How to change a constitution by hand-waving (Or, the unbearable lightness of evidence in support of lifting foreign ownership restrictions)

Toby Monsod, Aleli Kraft, Cielo Magno, Jan Carlo Punongbayan, Orville Jose Solon, Elizabeth Tan, Agustin Arcenas, Florian Alburo and Emmanuel de Dios
Additional contact information
Toby Monsod: School of Economics, University of the Philippines Diliman
Aleli Kraft: School of Economics, University of the Philippines Diliman
Cielo Magno: School of Economics, University of the Philippines Diliman
Jan Carlo Punongbayan: School of Economics, University of the Philippines Diliman
Orville Jose Solon: School of Economics, University of the Philippines Diliman
Elizabeth Tan: School of Economics, University of the Philippines Diliman
Agustin Arcenas: College of Public Affairs and Development, University of the Philippines Los Baños
Florian Alburo: School of Economics, University of the Philippines Diliman
Emmanuel de Dios: School of Economics, University of the Philippines Diliman

No 202401, UP School of Economics Discussion Papers from University of the Philippines School of Economics

Abstract: This paper provides a review of the empirical evidence cited in the current public discussions on removing the remaining constitutional restrictions on foreign-equity ownership in certain economic sectors. A fuller appreciation of the given evidence shows that lifting equity restrictions is not a necessary condition for explaining the inward stocks of foreign direct investment (FDI) in the cited countries, including the Philippines. While restrictive equity rules may represent a hindrance to FDI, their potential effects are small and sometimes insignificant in comparison to other explanatory variables such as the ease of doing business, physical infrastructure, and perceived corruption. The paper cautions against an uncritical mindset towards FDI, discussing how consistent empirical evidence of the positive effects of FDI on host economies has proved elusive and that knowledge and technological spillovers from FDI are highly context-specific, not unconditional, and not without cost. Instead, a more discriminating approach, focusing on the quality of multinational enterprises and its activities, rather than simply on the volume of FDI, is recommended. Finally, the paper warns that the push for legislative flexibility, while attractive on the surface, can be self-defeating since it also has the potential of increasing investment uncertainty, particularly given the idiosyncrasies of Philippine political economy.

Keywords: foreign direct investment; multinational enterprises; foreign equity restrictions, constitutional change, empirical models of investment distribution; influences on the distribution of direct foreign investments; rules versus discretion (search for similar items in EconPapers)
JEL-codes: F14 F21 F23 F60 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2024-04
New Economics Papers: this item is included in nep-fdg and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as UPSE Discussion Paper No. 2024-01, April 2024

Downloads: (external link)
https://econ.upd.edu.ph/dp/index.php/dp/article/view/1552 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:phs:dpaper:202401

Access Statistics for this paper

More papers in UP School of Economics Discussion Papers from University of the Philippines School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by RT Campos ().