure because, for the first time, mental illness will be recognized and integrated into the nation’s health care system.
I would also count the National ID Law as socially progressive legislation, although it also benefits the economy and strengthens peace and order and security. Too often, poor citizens cannot access banking services or social services for the lack of an ID.
However, there’s a risk that excessive social welfare spending will outpace productivity growth, causing inflation or stagnation. The government, therefore, must carefully calibrate implementation of social welfare spending relative to productivity growth.
Aside from pro-business and socially progressive legislation, the output of the 17th Congress includes pro-consumer laws. Among these are Number Portability Act, the Free Public Wifi Law, and the Estate Tax Amnesty.
The Number Portability Act, authored by Senator Win Gatchalian, will help spur competition in the telecommunications sector since mobile consumers can retain their old numbers even when switching to a new service provider. This will be a boon to the third telco as it tries to carve out market share by offering lower prices.
The Estate Tax Amnesty will help free up “dead capital” from estate property that couldn’t be sold or transferred due to the high taxes and fines under the old law.
There are two laws that will strengthen government institutions. After many years, a new Central Bank Charter was passed (RA 11211), a legacy of the late BSP Governor Nesting Espenilla who died shortly after the law was enacted. The new Charter strengthens the capital base of the Bangko Sentral to PHP 200 billion and mandates it to “pursue price stability conducive to a balanced and sustained growth of the economy.” The new law also gives it more powers over money service businesses, payment operators and other types of financial institutions. It restores BSP’s powers to issue its own debt papers.
Finally, the new SSS law similarly strengthens the Social Security System, ensuring that it remains financially sound to service its members. It also mandates compulsory coverage of overseas Filipino workers.
However, the 17th Congress hasn’t ended yet. There are still nine session days left before the current Congress adjourns sine die to pave the way for newly elected officials in the 18th Congress. It still has the time to pass the Public Service Act Amendment and the Open Access in Data Transmission Act. As I stated before, the Public Service Act Amendment, which seeks to remove foreign ownership restrictions in the strategic industries of transport and telecommunications to foster competition and facilitate technology transfer, is the most consequential piece of economic legislation since the founding of the Republic. The Senate would be remiss in its duty if it fails to pass this landmark measure.
On the other hand, the Open Access in Data Transmission Act will foster more competition and innovation in the broadband industry. The Open Access in Data Transmission Act, and not the entry of the third telco, is the real game changer to enable Filipino consumers to enjoy faster and cheaper Internet service.
It’s too bad that the impression of the Philippines abroad is all about extra-judicial killings (EJKs) and the bloody anti-drug war, thanks to our foul-mouthed President. However, there are some real positive changes — even some socially progressive legislation absent in advanced countries — going on. We can only hope that the 18th Congress, the last under President Duterte, will continue to pass legislation that will sustain economic growth with social inclusion.
Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.
