(DP 2005-12) The Economic Argument for Constitutional Reform

Abstract

The Philippines requires the revision of the economic provisions of the Constitution if it is to become a major recipient of foreign investment flows like other high growth economies in the East Asia. These economic provisions were adopted in 1935 and have helped to reduce the country's ability to achieve a strong economic development record for seven decades. Reforming these policies can be undertaken by making the specific policy issues the subject of ordinary legislation rather than through constitutional provisions that are hard to change. The most obvious benefits of such a constitutional reform are increased foreign investments, higher rate of economic growth and employment; rising incomes for the population; and sustaining the fight against poverty. The less obvious benefits affect the macroeconomic fundamentals of the country; reduction of the fiscal deficit; lessening of the external debt burden; imporvement of trade and payments and stabilization of the peso; increase of the saving rate; and improvement of the country's financial markets.