International Economic Law

The ASEAN INTEGRATION

(ASEAN Economic Community)

and the Constitutional of the Philippines

I. INTRODUCTION

The Association of South East Asian Nations is established in 1967 at Bangkok. It is

composed of 10 nations, namely, Dubai Darussalam, Kingdom of Cambodia, Republic of

Indonesia, Lao People’s Democratic Republic, Malaysia, Union of Myanmar, Republic of the

Philippines, Republic of Singapore, Kingdom of Thailand, and the Socialist Republic of Viet

Nam.

At the Bali Summit held in October 2003, the ASEAN Leaders, under the Declaration of

ASEAN Concord II, adopted the ASEAN Community by 2020, included therein is the ASEAN

Economic Community (AEC). During the 12th ASEAN Summit held in 2007, the ASEAN

Leaders dedicated to accelerate the institution of the ASEAN Community and its forerunner the

AEC by 2015. At 13th ASEAN Summit, the ASEAN Leaders adopted the AEC Blueprint, being

the master plan and guide in the establishment of the AEC. The AEC Blueprint poses four key

characteristics and core elements as follows:

A. Single market and production base A1. Free flow of goods (9 Strategic approaches) A2. Free flow of services (3 strategic approaches) A3.Free flow of investment (5 strategic approaches) A4. Freer flow of capital (7 strategic approaches) A5. Free flow of skilled labor A6. Priority of integration sectors A7. Food, agriculture and forestry

B. Competitive Economic Region B1. Competition policy B2. Consumer protection B3. Intellectual priority rights B4. Infrastructure development (10 strategic approaches) B5. Taxation B6. E-commerce

C. Equitable economic Development C1. SME development C2. Initiative for ASEAN Integration

D. Integration into the Global Economy D1.Coherent approach towards external economic relationD2. Enhanced participation in global supply networks1

1 Urata and Okabe, Tracing the Progress toward the ASEAN Economic Community, p.6, 2009

The AEC is the realization of the end goal of economic integration as espoused in the

Vision 2020, which is based on a convergence of interests of ASEAN Member Countries to

deepen and broaden economic integration through existing and new initiatives with clear

timelines.2 The end goal of the economic integration is to be accomplished in four stages: 2008-

2009, 2010-2011, 2012-2013, 2014-2015.3

The economic integration is on its last stage, and is a step forward towards its end goal

which is the ASEAN Economic Community; however it posits several constitutional barriers.

This paper will establish the constitutional barriers for the economic integration and AEC in the

Philippine context, and try to harmonize seemingly contradictory sides regarding the ASEAN

objectives and the sanctity of the Philippine Constitution.

2 AEC Blueprint, p. 5, part 5.3 Aldaba, et al., The ASEAN Community and the Philippines: Implementation, Outcomes, Impacts and Ways Forward, p. 1, 2013

II. ASEAN ECONOMIC COMMUNITY AND THE PHILIPPINE CONSITUTION

The framers of the Philippine Constitution recognizes the key role of national economy

and patrimony in nation-building, that is why a whole article, entitled Article XII, National

Economy and Patrimony, is dedicated in the 1987 Philippine Constitution. In a perfunctory

reading of Articles II and XII of the Philippine Constitution, it would seem that the ASEAN

Economic Community is in conflict with the Philippine Constitution.

It is provided in Article II, Sec. 7, The State shall pursue an independent foreign policy.

In its relations with other states the paramount consideration shall be national sovereignty,

territorial integrity, national interest and the right to self-determination. Such policy is a

guideline provided in the Constitution that the Philippines in its dealings with other states must

be free from foreign interference. It is in consonance with Art. II, Sec. 19, which provides: The

State shall develop a self-reliant and independent national economy effectively controlled by

Filipinos. These declarations command the legislature that in enacting and carrying out laws, the

paramount consideration must be economic independence, self-reliance and the control of the

economy by the Filipinos.

To further strike the point of an independent national economy, the framers of the

constitutions further provided in Section 10, Art. XII

“The Congress shall, upon recommendation of the economic and planning

agency, when the national interest dictates, reserve to citizens of the Philippines

or to corporations or associations at least sixty per centum of whose capital is

owned by such citizens, or such higher percentage as Congress may prescribe,

certain areas of investments. The Congress shall enact measures that will

encourage the formation and operation of enterprises whose capital is wholly

owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national

economy and patrimony, the State shall give preference to qualified Filipinos.

The State shall regulate and exercise authority over foreign investments

within its national jurisdiction and in accordance with its national goals and

priorities.”

Section 11, Art. XII

“No franchise, certificate, or any other form of authorization for the

operation of a public utility shall be granted except to citizens of the Philippines

or to corporations or associations organized under the laws of the Philippines, at

least sixty per centum of whose capital is owned by such citizens; nor shall such

franchise, certificate, or authorization be exclusive in character or for a longer

period than fifty years. Neither shall any such franchise or right be granted except

under the condition that it shall be subject to amendment, alteration, or repeal by

the Congress when the common good so requires. The State shall encourage

equity participation in public utilities by the general public. The participation of

foreign investors in the governing body of any public utility enterprise shall be

limited to their proportionate share in its capital, and all the executive and

managing officers of such corporation or association must be citizens of the

Philippines.”

Section 12, Art. XII

“The State shall promote the preferential use of Filipino labor, domestic

materials and locally produced goods, and adopt measures that help make them

competitive.”

These provisions in the Constitution provides the reservation for the Philippine Citizens

regarding investments, rights, privileges, concessions, covering national economy; Franchises,

certificates, and authorization for operation of public utility; The preferential use of Filipino

Labor domestic materials and locally procured goods.

It is argued that some constitutions are merely declarations of policies and principles,

being guidelines for the legislature in enacting and adopting laws. It is however established by

the Supreme Court that a provision which is complete in itself and becomes operative without

the aid of supplementary or enabling legislation, or that which supplies sufficient rule by means

of which the right it grants may be enjoyed or protected, is self-executing. Thus a constitutional

provision is self-executing if the nature and extent of the right conferred and the liability

imposed are fixed by the constitution itself, so that they can be determined by an examination

and construction of its terms, and there is no language indicating that the subject is referred to the

legislature for action.4

The ASEAN Economic Community having the key characteristic of a Single Market and

Production Base, providing for: a) Free flow of goods, b) Free flow of services, c) Free flow of

investment, d) Free flow of capital, and e) Free flow of skilled labor, cannot materialize in the

Philippines in conjunction with the constitution. It is because of the constitutional provisions

discussed above. Further basis for the impossibility of the AEC in the Philippines is evident in

jurisprudence. In the case of Manila Prince Hotel vs. GSIS, G.R. No. 122156, February 3, 1997,

the Supreme Court held Paragraph 2 Section 10 explicitly mandates the “Pro-Filipino” bias in all

economic concerns. It is better known as the Filipino First Policy. With the inclusion of the

Filipino First Policy in the Constitution, it is imperative that in establishing a stable national

economy, not only preference but bias, is to be afforded to Filipino citizens. Allowing the Single

Market and Production Base core element of the AEC in the Philippines would be in violation of

the Constitution.

We can argue that since provision of Article II of the Constitution regarding national

economy are only principles and policies, and that in enacting and adopting laws, the legislature

may provide enough leeway to level the playing ground between Filipinos and foreign states.

However the establishment of the Filipino First Policy being a positive mandate in the

4 Manila Prince Hotel vs. GSIS

Constitution cannot be set aside. In all economic dealings of the Philippines, preference is to be

given to Filipinos, a free flow of goods, services, investment, capital, and skilled labor is

unmanageable within the instructions of our Constitution.

In our times, the changing trends in economy cannot be disregarded, the growing

importance of Economic Regions and integrations is apparent. More and more states are opening

themselves to the world market, international economy is the inclination. The Philippines is ripe

for an open world market and the AEC is our first step its conception. However, we are faced

with a big hurdle, our very own Constitution.

It is expounded by Don Claro M. Recto that the greatest tragedy that can befall a Filipino

is to be an alien in his own land. This statement is regarded by the Constitution in the

establishment of the Filipino First Policy. Such is in the spirit of nationalism and patriotism.

However, in advancing the Filipino First Policy, we must heed to the dissent of Former Chief

Justice Puno in the case of Manila Hotel vs. GSIS, aptly stated as follows:

“Aside from being prohibited by the Constitution, such judicial is

short-sighted and, viewed properly, gravely prejudicial to long-term

Filipino interest. It encourages other countries — in the guise of reverse

comity or worse, unabashed retaliation — to discriminate against us in

their own jurisdictions by authorizing their own nationals to similarly

equal and defeat the higher bids of Filipino enterprises solely, while on

the other hand, allowing similar bids of other foreigners to remain

unchallenged by their nationals. The majority's thesis will thus

marginalize Filipinos as pariahs in the global marketplace with absolute

no chance of winning any bidding outside our country. Even authoritarian

regimes and hermit kingdoms have long ago found out unfairness, greed

and isolation are self-defeating and in the long-term, self-destructing.

The moral lesson here is simple: Do not do unto other what you don’t

want other to do unto you.

In the absence of a law specifying the degree or extent of the "Filipino

First" policy of the Constitution, the constitutional preference for the

"qualified Filipinos" may be allowed only where all the bids are equal. In

this manner, we put the Filipino ahead without self-destructing him and

without being unfair to the foreigner.

In short, the Constitution mandates a victory for the qualified Filipino

only when the scores are tied. But not when the ballgame is over and the

foreigner clearly posted the highest score.”5

Former Chief Justice Reynato Puno provided that in the interpretation of the Filipino

First Policy, the Supreme Court has established in our jurisprudence a Pro-Filipino but Anti-

Foreigner Policy. Upon the finality of the ASEAN Economic Community and the economic

integration, instances relative to the case of Manila Prince Hotel vs. GSIS may arise. And having

established the jurisprudence set forth in the said case, the Philippines being a member of the

ASEAN Economic Community is surely open for international humiliation and retaliation, since

the Single Market and Production Base, providing for free flow of goods, services, capital,

investment, and skilled labor cannot materialize in the Philippines. Allowance of such is

undoubtedly unconstitutional.

With the national economic policies duly established in the Philippines, the

implementation of the ASEAN Economic Community in the Philippines appears to be self-

defeating. Although the prospects are purely advantageous to the ASEAN economy, more so

with the Philippine economy, the present conditions pre-empted by the Philippine Constitution is

self-destructive. As aptly put in the dissent of Former Chief Justice Puno, we cannot have

Filipinos as pariahs in the global marketplace. It is proper that the framers of the Constitution

have provided for the safeguards against foreign control of the Philippine Economy; however

they have failed to perceive the importance of International Economy. In establishing the

ASEAN Economic Community, it is without an iota of doubt that the Philippine Laws regarding

International Economy is wanting. We need to establish a way on the emerging need for

5 G.R. No. 122156, February 3, 1997.

international economic laws in the Philippines without sacrificing the supremacy and sanctity of

our Constitution.

The ASEAN Economic Community is in its final stage, the Congress is still provided

with enough time to address the issue and provide enough leeway to demarcate the contradicting

advances of the economic integration and the Philippine Constitution. With the present

conditions of the Philippine Laws, preference for capital, investment, and labor is given to

Filipinos; this will truly defeat the goal of a free flowing economic exchange within the ASEAN

nations. We should not wait for the moment wherein the Philippines are unable to faithfully

comply with the key pillars of the ASEAN Economic Community. The legislature is to consider

that although there is a need to preserve nationalism and the reservation of the nation’s resources

for the Filipino People, there is also a need to open ourselves to the emerging trend of

International Economy. We cannot have further self-defeating or self-destructing legislation

regarding International Economy.

The entry of foreign players in our economy is limited as is, the ASEAN Economic

Community provides for a widened gate for entry of International players, but this is impossible

with the strict limitations enshrined in our Constitution. The present mood of the government

regarding the ASEAN Economic Community is promising, however they are blindsided by the

legal barriers and hurdles that are clearly placed in front of them. The main focus of the

Philippine Government is towards the free flow of skilled labor; The Philippines greatly

dependent on overseas contract workers.

The AEC is holistic, it does not only open a regional marketplace, but provides for the

establishment of a solid community of nations, we should not expect to only get from the

produce of the AEC but also give and contribute for its betterment. The AEC is a quid pro quo,

wherein we are only focused on the quid.

The present government is optimistic that through the AEC the entrance of foreign

industry in the Philippines would provide for a stable economy and open up jobs for Filipinos, as

earlier argued, the entry of foreign industry would not be easy, further, if such would be

contemplated, the internal economy of the Philippines would be dependent of foreign economy.

Lastly, in regards to the more job opportunities and the equal and free flow or exchange of

skilled labor and all necessary education of training related thereto, we must have proper

legislations to safeguard the interests of the people, we should be assured that we are afforded

with the protection of our laborers employed whether in the Philippines or in other ASEAN

Nations that our under foreign industries; We should have assurances that the AEC would not be

for the consolidation of wealth and power of the multi-national corporations. We must be

secured that economic growth brought about by the economic integration will ultimately redound

to the gains of the laborers and the poor.